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Saturday, 28 May 2022

Footnotes on Sequoia’s startup memo

Footnotes on Sequoia’s startup memo

Welcome to Startups Weekly, a fresh human-first take on this week’s startup news and trends. To get this in your inbox, subscribe here.

Sequoia takes things seriously. The storied venture firm is known to react to macro-economic events with grand memos aimed at portfolio companies, and sometimes the entrepreneurship scene at large. Most recently, Sequoia created a 52-slide deck, first reported by The Information, titled Adapting to Endure; the document reads like a follow-up course to its infamously ill-timed “Coronavirus: The Black Swan of 2020” memo of March 2020.

The firm is not always right in its prognostications — which is maybe why it stuck to internal musings instead of a Medium post this time — but it does do a service in providing a snapshot of how one of the most weathered, and successful, firms of all time thinks about a looming downturn.

“Our intention in gathering today is not to be a beacon of gloom,” the deck reads. “But we also believe that winning in the years ahead is going to depend on making hard, decisive choices confronting uncomfortable challenges that may have been masked during the exuberance and distortions of free capital over the past two years.”

Sequoia’s advice largely followed the same script that other venture firms have been using: extend runway, focus on sustainable growth and recognize that an economic recovery may be a ways away. There were, however, some tidbits that stood out, such as a subtweet I’m guessing is for Tiger Global and a precise explanation of how founders should define fluff these days.

For my full take on this topic, read my TechCrunch+ column, “Sequoia is the latest VC firm that wants you to take the downturn seriously.” In the rest of this newsletter, we’ll bring in a founder’s perspective on this moment in tech, a pitch deck teardown and a deal that may have flown under your radar this week. As always, you can support me by forwarding this newsletter to a friend or following me on Twitter or subscribing to my blog.

Let’s have a Heart to Heart

On Equity this week, Heart to Heart CEO Josh Ogundu joined us to talk about his perspective on the market for early-stage founders. Ogundu told us what he’s rethinking, the importance of honesty and what to do before considering a layoff. It’s not too often that we have guests on the show, so when we do, you know it’s going to be a good one.

Here’s why it’s important: So much of the advice, as this newsletter’s intro shows, has come from investors. Yet, founders are the ones living the change and making the hard decisions, so consider this episode an overdue reality check.

Image Credits: Bryce Durbin/TechCrunch

Pitch Deck Teardown

Our own Haje Jan Kamps has started a weekly series in which he reviews a startup’s pitch deck in the shape of a witty column. Most recently, he reviewed Lumigo’s Series A pitch deck that helped the startup land a $29 million round.

Here’s why it’s important, in his words: “I’ve been coaching startups for a long time, and the No. 1 challenge we always run into is that there’s no shortage of advice for how to do a good pitch deck (hell, I wrote a book about it), but the thing that’s always been missing is a good library of actual, real pitch decks that were successful in raising money. When I rejoined TechCrunch and started talking to founders about fundraising rounds, I realized this might be my chance. In this week’s teardown, we talk about what worked about the deck and where the company could have made further improvements. This is info that isn’t available anywhere else, and it’s been such a fun project so far!”

Deal of the week

It certainly feels like layoff announcements are the new funding round stories, but I do think it’s helpful to balance the doom and gloom with some growth-focused news. And no, I’m not just talking about new crypto funds. This week, Planet FWD announced that it has secured $10 million so the consumer products industry can track carbon emissions. No biggie.

Here’s why it’s important via reporter Christine Hall: “Time is of the essence in reducing emissions, with [CEO Julia Collins] noting that there are less than 100 months left to reach the 2030 global goal of cutting at least 40% of greenhouse gas emissions from 1990 levels. Household consumption of things like food, which impacts land, energy and water, account for 60% of global emissions, she added.”

Cloud computing in photography studio

Image Credits: Peter Dazeley (opens in a new window) / Getty Images

Across the week

Seen on TechCrunch

Report: Substack, the highly hyped newsletter platform, has ditched plans for a Series C

4 investors discuss the US cannabis market’s prospects in Q3 2022

Manish Maheshwari, former Twitter India head, leaves new startup

Founder alleges that YC-backed fintech startup is ‘copy-and-pasting’ its business

Everything you wanted to know about Elon Musk and Twitter (but didn’t want to ask)

Seen on TechCrunch+

Questions arise on Y Combinator’s role in startup correction

Sequoia’s Jess Lee explains how VCs think about their deals

Perhaps faster delivery times were a poor choice from a unit-economics perspective

Dear Sophie: Does International Entrepreneur Parole have any advantages over an O-1 visa?

Can recurring revenue financing drive growth in a turbulent market?

Until next time,

N



The TechCrunch Podcast: Why do people keep giving Adam Neumann money?

The TechCrunch Podcast: Why do people keep giving Adam Neumann money?

Welcome to the second episode of The TechCrunch Podcast, our weekly news show bringing you all the top stories in tech. This week, we sat down with TC writers Natasha Mascarenhas, Anita Ramaswamy and Devin Coldewey to talk about the continued, troubling trend of layoffs in tech; Adam Neumann’s new crypto carbon credit startup (?!); and the one-upmanship among AI image generation technologies happening between OpenAI and Google.

Listen below, and subscribe in iTunes or Spotify to get new episodes delivered weekly on Saturdays!

Articles from the episode:

Other news from the week:

Extras:

 



Cannabis, sex tech and psychedelics startups deserve more than stigma

Cannabis, sex tech and psychedelics startups deserve more than stigma

Welcome to The TechCrunch Exchange, a weekly startups-and-markets newsletter. It’s inspired by the daily TechCrunch+ column where it gets its name. Want it in your inbox every Saturday? Sign up here.

Cannabis, sex tech and psychedelics are often lumped together under the “vice” category — a characterization that prevents many VCs from investing in these spaces. But does that make sense? Let’s explore. — Anna

It’s (not) a sin

Isn’t cannabis actually similar to coffee, wine and spirits? That’s the argument Emily Paxhia made on a Twitter Space hosted by TechCrunch+ earlier this week to discuss our latest U.S. cannabis investor survey.

Despite regulatory hurdles, these 4 US cannabis investors are planting seeds for tomorrow

A managing director at cannabis-focused hedge fund Poseidon Asset Management, Paxhia argued that marijuana-derived products have a lot more to do with wellness than with the “sin” category they often fall under.

“Sin clause” and “vice clause” are terms that venture capitalists use to refer to their inability to invest in certain business categories, from porn and gambling to alcohol and tobacco. When I explored fundraising strategies for sex tech startups earlier this year, I found out that this veto typically comes from the fund’s limited partners, or LPs.

It is understandable why investors wouldn’t want to put their money in certain types of businesses, let alone be known for doing so. But there’s a fine line between moral stances and stigma.

“I don’t identify with the word ‘vice’ at all,” Andrea Barrica told me. Barrica is the founder of O.School, which she describes as a media platform for sexual wellness. “Wellness” is a popular term in both the sex tech and cannabis industries — because it makes them more palatable, sure, but also because it truly reflects the impact that entrepreneurs are hoping to have.

It is worth keeping in mind that cannabis isn’t just about providing a recreational high. In Europe, we heard from investors, it is medical cannabis that has most of the momentum. It is the perspective of health benefits that drives many entrepreneurs, who deserve better than cheap laughs.

Similarly, a deep dive into psychedelics taught me that this is about much more than drugs and fun. With investors sometimes getting into this space after personal journeys with depression or burnout, and founders hoping to make a dent on the global mental health crisis, easy jokes quickly feel out of place.

Psychedelics startups are on a long journey to consumer markets, but these 5 VCs are taking the ride

Missing out

The vice clause applies only to certain types of investors, which is also problematic. The fund that is handling your pension might pass on cannabis investments, but many family offices aren’t. This means that returns from these potentially lucrative bets will be concentrated in the hands of the already-wealthy.

Some fund managers are also investing as individuals, Paxhia said — and it’s them who will get the upside. Meanwhile, fiduciaries are missing out on the returns and the impact they could have, for arbitrary reasons. After all, what’s legal is not always moral, and vice versa.

The most glaring paradox is that the tobacco, nicotine and alcohol industries are actually keeping close tabs on cannabis and whether consumption might shift. Would the shift be a net negative for society? Perhaps not. As for psychedelics, there’s research ongoing to use nonhallucinogenic derivatives to treat opioid addiction. With overdose deaths involving fentanyl and methamphetamine surging in the U.S., is this vice? I don’t think so. Do you?



Why Convoy’s Dan Lewis expects digital freight to go mainstream within the year

Why Convoy’s Dan Lewis expects digital freight to go mainstream within the year

Dan Lewis, co-founder and CEO of digital freight company Convoy, didn’t start his company because he had a deep and abiding passion for trucking. At least, not at first.

The executive has a background in strategy and management consulting that progressed into a career in product development for top tech companies like Google and Amazon. But when he was struck by the urge to start a company, he researched the money-attracting industries of the world, and then, using AngelList, saw how many companies were trying to disrupt those industries.

His search yielded thousands of companies that were working on industries ranging from telecommunications and fashion to video games and food. Billions of dollars were going into trucking each year but fewer than 30 startups showed an interest in the field.

“I saw a massive opportunity and few people going after it,” Lewis told TechCrunch.

TechCrunch+ is having a Memorial Day sale. You can save 50% on annual subscriptions for a limited time.

Lewis and Grant Goodale co-founded Convoy in 2015, and since then, have brought on a series of high-profile investors. A couple of years after Convoy was founded, in a pivotal turn of events, the company secured its Series B from YC Combinator’s Continuity Fund, a fund that was usually geared toward earlier-stage companies.

More recently, Convoy secured a $260 million Series E, led by Baillie Gifford and T. Rowe Price, that brought the company’s valuation up to $3.8 billion. To date, the company has raised almost $1 billion to scale its platform, which connects the fragmented network of shippers, carriers and brokers across the United States.

Speed is a big feature of building a startup, and it’s also a big feature of not getting diluted, because you can show immense progress and then raise at a higher valuation based on that. Dan Lewis, co-founder and CEO of Convoy

We sat down with Lewis to talk about the importance of being customer-obsessed when starting a company, why compensation packages in the early days can help you avoid diluting your company too much in future fundraises, and how to set boundaries on the compromises you’ll make as a founder.

The following interview, which has been edited for brevity and clarity, is part of an ongoing series that focuses on founders in the transportation sector.

TC: YC’s investment in your Series B was notable because Convoy at the time was outside the Continuity Fund’s range of portfolio companies. What do you think made Convoy stand out?

Lewis: The YC culture is a really curious one, so they didn’t feel like they needed to stay in a particular lane, especially with the Continuity Fund, which was geared toward early growth-stage companies. When we met, I think the breakthrough was just the unique story. People don’t usually realize how fragmented, how large, how offline the trucking industry is. So YC viewed this as a major disruptive play.

We were excited to work with them because they’re an incubator and accelerator, so their whole system is designed around helping founders succeed. They had so many unique programs that helped us be successful and grow that I had never seen from other investors at the time.

You mentioned that a good way to decide on a direction for a startup was to compare industries where there’s lots of money against companies that are trying to disrupt those industries. Is that still a good method?

I think it is a really good method. It would be interesting to pull a list of industries and find out how much money is spent in those industries, and then see how many companies are going after those industries. AngelList is a great resource to find the newest, most innovative companies that are going after these spaces.

Before I ever started the company, I wrote this article in Quora that went viral and was published by Forbes. It was an answer to the question: How to come up with a startup idea. I wrote this really extensive theory, basically a playbook. So when I was going to start my own company, I was like, I should eat my own dog food. I went back and used my own process, and I can now say it’s credible because it works.



Coinbase is testing a real-time employee feedback system. It sounds rough.

Coinbase is testing a real-time employee feedback system. It sounds rough.

The crypto exchange Coinbase is testing a real-time workplace feedback tool called Dot Collector, created by hedge fund billionaire Ray Dalio, founder of Bridgewater Associates.

Slack your colleague to say hello? Perhaps you’ll be rated as being off-task. Babbling too much in a meeting? You’ll get a low rating in efficiency. Tired after a night awake with your sleepless toddler? That’s a low enthusiasm rating. At any moment of the work day, you can rate and be rated, watching as your scores fluctuate up and down.

Per a report from The Information, Coinbase has been using Dot Collector since the first quarter of the year, emulating a less intense version of the practices at Bridgewater.

Dalio is notorious for promoting a culture of “radical transparency” at Bridgewater. The fund has been known to videotape almost everything that happens at the office for reference, and employees walk around with iPads to grade each other on their adherence to Dalio’s Principles, a collection of over 200 rules for business and life.

With the Dot Collector program and Zoom plug-in, any company (like Coinbase) can invite their employees to judge each other’s performance in real time, even while working remotely.

“It’s hard to have an objective, open-minded, emotion-free conversation about performance if there is no data to discuss. It’s also hard to track progress,” Dalio wrote in a tweet about the product. “This is part of the reason I created the Dot Collector.”

But this data-driven, “emotion-free” approach to management ignores the humanity of the people behind products.

Feedback fatigue

Using Dalio’s Dot Collector app, Coinbase employees rate their colleagues based on how well they adhere to Coinbase’s cultural tenets, which include “positive energy,” “efficient execution” and “clear communication.”

An assistant management professor at the Wharton School, Samir Nurmohamed, told TechCrunch that there hasn’t been much research conducted on these kinds of feedback systems — but if a system works in one workplace, that doesn’t guarantee it will translate effectively in others. Plus, different workplaces and industries have different standards for churn. At Bridgewater, 30% of employees leave within 18 months of their start date. While Dalio might be okay with that, other managers might find that concerning.

Bridgewater aims to “champion diversity,” but Nurmohamed says that in the workplace, people are more likely to think favorably about people who share similar views, which may impact the way they rate their colleagues.

“So, if people from marginalized backgrounds are making comments that are not in line with my own values or ideology, I might suddenly penalize them when it comes to these rating systems,” he explains. “The question becomes then, how are these ratings being looked at? If there’s systemic bias across the board, how will they evaluate that data?”

Proponents of Dot Collector argue that the system levels the playing field, since it allows lower-level employees to provide honest feedback to managers. But that transparency comes at the cost of constant surveillance.

“From a managerial standpoint, it might be helpful, right? We know that sometimes, those with more power are more likely to dominate the conversation in meetings, rather than listen,” Nurmohamed says. “But those with less power are already getting worried about what kind of impression they’re giving off. It could induce a sense of fear in the organization.”

These systems may also cause a feeling of “feedback fatigue,” where workers become desensitized to criticism and are less likely to benefit from such constant feedback.

“Sometimes people just have a bad day — something went wrong at home last night, or maybe it’s a virtual meeting and their technology wasn’t good,” Nurmohamed adds. “It could be very exhausting for people at work to constantly get this feedback.”

‘A cauldron of fear’

Dalio credits Bridgewater’s unique and divisive corporate culture as its secret to success — his hedge fund is the largest in the world. Coinbase is similarly known for its company culture, which controversially bars employees from political activism.

In June 2020, a group of Coinbase employees staged a walk out in response to CEO Brian Armstrong’s refusal to support Black Lives Matter. Then, weeks before the 2020 U.S. Presidential election, he instituted this apolitical policy and offered severance packages for those who didn’t want to stay.

Over at Bridgewater, Dalio’s “radical transparency” isn’t always effective in practice either. In one high-profile case, an employee filed a complaint against the company, calling it “a cauldron of fear and intimidation.” That doesn’t seem too surprising a description of a workplace where workers are given iPads for the explicit purpose of judging each other.

According to a 2016 report in the New York Times, this employee alleged that he experienced sexual harassment from his supervisor, but kept this a secret out of fear that he wouldn’t be promoted. He suddenly withdrew the complaint jointly with Bridgewater, but then the National Labor Relations Board filed a separate complaint, arguing that Bridgewater was preventing employees from speaking about negative treatment due to the rigorous NDAs they sign upon employment. Bridgewater reached a resolution with the National Labor Relations Board over the complaint, but like most of what goes on at the hedge fund, the final agreement is secret.

Dalio has denied these claims, noting that “If Bridgewater was really as bad as the New York Times describes, then why would anyone want to work here?” (Money, probably.)

“It can sound mean, crazy or like a cult to people who don’t know what it’s really like,” Dalio said to Business Insider in 2016. “Some people describe it as being like an intellectual Navy SEAL. Others describe it as being like spending time with the Dalai Lama to obtain self-discovery. To me, it’s a wonderful community of people who bust their asses to be excellent.”

It’s still up in the air whether or not Coinbase will continue using Dot Collector. For now, companies using the tool must decide whether they hope to emulate Bridgewater — a profitable, yet intense company — or hone a culture where employee happiness is a priority.

What the ‘nonpolitical’ startup leader teaches us about company culture

Citizen Ray: Bridgewater’s Ray Dalio is the wise uncle you wished you had



Sequoia is the latest VC firm telling you to take the downturn seriously

Sequoia is the latest VC firm telling you to take the downturn seriously

Sequoia takes things seriously. The storied venture firm is known to react to macroeconomic events with grand memos aimed at portfolio companies and sometimes the entrepreneurship scene at large.

Most recently, Sequoia created a 52-slide deck, first reported by The Information, titled “Adapting to Endure.” The document reads like a follow-up course to its infamously ill-timed “Coronavirus: The Black Swan of 2020” memo of March 2020.

The firm is not always right in its prognostications — maybe why it stuck to internal musings instead of a Medium post this time — but it does do a service in providing a snapshot of how one of the most weathered, and successful, VC firms of all time thinks about a looming downturn.

TechCrunch+ is having a Memorial Day sale. You can save 50% on annual subscriptions for a limited time.

“Our intention in gathering today is not to be a beacon of gloom,” the deck reads. “But we also believe that winning in the years ahead is going to depend on making hard, decisive choices confronting uncomfortable challenges that may have been masked during the exuberance and distortions of free capital over the past two years.”

Sequoia’s advice largely followed the same script that other venture firms have been using: extend runway, focus on sustainable growth and recognize that an economic recovery may be a ways away. There were, however, some tidbits that stood out, such as a subtweet that I’m guessing is meant for Tiger Global and a precise explanation of how founders should define fluff these days.

The capital provider blames capital itself — capitalism, huh?

One of the clearest subtweets within the deck is Sequoia’s commentary on cross-over funds. The firm says that “cheap capital is not coming to the rescue” at this moment:



Can Andreessen Horowitz prevent the next crypto winter?

Can Andreessen Horowitz prevent the next crypto winter?

Hey everyone, and welcome back to Chain Reaction.

Last week, we talked about the rough road ahead for Coinbase. This week, we’re talking a bit about Andreessen Horowitz’s multibillion-dollar bet on web3’s continued viability. Read on to check out the latest episode of the Chain Reaction podcast as well.

To get this in your inbox every Thursday afternoon, you can subscribe on TechCrunch’s newsletter page.

$4,500,000,000

May hasn’t been the kindest month to crypto. Consecutive weeks of drops have left whispers of the “buy the dip” going cold as industry players buckle down for winter.

A brief moment of warmth came this week, when Andreessen Horowitz (a16z) announced that it has raised $4.5 billion for its fourth crypto fund, more than doubling the size of its last fund. It’s the largest institutional crypto firm to date and comes at an interesting time…

Amid crypto market turmoil, Andreessen Horowitz announces $4.5 billion web3 fund

While VC firms the world over have been pressing their portfolio companies to cut burn rates and buckle down for bad times, many crypto founders were already prepared for this moment, having raised stupid amounts of money from VCs solely for the purpose of not having to raise cash later. While tech broadly has not suffered a prolonged recession since the early 2000s, crypto startups have endured much tighter windows of boom and bust. Despite plenty of coffers being full, it’s fair to assume that a crypto winter will put plenty of venture-backed startups on ice.

A16z didn’t let too many details fly on their exact plans for this fund, but they did interestingly detail that they’re planning to devote at least $1.5 billion of the fund to seed deals. That’s an awful lot of seed deals — likely hundreds of them — coming from a single fund.

The question is whether the rest of the venture ecosystem around crypto sticks around. Plenty of hedge fund entrants to the markets have gotten burned and other traditional venture firms seemed to sheepishly poke their head into this cycle and may already be close to the door.

For a market that’s been frothing with dumb money for a couple years, any sort of pullback is going to leave startups in a lurch, and a16z’s focus on young companies with their new fund may be tough for companies eyeing growth dollars.

neumann, new man?

Now that Lucas has given you the breakdown on a16z, it’s Anita here to get you up to speed on the latest episode of the Chain Reaction podcast, where we unpack the latest web3 news, block-by-block for the crypto-curious. 

We talked plenty about Andreessen Horowitz, which really said “what downturn?” this week, announcing the largest dedicated crypto venture fund ever. Granted, much of that capital was probably raised before the crypto markets started tanking, but we unpacked the storied firm’s strategy and discussed a somewhat questionable investment it just made in a well-known grifter’s new blockchain startup (hint: he kinda looks like Jared Leto).

For our guest, we had investor Grace Isford join us from Lux Capital to talk about the infrastructure that works behind-the-scenes to make web3 tech run smoothly.

Subscribe to Chain Reaction on Apple, Spotify or your alternative podcast platform of choice to keep up with us every week.

Does WeWork’s Adam Neumann really deserve his second chance?

follow the money

Where startup money is moving in the crypto world:

  1. Singapore-based metaverse app BUD closed $36.8 million in a Series B round led by Sequoia Capital India.
  2. NFT-based social platform Primitives raised a $4 million seed round with Redpoint as lead investor.
  3. NFT fraud detection startup Doppel scored $5 million in seed funding led by FTX Ventures.
  4. DAO community management platform Common raised $20 million from Spark Capital, Polychain and others.
  5. Carbon credit tokenization protocol Flowcarbon raised $70 million through a Series A round led by a16z as well as a private token sale.
  6. Blockchain infrastructure provider StarkWare closed a $100 million Series D led by Greenoaks Capital and Coatue.
  7. DeFi personal finance app Pebble raised a $6.2 million seed round led by Y Combinator.
  8. Digital asset manager Babel Finance scored $80 million in a Series B round from Jeneration Capital, 10T Holdings, Dragonfly Capital and others.
  9. NFT social marketplace Bubblehouse nabbed $9 million in seed capital from Cassius Family, SV Angel, angel investors Steve Aoki and David Guetta and others.
  10. Crypto tax prep software ZenLedger nabbed $15 million in a Series B led by Parafi.

the week in web3

Everyone’s been talking about a cooldown in the crypto markets, but as reporters covering the space, we’ve felt busy as ever. It seems like venture investors are keeping busy, too, trying to put massive amounts of capital to work that they raised largely before the markets went south. 

As for the firms currently raising new funds, they seem to have conviction that there are still lucrative opportunities out there in the crypto startup world, and that this downturn will simply separate the winners from the losers. (They’re hoping their portfolios already contain the winners.)

  • A16z’s whopper of a web3 fund speaks to their commitment to the space, even if other firms pull back, investor Arianna Simpson told Lucas in an interview.
  • Soona Amhaz’s Volt Capital announced a $50 million crypto fund, just over a year after it debuted its $10 million vehicle. Marc Andreessen and Chris Dixon are amongst the familiar faces backing Amhaz. Lucas has the details here.
  • Anita wrote about some Twitter drama that unfolded this week as the founder of fintech startup, Eco, took to the platform to accuse the founders of Y Combinator-backed Pebble of copy-pasting its business model. The battle between the startups, which both use stablecoins to provide yield, caused some to question the investment approach taken by accelerators like YC.

TC+ analysis

Curated analysis that you can read on our subscription service TC+ (written by TC’s Jacquelyn Melinek): 

Terra’s community passes proposal to revive LUNA cryptocurrency following stablecoin-led implosion
Nine days ago, Terraform Labs (TFL) founder Do Kwon shared a plan to revive the Terra Ecosystem after its stablecoin and cryptocurrency nosedived earlier this month and brought down the crypto markets with it. Now, the plan has passed approval from Terra’s community for a new Terra 2.0, which not everyone is certain will succeed. Will history repeat itself? 

StarkWare quadruples valuation to $8B in 6 months, closing round in choppy market
Crypto markets may be choppy right now, but big players are still raising capital as demand for scalable blockchain infrastructure remains strong. The most recent example of that fact is StarkWare Industries, which just raised $100 million at a valuation of $8 billion, the company shared on Wednesday. The new capital came just six months after the unicorn closed a $50 million Series C, quadrupling its valuation from $2 billion to $8 billion.

Mastercard exec is bullish on crypto, sees mass adoption ‘sooner rather than later’
Both large and small companies are retaining their crypto optimism despite the recent market correction in the developing technology space. Mass adoption of blockchain technology and digital assets is going to happen sooner rather than later, according to Mastercard’s VP of new product development and innovation, Harold Bossé. But there are a number of challenges right now stopping corporations from entering the market, Bossé said, like lack of senior management understanding and regulatory concerns, among other aspects. 

Luna Foundation Guard adviser says Do Kwon hasn’t reached out since UST crash
 There seems to be no shortage of news around Terraform Labs’ cryptocurrency LUNA and algorithmic stablecoin TerraUSD (UST) imploding. Last Friday, one of the four advisers to Luna Foundation Guard (which was Terra’s Singapore-based nonprofit dedicated to protecting UST), told TechCrunch there have been no meetings with Terra founder Do Kwon since UST crashed. How does the adviser keep up with the Terra situation? Through Twitter like everyone else, he said. 

Thanks for reading and please subscribe to Chain Reaction on TechCrunch’s newsletter page,

Lucas and Anita



Friday, 27 May 2022

Manish Maheshwari, former Twitter India head, leaves new startup

Manish Maheshwari, former Twitter India head, leaves new startup

Manish Maheshwari, the former head of Twitter India, is leaving the startup he co-founded just six months ago following disagreements with co-founder and investors.

“I am moving out of Invact to first take a break for a few months and then pursue new opportunities. It is heartbreaking for a founder to leave the startup, like a mother leaving her baby. I am going through the same emotion,” Maheshwari, who served as the startup’s chief executive and managing director, wrote in a tweet.

Maheshwari left Twitter late last year to start Invact Metaversity with Tanay Pratap, a former Microsoft employee, TechCrunch first reported. The startup, which has raised $5 million to date, seeks to launch a metaverse where cohorts of students could take classes. But the startup has so far struggled to ship a product as the two founders locked horns and disagreed on the vision, according to a startling email Pratap sent to its investors earlier this month.

Maheshwari, who owned more equity of the startup than Tanay, according to a person familiar with the matter, assumed broader control over the startup’s direction.

“We are now standing at crossroads exploring possibilities such as (a) cutting the burn rate and pivoting to another idea, (b) letting one of the founders take full charge, or (c) returning the unspent capital to investors,” Maheshwari tweeted earlier this week following media reports of the tension between the two founders.

Things suddenly became more complicated after Gergely Orosz, an early backer of Invact, publicly called out Maheshwari for allegedly not listening to any investor, reneging on exit agreements and holding the startup “hostage.”

“Manish has been bullying Tanay into silence, threatening to use the company funds of $1.7M – including our angel investment money – to sue him, should Tanay speak ill of him in public,” Orosz wrote to investors this week in an email, reviewed by TechCrunch.

“This broke the straw with me, as that includes my money: which I never invested to be used as an instrument of a cofounder bullying the other one. Manish keeps walking back on promises he made to named investors, then breaking them. Names investors were meeting the terms he put up to accept the exit settlement so the company can continue operating. He then walks back on these terms. He has been doing this for weeks,” he wrote.

Invact raised a $5 million round earlier this year from Arkam Ventures, Antler India, Picus Capital, 2am VC and dozens of angel investors at a valuation of $33.5 million. It was putting together a new round at a $100 million valuation, according to a source familiar with the matter. Later it explored sale of the business, but could not find a buyer.

“The decision to part ways was not an easy one, but ultimately, Manish and Tanay had diverging visions for the company’s long-term prospects. Invact will continue and under leadership of Tanay will pursue its vision to make quality education accessible via Metaversity,” the startup said in a statement today.

In his Twitter thread today, Maheshwari described Tanay as “brother.”



Joywell Foods raises $25M to bring sweet proteins to market

Joywell Foods raises $25M to bring sweet proteins to market

When consumed in moderation, sugar is not bad for us, and humans’ ability to detect sweetness is etched into our DNA, but with the abundance of it in today’s food and drinks, we are getting more than we should.

Companies have created alternatives to sugar over the years, like Stevia, while others have tapped into technologies to come with new ways of sweetening foods in a way that is healthier. Some of those include Supplant, DouxMatok, MycoTechnology and Sensient.

Food tech startup Joywell Foods has been in this sector for nearly a decade, building up a sweet proteins platform and is nearing the commercialization of its first products, boosted by a cash infusion of $25 million in Series B funding.

The round was led by Piva Capital, with participation from B37 Ventures, Global Brain Corporation and existing investors Khosla Ventures, Evolv Ventures, SOSV’s IndieBio and Alumni Ventures.

As a part of the investment, Piva partner and co-founder Adzmel Adznan will join Joywell’s board. The new investment brings Joywell’s total funding to $38 million since the California-based company’s inception in 2014 by Alan Perlstein and Jason Ryder.

Joywell uses a proprietary microbial fermentation process to produce sweet proteins that are nearly identical to those found in exotic fruits and berries. Though these proteins taste like sugar — and are around 2,000 times sweeter than sugar —  they don’t impact blood sugar levels or gut microbiomes, CEO Ali Wing told TechCrunch.

“We’re biologically predisposed to crave sugar, so it’s not something we should actually feel so bad about,” she added. “If you really look at consumption today, over 70% of consumers are actively seeking to reduce sugar in their diets and the No. 1 culprit for that is daily added sugars. We just need to solve it differently, and that’s the beauty of technology and what we are doing.”

When Wing joined the company about a year ago from the healthcare industry, Joywell had just one protein. Now it has about half a dozen proteins derived from fruits, like the serendipity berry and katemfe fruit, and is working on a wide range of products. Wing said she was not able to go into exactly what those products were, but the company is already working on canned drinks and foods, like chocolate, and will essentially be able to plug into any food category that includes sugar.

In addition to providing a healthier alternative, Joywell is also out to be more sustainable, saying that “for every one percent reduction in sugar production results in approximately 650,000 acres of sugar cane fields saved.”

The company is still pre-revenue, so there was not much in the way of growth metrics Wing could speak about, but she did say she joined to lead Joywell’s commercialization, and the new funding will accelerate the R&D and scale-up efforts.

“A lot of what I’ve done in my nine months here is a lot of consumer testing around multiple product formulations to build the insights for the launch,” she added. “The most important next steps are very much in the regulatory process and have several regulatory milestones in front of us. We are also adding proteins and will be building a pipeline around those.”

IoT and data science will boost foodtech in the post-pandemic era



Indian fintech Jar eyes $50 million investment

Indian fintech Jar eyes $50 million investment

Indian fintech Jar, which closed a $32 million financing round in February this year, is in talks to raise new funding as it looks to scale its product and expand its offerings.

The Bengaluru-headquartered startup is engaging with several investors to raise about $50 million at a $350 million valuation, according to four people familiar with the matter. Asked for comment on Wednesday, Misbah Ashraf, co-founder of Jar, said it was too early to comment.

Tiger Global, an existing backer of Jar, is positioning to lead the one-year-old startup’s Series B funding, the sources said, requesting anonymity as the details are private. Folius Ventures and Paramark are also engaging to invest in the new round, the people said.

Jar, which operates an eponymous app, is helping millions of Indians begin their investment and saving journeys. The startup has amassed over 7.5 million registered users, it disclosed to investors last month.

Nearly a billion Indians have bank accounts today, but they have never made any investment. Part of the reason is confusion, explained Nishchay Ag, co-founder and chief executive of Jar, in an earlier interview with TechCrunch. “Their world is littered with ads of different financial instruments,” he told TechCrunch in an earlier interview.

For decades, banks and mutual funds have been trying to tap India masses with their products. Despite the hundreds of millions of dollars they have sunk in to win the market, they have been able to court fewer than 30 million individuals.

“Manufacturing a product is one thing and being able to sell it is another. All these institutions are good at manufacturing. For selling, you have to be aligned with the individual’s persona, idiosyncrasies, insecurities, cognitive load and the cultural significance. That’s an art and science by itself,” he said then.

Jar is tackling this by choosing a financial instrument that is familiar to most Indians: gold. For over a century, Indians have been stashing gold in their houses, treating the yellow metal as both good investment and status symbol, he said.

To say Indians, who have a private stash worth $1.5 trillion of the precious metal, would be an understatement. For generations, Indians across the socio-economic spectrum have preferred to stash their savings — or at least a part of it — in the form of gold. In fact, such is the demand for gold in India — Indians stockpile more gold than citizens in any other country — that the South Asian nation is also one of the world’s largest importers of this precious metal.

Jar fetches a tiny amount each time a user makes a transaction. It rounds up an individual’s daily spendings and puts some money aside as investment. Users’ investments in digital gold is backed by physical gold of the same amount and they can choose to withdraw that much gold or liquidate their investments at any time.



Thursday, 26 May 2022

FlexID gets Algorand funding to offer self-sovereign IDs to Africa’s unbanked

FlexID gets Algorand funding to offer self-sovereign IDs to Africa’s unbanked

Much of the world’s attention around blockchain is on the highs and lows of cryptocurrency values. Startups like FlexID remind us that distributed ledger technology has the potential to play other roles, including offering trusted records of identities without the need for a centralized authority.

One of the startups working towards this vision is Zimbabwe’s FlexID, which is building a blockchain-based identity system for those excluded from the banking system due to their lack of identity documents. FlexID’s idea has won it funding from Algorand, a blockchain protocol created by Turing Award-winning cryptographer Silvio Mical. The two parties didn’t disclose the size of the investment.

African countries have made great strides in promoting financial inclusion over the past decade, but it’s still early days. More than 60% of adults in sub-Saharan Africa are unbanked, according to World Bank estimates for 2021.

Several years ago the numbers were starker. In Zimbabwe, for instance, only 30% of the adult population had access to any financial services as of 2014. The number of bank accounts in the country stood at 1.5 million in 2016.

There’s a general conception that increasing access to financial services in a country leads to improvement in people’s economic welfare. And that’s what the Zimbabwean government sought to accomplish when it introduced a financial inclusion scheme from 2016 to 2020.

The effort achieved some success: the percentage of the Zimbabwean adult population with access to financial services increased to 55% while the number of bank accounts rose to 8.5 million in 2020.

However, there’s still plenty of work to be done in this regard. When people have little or no confidence in the financial system, or they don’t know certain financial services that meet their needs exist or they don’t have formal identification documents to seek these services, achieving optimal financial inclusion can prove herculean.

These are issues that affect Africa and emerging markets, not just Zimbabwe. FlexID’s self-sovereign identity (SSI) platform takes a decentralized approach and gives users control over their personal information — not common in Africa where other upstarts provide centralized solutions, such as Smile Identity, YC-backed Identitypass and Dojah.

With funding from Algorand, FlexID aims to make its decentralized identity network available in emerging markets where over one billion people are estimated to lack formal identification, the startup said in an announcement. Zimbabwean serial entrepreneur Victor Mapunga founded FlexID in 2018 out of his frustration with the banking system.

FlexID is giving users a blockchain wallet that stores their verificable credentials. Verification is done on-chain through Algorand, which bills itself as a solution to the blockchain trilemma of security, scalability, and decentralization. FlexID will also be integrating with other Algorand decentralized apps (dApps).

FlexID’s investment from Algorand comes at a time when African blockchain startups are pulling in huge sums from investors. A recent report said over 40 African blockchain startups raised a total of $127 million in 2021. This year has already seen some eye-popping investments such as Mara’s $23 million seed round from investors like crypto exchange giants Coinbase and FTX.

Though FlexID provides service in the identity space, the overarching sector its solution and most blockchain platforms fall under is fintech. Companies like FlexID are reducing people’s dependency on cash and remittance fees via crypto, lowering barriers to setting up an account via crypto wallets, and addressing the continent’s documentation challenge.

Decentralized identity startup Spruce wants to help users control their sign-in data

The promise of managing identity on the blockchain



Report: Substack, the highly hyped newsletter platform, has ditched plans for a Series C

Report: Substack, the highly hyped newsletter platform, has ditched plans for a Series C

Substack, the five-year-old newsletter platform that has aggressively positioned itself as a disruptive force in media, has abandoned efforts to raise a Series C round, the New York Times is reporting today.  According to its sources, Substack held discussions with potential investors in recent months about raising $75 million to $100 million at a valuation of between $750 million and $1 billion.

Substack, based in San Francisco, was most recently valued at $650 million after closing a $65 million Series B round in March of last year led by earlier investor Andreessen Horowitz (a16z). It had earlier raised a $15.3 million Series A round led by a16z in 2019.

Substack originally launched as a way to turn newsletters into a paid subscription business, inviting anyone with an interest to hop on the platform and start writing for however much they want to charge their readers. Writers were — and still are — encouraged to write for free; those who charge a subscription pay 10% of what they collect to Substack, with Stripe, its payment processor, collecting another 3%.

The company later added support for podcasts and just this month, it rolled out its own podcast player, along with new moderation tools, leaderboard categories and more. As CEO Chris Best told TechCrunch several years ago, Substack’s goal has always been to allow its users to create their own “personal media empire.”

Whether the business is capable of generating meaningful revenue despite these bells and whistles is the question investors might have been asking themselves.

The company told Axios late last year that the top 10 writers on the platform collectively generate $20 million in annual revenue. According to the Times, Substack told investors that, overall, it had revenue of about $9 million last year. (It told the Times in a separate story last month that it has hundreds of thousands of paid newsletters now on the platform.)

That’s not a lot of revenue for a company boasting a $650 million valuation. Substack also faces some inevitable churn, with some writers leaving the platform owing to Substack’s hands-off content moderation policy or for competing platforms that take a smaller cut. Other writers discover the economics aren’t compelling or simply burn out.

The Times notes that Substack is one of many outfits right now facing new headwinds as investors snap their checkbooks shut amid rising interest rates that have severely dented tech stocks and slowed growth in the U.S. and global economies.

Still, if Substack’s broader fortunes should change, it would be the second, highly hyped consumer company in a16z’s portfolio to have truly captured the public’s imagination, then lost momentum.

Clubhouse, the audio-based social network, has, like Substack, gathered the bulk of its funding across numerous rounds led by a16z. Just as Substack became a point of fascination for media companies (in addition to the Times, it has been covered by Vanity Fair, the New Yorker, and others), Clubhouse similarly dominated the headlines for several months during the pandemic thanks in part to appearances on the platform by Elon Musk, Mark Zuckerberg and a16z’s high-powered partners themselves.

Yet as the worst of Covid seemingly passed and those once drawn to the service now socializing again in person, Clubhouse has reportedly seen sign-ups plummet.

Andrew Chen, a general partner focused on consumer tech for a16z, led both deals.

Substack has raised $86 million over three rounds of funding, according to PitchBook. In addition to a16z, it is backed by Fifty Years, Y Combinator, and entrepreneur Audrey Gelman, who cofounded the co-working startup The Wing.

Substack declined to comment when reached earlier this afternoon. In the meantime, a spokesperson for the company told the New York Times that the change in the company’s fundraising strategy does not impact its hiring plans.”My comment is www.substack.com/jobs,” she told the outlet.



After buying Bungie, Sony goes all in on live service games

After buying Bungie, Sony goes all in on live service games

After buying Bungie earlier this year, Sony is moving fast to integrate the company’s expertise into its broader vision.

In an investor presentation Thursday, Sony Interactive Entertainment CEO Jim Ryan outlined a near future for the company that focuses heavily on continually updated online games inspired by Destiny, Bungie’s long-running hit.

Sony expects to spend 49% of its PlayStation Studios development budget on live service games by the end of the year. By 2025, Sony plans to bump that to 55%, up from just 12% in 2019. By the end of 2025, Sony projects that it will have 12 different live service games of its own, up from just one now.

The company declined to answer questions from TechCrunch about which of its franchises might get the live service treatment, but the presentation cited God of War, Horizon Forbidden West, Spider-Man, The Last of Us and Uncharted in a list of its noteworthy single-player first-party titles. Sony-owned studio Naughty Dog has been hiring for a standalone multiplayer game, so a new game could indeed emerge out of The Last of Us or Uncharted’s virtual worlds.

Bungie is best known for creating the Halo franchise, though most recently the studio has become synonymous with Destiny, a fresh sci-fi series the company developed after leaving Halo with Microsoft. Like Halo, Destiny is a futuristic first-person shooter with precise, satisfying mechanics. But Destiny’s real appeal is Bungie’s impressively seamless online multiplayer experience that brings players into central hubs where they can explore and run missions together, making it more akin to World of Warcraft than a traditional FPS like Call of Duty.

Three years after splitting with Microsoft, Bungie signed onto a 10-year partnership with Activision. The company eventually split with Activision, too, paving the way for Sony to snap it up earlier this year for $3.6 billion. Bungie will remain a standalone game studio on the other side of the deal, à la Naughty Dog.

Just after the Bungie acquisition was made public, Sony CFO Hiroki Totoki confirmed the company’s plan to weave Bungie’s live game service know-how into its broader gaming offerings.

“The strategic significance of this acquisition lies not only in obtaining the highly successful Destiny franchise, as well as major new IP Bungie is currently developing, but also incorporating into the Sony group the expertise and technologies Bungie has developed in the live game services space,” Totoki said.

In bringing Bungie under its wing, Sony is buying a lot of knowledge about how to build online multiplayer games that expand over time, keeping players coming back for more. This kind of experience, usually called a “live service game,” explains how Fortnite is still one of the world’s most popular games years after it first made headlines for luring casual gamers and hardcore streamers alike into its colorful, chaotic world.

It’s also an extremely lucrative business model. Live service games generally have an in-game storefront that invites dedicated players to buy digital goods like character skins and clothing. Those assets cycle in and out, creating scarcity and nudging players to spend real cash to collect them. In a given content season, players in games like Destiny 2 and Fortnite can pay to earn a special set of these cosmetic virtual goods with a “battle pass.”

Some live service games, like Final Fantasy XIV, require players to pay for a monthly subscription to access the most recent content, while others are free to play. Happily, these days, most free-to-play games no longer require a paid subscription through Microsoft or Sony’s own premium subscription services.

Live service games add expansion content over time, and players often pay to access the new stuff, even while the core game remains mostly the same. For game makers, the real allure is maintaining a game that can live and grow over time, raking in revenue for years rather than burning bright and fizzling out a few months postlaunch.

Sony snaps up ‘Halo’ and ‘Destiny’ creator Bungie for $3.6B



Canon takes another stab at the mirrorless market, with R7 and R10

Canon takes another stab at the mirrorless market, with R7 and R10

Camera giant Canon has had an impressive SLR camera lineup since the mid-’70s and has made a successful transition from film-based SLR cameras to the digital realm. The company has been less successful in the mirrorless space but recently picked up the sales numbers. The company claims that it took the top spot for market share for mirrorless cameras in Q1 this year. It just launched two new cameras — both with APS-C imaging sensors — that the company hopes will solidify its position in the market.

The R10 packs 24 million pixels into its large APS-C sized imaging sensor, while the R7 ups that number to 32 million. Both cameras can shoot at an impressive 15 frames per second running on the mechanical shutters and include optical imaging stabilization into its diminutive bodies. The R7 can shoot 4K video at up to 60 frames per second, while both cameras can shoot at 30p and 24p as well. Shooting with electronic shutter only, the R7 can shoot 30 frames per second worth of stills — very impressive indeed. It opens up a number of new workflows that make it possible to capture every critical moment.

EOS R7 and EOS R10 provide enhanced video functions and accessories, such as the new multifunction shoe with EOS R7, while still maintaining ease of use. With a robust mirrorless system at their core, these cameras provide users with a powerful telephoto reach through both still images and video, by virtue of the 1.6x crop factor that comes with APS-C sensor cameras.

Alongside the camera bodies, Canon is releasing a couple of new RF-S lenses. With names that really roll off the tongue (the RF-S18-45mm F4.5-6.3 IS STM and RF-S18-150mm F3.5-6.3 IS STM), these will be the standard zoom lenses for the EOS R7 and EOS R10 cameras. The RF-S 18-45mm provides an 18-45 mm focal length, but users will experience a field of view equivalent to 29-72 mm lens coverage on a full-frame camera. The RF-S18-150mm lens is a longer-range standard zoom, equivalent to 29-240 mm lens coverage on a full frame. While ideal for the new EOS R10 and EOS R7 APS-C sized sensor bodies, these lenses can be used for any R-series camera.

​​​​​​​The Canon EOS R10 camera body will be available for $979, and the Canon EOS R7 camera body will be available for $1,499. The lenses are $499 for the 18-150 mm and $299 for the 18-45 mm. All products will be available in late 2022.



Former Binance executives launch $100M crypto fund

Former Binance executives launch $100M crypto fund

A group of former executives from Binance, one of the largest cryptocurrency exchanges globally, has created a $100 million venture fund, the team told TechCrunch on Thursday.

Old Fashion Research (OFR) – whose name is derived from the classic cocktail – was founded in late 2021 by managing partners Ling Zhang, who was previously the vice president of M&A and investments at Binance, and Wayne Fu, former head of corporate development at the crypto exchange.

The fund will be focused on the metaverse and bringing greater crypto adoption to emerging markets like Latin America and Africa, Zhang said to TechCrunch.

“We are keen to work with builders for the long run,” Zhang said. “We are very Southern Hemisphere-focused. … We’ll go after all of the emerging markets, but it’s our goal and vision to accelerate adoption there.”

While at Binance, Zhang was responsible for many acquisitions and strategic investments, including FTX, Multicoin Capital, and CertiK.

The capital was raised by limited partners, traditional VC funds, family offices, and angel investors both inside and outside the crypto ecosystem, with global gaming platform WEMIX leading the investment, Zhang noted.

The project was operating in stealth mode until today, but has invested in over 50 blockchain projects to date, including blockchain analytics platform Nansen, trading platform WOO Network, move-to-earn NFT game Genopets, and Africa’s largest gaming community, Metaverse Magna.

“We’re strong believers in the metaverse, not just user activity but the assets perspective,” Zhang said. “We believe web3 will be the very first step to revolutionize [our] own identities and asset management.”

Wei Zhou, the former CFO at Binance, will serve as a strategic adviser and investor of OFR, and its venture arm will be supported by partner Jiang Xin, who led Binance Labs’ and Launchpad’s major investment deals such as Axie Infinity, Moonbeam, Alpha Finance, and others.

“The market conditions have cooled down a bit since the beginning of the year and we’re thinking it is more of an opportunity than a challenge for OFR,” Xin said. “Since [the fund] is newly started, we can find cheaper and more reasonable valuations during the market downturn and a lot of bubbles will be coming out.”

Zhang said she has noticed a growing interest of funds coming into the crypto space or new funds launching to invest in crypto after they saw the potentials of blockchain technology and crypto ecosystem.

“More and more VCs are looking for ways to invest in crypto projects,” Zhang said. “Crypto itself is a revolution and disruption of the capital plate. It’s no longer centralized in a top-down approach.”

Earlier this week, Andreessen Horowitz announced its fourth crypto-focused fund for $4.5 billion. The fund, more than double the size of its third fund of $2.2 billion, will dedicate one-third of its mega-fund to seed deals exclusively.

In recent weeks, there have been a number of mega-funds launched into the crypto space, which shows that even though markets might be down, venture capitalists are taking advantage of the sentiments and continuing to invest in the space.

When asked whether the market’s bearish sentiments will scare traditional firms away from continuing their crypto investments, a16z general partner Arianna Simpson told TechCrunch that “it’s likely other firms will pull back,” but that “the size of our new fund speaks to the level of excitement and belief we have in this category.”

Zhang echoed that, noting that market downturns provide investors looking to deploy capital into the space with clarity on which bets to make.

“This is the best timing for us to identify the long-term believers in the crypto space and is the best timing to make investments and incubate more projects,” Zhang said.

Money, meet mouth



Revenue-based financing platform Bloom secures $376M Series A led by Credo and Fortress

Revenue-based financing platform Bloom secures $376M Series A led by Credo and Fortress

European revenue-based financing is experiencing as much of a boom as it is in the US, with the likes of Pipe reaching a multi-billion valuation. UK-based startup platform Bloom has now secured a £300m / $376m financing round led by Credo Capital and Fortress Investment Group LLC (NYSE:FIG), making it one of the better-funded revenue-based lending businesses in Europe. It has now raised a total of £307m.

Bloom competes with companies like Wayflyer in Ireland, which has raised a total of $636.2M, according to Crunchbase, and Clearco in the US which has raised $681.5M.

The revenue-based lender says its pricing model and “pay-as-you-go” features set it apart from similar startups which have arisen in the last 18 months.

CEO, James Hickson said in a statement: “We are not another revenue-based lender. We estimate that ecommerce merchants have incurred £125-£200 million in excess fees based on the current pricing status quo. That’s money that could have been used for more stock, increased ad spend, or customer incentives. We saw an opportunity to innovate rather than simply join the herd.”

Founded during the pandemic in Luxembourg by Hickson, Bloom concentrates its service on online commerce companies.

Christopher Dailey, Credo Capital added: “Demand for eCommerce lending has expanded in Europe. We wanted to make an investment in a platform that was moving the product forward and combined all of the great technology and analytics you expect with a really differentiated product and approach.”



Wednesday, 25 May 2022

Indigov helps connect besieged lawmakers and their oft-frustrated constituents

Indigov helps connect besieged lawmakers and their oft-frustrated constituents

Republican lawmakers are facing growing anger over the deadliest mass shooting at an American school in nearly a decade yesterday, with many of their constituents expressing frustration over their repeated votes against even modest gun control reforms.

Social media can’t solve the problem. Indigov, a three-year-old, 70-person New York-based startup, can’t solve it either, but the outfit, a service platform for public officials, can likely help. Its entire raison d’être is giving lawmakers and others a way to communicate with those who voted them into office, as well as provide more assurance to these constituents that their voices are heard — and that their emails and tweets and letters are being read by an actual human.

How does it work? We talked with Indigov’s founder, Alex Kouts, last week, ahead of yesterday’s tragedy, and he explained Indigov’s software-as-a-service offering as a kind of multichannel communication platform with three components, all of which work together to better empower public officials to “ingest, triage, and resolve any type of request or opinion or message that comes into their office.”

First, Indigov build websites that Kouts says are far more responsive to voters than many you might find when looking up a pubic servant. The company declines to name its customers publicly, though we were pointed to a New York congressman’s website that immediately pushes a menu to visitors, asking if they’d like to request a meeting or sign up for a newsletter or help their community, among other options.

A second, behind-the scenes piece of Indigov’s offering is a workflow management system that receives inbound messages from email, websites, social media, and phone calls to which the company applies exact text-string matching in scouring their content, Kouts says.

Kouts — who worked briefly at Brigade, a since shuttered civic tech startup cofounded by famed founder Sean Parker  — claims the tech is more accurate than natural language processing or machine learning, where error rates can range from 2% to 5%, which is just enough to be hugely problematic. “It could mean a constituent could receive a response that’s not appropriate and gets screenshotted and posted on Twitter and becomes a scandal,” says Kouts, adding of text-string matching that it has an error rate of “basically zero.” (He also maintains that by dramatically improving the ability for staffers to process inbound content that they can respond to constituents in “a matter of hours” and not months.)

The third piece, according to Indigov, is simply better management of a public servant’s list of constituents so that she or he can more proactively communicate with them.

As with any young startup, how much traction Indigov can gain remains a question mark. The young company, by our estimate, currently has hundreds of customers based on its claim that “190 million Americans are supported” through its technology.

In the meantime, larger CRM vendors, including Salesforce, see the same opportunity that Indigov does to replace the janky legacy systems that are saddling the efforts of many public servants.

Naturally, Kouts believes Indigov is a better fit given its growing expertise with government officials and voters. “A decent amount of large vendors are out there trying to get into space, but our customers need an enormous number of hyper-specific features, and whereas CRM systems are designed to push a customer toward buying something, the government fundamentally doesn’t do that.”

Kouts further argues that the market Indiegov is chasing is enormous — and still wide open. He points specifically to FedRAMP, the Federal Risk and Authorization Management Program created in 2011 as a way to ensure the security of cloud services used by the U.S. government, saying: “I don’t think venture capitalists or most people understand that the government, [through initiatives like FedRamp], is just now beginning to embrace cloud-based SaaS for the first time . . . there’s a window that’s just open for companies like us that are completely rewriting the script of what govtech is.”

It’s a persuasive pitch. It seems to have worked, too. Today, Indigov is today announcing that it has garnered $25 million in Series B funding from Tusk Venture Partners, Wicklow Capital, Valor Equity Partners and earlier backer 8VC. The round brings the company’s total funding to more than $38.3 million to date.

Asked why drew him to the deal, Bradley Tusk of Tusk Ventures notes that he previously spent over a decade working in local, state and federal government before becoming a political advisor and investor and seen a lot of companies promise to fix government. Indigov, he insists, is the “only platform I have seen that is actually providing a solution to a massive problem facing elected officials” and that “allows them to spend more time addressing individual needs of constituents.”

They may need it more than ever after yesterday’s school shooting in Texas. Today, on social media and elsewhere, many Republican lawmakers are being taken to task, including for accepting contributions from the National Rifle Association. Among them is Senator Mitt Romney, who yesterday tweeted his “prayer and condolence” in the aftermath of the school rampage.

Critics, including Jemele Hill, a contributor to The Atlantic, noted in response to the tweet that Romney has previously accepted more than $13 million in contributions from the NRA, according to data compiled by the Brady Campaign to Prevent Gun Violence.

A spokesperson for the senator said in a statement afterward that, “No one owns Senator Romney’s vote, as evidenced by his record of independence in the Senate.”

But the statement and many others were soon overwhelmed by angry Americans who joined millions of others online to ask when the shootings will stop. Among them: NBA Coach Steve Kerr, whose own father died after being shot decades ago and whose open aggravation with pro-gun senators, during a pre-game interview, quickly went viral.



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