Tag: early stage

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Sweden’s EQT Ventures closes a its third fund at €1.1B to double down on European and early-stage startups

Startups might be in a funding midwinter, but the ray of sun shining on some VCs speaks of a different trend. EQT Ventures, the venture fund arm of Sweden’s investment giant EQT making early-stage bets on startups primarily in Europe, has closed its latest fund and filled its coffers with 1 billion euros (and $1.1 billion in total commitments).

This brings the total raised by EQT to €2.3 billion since the EQT Ventures launched in 2016. To date, the firm has backed some 100 companies, with 18 exits and nine “unicorns” (Wolt, Small Giant Games, Einride, Handshake, Netlify and Instabox/Instabee are in that group). This third fund fund was raised and closed relatively quickly, between February and June of this year (with final paperwork coming in since then), and there have been some 13 investments made out of it so far, Juni, Nothing, Knoetic and Candela among them.

The larger EQT has emerged as one of the key deal makers in recent months where larger privately-held companies have been looking for funding and/or exit opportunities. These have included the recent purchase of New Jersey-based Billtrust for $1.7 billion and leading an investment round for Knoetic.

But it has also put money where its mouth is, so to speak. Earlier this year sister subsidiary EQT Growth announced a $2.4 billion fund largely aimed at scaling startups out of Europe. Growth has backed the likes of Vinted, Epidemic Sound and Mambu.

The plan will be to use this latest EQT Venture fund for similar geographical ends: the firm wants to use it to make investments of between $1 million and $50 million, with about two-thirds of all investments falling in Europe, and the rest across the U.K. and the U.S., said Lars Jörnow, a partner at the firm.

In terms of categories, EQT Ventures will remain generalist but ideally is on the lookout for startups that address “where society has problems,” Jörnow said. That includes greentech investments, transportation and the future of work, he said (specifically areas like tools and platforms for freelancers).

The firm’s close of the fund speaks to what appears to be a bifurcation in the world of tech investing. While funds and firms that focus on much larger and later stage companies might be seeing big losses in their portfolios, there remains confidence among those that back the funds, the limited partners, that investors focusing on earlier (and smaller) stages still have a lot of opportunity ahead. “The higher the valuation before the contraction, the bigger the fall,” he warned.

It helps too to have a history of good bets. Jörnow noted that the company’s target had actually been €900 million. His takeaway of the relatively quick close and exceeding that figure:

“Investors think it’s a great idea to back VCs that are investing in early stage with a much longer holding period,” he said. On average, EQT expects exits to be made in 2031, “when the world will look different than today,” he added. “If you back the best founders, they will grow startups regardless of the current macro climate.”

Sweden’s EQT Ventures closes a its third fund at €1.1B to double down on European and early-stage startups by Ingrid Lunden originally published on TechCrunch

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Stanford moonshot promises near-term profitability with no-code magical mushrooms, ft. Plaid of X

Hello and welcome back to Equity, a podcast about the business of startups, where we unpack the numbers and nuance behind the headlines. As you can tell by the headline of this episode, this is a bonus episode all about Y Combinator Demo Day (and the terms we heard most often during the two-day affair).

Natasha and Alex jumped on Twitter Spaces to talk through our favorites of the batch, geography changes, and diversity shake-up that included less women getting funded batch over batch. Below are some of the posts we pulled from:

Y Combinator week is busy, but we made it through! Talk Monday!

Equity drops every Monday at 7 a.m. PDT and Wednesday and Friday at 6 a.m. PDT, so subscribe to us on Apple Podcasts, Overcast, Spotify and all the casts.

Stanford moonshot promises near-term profitability with no-code magical mushrooms, ft. Plaid of X by Natasha Mascarenhas originally published on TechCrunch

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Our 10 favorite startups from YC’s S22 Demo Day: Part 2

And we’re back! Yes, today was the second day of pitches from Y Combinator, a U.S. startup accelerator with global outreach that conducts demo days twice a year. This year’s Summer 2022 cohort gave us hundreds of batch companies to consider. For participating founders, it’s a critical day; for investors, it’s a buffet; for us in the media, it’s a chance to look at lots of companies, each hoping to be the next hit from the well-known startup backer.

TechCrunch has coverage on discrete areas of startup work that were represented, including geographic breakdowns, a dive into AI startups and a look into fintech’s future. But here, we’re detailing a few startups from the batch that caught our eye.

Where is Y Combinator startup-hunting in 2022?

As always, this list is for fun, in no particular order — just startups that stood out to TechCrunch reporters for one reason or another. You can find all of our coverage here and our favorites from the first day here. An entire list of all startups in the batch, provided by YC, is here as well.

Our 10 favorite startups from YC’s S22 Demo Day: Part 2 by Kyle Wiggers originally published on TechCrunch

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The biggest moonshots in YC’s S22 batch

Do bigger checks lead to bigger swings? Y Combinator’s latest participants are the second batch to land a $500,00 check as part of the accelerator’s recently refreshed standard deal. And while the accelerator says it only looks at founders when investing in startups, not sector, category or idea, more money in the pipeline may be empowering enough to attract a different cohort of founders.

With this in mind, this year’s batch provides a glimpse on what a cohort of YC-approved founders are prioritizing amid a downturn, pandemic, high inflation and ongoing war. The results are diverse — and we’ve already seen ways it’s impacting the future of fintech, crypto and artificial intelligence.

Our 11 favorite companies from YC’s S22 Demo Day: Part 1

Below, TechCrunch decided to draw out the biggest moonshots of the batch, with the above factors in mind. Because we don’t all bet our potential legacies on faux fish during a looming recession. Without further ado, let’s get into who made the cut.

Beyond Beyond Meat: Numi’s faux fish

Brands like Beyond Meat and Impossible have shown there’s demand for fake meat that “bleeds,” but are hordes of fish-eaters prepared to dine on imitation crustaceans?

The plant-based seafood industry is teeny compared to the global seafood business today, but demand is on the rise as brands explore a range of ingredients to see what sticks — like tomato for tuna (Ocean Hugger) and konjac for scallops (The Plant Based Seafood Co). Joining the fray is Numi, a YC-backed startup that’s using a “combination of soy, pea and lentil protein” and “precision fermentation” to prepare something resembling shellfish.

Numi’s products are still in development, but the company is already boasting about a moonshot-sized goal — to capture 30% of the seafood market in 10 years. That’s a whole lot of potential mouths to feed; seafood consumption is poised to nearly double by 2050, per researchers at Stanford. But in light of the industry’s many environmental ills, including overfishing, trash, emissions and waste, it sure seems like a new wave of convincing faux fish companies would do some good.

– Harri Weber

Solving optimization problems with bespoke hardware

Optimization problems are the bane of many companies’ existences. For example, shipping and logistics providers have to figure out on a daily basis which products can ship in which containers — and indeed, how many containers they need in the first place. According to one source, 85% of Fortune 500 companies use mathematical optimization in their operations.

Enter Integrated Reasoning, a startup that claims to be developing hardware for solving these sorts of problems in the cloud. Founded by longtime engineers, there’s little that’s been made public about the company’s plans. But the co-founders did reveal during Demo Day that they have an initial product targeting the knapsack problem, an optimization problem where, given a set of items — each with a weight and value — one must determine the number of items to include in a collection so that the total weight is less than or equal to a given limit and the total value is as large as possible.

Optimization problems might sound like an odd market around which to build a company. But there’s clearly a customer base, and Integrated Reasoning is promising the moon. The company claims its hardware could make it up to 100x faster and 10x cheaper to solve problems like scheduling airline pilots or packing shipping containers, which — if accurate — might just enable Integrated Reasoning to make a splash in lucrative industries.

– Kyle Wiggers

Flying for dummies

Learning to fly is a common bucket list item, but it is costly, time-consuming and difficult. This causes a large number of student pilots to drop out of training before they reach their dreams. And sadly, some of those who do get their license will end up having fatal accidents due to mistakes of theirs.

Airhart Aeronautics is working on building airplanes that are easier and safer to fly, thanks to semi-autonomous flight control systems that don’t require “stick and rudder mastery.” It’s too early to tell when Airhart will reach product-market fit, but its proposal to “make flying to Tahoe as easy as driving to the grocery store” did sound like a strong audience fit for YC’s Demo Day.

It may seem late to build airplanes anyone can fly when other startups are focusing on airplanes nobody has to fly. Companies working on delivering autonomous aircraft include Merlin Labs, Pyka, Reliable Robotics, Volocopter and Xwing, some of which are already far along in their journey. But we are still calling Airhart a moonshot, because semi-autonomy does seem to have better odds of landing on time than full autonomy, especially for private flying.

– Anna Heim

I’d like to buy 10% of your future earnings, please

It’s hard to be an athlete, and finding enough time and resources to become a professional athlete takes time and cash dollars. Moonshot is letting angel investors invest in the futures of athletes, in exchange for a share in their future prize money. It’s kind of similar to what Trendex is doing (although Trendex lets you invest in all sorts of talent — including musicians).

So why is this a moonshot? Part of me can see this as the future; if you are a promising athlete, getting an early injection of cash could make or break your career, and I recognize that for some folks, this may be the only way to make their dreams come true.

Another part of me just can’t get over how fantastically bleak it is to essentially enable people to sell a part of their future net worth to investors. I know we are living in late-stage capitalism, but however I turn this, I can’t make this concept feel like anything but rent-seeking. I’m sure the founders didn’t specifically design their companies to make an unequal world even less equitable, but we’re one or two market cycles away from this getting truly grim.

– Haje Kamps

Let’s try this DTC healthcare thing again, but better this time

The direct-to-consumer healthcare space was hot, then not, as sector unicorns have scaled back ambitions upon hitting growth pains. That’s why I was surprised, then impressed to see Almond take the stage at Y Combinator Demo Day this week. Almond is a healthcare platform that is trying to make ObGyn care faster through in-person and telehealth services.

“We’re rebuilding back-office tech that saves physicians time, and we’re hiring a wider range of care providers roles, which let us deliver better outcomes to patients and reduce the amount of time it takes to get their issue resolved,” the company said via Y Combinator’s website. Membership for Almond is an annual $250 fee, similar to a OneMedical-type business model, and founding members get the first year for $150. Any visits and lab charges are billed to insurance.

The co-founders have a balance in backgrounds. Carly Allen, co-founder and chief brand officer, has been head of production for campaigns that help brands like Coca-Cola, Nike, Chipotle and Bonobos, while Tara Raffi, co-founder and CEO, has startup chops through building McKinsey’s internal tech incubator and consulting with large U.S. hospital systems. As we know from struggles faced at Ro, Hims and other platforms, the DTC healthcare space needs a good balance of smart, accessible branding and efficacy, so let’s see how Almond executes.

– Natasha Mascarenhas 

Future flight, fuck yeah

For my moonshot selection I want to highlight a few companies from the recent batch that have wings, and want to shake up moving stuff around.

When Boom came around, I figured it was a cool idea that would go precisely nowhere. But, to my incredibly excited chagrin, the company is still in business and has raised buckets of money. Perhaps there is a venture market for the future of flight.

Velontra wants to build a “hypersonic space plane,” which is a good idea. There’s less friction that high up, and you can zip around pretty quick without air holding you back. Velontra, sweetening the deal, wants its planes to be able to “takeoff from anywhere in any weather.” Excellent and perfect, no notes.

Seaflight Technologies is doing the opposite. Instead of wanting to fly very high and very fast, it wants to fly lower and slower. The company is building electric “autonomous wingships” that fly very close to the ground. Per its pitch, if I understood the regulatory nuance, being so close to the ground clears the air — ha! — when it comes to government oversight.

Naturally these companies will each require lots of capital, and have real tech risk to their makeup. But that’s what makes them good — you can’t shake up flight without a bucket of money and a big vision. And while the 737 is great, and I will always be fond of it for shuttling me around my home country for so very long, and so very far, I am ready for something faster and higher. And for my delivered goods, the inverse.

– Alex Wilhelm

Honorable mentions

  • Ult, which describes itself as an “Uber for gamers” startup. The startup charges users to get them matched with fun (or challenging) competitors. Also, it has a great website.
  • Drip, which describes itself as a “BNPL for Brazil.” The BNPL space is difficult for a variety of reasons, and to still be disrupting in the category — despite public market rumblings — is impressive. “While Affirm is creating the habit in the US, Brazilians already split in installments 30% of their retail payments,” the company said via Y Combinator’s website. “With Drip, they now split payments without eating into their credit card limits and earn better rewards.”
  • Coverage Cat, because it’s a damn cute name and a damn difficult category to build in. But, selfishly, sign us up for consumer optimized insurance!

The biggest moonshots in YC’s S22 batch by Natasha Mascarenhas originally published on TechCrunch

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Where is Y Combinator startup-hunting in 2022?

Like the startup ecosystem itself, accelerators change with time. Techstars has expanded to a network of programs, to pick one example. Y Combinator, perhaps the best-known startup accelerator, has also evolved. It now offers more capital to chosen companies than ever and is in the process of working out how its program will operate in a post-COVID world.

Like much of the venture capital landscape, Y Combinator has shrunk slightly this year. The current cohort of startups in the U.S. program is around 40% slimmer, featuring only 240 companies compared to the preceding batch’s 400.

That change had us curious about the second-order effects of admitting fewer companies into the program: What would a smaller batch do to the geographic makeup of the companies at the accelerator?

Before we dive into the data, a caveat concerning remote work: Per the accelerator, more than one-third (35%) of startups in its present program are remote, and even more (37%) are what it calls “remote-friendly.” Remote work and partially remote teams dilute the importance of where a company is “based.”

This is not a new trend. COVID led to a host of startups being born in a remote-first world, meaning that the hiring in the last few years has often been distributed. Never has it meant less to be based in, say, the United States, if your team is spread across countries and time zones. Still, where a company is domiciled still means something and tells us where companies are basing themselves to best collect talent, capital and exit possibilities.

There’s only one Colombian startup in the current batch, which takes things back to pre-COVID levels.

Let’s see where Y Combinator’s most promising young tech companies come from to get a loose barometer of where the accelerator is finding the most intriguing founders to back.

Global overview

Given its smaller size, the fact that this year’s Y Combinator group represents fewer countries is not a surprise. Per the investing group, the Summer 2022 class has startups from 34 countries, down from the 42 countries in the Winter 2022 cohort.

Notably, that decrease is only slightly less than 20%, which is about half the 40% drop in the total number of startups accepted into the program, as we mentioned above. It appears geographic diversity in terms of the countries represented did not decrease linearly with the reduction in batch size.

Its diversity may not have shrunk as much as some might expect, but this cohort is still more centered on the United States than before. Per the company, about 58% of its present batch are based in the United States, up from 50% in the Winter 2022 cohort.

Where is Y Combinator startup-hunting in 2022? by Anna Heim originally published on TechCrunch

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Our 11 favorite companies from YC’s S22 Demo Day: Part 1

Y Combinator is back, this time with a slightly smaller batch of startups. Still, the massive accelerator has two days’ worth of upstart tech companies to show off. TechCrunch is tuned in, as always, and in keeping with our historical coverage, we compiled a list of our favorites from the first day’s pitches.

For more on Y Combinator’s latest batch, TechCrunch examined the cohort’s diversity makeup, looked into fintech bets from the group and examined what’s going on in seed-stage crypto.

These are startups that stood out to us for one reason or another. They aren’t endorsements and sometimes are just for fun. The idea is that you might not have time to sit through over 100 pitches — so let us filter a bit and highlight some of the best companies from the first day of Y Combinator’s Summer 2022 Demo Day.

We’ve tagged each selection with the TechCrunch author who picked it and provided a link to the company, along with notes on what it does — and why we think it’s cool. Let’s have some fun!

Our 11 favorite companies from YC’s S22 Demo Day: Part 1 by Anna Heim originally published on TechCrunch

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Here’s where YC’s latest batch of founders are placing fintech bets

Y Combinator’s latest cohort of founders have opinions on the future of fintech. One-fifth of the accelerator’s Summer 2022 batch, which spans 240 companies, is working on solving issues in the financial space. The pitches range from building the Square for micro-merchants in Latin America to creating a way to angel invest in your favorite athlete.

And while the pitches are diverse, some concentrations show key ways that a group of vetted entrepreneurs are thinking about the landscape’s shift in light of finicky venture markets, a downturn, and some public market meltdowns. The most popular problem area among this batch’s fintech cohort has to do with payments, which is unsurprising. The story really begins with which focus made second place: neobanks.

Thank U, Neobanks

This year’s cohort includes 11 neobanks, a trend we saw start to take off with YC’s W22 cohort that also included 18 such companies. That’s a substantial increase from the 1-2 neobanks per batch that made the cut for YC in both 2020 and 2021, suggesting that the accelerator is doubling down on founders who are aiming to build the next “one-stop-shop” for fintech services.

The neobank founders it has chosen to back this summer tend to have highly specialized knowledge of niche markets, which gives them the potential to capture the entire wallet share of specific populations they know well rather than trying to cultivate a broader but perhaps less deep appeal. Nearly half of the neobanks in this batch are based in the United States, while the remaining are spread across the U.K, Swizerland, India, Nigeria, Senegal and other geographies.

Lagos, Nigeria-based Pivo is focused on freight carriers in Africa, Hostfi is looking to capture the market of short-term rental hosts and Pana says it is targeting the 62 million Latinos living in the U.S., just to name a few examples from the latest batch. The three companies are founded by a Nigerian port operations manager, an Airbnb superhost and a LatAm-focused digital banking exec, respectively, showcasing the deeply focused approach of these founders on more niche segments of the market where they have prior experience.

YC’s concentration of neobanks feels somewhat contrarian to general fintech sentiment these days. There’s been a slew of examples of why neobanks – despite being low-cost, savvy banking solutions – don’t work well: despite mega venture rounds, there are large losses. Strong growth is possible, but often at the cost of more and more operating expenses.

Yet, while some saw sector big losses as the end of neobanks, Chime offers hope. The well-known neobank became EBITDA-positive in late 2020, showing that the cohort can get to a place of economic health and shutting down some critiques. Still, the banking world is an increasingly competitive space, as practically every fintech company fights for consumer wallet share. Neobanks are unlikely to be a winner-takes-all market – rather, more specialized upstarts may be better suited to cater to the specific needs of a given community in a holistic way. And this batch supports that realization.

International fintech remains a key focus

India has always been Y Combinator’s favorite geography to invest in, outside the United States. Last batch, YC’s India founders appeared concentrated mostly within the financial services sector, around 30% when you consider that out of 36 Indian startups, 11 were in the fintech world. Then it was a contrast from prior showings, in which most of India’s YC startups fell into the B2B services category.

While last year showed a bigger focus on fintech, this year the courses slightly reversed. Out of the 21 startups YC backed in India this cohort, about 40%, or 8 startups, are in the fintech category. Fintech is still a big area of focus, but B2B did take the lead for the geography: 47% of YC’s India startups are focused in the enterprise world this year.

The slight shift away from Indian fintechs is not necessarily indicative of YC caring less about fintech startups globally. The accelerator backed eight fintech bets in Latin America, worth 57% of its total wagers in the region this season. The Latin American fascination with financial technology continues, it appears, perhaps supercharged by the success of high-profile Brazilian neobank Nubank, which went public and officially became Latin America’s most valuable listed bank late last year.

African fintech has a similar story, with five of the accelerator’s eight investments working in the fintech space. There’s Anchor, a remote banking-as-a-service platform that has already raised over $1 million for its platform, Bridgecard, a card issuer for Nigeria, and erad, a non-dilutive funding platform for Middle East startups.

The future of friendly investment terms

Despite a bit of a slowdown in fintech funding for private companies this year compared to the ultra-hot 2021 market, the sector remains much hotter than it was in years past, accounting for nearly 21% of total venture deals as of Q2 2022. YC follows the same trend, with pre-seed perhaps getting a boon in enthusiasm from the fact that late-stage businesses like Stripe or publicly-traded fintechs, like Robinhood and Affirm don’t feel exactly stable right now.

Here’s a breakdown of the percentage of fintech companies in the accelerator’s past few batches:

 

As with any sector, we could see competitive tensions within the accelerator itself start to breed depending on where startups go from here. Crypto startups Eco and Pebble, both YC participants, had a feud earlier this year when Eco’s CEO made allegations against the Pebble founders for “copy-and-pasting” significant parts of his company.

The overall fintech space is a bloodbath right now as the market has become saturated with companies that all play in similar areas trying to fight for the same sets of customers. YC’s startups are no exception – only time will tell if their approach of focusing in on international companies operating in niche markets will pay off or if consolidation in the sector has already gone too far for new upstarts to see breakout success.

Here’s where YC’s latest batch of founders are placing fintech bets by Natasha Mascarenhas originally published on TechCrunch

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Let’s talk about party rounds

When it comes to types of venture capital instruments, party rounds are as controversial as they come. A party round is an early-stage financing round, usually occurring between the pre-seed and Series A stages, that includes a laundry list – or “party” – of individual investors. It’s different from a more traditional round, which may look like it’s led by one or two institutional investors with a few participating investors also taking part.

The investment vehicle has been around for over a decade and has been a subject of debate for just as long. The positives are obvious: With more investors on their cap table, startups have more avenues for distribution, introductions and advice throughout their lifecycle.

The cons are more complicated. Is the party-round investment as helpful as capital from fewer, more commitment sources? Are there too many cooks in the kitchen? Is it a negative signal that this startup had to raise from dozens of people instead of one high-conviction partner? During a downturn, is a party round all about the confetti and no allergen-friendly appetizers?

Party rounds are either the dinner party of your dreams or the one where no one shows up

While the argument is nothing new, the current market introduces dynamics that make party rounds a little more complex than just bringing a few of your favorite founders and thought leaders onto your cap table.

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Founders, whales and the sea change in the entrepreneurial energy

Hello and welcome back to Equity, a podcast about the business of startups, where we unpack the numbers and nuance behind the headlines.

This is our Wednesday show, where we niche down to a single topic, think about a question and unpack the rest. This week, Natasha and Alex asked: Despite all the dollars and deals out there, does a drop in activation energy change how many entrepreneurs we’ll see in the early-stage market?

But, we’re not alone! Found co-hosts Jordan Crook and Darrell Etherington hopped on the mics to do a rare cross-over episode with us. They spend every week on Found talking to early-stage founders about everything from origin stories, to pivots, to some of the hardest decisions that leaders need to make these days. Big thanks to the duo for joining us, and without further ado, here’s what we got to:

  • Who is succeeding right now, and what are the types of founders that we’re seeing more often?
  • Is there anything that can be done differently when it comes to activating unlikely founders?
  • How do you square up a need for more business fundamentals with an asset class designed for rocketships?
  • Risk, luck and what the heck do whales and fizzy water have to do with this?

Equity drops every Monday at 7 a.m. PDT and Wednesday and Friday at 6 a.m. PDT, so subscribe to us on Apple Podcasts, Overcast, Spotify and all the casts.