EC North America Archives - Product Management Confabulation

August 24, 2022

Canada’s seed market set a record in Q2. Why is the US starting to retract?

The earliest stages of venture investing are the most insulated from macroeconomic conditions. When the public market dislocation started causing a broad venture funding pullback, it appeared seed investing would be safe for a while. Data indicates that that is bearing out as expected. But checking in halfway through the year, some markets are faring better than others.

Canada, for one, is having a great year. The second quarter saw the most capital invested into Canadian seed-stage companies yet. New data from the Canadian Venture Capital and Private Equity Association found that CAD$263 million (USD$202 million) was invested in Q2 through 104 seed deals, the second highest deal count on record.

Canada’s seed investment volume increased by 30% in Q2 over Q1 and was up 8% over its second-best quarter on record, Q2 2021, when CAD$243 million was invested. Meanwhile, U.S. seed funding declined 35% from Q1 to Q2 of this year, according to data from PitchBook.

Yes, the Canadian market is not very big; for comparison, total U.S. seed volume in Q2 2022 was $3.9 billion. But Canada’s seed market is heading up and to the right, which is not something that can be said about the U.S.

It’s fun to speculate on why Canada’s seed market is growing while the United States’ is retracting.

August 11, 2022

LPs are abandoning the US Midwest this year (and it doesn’t make sense)

Venture funds based in the U.S. saw record fundraising in the first half of this year, but some regions saw little to none of that LP capital.

The Midwest took a huge fundraising hit in H1 2022, no matter which states you choose to include in the region. According to PitchBook data — we are combining the Great Lakes and Midwest regions for a broader view — $3.4 billion was raised across 20 funds. This shows that the region is not on track to match last year’s total of $9.7 billion across 81 funds.

In July, Chicago-based MATH Venture partners announced it would not be raising a third fund because it could not secure enough investor interest. This is despite 50 of the firm’s 72 investments remaining active and 10 exits under its belt.

This creates a disconnect because while LPs are shying away from the region, VCs are not.

August 10, 2022

Weedmaps for Business debuts as a SaaS suite for cannabis retailers and brands

Veteran cannabis tech company WM Technology is rebranding and expanding its SaaS offering to move upstream beyond its existing Weedmaps marketplace. Previously known as WM Business, this B2B subscription-based suite will now be known as Weedmaps for Business, a service designed to offer an end-to-end solution for cannabis retailers and brands.

Due to regulatory restrictions and stigma, cannabis businesses can’t operate as freely as their peers in other sectors: From ads to payments and delivery, they require dedicated tools to comply with fragmented legislation, both in the U.S. and Canada. But the more tools they require, the more complex things become.

That’s where Weedmaps for Business hopes to step in.

The service is more integrated than its predecessor, CEO Chris Beals told TechCrunch. This evolution, he said, is based on the company identifying, “a need for a unified set of tools that would help retailers and brands with the lifecycle of how they reach, convert, retain consumers — but also how they get insights and analytics around that lifecycle.”

Christopher Fenske, chief strategy officer at California-based dispensary Jaderoom, confirmed that a lack of integration was a pain point for dispensaries, saying that, “the biggest hurdle in the cannabis industry right now is connecting all the software seamlessly between your CRM, orders fulfillment and delivery management system.”

Weedmaps for Business aims to be a full SaaS suite, in part thanks to integrating the offering of several companies WM Technology acquired since it went public on the Nasdaq via a SPAC under the MAPS ticker in July 2021.

“What we now have,” Beals told TechCrunch, “is the culmination of several years of acquisition and M&A work, integration work and shared feature work such that businesses can now go and buy once and log into this first full platform offering for consumer lifecycle management.”

Each of WM’s recent acquisitions have turned into elements of the suite: Sprout, into WM CRM; Enlighten, into advertising-centric WM Adsuite & WM Screens; logistics-focused Cannveya, into WM Dispatch; and CannCurrent, into WM Connectors, which Beals referred to as a “Zapier for cannabis.”

All in all, WM Technology’s ambition is to support retailers and brands at every stage in the consumer funnel. In a similar move, Oregon-based Dutchie recently launched Dutchie Pay to help dispensaries accept cashless payments.

Integrated suites are particularly relevant in the cannabis sector, Beals said. “Cannabis is an incredibly highly regulated space and so the laws and regulations vary widely from state to state and in some places from city to city. The ability for us to build compliance functions and then have them be seamlessly leveraged across the suite and handoff compliantly is a real advantage of having a centralized platform.”

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

Saving time and money matters more to dispensaries and cannabis brands than ever, as, “these businesses are suffering the effects of margin compression given that we’re in what appears to be a recessionary period,” the CEO added.

According to Beals, one of the main challenges for cannabis brands is that, “it’s incredibly difficult to reach actual high frequency cannabis consumers.”

Another issue that WM is hoping to help tackle is that “almost half of cannabis consumers don’t have a favorite brand.” As a result, “In cannabis, we haven’t seen the same level of the same ability of brands to generate increased premiums for brand affinity as we’ve seen in other consumer goods. But that’s going to change,” Beals hopes.

Better analytics and benchmarks data would also help brands maximize their profits. Weedmaps for Business already includes analytics elements, but the company is hoping to further expand that side of the suite over time.

“We’re looking to start adding information on Share of Voice, suggestions of products that seemed to be drawing increased consumer affinity, on skewed distributions by geographies. A lot of that data sits with us currently, it’s just a matter of building it into as we iterate on these analytical solutions,” Beals said.

July 12, 2022

Battle of the bridge: Startups struggle to secure runway financing

Despite the venture capital asset class sitting on historic levels of dry powder, many investors aren’t deploying it, leaving their portfolio companies scrambling for financing.

Venture funding has been declining across the board this year, but the tone of how this temporary pullback could impact companies is starting to change. The mood at the beginning of the slowdown was that only subpar startups would struggle, while good companies would raise normally or raise bridge financing — not that they would ever call it that — and raise a proper round next year.

But now it seems that more companies than not are struggling.

Elizabeth Yin, a general partner and co-founder at pre-seed-focused Hustle Fund, tweeted last week that she has started to get emails from founders who had raised a seed round but were struggling to extend their runway, abandoned by their previous investors.

May 19, 2022

North American and European insurtechs are recalibrating after a blockbuster 2021

How much difference a year makes.

In April 2021, TechCrunch published a venture capitalist’s take that “the era of the European insurtech IPO will soon be upon us.” At the time, the perspective made some sense.

After all, just last June, this column explored the rapid-fire fundraising in the insurance technology startup market, declaring that “insurtech is hot on both sides of the Atlantic.” At the time, WeFox had recently raised a $650 million round, putting big points on the board for European insurtech.

Since then, we’ve seen the technology market correct and public-market investors spit up the insurtech IPOs from late 2020 and early 2021, essentially repricing the value of neoinsurance companies to near zero if we deduct cash from their market caps.

The Exchange explores startups, markets and money.

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The change in sentiment led The Exchange to ask in February which insurtech startups might thrive this year and which might suffer. Since then, tech stocks, including the most recent insurtech IPOs, have continued to correct, bleeding value across the Nasdaq and NYSE.

Now, roughly a year past when it seemed a period of hyperactivity was going to send a host of European insurtechs to the public markets, we’re examining just how different the market is. With venture capital data collected for TechCrunch by PitchBook and notes from active insurtech venture capitalist Florian Graillot of Astorya.vc, we now know a lot more.

While the 2022 data tells a stark story, the rest of Q2 could prove pivotal for insurtech this year. Let’s explore insurtech activity in both North America and Europe, compare recent results and look at what could lie ahead.

How insurtech investing has changed this year

The optimism around insurtech outcomes last year fits neatly with the data that we can now see with the benefit of hindsight.

In North America, PitchBook reports that insurtech venture capital activity rose to $2.21 billion across 83 rounds in the second quarter from $1.67 billion across 78 rounds in Q1 2021. It peaked in Q3 2021 with $2.51 billion invested in 66 deals before falling to $1.80 billion in the fourth quarter of 2021 and to $1.52 billion in the first quarter of 2022.

The number of deals also slipped to just 54 in the first quarter of 2022 from 67 in Q4 2021.

Insurtech’s story in Europe has been a little different. Investment has been largely flat from Q1 2021 through the first quarter of 2022, per PitchBook, with one exception: the second quarter of last year.

Apart from Q2 2021, European insurtech investments mostly floated between $450 million and $550 million from the start of last year through the first quarter of 2022. In Q2 2021, however, some $1.76 billion was invested across 57 rounds, setting a both deal and dollar peak for the recent past. (More shortly on why Q2 2021 is key to understanding insurtech’s future in Europe.)

May 15, 2022

Corporate venture investors pulled back in Q1, but less than you imagined

The global venture capital market didn’t reach its 2021 peak in a year. It will also take a good amount of time to unwind from last year’s excesses.

That fact is clear in new corporate venture capital (CVC) data collected by business intelligence concern CB Insights. Per the company’s latest report on the topic, CVC activity was strong in the first quarter, albeit with some weak spots that we suspect developed as the first quarter rolled through its final month.

The Exchange explores startups, markets and money.

Read it every morning on TechCrunch+ or get The Exchange newsletter every Saturday.

Given recent trends that we’ve observed in the larger venture capital market, expecting CVC to reverse course and charge back toward records feels unlikely; more declines seem to be a reasonable expectation.

That CVC is in retreat as venture capital overall decelerates is not a surprise. CVC figures were a component of venture’s rise, and as they were coupled on the way up, seeing them decline at the same time is hardly bewildering.

The somewhat modest declines in CVC that we’ll observe shortly are important for reasons other than simply tracking available investment flow for startups. Recall that TechCrunch explored the concept of historically elevated levels of CVC investment potentially converting into notable startup M&A volume this year. That corporate venture capital was not in rapid decline in Q1 2022 gives extra weight to the concept, as there are now even more potential investment deals to convert into acqui-hires as the year progresses.

Let’s get our hands around the changing pace of CVC activity and then whittle down our focus to geographic trends to see where things are hotter and cooler. (Hint: Europe and China are outliers, in opposite directions.) We’ll close with a recap of the M&A argument and chat about which CVC may be the most overexposed to changing venture conditions.

June 28, 2021

VCs discuss the opportunities – and challenges – in Pittsburgh’s startup ecosystem

Ahead of our TechCrunch City Spotlight: Pittsburgh event tomorrow, I spoke to current Mayor Bill Peduto and Dave Mawhinney, the executive director of Carnegie Mellon University’s Swartz Center for Entrepreneurship. Like many in the Steel City startup community, both share a focus on the historically difficult task of keeping startups in town.

For more on investing in Pittsburgh, be sure to tune in to our City Spotlight on Tuesday, June 29, where we will be joined by Peduto, Duolingo director of engineering Karin Tsai, and Carnegie Mellon University President Farnam Jahanian. Register for the free event here.

I asked Peduto and Mawhinney what the single biggest obstacle has been in building out Pittsburgh’s startup ecosystem. Both responded the same way: venture capital. Raising funding is, of course, a hurdle regardless of location, but many VCs have been reluctant to invest in startups outside of traditional hubs like San Francisco and New York.

“But one of the challenges is getting that capital to come into the community,” said Mawhinney, who leads CMU’s startup efforts. “If you look at how much Uber ATG brought in, how much Argo AI and Aurora — collectively, those three companies, which have all licensed CMU technologies, they’ve all got over $7 billion in collective capital. Not all of it will be spent here, but a lot of it will be spent here. But that doesn’t necessarily trickle down to the next AI startup raising their first $3 million.”

Image Credits: Eilis Garvey/Unsplash

Peduto said growing the VC pipeline has been a focus during his time as mayor.

“I think we’ve been able to convince investors from the coast that the companies don’t need to leave Pittsburgh in order to be highly successful and see their investment pay off,” he told TechCrunch. “However, I believe if we had more venture capital arriving here to help to take early-stage companies into that critical next stage of expansion, it would build off itself and it would excel growth in all of the industry cluster, significantly.”