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6 investors share where they draw the line when it comes to ethical issues

The venture capital industry doesn’t have the best track record when you’re talking about ethics.

Like most professions involving power and wealth, venture capital also sometimes attracts people for whom doing the right thing isn’t a concern. Limited regulatory oversight and a lack of transparency mean that investors can often get off scot-free for not factoring ethics into their investment philosophy.

We’ve all seen startups happily taking money from investors who back companies that have a negative impact on the climate or broadcast misogynistic rhetoric. Sometimes, we also get venture firms raising capital from foreign governments that don’t have the best track records surrounding issues like human rights.

But not every investor is a bad person, of course, and it seems as though the industry is taking steps to clean up its act — albeit slowly. Startups and investors are increasingly paying attention to what kind of people they want to work with and where they want their money to come from. Investors also looking for startups that won’t just make them money but have the potential to leave society and the planet in a better place.

To find out just how ethical venture capital is at the moment and how far it can still go, TechCrunch surveyed six investors about how they approach ethics in their day-to-day. We’re happy to report that all of them said the industry doesn’t do enough to police itself on issues surrounding ethics. They also wanted more to be done to make the industry fairer and better.

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Several investors said that having more transparency in the industry would help alleviate some of the ethical problems that continue to flourish, like bad actors being given seemingly endless chances and firms covering up questionable practices.

“Venture capital’s opacity presents significant barriers to effect self-policing,” Geri Kirilova, a partner at Laconia Capital, said. “Greater transparency in decision-making processes and capital flows, whether it’s voluntary or mandated by regulation, would help.”

Logan Allin, founder and managing partner at Fin Capital, agreed. He said that it would be nice to see some consequences and accountability from industry organizations like National Venture Capital Association (NVCA) or government entities like the SEC to help stop such issues from being repeated often.

But without regulation, many firms are taking matters into their own hands. While they can’t be responsible for fixing the industry on their own, they are personally keeping ethics top of mind as they invest and raise capital.

To get a feel for how some players approach different ethical issues, we surveyed:

Geri Kirilova, managing partner, Laconia

How much does a company’s potential to create positive social or societal impact influence your investment decisions? What if the impact of a startup could be negative?

Negative externalities, particularly detrimental social and environmental effects, are often deal-breakers for us. We are particularly averse to companies that exacerbate human exploitation, social and economic inequality (ironic coming from a VC, I know), and environmental harm.

Capital is never enough to make a business or relationship successful. Laura González-Estéfani, founder and CEO, TheVentureCity

How much should VC incorporate ESG metrics in their investment decisions?

The application of ESG frameworks to VC is hazy. VCs typically have a fiduciary duty to maximize returns for their LPs. If they believe ESG, however it is defined and applied to their investment process, positively impacts returns, they should incorporate it.

If ESG matters to a LPs’ mission, it seems logical that the VC’s investments, at minimum, should not be counterproductive to these efforts. But this question is better suited to the LPs themselves.

Do the ethics or reputation of another VC firm have an impact on your willingness to follow on their investment or co-invest?

Yes, they are a factor in our decision-making process, particularly regarding our risk analysis of the business.

How do you think about ethics when raising and accepting LP money?

Beyond following standard KYC/AML procedures, we have a high bar for alignment of ethics and values with our LPs. Our LPs are also included in our anti-harassment, non-discrimination, and diversity policy.

Does the venture capital industry do enough to self-police? What could be done to remove or deplatform bad actors?

Venture capital’s opacity presents significant barriers to effect self-policing. Greater transparency in decision-making processes and capital flows, whether it’s voluntary or mandated by regulation, would help.

How often do founder-related red flags scuttle an investment in a startup that otherwise appears to be an attractive investment?

If we are not confident in a founder’s trustworthiness and judgment, we will not invest.

Do you believe that founders can learn from past mistakes? Would you invest in a company led by someone with a troubled past?

We do believe founders are capable of learning from their mistakes.

Beyond the financials, what about a company compels you to invest?

Given our pre-seed and seed investment focus, the financials are never the most exciting element for us. We are drawn to mission-critical solutions, with some form of market demand validation, led by founders who have a deep understanding of the customers they’re serving and the ability to effectively build a big company.

How do you prefer to receive pitches? What’s the most important thing a founder should know before they get on a call with you?

We review all inbound submissions. The easiest way to submit is through this form. Founders can learn more about our investment process and strategy here.

Vital Laptenok, founder and general partner, Flyer One Ventures

How much does a company’s potential to create positive social or societal impact influence your investment decisions?

We believe that technology should be intended to change the world we live in for the better, not the other way around. Unfortunately, this is not always the case — for instance, facial recognition technology can be used both for beneficial purposes and for negative ones.

For us, it is crucial that the company we consider as an investment use the technology for good and [do so] responsibly. That is why we have a large number of edtech startups in our portfolio — we believe this industry will be transformed by startups all over the world.

What if the social or societal impact of a startup has the potential to be negative?

Technology is first and foremost a tool that can do both good and harm. That’s why we investigate the moral guidelines of the founders’ team very carefully — it ultimately determines the startup’s direction.

If we figure out that the founders are willing to compromise on some issues, we will definitely turn down the deal.

How much should VC incorporate ESG metrics in their investment decisions?

The VC industry has a huge impact on what our world will be like 10-15 years from now, so we think the industry should have higher ESG standards than it does today.

After all, startups that are supported by VCs today will be big corporations in seven to 10 years, and their products will be used by hundreds of millions of people.

Do the ethics or reputation of another VC firm have an impact on your willingness to follow on their investment or co-invest?

6 investors share where they draw the line when it comes to ethical issues by Rebecca Szkutak originally published on TechCrunch

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7 investors discuss how agtech can solve agriculture’s biggest problems

Climate change and geopolitical instability are wreaking havoc on agriculture. To gauge how VCs are responding to these issues, we spoke with 7 investors.

For starters, rising greenhouse gas emissions are driving punishing droughts and storms, which are harming crops, exacerbating food insecurity, and threatening countless livelihoods. At the same time, Russia’s invasion of Ukraine is rattling the world’s grain supply, driving up costs and further aggravating supply chains.

Even as these and other crises hammer the multi-trillion-dollar industry, startup investors see potential for huge returns with tech that could boost yields, slash emissions and mitigate waste.

“There are opportunities to develop [and] adopt new technologies all along the food value chain that will impact key issues like food security and emissions,” Adam Anders, a managing partner at Anterra Capital, told TechCrunch. Among the areas where he sees the biggest potential impact, the investor cited improving plant genetics, boosting the shelf life of more products, and putting digital tools in the hands of farmers.

Consumer behavior is another piece of the proverbial puzzle as climate literacy increasingly alters how folks shop.

“Over the last few years, we have seen skyrocketing interest in sustainability from consumers and food brands, and awareness over the negative impacts of agriculture continues to grow,” said Ting-Ting Liu, principal at Prosus Ventures. “People are not only paying more attention to agricultural-related emissions, but also how much land and water is required to support the world’s food supply, and the amount of run-off being generated,” she said.

Liu argued that this demand is creating strong tailwinds for businesses that strive to address agriculture’s environmental impact, ultimately driving more capital into everything from cellular agriculture to methane reduction solutions for livestock.

Still, agtech is not immune to some of the broader trends in venture.

While the value of agtech VC deals rose to 11.4 billion in 2021 from $6.5 billion in 2020, several investors told TechCrunch they’ve noticed a slow-down in agtech deals this year amid the wider tech downturn of 2022.

“2021 was a record year for VC across the board. In 2022, VC investments across the board are about 30% lower year-on-year, and I would expect a similar slowdown for agtech,” Monica Varman, a partner at G2 Venture Partners, told TechCrunch. “Over the medium to long term, however, I do expect agtech VC funding to grow, given supply chain challenges, traceability concerns, and advancements in enabling technologies in synbio and robotics,” she added.

Agtech investors are also still largely funding men. Out of the nearly $11 billion dispensed into agtech in 2021, 78% went to firms with all-male founders, according to Pitchbook. The disparity has only worsened so far in 2022, rising to 81% (out of nearly $7.3 billion) as of September 14, per the data firm.

To gauge whether (and how) VCs are responding to these issues and more, we reached out to:

Brett Brohl, managing partner, Bread and Butter Ventures

Agtech VC deal value rocketed from $6.5 billion in 2020 to $11.4 billion in 2021. Will this sort of growth continue?

It’s not going to continue in the short run largely because of macroeconomic factors you’re just not seeing — for example, many late-stage deals are going through recently — so in the short term, definitely not.

In the long run, the sector has a tremendous amount of opportunity and room for innovation, so with time, you will see continued growth and investor focus on agtech.

Agriculture is responsible for about a quarter of global GhG emissions. How has the climate crisis changed how you invest?

It is a huge reason deal value skyrocketed in 2020 and 2021. Investors understand that this challenge creates an opportunity. Agtech is not as mainstream as many other sectors, so we need more eyeballs and capital. If you are making the food system more effective and efficient, you are making it more sustainable.

We aren’t a big enough fund to finance a startup forever, and we depend on later-stage investors, so this attention and resulting influx of capital helps remove some risk from our portfolio.

Which emerging technologies, such as cellular agriculture and AI-powered robots, have the greatest potential to impact key issues like food security and emissions in the next decade?

We 100% believe in cellular agriculture, and are also huge fans of the robotics space, especially robotics that solve very specific pain points and have low BOMs.

Automation and computer vision will be transformative for agriculture over the next decade, particularly as food production is moved closer to the point of consumption due to food security concerns. Monica Varman, partner, G2 Venture Partners

We also love the packaging space — lots of packaging goes into the transportation and movement of food. We’re also excited about anything to do with logistics, manufacturing or transportation that makes the food chain more sustainable.

When investing in an agtech startup, which green flags do you look for? Are you open to backing founders who don’t have experience in the industry?

Investing in agtech startups is no different from any other company. A great team can take a C- idea, pivot, iterate and make it work. But a C- founder will run any idea into the ground, regardless of how good it is.

While founder-market fit can be a benefit to a company, great entrepreneurs are smart, have a great work ethic, are coachable, and know how to surround themselves with people who make up for their weaknesses. So industry experience isn’t a requirement for us.

Which areas of agtech have received the most attention from early stage founders in recent years? In which areas would you like to see more work done or investments?

The obvious answer is alternative proteins. So much capital has been invested and so many founders are building cool things in the space.

I’d love to see more attention paid to things that are a bit downstream, such as manufacturing, logistics, and the future of food retail. Over the last few years, you have seen traditional agtech investors move their thesis further downstream, so it is happening.

I’m also really interested in fintech applications in the agriculture space, like what Traive and Milk Moovement are doing.

What are you doing to fund under-represented founders in agtech?

We actively seek out investors, forums and networks that support under-represented founders, and invest or work with entrepreneurs that are a stage earlier than where we invest. We also maintain a diverse investment team — 75% of our fund are women.

Finally, we hold open office hours for anyone every week, and provide free public education through multiple channels to help founders level up.

Before the invasion, Russia and Ukraine accounted for about 28% of wheat and 15% of corn exports globally. How has the Russian invasion of Ukraine affected agtech VC dealmaking given its impact on the global supply chain and the world’s grain supply?

I don’t think it’s done much to early stage agtech founders or venture capital. The macroeconomic effect of the war has at least, in part, been a tightening of monetary supply, which will trickle down to early stage startups. However, the impact has not been significant at early stages yet.

Bayer bought Monsanto for $63 billion in 2018, and a year earlier, ChemChina acquired Syngenta for $43 billion. Today, Bayer’s market cap is less than that deal’s value, and China’s ambassador to Switzerland has called the Syngenta acquisition a bad deal for Beijing. Have the outcomes of these deals affected investors’ hopes for blowout late-stage exits?

I wouldn’t call these acquisitions of “modern” agtech companies. Monsanto has been around for 100+ years, and Syngenta was formed over 20 years ago, and even then it was a spin-off. Additionally, these happened in 2017 and 2018. Investment in agtech has exploded since then, indicating that the market does not think these two acquisitions are indicative of underperforming venture investments.

The outcomes of companies like Upside Foods, FBN and Indigo Ag will be far more important to the agtech ecosystem. Unfortunately, it’s a very tough market for late-stage companies right now, and that will slow exits and depress ROI on many venture investments, not just agtech deals.

How do you prefer to receive pitches? What’s the most important thing a founder should know before they get on a call with you?

I’m open to warm intros, thoughtful cold emails, or pitches during my open office hours. If you’re pitching me on a call, the number one thing is to be yourself.

Anything else you’d like to comment on?

I think the blurred lines between food tech and agtech are really interesting. What is agtech? It’s not just farm inputs, there is a lot more to it and that, to me, is exciting.

Monica Varman, partner, G2VP

Agtech VC deal value rocketed from $6.5 billion in 2020 to $11.4 billion in 2021. Will this sort of growth continue?

2021 was a record year for VC. In 2022, VC investments across the board are about 30% lower, and I would expect a similar slowdown for agtech.

Over the medium- and long-term, however, I do expect agtech VC funding to rise given supply chain challenges, traceability concerns, and advancements in enabling technologies in synbio and robotics.

7 investors discuss how agtech can solve agriculture’s biggest problems by Harri Weber originally published on TechCrunch

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8 investors weigh in on the state of insurtech in Q3 2022

Insurtech companies have been among the biggest victims of the public market selloff, especially those that went public in 2021. Notably, Metromile saw its valuation decline over 85% and was subsequently acquired by peer Lemonade, and it hasn’t been alone in losing a lot of value and being eyed by peers and incumbents.

All this M&A activity and repricing in the public insurtech cohort left us wondering about their private peers: Are the same trends at play, and to what extent?

Investors across North America and Europe agreed that while insurtech has suffered as investors sought out more profitable sectors, the sector is still alive and thriving. “I do not believe the insurtech market to be dead, because it is still a multi-billion-dollar market,” Hélène Falchier, partner at Portage Ventures, told TechCrunch.

“Short term, it might be more difficult to raise at valuations we have seen before the public market adjustment, but with a strong business model and an experienced management team that understands the market and growth KPIs, it is possible,” she said.

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While leagues behind fintech as a whole, insurtech startups have still attracted a significant amount of investment over the last few years — $43 billion between 2016 and 2022, according to a recent report. That level of interest can’t have vanished entirely, but there will definitely be winners and losers.

David Wechsler, a principal at OMERS Ventures, is clear that some private insurtechs will struggle to raise their next round of funding, but the downturn is not as bad as the doomers and gloomers make it out to be.

“We are simply seeing a reality check happen,” he said. “If the last round was done at too high of a valuation, the market will force it back in line. Unfortunately, there are many companies that should not have raised as much as they did, or perhaps don’t have sustainable business models. These companies will struggle to survive.”

In the absence of easy funding, the insurtech private market seems ripe for M&A, several investors pointed out. “As insurtech valuations have become more realistic, many companies are probing, looking for M&A opportunities,” Wechsler said. “I believe the next 12 to 18 months will have lots of interesting deals really invigorating the ecosystem and creating a lot more excitement for investors to come back in, and at the correct prices.”

This leaves us with questions: What seals the fate of private insurtech startups these days? Have some approaches entirely fallen out of favor? Which avenues enjoy new tailwinds?

To take the pulse of all things insurtech, we spoke with:

Martha Notaras, general partner, Brewer Lane Ventures

The public-market insurtech selloff has clearly trickled down to private dealmaking. Do you expect late-stage insurtech investment volume and valuations to fall further than what we have already seen this year?

The decline in valuations of the first batch of insurtech IPOs has changed the rules: Investors are more focused on proof of sales traction and time to profitability. Late-stage insurtech funding is now a lot more variable – everyone won’t get a trophy, as they did in 2021.

But good companies with strong leaders who are converting revenue to a path to profitability are continuing to get funded at mutually acceptable valuations.

Insurtech IPOs don’t seem to be on the cards for 2022. Does that make it OK for founders to say when fundraising that they are hoping their company will be acquired?

If startups are focused primarily on a trade sale, they need to be disciplined about how much capital they raise in order to deliver a good outcome for all.

VC return expectations might deliver valuations that a founder perceives as too low. That might mean some insurtechs could go for alternative funding sources that are less sensitive to exit valuations, including strategic investors, who are looking to gain non-monetary rewards as well as investment returns.

Regardless of what founders aspire to, not every startup gets to IPO even in the best times. And not all trade sales are at disappointing prices, as Adobe just showed with the Figma deal.

Who are the most likely acquirers of insurtech startups right now: Legacy insurance companies, or private equity funds?

These two sets of buyers are solving for different use cases, so both are likely acquirers of different insurtechs.

Smart legacy insurance companies are looking for insurtechs that have great technology, but not enough customers or premium volume to get the most value out of the technology. The legacy insurance companies will look to leverage technology that they wished they had created, across premiums that they already know how to sell.

For later-stage insurtechs that raised a subsequent amount of money at a high valuation, an M&A exit is unlikely without a price cut. Clarisse Lam, associate, New Alpha Asset Management

PE funds will look for insurtechs that can keep growing and can benefit from the classic PE approach of leveraging operations and bolting on other acquisitions.

Compared to 2021, when there was a greater focus on growth over revenue, which business models or approaches are now seeing lower investment interest due to unclear paths to profitability?

The mantra in 2022 is definitely “how and when can you get to profitability,” in contrast to 2021’s approach of “if you’re not growing the top line by over 5x, you’re not really trying.” DTC insurtechs with high CAC [customer acquisition cost] and no proprietary source of leads have a tougher time finding investors today.

I have always liked B2B insurtechs with recurring revenue models, and now other investors are focusing on these opportunities as well. But startups still need to make sure they are focused on markets that can deliver substantial revenue growth in order to achieve the profits that are now required.

Which insurtech business models have the most in-market traction today, and are those the same models that venture investors are investing in?

There are several MGAs and technology-driven, full-stack insurance carriers that have built impressive premium bases, including in newer risk categories like cyber. Venture investors have recently become more selective about investing in MGAs before they achieve scale. This caution reflects current public-market trading, as investors project forward to exit.

[Editor’s note: As David Wechsler previously noted in a guest post, “a managing general agent (MGA) is a hybrid between an insurance agency (policy sales) and insurance carrier (underwriting and assumption of the risk).”]

I see investor enthusiasm for B2B insurtechs with a recurring revenue model. Many of these startups are delivering efficiency and cost savings to traditional insurers, and those existing insurers have become more receptive to bringing in startups to solve difficult operating problems.

How does the insurtech landscape in emerging markets compare to developed markets? How does Europe measure up?

In emerging markets, insurtech is following the path of fintech, where we are seeing fast followers of models that have worked elsewhere. The pace of innovation and funding outside of the U.S. has picked up significantly in the past three years.

Historically, European insurtechs have had less access to funding than U.S. startups. I am starting to see insurtechs that started in Europe are targeting problems that are relevant regardless of geography. Some of these are getting impressive traction.

How much have early-stage insurtech deals slowed in 2022? Are they falling back to pre-COVID levels?

The reality of falling back to pre-COVID levels brings up a really good point: 18 months of rising valuations does not represent sustainable reality. So the doom and gloom overstates the issue.

That said, deals have slowed, and insurtechs that have raised in this environment are either stars, or have adjusted their valuation expectations to the new rules in the market. The other factor that is constraining external fundraising is existing investors providing bridge financing, either in the form of convertible notes or round extensions.

In some cases, this is postponing the inevitable. But the positive view is that the startup’s existing investors have faith in the vision and want to extend the runway until new investors get excited by the company’s prospects.

Deals are taking longer in 2022 because investors are doing more thoughtful due diligence. I am no longer hearing stories of startups getting term sheets following a 30-minute conversation. Our team is a proponent of value-add due diligence, seeking to ask questions that not only inform the investor, but also reframe the situation, providing new perspectives and insight for the operating team as well. This year feels like a time when investors are embracing due diligence, and I think the resulting investments will be a lot stronger as a result.

How do you feel about insurtech companies innovating beyond technology?

We have certainly moved beyond Insurtech 1.0, where it was enough to digitize an insurance transaction with an improved customer interface. Now, insurtechs are looking to use technology not only to distribute insurance more effectively, but to change the product and the risk profile of the product. This feels like the natural path of evolution, and it’s why the insurtechs today are even more compelling investments than the pioneers.

How is the insurtech sector responding to the climate crisis? What more can possibly be done with social impact more broadly?

You’ve hit on an area I am particularly interested in – the intersection of climate and insurtech. Yes, I have seen some innovations on climate. Insurtechs are offering parametric insurance, which can make difficult risks insurable. Others are tracking climate risk, and finding ways to neutralize climate risk that are not just cosmetic, like carbon offsets.

I hope to see more insurtechs addressing these truly hard problems. Today’s combination of technology, very granular data and access to processing power create the conditions for some strong startups. Insurtechs are going to have to be part of this effort; existing insurers have the will to change, but I think insurtechs will deliver the actual solutions.

Are you open to cold pitches? How can founders reach you?

Sure. All investors pass on more investments than they make, but I’ll do my best to respond quickly and thoughtfully. Reach me at martha@brewerlane.com.

David Wechsler, principal, OMERS Ventures

The public-market insurtech selloff has clearly trickled down to private dealmaking. Do you expect late-stage insurtech investment volume and valuations to fall further than what we have already seen this year?  

Yes, I suspect that in the public eye, earlier- and later-stage valuations will continue to decrease. However, this may be simply a product of deals working through the system. In other words, many of these deals are done or well underway and are yet to be announced. Strong companies that raised at realistic valuations over the past one to two years will not feel as great of an impact. There will even be up rounds.

We are simply seeing a reality check happen. If the last round was done at too high of a valuation, the market will force it back in line. Unfortunately, there are many companies that should not have raised as much as they did, or perhaps don’t have sustainable business models. These companies will struggle to survive.

Insurtech IPOs don’t seem to be on the cards for 2022. Does that make it OK for founders to say when fundraising that they are hoping their company will be acquired?

Absolutely. Selling a business can be a great outcome for both entrepreneurs and investors. However, the absolute dollars paid tend to be less than an IPO. As such, entrepreneurs need to raise capital accordingly.

If your business plan requires a tremendous amount of capital, you are limiting the number of potential acquirers. Entrepreneurs need to be thoughtful in showing how a capital-efficient model can result in building a business that is attractive to acquirers, and paint a realistic picture of who those acquirers might be.

Who are the most likely acquirers of insurtech startups right now: Legacy insurance companies, or private equity funds?

“Insurtech” is a broad category and refers not only to next-gen insurers, but also vendors of tools and technology for the insurance ecosystem. Potential acquirers include not only traditional insurance carriers and private equity funds, you also have tech vendors looking to go deeper into the insurance market.

8 investors weigh in on the state of insurtech in Q3 2022 by Anna Heim originally published on TechCrunch

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8 investors discuss what’s ahead for reproductive health startups in a post-Roe world

One of the most pressing issues the U.S. has to prepare for, perhaps, is the future it faces after the toppling of Roe v. Wade.

Come the midterm elections, voters will weigh in on candidates and, consequently, measures that will dictate abortion access and other human rights issues. The role venture capital must play in all of this is becoming clearer: There has been a push to fund more reproductive health companies, include healthcare access in ESG investments and reevaluate the safest places to open a business for women employees.

To get a clearer picture of what lies ahead, TechCrunch+ surveyed eight investors and learned what they think venture’s role should be in a post-Roe world. McKeever Conwell, the founder of RareBreed Ventures, noted the tenuous relationship between venture money and ethics. He said although there are some who might not care about human rights issues in relation to investing, he wants to double down on funding startups focused on reproductive health.

Theodora Lau, the founder of Unconventional Ventures, said she believes more venture investors should take political stances on issues. “Access to healthcare is a right; it’s not politics,” she said. “These are existential issues that should concern all of us, regardless of our role.”

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“Where legislation continues to lag, it’s important for technology to take a proactive stance to bring transparency to current and future innovations and mitigate the kinds of risks we see today.” Hessie Jones, partner, MATR Ventures

Meanwhile, Hessie Jones, a partner at MATR Ventures, said the due diligence process needs to go deeper to identify the risks of developing new technology. “Due diligence needs to expand past the point of founder ‘intentions.’ We have to ask ourselves: What is the potential that this technology can be used for other use cases beyond its current intention? What is the impending risk to people or groups?”

Finally, nearly everyone we spoke to is keeping an eye out for change that could come in November. “Vote,” Lau said. “With your voice, with your action and with your wallet.”

We spoke with:

Hessie Jones, partner, MATR Ventures

What was your initial response to the overturn of Roe? What are other impacts the overturn of Roe has had on your firm and investment strategy?

I grew up in the Catholic system, which vehemently opposed abortion and the right of women to decide what to do with their own body. I am also a Canadian, and our laws regarding abortion and the rights of the mother are very different than the U.S.

The Dobbs v. Jackson’s Women’s Health decision implies the rights referenced under the 14th Amendment — specifically, a woman’s right to privacy under the “due process clause,” which affirmed her right to choose whether to have an abortion — leaves all civil right precedents vulnerable to being overturned.

The assumed misinterpretation of the 14th Amendment in this opinion turns back the clock when it comes to the rights women have been fighting for years.

Where legislation continues to lag, it’s important for technology to take a proactive stance to bring transparency to current and future innovations and mitigate the kinds of risks we see today: Exposure of personal information, data surveillance and the use of personal information that will ultimately inflict harm on individuals and groups.

This is already happening, and now it has found its way into communities where reproductive data is leveraged against the data subjects.

Will the Dobbs decision affect the criteria you use to conduct due diligence?

Absolutely! Apps that have been used to help women, like Flow, Glowing and Cue, can be weaponized with warrants to identify those who are or may be seeking abortions. The data collected by these apps and Big Tech can be sold, breached or acquired via government warrants without taking into consideration the rights of the subject.

Due diligence needs to expand past the point of founder “intentions.” We have to ask ourselves: What is the potential that this technology can be used for other use cases beyond its current intention? What is the impending risk to people or groups? As well, we must, at the very least, demand privacy-by-design standards and the security of the infrastructure acquiring any personal data.

We must scrutinize founders’ intentions, how the data will be used, who the partners are, to what extent data will be shared and for what purposes. We’ve come to a perilous crossroads where technology has contributed to harms, and we now must put the onus on founders to be more accountable for what they’re building.

8 investors discuss what’s ahead for reproductive health startups in a post-Roe world by Dominic-Madori Davis originally published on TechCrunch

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3 investors explain why earned wage access startups are set to cash more checks

It always feels good to get paid, so it’s no surprise that a payroll model like earned wage access (EWA), which lets employees withdraw their accrued wages at any time, has exploded in popularity.

The pandemic certainly played a big role in helping people understand the benefits of being able to treat their accrued salaries like a small bank account. While wage advances and payday loans have been around for much longer, they serve a very different purpose. With EWA, since you’re only accessing money you’ve already earned, there’s no risk of accumulating debt, and workers can better manage their finances.

The potential for this model is huge, but the industry is still very much in its early stages. Several countries don’t yet have an EWA provider, and in most others, providers are still taking their first steps.

Jennifer Ho, partner at Integra Partners, is confident that the EWA industry is going to keep growing after positive early interest. “In 2021, over $1.13 billion was raised by startups offering EWA products. Due to changing lifestyles, rising costs of living and the residual impact of COVID-19, many small and medium-sized enterprises have grown dependent on EWA,” she said.

That’s not to say there aren’t some issues. Most EWA providers are still experimenting to find out what works, and the business models vary widely, which is a symptom of an industry trying to find its footing. Two of the more prominent models involve either charging the employer a flat fee or charging employees per transaction.

Aris Xenofontos, partner at Seaya, believes an employer-paid model is the way to go for two reasons: social impact and long-term viability. “From a social impact perspective, would you want the party that needs the money the most, the employee, to pay for the services? And from a long-term viability perspective, offering the service for free to employees helps drive better adoption — often 2x-3x the adoption you get when employees pay per transaction,” he said.

“EWA companies are typically B2B2C businesses and face the same challenges that many B2B2C businesses face: The decision-maker and the consumer have different incentives and priorities.” Jennifer Ho, partner, Integra Partners

“Taking into account that the purely EWA business model is not among the strongest in the fintech world, choosing the model that helps drive better adoption leads to more cross-selling opportunities, and eventually, better economics.”

To get a more in-depth look at the state of the EWA industry, how it should be classified and where the money is going, we spoke to a few active investors in the space:

EWA is already prevalent in the U.S. in industries such as retail and fast food, so how difficult will it be for startups to bring the technology to new sectors? Which sectors are the most ripe, and which ones offer the most resistance?

Jennifer: EWA works in any sector where wages are not paid instantly, and it works best when they can serve large pools of financially underserved employees. The less savings people have to finance their day-to-day ahead of wage disbursement, the more valuable EWA becomes.

In developed markets, this typically means sectors that have a large blue-collar workforce. However, in emerging markets like Southeast Asia, where financial literacy remains relatively low, and large segments of the middle class remain financially underserved, EWA can have a far broader impact.

Aris: We have been observing recently a penetration of EWA in two dimensions: vertically and horizontally.

From a vertical perspective, retail and fast food are indeed some of the first ones to come to mind, but other sectors are seeing growing penetration as well. Especially those where the headcount is blue collar dominated, such as manufacturing and transport.

From a horizontal perspective, we see EWA penetrating nearly every sector at the lower compensation/entry-level employees point. This is for sectors where the proportion of permanent full-time employees is high.

We believe the cost of living crisis that started in 2022 and will presumably last for some time is likely to promote this horizontal penetration.

Aditi: The best way to roll out EWA to new sectors is by distributing through payroll providers. One sector where EWA is viewed favorably is the nursing/medical industry.

Earned wage access is still a fairly new service, and we see multiple models, with some charging employers and others charging employees. Which earned wage access model is the strongest? Why?

Jennifer: From a financial inclusion perspective, models where the employer — rather than the employee — bears the cost have the stronger social impact case. What we’ve found is that EWA startups typically service a mix of customers across both models, where the employer pays in some cases and the employee pays in others.

3 investors explain why earned wage access startups are set to cash more checks by Karan Bhasin originally published on TechCrunch

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5 investors explain why longevity tech is a long-term play

Of all the stories passed on through history, the tales of life unending have persisted in the human imagination without much change. The details differ, but nearly every civilization right from the time of the Egyptians has in some form or the other sought to delay death.

While we’re still far away from achieving that lofty goal, science has advanced a lot and as life expectancy increased, longevity is now a realm of technology and medicine that aims to increase how long people can live healthily.

“There is a common misconception in the general public that longevity means being frail and looking old for longer (“Curse of Tithonus”),” said Nathan Cheng and Sebastian Brunemeier of Healthspan Capital. “The goal is to slow the pace of aging, and even reverse the clock — this is possible in animals already. Longevity therapies mean we will live longer and in better health.”

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But the cost and time involved in developing longevity solutions presents a major hurdle, which means founders must be prepared to take the long view. “It is very difficult to convince people to do things that leave a visible impact only in the long term. Longevity is one of those things,” said Samuel Gil, partner at JME Ventures.

“The space is only getting started now and will infiltrate all aspects of our life in the next five to 10 years.” Samuel Gil, partner, JME Ventures

But Gil noted that the sheer breadth of opportunity the space offers is nearly unprecedented:

There are multiple angles to solve problems for very heterogeneous groups with different requirements. Health span versus life span, longevity for pets versus humans, biotech versus wellness, seniors versus young people, dependency versus autonomy, prevention versus treatment, analytics, education, infrastructure … Almost like how fintech was not just about creating credit card startups, we will see longevity APIs, back ends and many others.

It’s becoming clear that longevity as a theme has resonated with investors, though it appears it will be some time before more generalist investors take interest.

To get you up to speed on where the longevity market stands and where it’s headed, we spoke with:

Samuel Gil, partner, JME Ventures

What’s the most important thing first-time longevity founders need to know?

Longevity is a loaded word. Although most people are interested in extending health spans (number of years you live with no major age-related health issues), not everyone is interested in (and some have prejudices against) extending life spans (delaying human death).

There are multiple reasons for this. Some think that life is meaningful because it is finite (who wants to live forever?). Others think about environmental or economic issues.

So my advice here is to use the term “longevity” with caution or use alternatives.

As we all know, it is very difficult to convince people to do things that leave a visible impact only in the long term. Longevity is one of those things. My advice here is that your product has to solve a problem for the user right now — help them relieve back or knee pain, look better and so on — to entice them to buy now. Then, you can use the longevity program as a way to retain the user for the long term.

There are multiple angles to solve problems for very heterogeneous groups with different requirements. Health span versus life span, longevity for pets versus humans, biotech versus wellness, seniors versus young people, dependency versus autonomy, prevention versus treatment, analytics, education, infrastructure … Almost like how fintech was not just about creating credit card startups, we will see longevity APIs, back ends and many others.

Analysts estimate that the market for delaying human death could be worth $610 billion by 2025. What would unlock more growth in this sector?

Let me take the opposite point of view: I think the main challenge of the space is that the most audacious approaches and products have to be clinically tested in large samples of the population for very long periods of time. However, there are many other things that you can already try with a big upside and almost no downside.

As soon as a clinical trial shows positive results in humans, it will be a gold rush.

What are you most enthusiastic about in the longevity space?

We all know how powerful technology can be in shaping behavior. I believe there is enormous potential in using technology for shaping health-positive behavior (sleep, exercise, nutrition) in the population. The impacts on the healthcare system may be tremendous.

I am also very keen on quantified self-movement. I find it very gross that we know in real time what is happening in our cars, but we have no clue what’s going on inside our bodies. Continuous monitoring is going to be a reality at some point.

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7 investors discuss why edtech startups must go back to basics to survive

In retrospect, edtech’s spotlight feels like a fever dream. In the early innings of the pandemic, top companies turned into unicorns seemingly overnight as Zoom school became an actual reality for millions across the world, and a frenzy of check-writing seized investors.

Then, we slowly saw the spotlight focus and sharpen. The very companies building for any consumer who needed a better way to learn online began turning to stickier customers — enterprises — for more reliable sources of revenue. The companies that took their first venture capital during the craze decided to join forces with other well-capitalized competitors. And those that raised lots of cash in a short period of time have had to conduct significant rounds of layoffs due to the overhiring that followed.

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Which brings us to today — and tomorrow. To give TechCrunch+ readers a better understanding of what education investors are looking for today, seven leading venture capitalists in the category answered a series of questions about the sector’s future.

Here’s who we surveyed:

I’ll be honest, the diversity of the answers surprised me — ranging from how climate and workforce mobility are edtech’s next opportunities to how the departure of tourist VCs is playing out differently depending on company stages. The tone also felt balanced: Many admitted that things have changed, but opportunity continues to exist. Like everything these days, the vibe is nuanced.

Reach Capital’s Jomayra Herrera encapsulated the changing landscape well: “The deal pace has definitely slowed down in 2022 across most sectors. For context, we were closing a transaction every four days last year, and that has significantly dropped this year given the market conditions. I would say the past few years have been more of an anomaly, and we are getting back to a more sustainable pace.”

Emerge Education’s Jan Lynn-Matern, meanwhile, was quick to point out that edtech investment in Europe is growing despite the slowdown in the United States — the sector has secured $1.4 billion in Europe thus far in 2022, 40% more than a year earlier, reports say).

Investors are preparing for a time of going heads down, helping their existing portfolio companies that want to prioritize internal growth instead of raising more capital, and rethinking their metrics of success. But that’s all I’m giving away now; read the entire survey to see where investors are finding hope, what is no longer venture-backable, and what wave of edtech innovation they think we’re in today.

Ashley Bittner and Kate Ballinger, Firework Ventures

The early innings of the pandemic netted edtech massive investments of more than $10 billion in venture capital investment globally in 2020 and $20 billion in 2021. But the sector is now facing a downturn. How has this affected your edtech portfolio’s ability to grow, and how are you changing strategy?

It is important to acknowledge that this slowdown looks different from past downturns like the Great Recession. We have not seen a sharp increase in unemployment – as of May 2022, unemployment was just 3.6%, compared to 5% at the start and 10% at its peak during the 2008 recession – largely due to the tight labor market that emerged from the pandemic and the Great Resignation. We still see job openings and turnover at record highs, and many companies are not planning to cut back on hiring, let alone turn to layoffs.

These differences are reflected in the experience of our portfolio companies, many of whom sell into HR and learning and development. In fact, one of our companies had their best quarter on record in Q2.

When it comes to workforce learning, we believe companies are taking a different approach than they did in 2008. During the Great Recession, 1.5 million U.S. workers were laid off across over 8,000 mass layoff events. In an effort to further reduce spending, companies were quick to cut costs in areas like learning and development, which, at the time, were considered less essential.

We now know that decisions like these may have significantly contributed to the massive skills shortage we face today.

Over the past decade, many companies have grown to realize that investing in your workforce is essential to the success of the business – over half of companies facing skills gaps believe internal skill building is the most effective response, compared to one-third who believe hiring is the most effective.

Last year, we were price-disciplined and adhered to our investment strategy as we deployed capital, bringing many of the valuations we’re seeing today in line with our existing philosophy and expectations.

The pandemic’s spotlight on edtech led a slew of generalist investors to start looking at the sector and pouring money into it. This impacted the kinds of startups that got funding and the total capital in the market. Has edtech seen a slowing of the “tourism” from generalist founders and investors? If yes, what is the impact of a more focused sector?

We believe that category expertise is particularly important at the seed and Series A stages. Category expertise is key for an investor to identify product-market fit in the context of the nuances of the sector. We believe there is space for generalist investors to continue investing in the category at the later stages, once product-market fit has been achieved and a company shifts its focus towards scaling.

Edtech activity feels quieter. Is your deal cadence where you expected it to be one year ago? And are the pace of edtech exits today in line with your prior thinking?

Our deal cadence remains unchanged. Firework leads investments primarily at the Series A stage, a strategy that is more concentrated by design (and likely not as adversely impacted by a downturn as other models). We build relationships with founders over time, developing conviction in them, their team, and the company before investing.

This approach allowed us to avoid the investing frenzy of last year. It also means we are not feeling a slowdown in deal cadence this year. We are seeing a lot of companies looking to raise money, and have continued to spend time building relationships with impressive entrepreneurs.

How did the pandemic change your perception of what makes an interesting edtech company? How has that held up when deciding what is considered impressive versus normal growth?

The pandemic has not necessarily changed our thesis, but has accelerated many of its underlying trends. We saw millions of people move to remote work and learning overnight, opening up massive opportunities around remote and distributed training.

The economic recovery from the pandemic has been one of the most unequal in history, with a large number of women and other marginalized groups leaving the workforce altogether. This has only further emphasized the need to build solutions, in edtech and beyond, that are working to close these opportunity gaps.

As a Series A investor, we often look at companies with high growth rates. While strong growth is important, we are focused on ensuring that growth is durable over time. For example, a company could have achieved tremendous growth during the pandemic by tapping into COVID relief funds, but this source of funding may not be stable enough to sustain them for years to come.

What is no longer a venture-backable business model, in your view, in edtech?

We do not have a prediction about any one business model no longer being venture-backable. We continue to look for founders with a high capacity for growth, both personally and for their business, in exciting market opportunities.

What fraction of your companies plan to raise this year? What percent are raising extension rounds and how common is that proving in edtech?

We do not have companies raising extensions of their previous rounds, but we have heard from many founders who are. This move toward extension rounds illustrates a level-setting of expectations from founders around fundraising in the current economic environment.

Understanding the venture context is incredibly important for founders looking to raise capital. We work closely with our portfolio companies ahead of when they are looking to raise their next round to help them understand this context (along with their specific company context), and set goals for the fundraise accordingly.

Some edtech’s unicorns have had to cut staff to deal with the looming recession and the downturn. What should edtech companies do to optimize their runway for the next couple of years?

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6 first-time fund managers detail how they’re preparing to thrive during the downturn

Until a few months ago, the venture market was on a historic bull run that lasted for the better part of a decade. Many new investors and funds entered the fray, but the last few years also saw a proliferation of new venture firms. That trend came to a peak in 2021, when 270 first-time funds raised a collective $16.8 billion, according to PitchBook data.

That means there are now nearly 300 firms in the U.S. alone that raised their debut fund in the bull market and are finding themselves operating in very different market conditions today.

Over the past few months, many established investors have been quick to speculate that many of these new funds will struggle as markets worsen, even if they can survive. But these legacy VCs are forgetting that the new entrants don’t have to think about an existing portfolio with dozens of startups before making each decision.

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What’s keeping these first-time fund managers up at night isn’t their chances of survival or if they’ll raise a second fund, but rather how to best manage their time and assets in a seemingly volatile market. “The biggest challenge has been around scaling my team’s time, particularly around managing a growing portfolio at a time when founder support is critical,” said Ariana Thacker, founder of Conscience VC.

Several such investors, like Rex Salisbury, founding partner of Cambrian, said the downturn is actually a good thing for new funds given their long-term goals: “The current macro environment is causing the most pain at the Series B and beyond. But the exit environment that matters to a fund like ours, which is investing very early, is more than seven years in the future,” he said. “So, price compression in the short term, which is just starting to trickle down to the early stages of the venture market, is, if anything, a tailwind.”

That’s not to say these VCs aren’t being cautious about what they’re willing to bet on. “Our process for assessing companies has not changed, but we have certainly recalibrated our compass on assessing the current, instead of the future projected value of the companies we are considering investing in,” said Giuseppe Stuto, co-founder and managing partner, 186 Ventures.

“It makes sense for us to be more thoughtful than we already were with regard to portfolio construction and make sure we are not over-levered in any one vintage or ‘company stage’ pricing, e.g., 2021, pre-product, pre-revenue,” he said.

So how are these first-time fund managers going to fare? TechCrunch+ asked six of them to find out how they’re preparing to tackle this volatile market, how this environment has changed their approach to investments and raising Fund II, the best way to pitch them and more.

We spoke with:

Giuseppe Stuto, co-founder and managing partner, 186 Ventures

How would you describe your fund’s thesis and structure?

We are a $37 million pre-seed and seed-stage fund focused on multiple industry groups — fintech, web3, enterprise SaaS, digital health and consumer-based innovations. Although we are geographically agnostic, we anticipate most of Fund I’s investments will be U.S. based (we have only one based internationally today in Nigeria).

Our strategy is that of a seed-stage generalist. That said, we consider our edge to be our ability to provide pragmatic “0 to 1” company growth know-how, given our founder/operator backgrounds and access to a network of industry leaders across multiple industries.

We have a traditional VC vehicle structure on a 10-year life cycle. The team today is composed of three full-time staff — myself (founder, investment team), Julian Fialkow (founder, investment team), and Sophie Panarese (platform and ops).

How are you preparing for the current, more conservative market conditions after raising a first-time fund in a bull market?

We like to think that we’ve been consistent in how we source and consider investment opportunities through both the bull market and the current market.

We started investing in September 2021, so we have a fair amount of bull market investing under our belt (about 10 of our 11 investments were completed during bull market times). We have two outstanding commitments, so we anticipate that by the end of August, we will have completed at least three investments after the bull market.

Our process for assessing companies has not changed, but we have certainly recalibrated our compass on assessing the current instead of the future projected value of the companies we are considering investing in.

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How fintech startups are navigating the extension-round rush

As the fintech venture market goes, so goes the venture market itself. Why? Because fintech investment has historically made up around one-fifth of every venture dollar invested — at least in recent years. And after both fintech investing and venture capital itself went a bit bonkers last year, both are dealing with a new, more conservative reality.

For fintech startups, the downturn is real, and many upstart companies — we learned during our recent fintech investor survey — are looking to avoid de-novo rounds that include a new valuation (no one wants to raise a down round!). Therefore, extension rounds are an attractive option for many founders.

But as TechCrunch has reported, while extension rounds are popular even beyond fintech today, there are often more startups hunting for the round type than there are checks. So, to better understand the market for fintech extension rounds today, we have one more set of answers from a group of fintech venture investors we surveyed. Here’s the question we posed:

How popular are extension rounds proving? Are you seeing more companies opt to raise extensions rather than new rounds compared to, say, 2021 and 2020?

Eight investors answered: Paul Stamas of General Atlantic, Alda Leu Dennis of Initialized Capital, Michael Gilroy of Coatue, Justin Overdorff of Lightspeed Venture Partners, Addie Lerner of Avid Ventures, David Jegen of F-Prime Capital, Nik Milanović of The Fintech Fund, Jay Ganatra of Infinity Ventures. (Their answers have been lightly edited for clarity.)

Michael Gilroy, general partner and co-head of fintech, Coatue

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8 fintech investors discuss the shifting investing landscape and how to pitch them in Q3 2022

Last year, more than 20% of venture dollars went into fintech startups globally, according to CB Insights. Equally notable:
One-third of all unicorns created in 2021 were fintech companies.

This year, market conditions are dramatically different in every sector, including fintech. But while this year’s pace of funding in the fintech space is noticeably slower — and falling — the fact remains that the sector still accounts for a significant share of venture funding globally. In the second quarter, for example, about 18% of global venture dollars went into fintech startups.

To give TechCrunch+ readers specific knowledge about what fintech investors are looking for right now and what you should understand before approaching them, we interviewed eight active venture capitalists in the sector over the last couple of weeks. Their answers have been edited for brevity and clarity.

Here’s who we surveyed:

Paul Stamas, managing partner and co-head of financial services, General Atlantic

Globally, fintech startups raised $131.5 billion in venture funding in 2021. As a firm that has been investing in the space for a while, what differences in the landscape have you seen since this time last year? Were deals much more competitive last year?

There is no question that the deal environment is slower now than it was this time last year, particularly with respect to late-stage growth. Many companies are rightly focused internally on optimizing their business and waiting to test the market. There still appears to be a bid-ask spread in private market expectations relative to, say, public market valuations.

Deals do feel a little less competitive, but there are still a lot of capital providers – General Atlantic being one of them – who are excited to continue to invest in great opportunities and back great entrepreneurs. The environment has caused the pace of a deal to slow down, which, honestly, is probably a good thing. It gives companies and investors more time to get to know one another and perform diligence, in both directions.

“Adversity breeds tenacity, and we predict some exceptional companies will come out of this market cycle.” Justin Overdorff, partner, Lightspeed Venture Partners

Many people are calling this a downturn. How has your investment thesis changed in the last several months, and are you still closing deals at the same velocity?

Our thesis has largely remained the same. We’re still excited to invest in longstanding themes related to the transition to the digital economy and the globalization of entrepreneurship, and we are actively pursuing opportunities to back visionary entrepreneurs with proven business models. What has always been the case is that we gravitate toward situations where we believe, and where the company believes, that we can be a trusted partner and add substantial value. As we enter a more challenging macro environment, maybe that promise resonates even more. We’d like to think our 40-plus-year track record through some complex operating environments puts us in a position to help.

Fintech companies often have multiple revenue levers – adding new product lines, building in payments, etc. How viable will these levers be for fintech companies in 2022 looking to defend their 2020-2021 growth rates?