It could be the long-awaited turning point in the world of venture capital and beyond. Yale, whose $32 billion endowment has been led since 1985 by the legendary investor David Swensen, just let its 70 U.S. money managers across a variety of asset classes know that for the school, diversity has now moved front and center.
According to the WSJ, Swensen has told the firms that from here on out, they will be measured annually on their progress in increasing the diversity of their investment staff, from hiring to training to mentoring to their retention of women and minorities.
Those that show little improvement may see the prestigious university pull its money, Swensen tells the outlet.
It’s hard to overstate the move’s significance. Though Yale’s endowment saw atypically poor performance last year, Swensen, at 66, is among the most highly regarded money managers in the world, growing Yale’s endowment from $1 billion when he joined as a 31-year-old former grad student of the school, to the second-largest school endowment in the country after Harvard, which currently manages $40 billion.
Credited for developing the so-called Yale Model, which is short on public equities and long on commitments to venture shops, private equity funds, hedge funds, and international investments, Swensen has inspired legions of other endowment managers, many of whom worked for him previously, including the current endowment heads of Princeton, Stanford, and the University of Pennsylvania.
It isn’t a stretch to imagine these managers and many others will again follow Swensen’s decision, one that was inspired by the growing diversity with Yale itself. Should such metrics become standard, they could dramatically change the stubbornly intractable world of money management, which remains mostly white and mostly male.
Indeed, while the dearth of woman and minorities within the ranks of venture firms may not be news to readers, a 2019 study commissioned by the Knight Foundation and cited by the WSJ underscores how big an issue it remains across asset classes. Women- and minority-owned firms held less than 1% of assets managed by mutual funds, hedge funds, private-equity funds and real-estate funds in 2017, even though their performance was on a par with such firms.
As for why Swensen didn’t write this letter much sooner to universe of fund managers backed by Yale, Swensen tells that WSJ that he has long talked about diversity with them but that he held off on asking for systematic changes owing to a belief, in part, that there were not enough diverse candidates entering into asset management.
Inspired by the Black Lives Movement that gained momentum this spring, he decided it was time to take the leap anyway.
As for that perceived pipeline concern, fund managers will have to figure it out. For his part, according to the WSJ, Swensen offered a suggestion to those same U.S. managers. He proposed that they forget the similar resumes for which they’ve long looked and consider recruiting directly from college campuses.
Scott Purcell is the CEO and chief trust officer of Prime Trust, an innovative API-enabled B2B open-banking financial solutions provider.
The economic impact of the COVID-19 pandemic adversely affected the financial outlook for millions of people, and continues to cause significant fiscal distress to millions more, but such challenging times have also wrought a more resilient and resourceful financial system.
With the ingenuity of crowdfunding, considered to be one of the last decade’s greatest “success stories,” and such desperate times calling for bold new ways to finance a wide variety of COVID-19 relief efforts, we are now seeing an excellent opportunity for banks and other financial institutions to partner with crowdfunding platforms and campaigns, bolstering their efforts and impact.
COVID-19 crowdfunding: A world of possibilities to help others
Before considering how financial institutions can assist with crowdfunding campaigns, we must first look at the diverse array of impressive results from this financing option during the pandemic. As people choose between paying the rent or buying groceries, and countless other despairing circumstances, we must look to some of the more inventive ways businesses, entrepreneurs and people in general are using crowdfunding to provide the COVID-19 relief that cash-strapped consumers with maxed-out or poor credit do not have access to or the government has not provided.
Some great examples of COVID-19 crowdfunding at its best include the following:
The possibilities presented by crowdfunding in this age of the coronavirus are endless, and financial institutions can certainly lend their assistance. Here is how.
1. Acknowledge that crowdfunding is not a trend
Crowdfunding is a substantial and ever-so relevant means of financing all sorts of businesses, people and products. Denying its substantive contribution to the economy, especially in digital finance during this pandemic, is akin to wearing a monocle when you actually need glasses for both of your eyes. Do not be shortsighted on this. Crowdfunding is here to stay. In fact, countless crowdfunding businesses and platforms continue to make major moves within the markets globally. For example, Parpera from Australia, in coordination with the equity-crowdfunding platforms, hopes to rival the likes of GoFundMe, Kickstarter and Indiegogo.
2. Be willing to invest in crowdfunded campaigns
This might seem contrary to the original purpose of these campaigns, but the right amount of seed-cash infusions to campaigns that are aligned with your goals as a company is a win-win for both you and the entrepreneurs or causes, especially now in such desperate times of need.
3. Get involved in the community and its crowdfunding efforts
This means that small businesses and medium-sized businesses within your institution’s community could use your help. Consider investing in crowdfunding campaigns similar to the ones mentioned earlier. Better yet, bridge the gaps between financial institutions and crowdfunding platforms and campaigns so that smaller businesses get the opportunities they need to survive through these difficult times.
4. Enable sustainable development goals (SDG)
Last month, the United Nations Development Program released a report proclaiming that digital finance is now allowing people from all over the world to customize and personalize their money-management experiences such that their financial needs have the potential to be more readily and sufficiently met. Financial institutions willing to work as a partner with crowdfunding platforms and campaigns will further these goals and set society up for a more robust rebound from any possible detrimental effects of the COVID-19 recession.
5. Lend your regulatory expertise to this relatively new industry
Other countries are already beginning to figure out better ways to regulate the crowdfunding financing industry, such as the recent updates to the European Union’s handling of crowdfunding regulations, set to take effect this fall. Well-established financial institutions can lend their support in defining the policies and standard operating procedures for crowdfunding even during such a chaotic time as the COVID-19 pandemic. Doing so will ensure fair and equitable financing for all, at least, in theory.
While originally born out of either philanthropy or early-adopting innovation, depending on the situation, person or product, crowdfunding has become an increasingly reliable means of providing COVID-19 economic relief when other organizations, including the government and some banks, cannot provide sufficient assistance. Financial institutions must lend their vast expertise, knowledge and resources to these worthy causes; after all, we are all in this together.
TechCrunch is embarking on a major new project to survey the venture capital investors of Europe, and their cities.
Our survey of VCs in Brussels will capture how the city is faring, and what changes are being wrought amongst investors by the coronavirus pandemic. (Please note, if you have filled out the survey already, there is no need to do it again).
We’d like to know how Brussels’ startup scene is evolving, how the tech sector is being impacted by COVID-19 and, generally, how your thinking will evolve from here.
Our survey will only be about investors, and only the contributions of VC investors will be included. More than one partner is welcome to fill out the survey.
The shortlist of questions will require only brief responses, but the more you can add, the better.
Obviously, investors who contribute will be featured in the final surveys, with links to their companies and profiles.
What kinds of things do we want to know? Questions include: Which trends are you most excited by? What startup do you wish someone would create? Where are the overlooked opportunities? What are you looking for in your next investment, in general? How is your local ecosystem going? And how has COVID-19 impacted your investment strategy?
This survey is part of a broader series of surveys we’re doing to help founders find the right investors.
You are not in Brussels, but would like to take part? Or you are in another part of the country? That’s fine! Any European VC investor can STILL fill out the survey, as we probably will be putting out a call to your city next anyway! And we will use the data for future surveys on vertical topics.
The survey is covering almost every European country on the continent of Europe (not just EU members, btw), so just look for your country and city on the survey and please participate (if you’re a venture capital investor).
Thank you for participating. If you have questions you can email firstname.lastname@example.org
Yes, the media f’ing gorged on the Quibi story yesterday. We did, they did, everyone did. And really, truly, how could anyone not? Nearly $2 billion came in (with $350 million heading back), a star-studded lineup of executives and production teams, an absolutely massive advertising campaign, and a PR strategy that all but begged the sun to melt Icarus’ wings.
Our collective exhalation on the complete clusterfuck that was Quibi though leads to a legitimate and interesting question: are we obnoxiously attacking a good-faith failure? Wasn’t Quibi a bet just like every other startup, a bet that just happened to fail? A16Z’s general partner Andrew Chen put it vividly on Twitter, saying “It’s gross” and lauding the entrepreneurial challenge of building a startup:
all the people rushing to their keyboards to type in their “i told you so” hot takes on Quibi:
It’s gross. Building a company is hard, why celebrate a fail?
Go build something instead of using your energy to let twitter know how smart you are the say the consensus thing.
I understand this view, deeply. In fact, all of us at TechCrunch understand this. One of the things that we pride ourselves on here is respecting the hustle. We know how hard it is to launch a startup. As a team, we collectively talk to thousands of founders every year, and we hear the heartbreaking stories and the downright trauma at times that comes with building a company. Occasionally (and yes, we focus most of our reporting here), we hear about the wins and successes too.
Let’s be honest: most startups fail. Most ideas turn out wrong. Most entrepreneurs are never going to make it. That doesn’t mean no one should build a startup, or pursue their passions and dreams. And when success happens, we like to talk about it, report on, and try to explain why it happens — because ultimately, more entrepreneurial success is good for all of us and helps to drive progress in our world.
But let’s also be clear that there are bad ideas, and then there are flagrantly bad ideas with billions in funding from smart people who otherwise should know better. Quibi wasn’t the spark of the proverbial college dropout with a passion for entertainment trying to invent a new format for mobile phones with ramen money from friends and family. Quibi was run by two of the most powerful and influential executives in the United States today, who raised more money for their project than other female founders have raised collectively this year.
Why do supposedly dumb ideas turn out to be smart? Part of the reason is that what starts out as dumb slowly iterates into something that is very smart. Facebook was just a “facebook” for checking out your classmates on college campuses. If it had ended there and withered away like many other social networks before it, we might well have put it in the waste bin of history. But Zuckerberg and his crew iterated — adding features like photos, a feed, messaging and more with an extreme focus on growth that made the product so much more than when it started.
We’ve seen this pattern again and again throughout time. Founders get feedback from users, they iterate, they pivot, they try new things, and slowly but surely they start to migrate from what might have been a very raw concept to something much more ready to compete in the ferocious marketplace of business and consumer attention today.
This was never the story with Quibi. There was never an iteration of the product, or a long-range plan to assiduously cultivate users and talent as the company found traction while carefully husbanding its capital for the inevitable tough moments in the growth of any company.
Yes, we in the commentariat do make mistakes, but analysts weren’t dumb in pointing out all of Quibi’s glaring, red-alert flaws. Those analysts were smart. They were right. They might not be right next time, of course — no analyst should get too overconfident in their predictions. But at the same time, we shouldn’t just collectively throw up our hands and declare every idea that comes our way a brilliant gift from the heavens. Most ideas are dumb, and we and everyone else have every right to point that out.
So respect the hustle. Don’t kick a hardworking entrepreneur down who is just trying to get their project out there and show it the world. But that doesn’t mean you can’t call out stupid when you see it. The best entrepreneurs know that — even at its most vituperative — critical feedback is the necessary ingredient to startup success. Lauding everyone lauds no one.
European entrepreneurs who want to launch startups could do worse than Switzerland.
In a report analyzing Europe’s general economic health, cost of doing business, business environment and labor force quality, analysts looked for highly educated populations, strong economies, healthy business environments and relatively low costs for conducting business. Switzerland ended up ranking third out of 31 European nations, according to Nimblefins. (Germany and the UK came out first and second, respectively).
According to official estimates, the number of new Swiss startups has skyrocketed by 700% since 1996. Zurich tends to take the lion’s share, as the city’s embrace of startups has jump-started development, although Geneva and Lausanne are also hotspots.
As well as traditional software engineering startups, Switzerland’s largest city boasts a startup culture that emphasizes life sciences, mechanical engineering and robotics. Compared to other European countries, Switzerland has a low regulatory burden and a well-educated, highly qualified workforce. Google’s largest R&D center outside of the United States is in Zurich.
But it’s also one of the more expensive places to start a business, due to its high cost of living, salary expectations and relatively small labor market. Native startups will need 25,000 Swiss Francs to open an LLC and 50,000 more to incorporate. While they can withdraw those funds from the business the next day, local founders must still secure decent backing to even begin the work.
This means Switzerland has gained a reputation as a place to startup — and a place to relocate, which is something quite different. It’s one reason why the region is home to many fintech businesses born elsewhere that need proximity to a large banking ecosystem, as well as the blockchain/crypto crowd, which have found a highly amenable regulatory environment in Zug, right next door to Zurich. Zurich/Zug’s “Crypto Valley” is a global blockchain hotspot and is home to, among others, the Ethereum Foundation.
Lawyers and accountants tend to err on the conservative side, leading to a low failure rate of businesses but less “moonshot innovation,” shall we say.
But in recent years, corporate docs are being drawn up in English to facilitate communication both inside Switzerland’s various language regions and foreign capital, and investment documentation is modeled after the U.S.
Ten years ago startups were unusual. Today, pitch competitions, incubators, accelerators, VCs and angel groups proliferate.
The country’s Federal Commission for Technology and Innovation (KTI) supports CTI-Startup and CTI-Invest, providing startups with investment and support. Venture Kick was launched in 2007 with the vision to double the number of spin-offs from Swiss universities and draws from a jury of more than 150 leading startup experts in Switzerland. It grants up to CHF 130,000 per company. Fundraising platforms such as Investiere have boosted the angel community support of early funding rounds.
Swiss companies, like almost all European companies, tend to raise lower early-stage rounds than U.S. ones. A CHF 1-2 million Series A or a CHF 5 million Series B investment is common. This has meant smaller exits, and thus less development for the ecosystem.
What trends are you most excited about investing in, generally? Consumer-facing startups with first revenues.
What’s your latest, most exciting investment? AirConsole — a cloud-gaming platform where you don’t need a console and can play with all your friends and family.
Are there startups that you wish you would see in the industry but don’t? What are some overlooked opportunities right now? I really wish that the business case for social and ecological startups will finally be proven (kind of like Oatly showed with the Blackstone investment). I also think that femtech is a hyped category but funding as well as renown exits are still missing.
What are you looking for in your next investment, in general? I am looking for easy, scalable solutions with a great team.
Which areas are either oversaturated or would be too hard to compete in at this point for a new startup? What other types of products/services are you wary or concerned about? I think the whole scooter/mobility space is super hyped but also super capital intensive so I think to compete in this market at this stage is hard. I also think that the whole edtech space is an important area of investment, but there are already quite a lot of players and it oftentimes requires cooperation with governments and schools, which makes it much more difficult to operate in. Lastly, I don’t get why people still start fitness startups as I feel like the market has reached its limits.
How much are you focused on investing in your local ecosystem versus other startup hubs (or everywhere) in general? More than 50%? Less? Switzerland makes — maximum — half of our investments. We are also interested in Germany and Austria as well as the Nordics.
Which industries in your city and region seem well-positioned to thrive, or not, long term? What are companies you are excited about (your portfolio or not), which founders? Zurich and Lausanne are for sure the most exciting cities, just because they host great engineering universities. Berne is still lagging behind but I am hoping to see some more startups emerging from there, especially in the medtech industry.
How should investors in other cities think about the overall investment climate and opportunities in your city? Overall, Switzerland is a great market for a startup to be in — although small, buying power is huge! So investors should always keep this in mind when thinking about coming to Switzerland. The startup scene is pretty small and well connected, so it helps to get access through somebody already familiar with the space. Unfortunately for us, typical B2C cases are rather scarce.
Do you expect to see a surge in more founders coming from geographies outside major cities in the years to come, with startup hubs losing people due to the pandemic and lingering concerns, plus the attraction of remote work? I think it is hard to make any kind of predictions. But on the one hand, I could see this happening. On the other hand, I also think that the magic of cities is that there are serendipity moments where you can find your co-founder at a random networking dinner or come across an idea for a new venture while talking to a stranger. These moments will most likely be much harder to encounter now and in the next couple of months.
Which industry segments that you invest in look weaker or more exposed to potential shifts in consumer and business behavior because of COVID-19? What are the opportunities startups may be able to tap into during these unprecedented times? I think travel is a big question mark still. The same goes for luxury goods, as people are more worried about the economic situation they are in. On the other hand, remote work has seen a surge in investments. Also sustainability will hopefully be put back on the agenda.
How has COVID-19 impacted your investment strategy? What are the biggest worries of the founders in your portfolio? What is your advice to startups in your portfolio right now? Not much. I think we allocated a bit more for the existing portfolio but otherwise we continue to look at and discuss the best cases. The biggest worries are the uncertainties about [what] the future might look like and the related planning. We tell them to first and foremost secure cash flow.
Are you seeing “green shoots” regarding revenue growth, retention or other momentum in your portfolio as they adapt to the pandemic? Totally! Some portfolio companies have really profited from the crisis, especially our subscription-based models that offer a variety of different options to spend time at home. The challenge now is to keep up the momentum after the lockdown.
What is a moment that has given you hope in the last month or so? This can be professional, personal or a mix of the two. What gives me hope is to see that people find ways to still work together — the amount of online events, office hours, etc. is incredible. I see the pandemic also as a big opportunity to make changes in the way we worked and the way things were without ever questioning them.
“I have to choose my words carefully,” says Joe Castelino of Stevens Creek Volkswagen in San Jose, California, when asked about the management software on which most car dealerships rely for inventory information, marketing, customer relationships and more.
Castelino, the dealership’s service director, laughs as he says this. But the joke has been on car dealers, most of whom have largely relied on a few frustratingly antiquated vendors for their dealer management systems over the years — along with more sophisticated point solutions.
It’s the precise opportunity that former Tesla CIO, Jay Vijayan, concluded he was well-positioned to address while still in the employ of the electric vehicle giant.
As Vijayan tells it now, he knew nothing about cars until joining Tesla in 2011, following 12 years in product development at Oracle, then VMware. Yet he learned plenty over the subsequent four years. Specifically, he says he helped to build with Elon Musk a central analysis system inside Tesla, a kind of brain that could see all of the company’s internal systems, from what was happening in the supply chain, to its factory systems, to its retail platform.
Tesla had to build it itself, says Vijayan; after evaluating the existing software of third-company providers, the team “realized that none of them had anything close to what we needed to provide a frictionless modern consumer experience.”
It was around that time that a lightbulb turned on. If Tesla could transform the experience for its own customers, maybe Vijayan could transform the buying and selling experience for the much bigger, broader automotive industry. Enter Tekion, a now four-year-old, San Carlos, California company that already employs 470 people locally and in Bangalore and just attracted $150 million in fresh funding led by the private equity investor Advent International.
With the Series C round — which also participation from Index Ventures, Airbus Ventures, FM Capital and Exor, the holding company of Fiat-Chrysler and Ferrari — the company has now raised $185 million altogether.
It’s also valued at north of $1 billion. (The automakers General Motors, BMW and the Nissan-Renault-Mitsubishi Alliance are also investors.)
Eric Wei, a managing director at Advent, says that over the last decade, his team had been eager to seize on what’s approaching a $10 billion market annually. Instead, they found themselves tracking incumbents Reynolds & Reynolds, CDKGlobal and Cox Automotive’s Dealertrack — and waiting for a better player to emerge.
Then Wei met Tekion through Jon McNeill, a former Tesla president and an advisory partner to Advent.
Says Wei of seeing how Tekion’s tech compared with its more established rivals: “It was like comparing a flip phone to an iPhone.”
Unsurprisingly, McNeill, who worked at Tesla with Vijayan, also sings the company’s praises, noting that Tekion even bought a dealership in Gilroy, Calif., to use as a kind of lab while it was building its technology from scratch.
It’s nice, such acclaim, but more important is that Tekion is also attracting the attention of dealers. Though Vijayan declines to share how many customers have bought its cloud software — which connects dealers with both manufacturers and car buyers and is powered by machine learning algorithms — he says it’s already being used across 28 states.
One of these dealerships is the national chain Serra Automotive, whose founder, Joseph Serra, is now an investor in Tekion.
Another is that Volkswagen dealership in San Jose, where Castelino — who doesn’t have a financial interest in Tekion — speaks enthusiastically about the time and expenses his team is saving because of Tekion’s platform.
For example, he says customers need only log-in now to flag a particular issue. After that, with the help of an RFID tag, Stevens Creek knows exactly when that customer pulls into the dealership and what kind of help they need, making their arrival far more seamless.
Tekion can also make recommendations based on a car’s history. It might, for instance, suggest a brake fluid flush to a customer without an advisor having to look through that customer’s history, Castelino says.
As crucially, he says, the dealership has been able to cut ties with a lot of other software vendors, while also making more productive use of its time. Says Castelino, “As soon as a [repair order] is live, it’s in a dispatcher’s hand and a technician can grab the car.” It’s like that with every step, he insists. “You’re saving 15 minutes again and again, and suddenly, you have three hours where your intake can be higher.”
With converts like Castelino, it’s easy to image Tekion making serious strides in market share. And yet it does have rivals, some of which have long contracts in place with their customers.
Even steeper competition, should it come, might eventually be from Tesla itself.
In a Tesla earnings call earlier today, Musk told analysts that there are essentially a dozen startups housed inside of Tesla, including one centered on vehicle service. It’s the very business that Vijayan helped to create.
As for whether Musk might spin out any of these, he said Tesla currently has no plans to do so. He suggested it has enough on its plate for the time being. If Tekion takes off, however, that could well change.
Bradley Tusk has become known in recent years for being involved in what’s about to get hot, from his early days advising Uber, to writing one of the first checks to the insurance startup Lemonade, to pushing forward the idea that we should be using the smart devices in our pockets to vote.
Indeed, because he’s often at the vanguard, it wasn’t hugely surprising when Tusk, like a growing number of other investors, formed a $300 million SPAC or special acquisition company, one that he and a partner plan to use to target a business in the leisure, gaming, or hospitality industry, according to a regulatory filing.
Because Tusk — a former political operative who ran the successful third mayoral campaign for Mike Bloomberg — seems adept at seeing around corners, we called him up late last week to ask whether SPACs are here to stay, how a Biden administration might impact the startup investing landscape, and how worried (or not) big tech should be about this election. You can hear the full conversation here. Owing to length, we are featuring solely the part of our conversation that centered on SPACs.
BT: They are down today last I checked. When you only check once in a blue moon, you’re like, ‘Hey, look at how great this is,’ whereas if, like me, you check me every day, you’re like, ‘It lost 4%, where’s my money?’
We got really lucky; Lemonade was our second deal that we did out of our first fund, and the fact that it IPO’d within four years of the company’s founding is pretty amazing.
TC: Is it amazing? I wonder what it says about the common complaint that the traditional IPO process is bad — is it just an excuse?
BT: [CEO] Daniel Schrieber was very clear that he and [cofounder] Shai Wininger had a strategy from day one to go public as quickly as they possibly could, because in his view, an IPO is supposed to represent kind of the the beginning. It’s the ‘Okay, we’ve proven that there’s product market fit, we’ve proven that there’s customer demand; now let’s see what we can really do with this thing.’ And it’s supposed to be about hope and promise and future and excitement. And if you’ve been a private company for 10 years, and you’re worth tens of billions of dollars and your growth is already starting to flatten out a little bit, it’s just much less exciting for public investors.
The question now for everyone in our business is what happens with Airbnb in a few weeks or whenever they are [staging an IPO]. Will that pixie dust be there, or will they have been around so long that the market is kind of indifferent?
TC: Is that why we’re seeing so many SPACs? Some of that pixie dust is gone. No one knows when the IPO window might shut. Let’s get some of these companies out into the public market while we still can?
BT: No, I don’t I don’t think so. I think SPACs have become a way to raise a lot of money very quickly. It took me two years to raise $37 million for my first venture fund, and three months was the entire process for me to raise $300 million for my SPAC. So it’s a mechanism that is highly efficient and right now is so popular with public market investors that there is just a lot of opportunity, and people are grabbing it. In fact, now you’re hearing about people who are planning SPACs having to pull [them] back because there’s a ton of competition right now.
At the end of the day, the fundamentals still rule. If you take a really bad company public through a SPAC, maybe the excitement of the SPAC gets you an early pop. But if the company has neither good unit economics nor high growth, there’s no real reason to believe it will be successful. And especially for the people in the SPAC, where they have to hold on to it for a little while, by the time the lockup ends, the world has probably figured out that this is not the greatest IPO of all time. You can’t put lipstick on a pig.
TC: You say you raised the SPAC very quickly. How is the investor profile different than that of a typical venture fund investor?
BT: The investors for this SPAC — at least when I did the roadshow, and I think I did 28 meetings over a couple of days — is mainly hedge funds and people who don’t really invest in venture at all, so there was no overlap between my [venture fund] LP base and the people who invested in our SPAC that I’m aware of. These are public market investors who are used to moving very quickly. There’s a lot more liquidity in a SPAC. We have two years to acquire something, but ultimately, it’s a public property, so investors can come in and out as they see fit.
TC: So it’s mostly hedge funds that are getting paid management fees to deploy their capital in this comparatively safe way and that are getting interest on the money invested, too, while it’s sitting around in a trust while [the SPAC managers] look for a target company.
BT: Why it kind of does make sense for [them to back] VCs is they are basically making the bet to say: does this person running the SPAC have enough deal flow, enough of a public profile, enough going on that they are going to come across the right target? And venture investors in many ways fit that profile because we just look at so many companies before deploying capital.
TC: Do you have to demonstrate some kind of public markets expertise in order to convince some of these investors that you know what it takes to take a company public and grow it in the public markets?
BT: I guess. We raised the money, so I guess I passed the test. But I did spend a little under two years on Wall Street; I created the lottery privatization group of Lehman Brothers. And my partner [in the SPAC], Christian Goode, has a lot of experience with big gaming companies. But overall, I think that if you are a venture investor with a ton of deal flow and a good track record but very little or no public market experience, I don’t know that that would disqualify you from being able to rate a SPAC.
SAIF Partners has raised $400 million for a new fund and rebranded the 18-year-old influential venture capital firm as it looks to back more early-stage startups in the world’s second largest internet market.
The new fund is SAIF Partners’ seventh for early-stage startups in India. Its previous two funds were each $350 million in size, and the firm today manages more than $2 billion in assets.
SAIF Partners started investing in Indian startups 18 years ago. The firm began as a joint venture with SoftBank and its first high-profile investment was Sify. But the two firms’ joint venture ended more than a decade ago, so the firm is now getting around to rebranding itself, Ravi Adusumalli, the managing partner of SAIF Partners, told TechCrunch in an interview.
“Elevation reflects our investment ethos and re-emphasises our commitment to the founders who help redefine our future. For our existing partners, it is a commitment of continued collaboration on our path-breaking journeys together. For our new partners, it is a promise to do all we can to achieve great heights together, from day one,” said Adusumalli.
SAIF Partners has backed more than 100 startups to date. The venture firm makes long-term bets on founders and backs young firms beginning their early years when they are raising their seed, pre-Series A and Series A financing rounds.
The venture firm invests in startups operating in a wide-range of sectors and plans to continue this strategy and add more areas of interest, said Deepak Gaur, a managing director at Elevation Capital, in an interview with TechCrunch.
“Enterprise SaaS is one area where we are spending a lot of resources,” he said. “We believe the time has come for this sector and we will see many global companies emerge from India.”
More than 15 startups in Elevation Capital’s portfolio are projected to become a unicorn in the next few years, according to Tracxn, a firm that tracks startups and investments in India. These include healthcare booking platform PharmEasy, app-based platform to book home services Urban Company, insurance tech startup Acko, digital loan platform Capital Float, real estate property marketplace NoBroker and online marketplace for gold Rupeek.
A number of SAIF Partners-backed startups, including IndiaMART, MakeMyTrip and Justdial, have become publicly listed companies, too.
Mukul Arora, a managing partner at SAIF Partners, said that the state of the Indian startup ecosystem has changed for the better in the past decade. “A few years ago, we were seeing many startups replicate a foreign company’s play in India. Today, we are seeing our ideas being replicated outside of the country. Someone is building a Meesho for Brazil,” he said.
The founders have also grown more sophisticated, said Mayank Khanduja. Elevation Capital has over three dozen employees, with about two-dozen focused on the investment size.
All of the LPs participating in Elevation Capital’s new fund, as was the case with previous funds, are U.S.-based, and the vast majority of them are nonprofits, said Adusumalli. Without disclosing any figures, he said the firm’s previous funds have performed very well.
On Friday, former Tiger Global Management investor Lee Fixel registered plans for the second fund of his new investment firm, Addition, just four months after closing the first. According to a report on Friday by the Financial Times, the outfit spent last week finalizing the fundraising for the $1.4 billion fund, which Addition reportedly doesn’t plan to begin investing until next year.
Now a source close to the firm says the capital has not been raised. That’s perhaps good news for investors who were shut out of Addition’s $1.3 billion debut fund and who might be hoping to write a check this time around.
The mere fact that Fixel is back in the market already has tongues wagging about the dealmaker, one whose reluctance to talk on the record with media outlets seems only to add to his mystique. Forbes published a lengthy piece about Fixel this summer, in which Fixel seems to have provided just one public statement, confirming the close of Addition’s first fund and adding little else. “We are excited to partner with visionary entrepreneurs, and with our 15-year fund duration, we have the patience to support our portfolio companies on their journey to build impactful and enduring businesses,” it read.
According to Forbes, that first fund — which Fixel is actively putting to work right now — intends to invest one-third of its capital in early-stage startups and two-thirds in growth-stage opportunities.
Whether that includes some of the special purpose acquisition vehicles, or SPACs, that are coming together right and left, isn’t yet known, though one imagines these might appeal to Fixel, who has long seemed to be at the forefront of new trends impacting growth-stage companies in particular. (A growing number of SPACs is right now looking to transform into public companies some of the many hundreds of richly valued private companies in the world.)
Clearer is that Addition is wasting little time in writing some big checks. Among its announced deals is Inshorts, a seven-year-old, New Delhi, India-based popular news aggregation app that last week unveiled $35 million new funding led by Fixel.
The deal represents Addition’s first India-based bet, even while Fixel knows both the country and the startup well. He previously invested in Inshorts on behalf of Tiger; he’s also credited for snatching up a big stake in Flipkart on behalf of Tiger, a move that reportedly produced $3.5 billion in profits when Flipkart sold to Walmart.
Addition also led a $200 million round last month in Snyk, a five-year-old, London-based startup that helps companies securely use open-source code. The round valued the company at $2.6 billion — more than twice the valuation it was assigned when it raised its previous round 10 months ago.
And in August, Addition led a $110 million Series D round for Lyra Health, a five-year-old, Burlingame, California-based provider of mental health care benefits for employers that was founded by former Facebook CFO David Ebersman.
A smaller check went to Temporal, a year-old, Seattle-based startup that is building an open-source, stateful microservices orchestration platform. Last week, the company announced $18.75 million in Series A funding led by Sequoia Capital, but Addition also joined the round, having been an earlier investor in the company.
According to PitchBook data, Addition has made at least 17 investments altogether.
Fixel — whose bets while at Tiger include Peloton and Spotify — isn’t running Addition single-handedly, though according to Forbes, he is the single “key man” around which the firm revolves, as well as the biggest investor in Addition’s first fund.
He has also brought aboard at least three investment principals from Wall Street and a head of data science who worked formerly for Uber (per Forbes). Ward Breeze, a longtime attorney who worked formerly in the emerging companies practice of Gunderson Dettmer, is also working with Fixel at Addition.
(Correction: An earlier version of this story reported that Fixel’s newest fund was already raised, per the FT.)
Brighteye Ventures, the European edtech VC firm, is announcing the $54 million first close of its second fund, bringing total assets under management to over $112 million.
Backing comes from a mixture of existing and new investors, made up primarily of unnamed international family offices. The fund’s second close is expected to take place next year and will include additional institutional investors.
Founded in 2017, Brighteye describes itself as a thesis-driven fund investing in startups that enhance learning. Unsurprisingly, the VC says it sees an unprecedented opportunity within the $7 trillion global education sector “as educators and students are adapting to distance learning en masse and millions of displaced workers are seeking to upskill’.
Out of this new fund, Brighteye will invest in 15-20 companies over the next three years at the seed and Series A stage and write cheques of up to $5 million.
“We invest in startups that use technology to directly enable learning, skills acquisition or research as well as companies whose products address structural needs in the education sector,” Alex Spiro Latsis, managing partner at Brighteye Ventures, tells me.
“For example, Zen Educate addresses the systemic issue of teacher supply shortages in the U.K., via an on-demand platform that saves schools money whilst allowing educators to earn more. Litigate is an AI-driven coach and workflow tool improving results for legal associates, while Ironhack, the largest tech bootcamp in Europe and Latin America, gives young professionals the skills needed to enter the innovation economy and connects them to employers with a 90% job placement rate”.
The VC’s investments also includes Ornikar, the online driving school in France and Spain serving more than 1.6 million students; Tandem, the Berlin-based peer-to-peer language learning platform with over 10 million members; and Epic!, a reading platform said to be used in more than 90% of U.S. schools.
“Sector specialisation means that our entire team is devoted to mapping, evaluating and building networks in the learning industry,” adds Spiro Latsis, when asked how Brighteye will compete for edtech deals when many generalist VCs are eyeing up the sector. “We understand what a differentiated approach looks like, can develop conviction quickly and make an offer based on that conviction. Once we invest, portfolio companies benefit from a network that includes not just potential clients and investors but also some of the best performing edtech companies in Europe.”
Meanwhile, Brighteye says it will be expanding its advisory team to support the new fund and expects to grow from three members to 10 within the next 12 months. In addition, David Guerin has been promoted to principal to manage deal making and portfolio support in Paris, and the firm expects to open a DACH region presence by summer 2022.