From a whirlwind, clarity

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Saying goodbye to Q1

What a week.

If you were plugged in to the startup news cycle recently, you’ve been busy. Y Combinator dropped hundreds of new startups onto the market, Instacart’s repricing continued to reverberate, and it feels like we’re discovering that some parts of the startup market are already in a period of correction.

That’s starting to feel like a summary of the first quarter: A hot early-stage market and a late-stage startup climate in a cooling period. We’ll better understand the full Q1 picture when we get all the incoming venture capital data, but early marks do match that summary.

What’s ahead is going to prove utterly fascinating. Q2 will see a host of startups need to raise new capital, and many will find the investing landscape utterly foreign compared to when they last looked for capital. What will that force? Will unicorns tap venture debt? Will we see a parade of down-rounds? Smaller inside deals to bolster runway? I don’t know.

Listening between the cracks, the public conversation about a startup pullback may actually be somewhat late. If it was happening internally earlier in the year then we might have picked up on it.

But what we can say is that the news hurricane of the last few weeks has been clarifying. From falling tech stocks to retreating unicorns and infinite early-stage hype, we are in a strange period, but one that I think we can now put a bow atop and move on from. Here’s to Q2.

TechCrunch+

This little newsletter launched out of my daily column for TechCrunch+, TechCrunch’s reporting that sits behind our paywall. Launched a few years ago under the Extra Crunch brand, our experiment into the subscription media space has been a fascinating journey.

Last week we announced that I would take over as Editor in Chief of TechCrunch+, something that I am very excited about. And frankly more than a little humbled, but saying so is past cliche at this point so we can move on.

A few notes on what’s ahead seem fair at this juncture, as The Exchange’s regular entries have been a staple of the TechCrunch+ posting flow since late 2019, which means that you all are veterans of the project. Thank you, by the way.

TechCrunch+ has reached material scale, which means we have a strong cohort of subscribers, hard evidence that we’re doing something worthwhile and that the larger TechCrunch community is willing to endorse that work. The even better news is that we’re investing in TechCrunch+ this year, with more staff and lots of neat ideas ahead. Our goal is to not only do more reporting and writing, but also to widen our lens somewhat to ensure a broader content mix.

That’s why Jacquelyn is aboard to write about the fascinating, infuriating, and quickly evolving world of crypto. We’ll have more names to announce shortly in other areas, including the areas where I have traditionally written for you.

That TechCrunch+ is not only alive, but growing is great news if you care about startups. One very nice thing about having a subscription service as part of a publication is that you can afford — literally — to go a bit more niche than you otherwise might be able to. This means that The Exchange has been able to, at times, focus down to a single startup topic and spend endless time gutting through its mechanics. Our work covering the 2021 venture boom, the 2020 consumer fintech explosion, and 2022’s startup slowdown that we mentioned above are a few examples.

TechCrunch is building this year. And part of that work is accelerating TechCrunch+. I think I am supposed to end this with some sort of pitch, right? I’ll try: Give TechCrunch+ a try this year when it makes sense. When the right article makes you curse the paywall, I hope that we earn your attention, and, well, money, this year.

Hugs, be kind to one another, and I’ll talk to you Monday. — Alex

Are we about to see a unicorn selloff?

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

Welcome to the weekend! We have a lot of ground to cover today, so pour some coffee, settle in, and roll with me.

The great selloff?

Remember when Amplitude direct listed, started to trade, and then ran into a wall when it reported Q4 2021 earnings? It was hardly alone amongst public tech companies in taking a haircut in early 2022, but the scale of its repricing stood. Now, Instacart is undergoing something similar-ish, albeit on the private markets.

Should we expect more private companies to also shake up how they value their share price to better incent new hires to join and current employees to stay? Maybe. GGV’s Jeff Richards had some food for thought Friday:

Yep. There’s no avoiding the market. You can put off reality by raising venture capital and not seeing a repricing until you raise again. Sure. But if you are a late-stage unicorn that has ample cash, how do you figure out your market worth if you don’t raise new funds?

If Instacart is the start of a trend, flat really could be — once again — the new up when it comes to startup valuations.

Technori finds a new home

A small fact about me is that I went to school in Chicago, and thus I was in and around the city’s tech scene as a baby journalist. This meant that I went to community events, working to better understand what was going on. I met Justyn Howard when Sprout Social was a startup (it’s now public) and I got to go to Uber’s launch dinner in the city back when it was all black cars. (That’s where I met my first TechCrunch reporter, who later helped me get hired at the publication, the first time.)

Back then there was a community effort taking off called Technori, which hosted events that showed off local tech efforts. It was good fun.

Since then, Technori evolved into a media play of sorts, with a podcast and pitch events, helping startups raise capital via equity crowdfunding. I got back into sync with the company when its CEO, Scott Kitun, had me on the podcast. And now Technori is back in our lens because it’s being sold to KingsCrowd, a service that vets and rates startups raising on online platforms. Given that Technori evolved into a platform to help folks raise, the tie-up seems reasonable.

The transaction was all-stock, Kitun said. KingsCrowd also has a media strategy, so the two firms have more than a little overlap.

Kitun told The Exchange in an interview that he’s excited about the Technori-KingsCrowd deal because it will make vetting startups looking for equity crowdfunding more data-driven, instead of based on his instincts. We’ll have wait to see whether, in time, the pair of companies can drive more total capital into the startup market via the fundraising mechanism, and how much of that lands in Chicago.

Widening our lens somewhat, recall that Public recently bought Otis, looking to add more investment variety to its platform. We can somewhat put the Technori and KingsCrowd deal under a similar umbrella, in that the duo want to make one for of newer investment into the hands of the regular person.

This is likely not the last we’ll hear of Kitun, as he’s a co-founder at SongFinch, a separate company.

Changes to the experts program

This week I changed roles at TechCrunch, swapping my full-time reporter hat for the editor in chief gig at TechCrunch+. Long-time readers of The Exchange’s on-site posts and newsletter will know that much of my work in the past few years has been on the paid site. I am not stopping my writing entirely, but we are aggressively expanding the TechCrunch+ team. So, strap in if you are not yet a member. (For U.S.-based folks, apply the discount code EICEXCHANGE at checkout for 25% off.) It’s going to be one hell of a year.

We are making some changes, including a winding-down of the Experts program that has run for a few years. An effort to create a database of startup servicing companies by activity — SEO, say — was part of our general vibe of helping founders build. But from here on out we’re going to evolve the effort into pieces that are more targeted at squeezing insights from different operators in the market, more than creating a list of possible vendors.

This means that we’re leaving a little fruit on the vine, however, so one last note from Experts land about a participant. Growthcurve is the final company we’re including in the old format. As per that old structure, folks wrote in endorsing the group. Mariam Danielova of ANNA Money says that they are reliable, results-oriented, [and] data-driven,” which is about all that you can hope for from a growth-marketing team.

Something I learned while clearing the TechCrunch+ decks of prior efforts, and thus spending time reading through older interview files and the like, was the lingering importance of SEO. It came up in Growthcurve founder Mulenga Agley’s notes that I parsed, and I wonder if in the new iOS 14 world that we live in it will become all the more important? If so, bully for Google I suppose.

Regardless, The Exchange’s own Anna Heim will still be taking on some how-tos that feature external operating experts. It will just look a little different this year. Thanks to everyone who took part in the past and to Growthcurve for being the final entrant in the ledger.

Onward!

Ukraine, API startups and startup valuations

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

Hello friends! I had a little something saved for this email, but it wound up being pushed back to next week, so expect to read about that in a few days. The good news is that we now have some more room to play with today.

So let’s chat tech’s response to Ukraine, API startups, and startup valuations, yeah? This will be fun.

Tech shows spine

I was worried that when Russia invaded Ukraine that the world would not step up to the task of giving a shit. Happily, however, the opposite has largely happened. And even more, tech has taken a stand.

And not just a positioning or verbal response to the ridiculous and tragic invasion, but a business-impacting response. When Microsoft and others stop selling stuff in Russia, Airbnb pulls out, and other tech companies large and small make noise, it’s encouraging.

What do the actions add up to? We don’t know yet, but Russia is taking a similar tack, banning social services in the country that its citizens might have used to, you know, figure out what is actually going on. So we’re seeing a blackout of tech products and services from both internal and external sources in the country. Given how much of the world Russia touches, in both geographic and economic terms, we’re in experimental territory.

Perhaps the tech moves will prove footnote to the larger international sanctions push. But they do indicate to any other nation considering using its military power to crush smaller nations that the response to such action won’t only come from nation-states, perhaps adding a little weight against such belligerence.

Let’s hope we keep hearing news about how tech is decoupling from autocratic imperialism.

API startups

Oh boy. This week I wrote up some notes on GGV’s new API startup index. It’s a nascent project from the venture firm, but one that I liked. In short, GGV is building a database of sorts of private API startups that are doing cool stuff. Naturally, the VC wants to be in the center of the API conversation, so the effort is at once a research project and some form of content marketing.

But it did provide a good excuse to list out roughly 8,392 different API startups, or startups with strong API components to their model. And more keep coming in. One such startup is Highnote, which has built APIs to allow other companies to build card-issuance services into their products.

I wasn’t going to add more names to the mix of API startups that we already listed, because I still have carpal tunnel from finding all the links, but something about Highnote caught my eye. Its website argues that using its service is a faster way to get up and running with card issuance. Yes, you are saying, that is literally the point of an API-delivered service, the abstraction of complexity away from where a product, and not a problem, is needed.

Yes, but I just spent two days digging through the corporate venture world, and I see a parallel. Basically when Airbase raised capital from Amex Ventures and put together a deal to bring its software to Amex’s customers, part of the latter’s argument in favor of the deal was time to market. It could move more quickly with a partnership and investment than it could in building its own version of what Airbase had already cooked up.

Sound familiar? In some sense, then, API startups allow companies of all sorts to access and test products more quickly than ever before. This also means that they can sort the build-versus-buy argument more quickly and clearly than ever before. So API products are to smaller companies what corporate venture capital firms are to incumbents? Kinda!

A Friday thought, I know, but it was on my mind so I figured I’d share it.

Everyone is hosed

Closing out, the bad news. SaaS multiples have compressed back to the single digits for even middle-growth companies. For startups, this means that if they are targeting a double-digit revenue (ARR, etc.) multiple, they had best be growing faster than nearly all their peers. The public markets have taken back essentially all the gains afforded to software companies during COVID. We’re back to where we were before, or worse, from a valuations perspective.

For the startups that raised fat rounds at 100x ARR, good luck.

Alex

Not all SPACs are garbage, and the power of teamwork

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

Hello and happy Saturday! Today we’re taking on two topics. The first fits neatly into our usual coverage area. The second not so much. Let’s go!

Not all SPACs are garbage

In the 2021 SPAC rush I missed the public debut of Alight Solutions. Based outside of Chicago, the company is a business process outsourcing shop that supports tens of millions of employees in the United States. It combined with Foley Trasimene, a blank-check company, last July after announcing its intentions to list via the SPAC earlier in 2021.

It also reported earnings this week, and I chatted with its CEO Stephan Scholl after the fact. There are three things that matter from the Alight report that I want to noodle on with you. In order:

  • Not all SPACs are a mess: Today Alight Solutions is worth about $4.7 billion, and is trading a fraction above its pre-combination $10 per share price. That means that the company’s SPAC deal was valued pretty well, and that it is possible to take a company public using the method and not have it eat its own shorts in the following weeks, months and quarters. SoFi was, previously, our leading example of a SPAC combo that failed to flounder; we can add another name to the list.
  • Some SPAC projections bear out: In its investor deck from its combination announcement from last January, Alight said that it expected to generate $363 million in BPaaS revenues in 2021. BPaaS stands for Business Process as a Service, and is the company’s SaaS-y service that is its fastest-growing revenue segment. In 2021, however, the company actually saw $390 million in BPaaS revenues. It beat on a key metric! That’s why the company is above water, I reckon.
  • The idea of profitable growth: Why is it considered bad news in some circles if a tech company starts to pay a dividend? One line of thinking is that the choice to return cash to shareholders via regular disbursements is an indication that the company in question is out of places to deploy funds, which implies slower future growth. So we tend to see tech companies that aren’t goliaths simply grow like hell even at the expense of profits. Alight appears to sit between the two extremes, focusing on what Scholl described as profitable growth to TechCrunch. This, he explained, ensures that his company doesn’t “over-rotate” on any particular effort, and isn’t burning its ships on its BPaaS strategy; if it doesn’t work out long-term, the company will survive. Alight is rather profitable, so he’s speaking from a position of black ink, for reference. Still, it was interesting to talk to a company that has much in line with tech companies going through a software transition, but with a very different approach to balancing growth and profits. Interesting.

And now, something different.

Teamwork

I am writing to you, as I do every week, on Friday afternoon. I type up this little missive, contribute to Daily Crunch, and then bounce into the weekend.

This Friday, however, has been a grinder. Not only because of economic uncertainty, the pandemic, or the invasion of Ukraine, but also because Chris Gates is leaving TechCrunch for a new role elsewhere. You probably don’t know Chris, which is evidence that I haven’t done enough along the way to shout him out.

Regardless, he was a founding member of the Equity podcast, and his last day was today. By the time you read this, he will be gone. We worked together for around a half decade, recording hundreds of shows, suffering from failures, celebrating wins and generally making the show work as a team. Through host changes, the sale of our parent company, and so very much more, he was there, steady, warm and ready to fucking go. It goes without saying that Equity is also Grace and Mary Ann and Natasha, and has also had the pleasure of having Danny and Kate and Matthew and Katie and Connie in the mix during its life. It is very much a group project.

I’m going to miss working with Chris so much. But his exit is a good reminder of the very human force-multiplier called teamwork.

The man, the myth, the smile. Chris posted this to Slack when he announced his exit, so it’s only fair to troll him with it here. This is the energy he brought every single day.

This newsletter, for example, gets written by myself. Then Annie or Richard give it a read. Henry often peeks at it, as well, as he helped dream it up with me a few years back and supported its birth. Finally, it’s moved into our email software, into a slot that our sales team prepares to include the correct advertising elements. It then gets sent out to your inbox and posted on the site, which our tech crew makes possible. I just get my name at the top because I wrote the words. But this product is the result of material, longitudinal teamwork.

I’ve had better luck than I have deserved when it comes to teams. The folks I have had the pleasure of working with in my career have, with very few exceptions, been people I have loved having in my life more generally. Chris and I worked on Equity together through weddings, the birth of kids, moves and more. We did life together, you know?

And let me just note that the TechCrunch+ team, which is where The Exchange lives generally, is aces. Walter and Annie and Ram and Anna and the rest of the team are excellent folks I am lucky to orbit around. I get to do so much more because we work together. And I hope I am returning the favor.

Teamwork. It’s the best. And it makes work breakups all the harder.

Godspeed, Chris, in your next adventure. I look forward to being your #1 fan in whatever it is you’re cooking up next.

Alex

When to pivot your product, and a tale of two earnings calls

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

Oh yeah, y’all, it’s the weekend and it’s a long one here in the United States as we have Monday off. As you read this I am – hopefully – napping on the couch with three dogs festooned around me, all four of us drooling while we snooze.

But! First! There’s much to do, so let’s dive into one startup’s pivot from earlier in the week and, yes, talk a little about money.

Jukes, pivots

The esports world is a pretty fragmented place. Built atop different games, forums, tournament series, platforms, chat apps, and websites, it can be a legit effort to figure out what the hell is going on, even in your favorite game. So, Juked.gg set out to build a centralized news hub for all things esports back in 2020.

The company saw some early success, raising a seven-figure round that we covered back in early 2021. But according to co-founder Ben Goldhaber, the service had a period of rapid growth, what he described as “up and to the right” in graph form, before seeing its active user count plateau last year.

What happened? According to Goldhaber, who also goes by the gamertag “FishStix,” Juked wound up serving the top 1% of esports fans, but wasn’t reaching a larger audience. So, the nascent company did the smart thing of asking its users about its service and what they thought of it. From those conversations, Goldhaber said that users brought up issues endemic to esports like community toxicity, spam, and hot takes.

So, Juked decided to pivot slightly and build the social network that its users were effectively asking for – a less toxic place to be an esports fan.

The product launched Thursday after a period in a closed alpha after having tested it with around 750 users before making it more generally available.

According to information from AppAnnie (now Data.ai, apparently), the service did chart among iOS users in the United States this week, albeit only in the social networking category. We’ll check back with the company in a few months to see how downloads shake out.

Big questions remain, including how the service intends to combat toxicity at scale — I had to agree to a pretty strong set of terms to sign up. Juked intends to use human moderation with AI in the future, and requires users to sign up with a phone number. All good ideas, but untested for the company at mass scale.

I dig what Juked has been working on because I am an esports fan. But I am also not precisely in the market for a new social network. Let’s see how the startup’s in-market juke can help it score more points. (And probably raise money, since it’s been a year since its equity crowdfunding round, so we wouldn’t fall over in shock if the company worked to pick up more cash in the coming quarters.)

A tale of two earnings calls

This week brought with it another sheaf of earnings calls from tech companies. And as always, we’ve had our eyes tuned into the market for hints about what’s ahead for startups.

Most of our work is here, in our dive into just how important forward guidance is for tech companies today. Trailing results appear to be far less important to investors than what they see ahead. So when Amplitude got whacked by public-market investors, we took notes. There were other companies that took similar knocks, including Meta, so don’t think that we’re pointing a finger at the recently public Amplitude. (It direct-listed last year, recall.)

But there was another side to the coin, namely Appian’s earnings. The low-code automation company has been a quieter public-market story than most tech debuts. That’s not a diss, mind; its CEO Matt Calkins told me as much this week when discussing the company’s results.

How so? It boils down to Calkins’ definition of what innovation is, and it’s not just building something. Telling TechCrunch that his company has long been an engineering-led organization, he told us that it’s not enough to make something cool. If the company doesn’t market a new feature, sell it, and get it used, then it hasn’t actually innovated. Innovation, he said, is an experience, not a product. The final result of innovation, he added, is a customer testimonial of a new feature – when someone will go on record and say that a new thing really is good. Which requires people to, well, know that something exists so that they can give it a whirl.

I like his perspective. It helps explain why much of the so-called innovation in the blockchain world seems less like real innovation than the creation of a collection of hypotheses; yes, some of the more esoteric web3 products that are in the market today will have real impact, but most are more coding tricks than useful tools.

A little more before I let you go. The staffing crunch that companies are feeling in the United States is not merely driving up the cost of hiring, it’s helping companies like Appian. The company is seeing demand from customers to automate more of their work because employees don’t want to do it. And unhappy employees bounce.

Finally, Appian’s growth has been accelerating for a little while now. And it had an earnings report that led not to a share-price collapse, but a gain. Returning to our entry point for this conversation, that’s the bar that companies have to clear today to grind out a few hundred basis points of market cap extension. It’s a far harder market than a few quarters ago. Which is why, I think, the IPO window is kaput for some time yet.

Hugs, and I hope your weekend is restful!

Alex

Soon all blockchain companies will be crypto speculators

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

It’s a little hard to sit down and write up some jaunty notes on the current state of the technology startup market when news just broke that Russia is expected to invade Ukraine in short order. If you are a believer in democracy over autocracy, it’s a pretty dark day. And geopolitical clouds on our very-near temporal horizon promise more bad news.

And yet, the news engine grinds forward, and we have to do someting with this space, so let’s talk about capital recycling in the crypto market to stay occupied.

Round and round it goes

One result of today’s increasingly rapid cadence of innovation in the technology world is that corporate venture capital work — both defensive and offensive — seems to start earlier and earlier in the lives of companies.

OpenSea is the latest example of the trend. The company said earlier today that it will launch OpenSea Ventures and a program it calls “Ecosystem Grants,” both of which are “aimed at supporting the creators, teams, and emerging technologies advancing the global growth of web3 and NFTs.”

Companies that take capital from OpenSea will receive access “to OpenSea leadership,” and OpenSea investors, including a16z, naturally.

As The Block notes, “OpenSea joins a number of crypto startups that have launched their own venture units, including unicorns Alchemy and FTX.” All of which, I’ll note, are private companies. It’s common, then, that rapidly-growing blockchain firms with extra cash to begin to reinvest that capital into other groups.

Gone are the days when Intel Capital was the paradigm for corporate venture dealmaking; Coinbase is probably the most respected corporate investing team these days, but its rivals are looking to take it on.

Or are they? There’s a weird nuance to all of this:

  • Coinbase was backed while private by a16z
  • Marc Andreessen remains on Coinbase’s board, along with Katie Haun, who recently launched her own crypto fund
  • Coinbase Ventures backs OpenSea
  • a16z backs OpenSea as well
  • OpenSea is now doing its own investing, in theory in conjunction with a16z to some degree, given its pledge

That’s quite a web. a16z is also an investor in Alchemy, which is doing its own investing. OpenSea uses Alchemy tech, it’s all very integrated. (That this level of centralization and familial fraternization is the exact opposite of decentralization, or democratization, goes without saying.)

At what point does this capital-chasing-crypto-chasing-capital whirlpool start to de-thread, and get more internally competitive? If Coinbase is going to launch its own NFT product as it has promised, how long will OpenSea want to stay close to their shared investor? What if Coinbase wants to sell infra and gets into Alchemy’s space? How could Coinbase not want to do that, frankly, given how much activity the latter company is seeing?

Today it’s whimsical that OpenSea is recycling capital into other ventures before it finds its own exit; but the pace of change in the larger crypto market appears to have made even companies with simple business models speculators if not in majority, at least to a more than modest degree. Wild! And weird!

I’m trying to keep tabs on the closed-network of leading crypto players and their financial sponsors. To me it’s even more centralized than most venture categories, which is a bit weird. I can’t get the bitter taste of bullshit out my mouth when I keep reading about folks pushing decentralized autonomous organizations, zero-trust setups and the like when it appears that the same people who made a huge chunk of the Web 2.0 money appear set to reap most of the rewards for whatever Web3 becomes.

Alright I’m going to fuck off now and worry about free society now and the fate of democracy. Let’s hope by Monday Russia has not invaded Ukraine. — Alex

The startup sobriety gambit

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

Hello and welcome to the weekend, my friends! Today we’re sticking to simple fare. The meat and potatoes — pea protein and gluten-free starches? — of our beat, namely startup activity. So, read on for some news from startups that we think are pretty neat.

Not to beat the personal drum too hard, but I’ve had my ins and outs with drinking. Ultimately, I gave it up entirely. So when Reframe entered my view the other week, I was curious.

The startup offers an app built to help people reduce their alcohol consumption, focused on individuals who are not physically addicted to the drug but do want to reduce their consumption or quit altogether. The market for help with drinking — really any drug addiction, dependency or issue — is huge. I know this because I have the enormous privilege of talking to lots of folks who are looking to cut back or stop boozing altogether. The situation is getting worse during the pandemic, I’d add.

So I was not surprised to learn that Reframe has been on a rapid trajectory of late, raising $1.4 million from Atlanta Ventures before taking part in Y Combinator (Summer 2021 class, when I cited it as one of my favorites). It raised $3.4 million after the accelerator program and recently closed a $12.5 million round. That final funding event took place just as 2021 closed, and was put together at a $100 million post-money valuation.

The startup is clearly onto something. And, thankfully, it was willing to talk about its results in detail.

I spoke with the company’s CEO, Vedant Pradeep, who told The Exchange that in the last six months, Reframe has scaled its ARR by a compounding rate of around 79%. Pradeep also said that his company has seen 10.3% compounding weekly growth over the last 12 months. All that has added up to $9.5 million worth of ARR by January 28, a figure that Pradeep updated to $10 million earlier this week by text message.

Even better, the company’s mix of tools — CBT, journaling, etc. — is helping people make real changes to their drinking. Per Pradeep, some 88.63% of its users “reported meeting their drinking goals” at the two-month mark. The CEO added that based on his company’s data, the preceding data point “represents a [greater than] 50% reduction in their drinking.”

That’s huge. Like huge.

Now, I do have some squeamishness about for-profit care for drug-related matters. But I talked through the company’s pricing model with Pradeep, as well as his policies regarding those without enough money to pay Reframe. At least by my standards, the company is striking a fair balance.

At a time in which it seems that every tech leader, luminary and knave is piling head-first into the crypto space in hopes of a quick buck, Reframe is a reminder that solving real problems is another way to make money. I just wonder why the company’s most recent valuation didn’t have another zero in it, given recent startup pricing trends.

And speaking of alcohol

Sticking to the boozing theme of today: wine. It’s a whole thing.

I can tell you that time spent learning about wine is not wasted. Provided you aren’t in the Reframe customer demographic, wine snobbery is a fun pastime. Knowing how to enjoy a chablis over a robust California cabernet is table-stakes if you like to plop around chairs with friends and slowly intoxicate your cranium.

But not all wine is strictly for drinking. Some of it is actually investment-grade stuff. Which is why Vinovest is building a platform to let regulars bet on wine price appreciation. It recently released a way for its customers to invest in individual wines. Previously, Vinovest was more focused on its robo-advisor service in the wine investing category. In short, the company is a wager that more folks want access to alternative investing options, fine wine being one that has usually been out of reach.

I bring the Vinovest news up as it appears to be onto something, posting 500% AUM growth in 2021. Per the company and its intrepid spokesperson William Ruben, Vinovest holds more than 250,000 bottles in user portfolios, which are stored in “custom-built warehouses across the world.”

Between the crypto surge, folks buying digital collectibles and more, perhaps wine investing is going to find allocation in more suburban 401(k)s. If that pans out, well, Vinovest’s market bet could bear — fermentable — fruit.

Frozen giants, and why everyone is competing with everyone regardless of what they say

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

Hello my dear friends, here’s hoping that you are warm, safe, and happy today. Welcome to the weekend. Today’s Exchange note is somewhat brief, and, I hope, good fun. We’re talking gaming and competition, two of my very favorite things.

Notes on the gaming world

While the venture capital world loses its mind over crypto-based video games bringing fiscally focused activity to the “gaming” space, some builders are sticking to more traditional models.

One such company is Frost Giant, which announced a Series A this week worth $25 million, and is building a de novo RTS game. As a longtime fan of the genre, I am incredibly excited about this. As a business and technology journalist, I am curious as well.

I got on the phone the other day with its founders – the Two Tims – to chat through what they are building. Details are somewhat sparse at the moment because the company is still a ways from releasing its title. But! It will be a real-time strategy (RTS) game, a genre made famous by beloved entries like Age of Empires and Starcraft. It should feature, we learned, a campaign and multiplayer capabilities. And the group is talking to esports players as well so that it works out of the box for more competitive battles.

Per the company, it’s being built to be a game as a service of sorts, with a long shelf life. That’s a big goal. And to do so with new IP as the core is a big gamble. In a good way, I think; this is what venture capital is for – venturing into the unknown. Not just building more B2B SaaS.

For now, Frost Giant is staying mum on setting and anything more substantial about the game’s core elements, so we’ll be keeping an eye on what it’s building.

In a more nuts/bolts sense, Frost Giant raised a $4.7 million seed round after being founded in 2020, later adding another $5 million to that round. Kakao Games, a South Korean game developer, led the company’s Series A, which should provide its team of 25 full-timers and 12 contractors plenty of breathing room to get the game right.

And speaking of taking time to get the game right, let’s talk about Paradox. Paradox is a gaming studio based in Sweden, is the maker of so-called grand strategy games. They are real-time in a sense, but different from the traditional RTS genre in their complexity and length of play. You can K.O. someone in Starcraft 2 in 15 minutes if you know what you are doing. A play-through of Paradox title Crusader Kings 3 (CK3) could take you days and days of plugging away. Not that I am intimately aware of that fact or anything.

Anyhoo, Paradox is executing a natural experiment before our eyes with its first major expansion to CK3, called Royal Court. The company announced it ages ago, only telling fans last October that it would come out this February. The news was a bit of a surprise, but after some hiccups in expansions for some of its other titles, the CK3 player base appeared mostly cool with the later-than-anticipated launch, provided that the new code came out the gate solid as a rock.

February 8, the launch date for Royal Court, is just around the corner, and as Paradox is a public company, we’ll be able to see if its wager that making gamers wait – and perhaps lose interest? – for a big update pays out. I, for one, am buying the expansion, but don’t want to over-index on my own experiences.

In related CK3 news, Paradox just announced that it is bringing the title to consoles this week. I actually got invited to a press event with the company, and the studio it hired to help bring the game to a handset-powered environment. Why folks don’t just buy a damn gaming PC is beyond me, but I will say that I learned quite a lot about how games get ported to other platforms. It’s a lot of work to make a PC game work in a non keyboard/mouse environment, it turns out.

Everyone is fighting everyone

Wrapping on a tiny note, did you catch this story in The Information? At one point, Databricks (soon to be public, worth a bajillion dollars) and Snowflake (public, worth a bajillion dollars) were kinda friends. And if you asked, say, Databricks, about the other company, it might tell you that they were operating in different areas.

And maybe that was true for a while, but as The Information notes, it’s no longer the case.

Why do I bring this up? Simply to make another public request for the Databricks S-1 document? Well, yes, but more to note that startups of all sizes love to talk about how they aren’t really competing with one company or another. But as they grow, they tend to overlap more and more with a greater swath of the market.

So the next time a startup says that they aren’t competing with a similar entity or a major firm in their space, just set a timer. And wait.

Alex

Get in, nerds, we’re going to the metaverse

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

Hello friends, I hope you are well and warm and healthy and happy and good. If not, some of those things. If you are none, well there’s a reason we invented ice cream.

In good news I have a few tasty nuggets for you this fine Saturday. We’re talking the metaverse, a venture capital story that I’ve watched from its genesis, and a funding round for a very cool startup that I accidentally blanked this week, so we’re talking about it here. Ready? Let’s have some fun.

The most fun that I had this week was a visit to Decentraland. In short, I was in edit and trying to distract myself so that I wouldn’t bother the editing team while they worked, so I fired up the social-crypto environment – metaverse, in other words – and went for a tour. Rocking a mohawk and some pretty cool pants I managed to get lost, visit an NFT gallery, and fail to gain access to an arena.

Look, the metaverse as it exists today looks a lot like Runescape. That’s not that big a diss, given the sheer historical footprint that the online RPG has built for itself. But what I don’t really need is a less featured MMORPG that includes, oddly, a more financial angle than I tend to like in my games.

I am neutral at the moment, and open to the metaverse becoming sufficiently cool that I log in daily. But today it seems that some Web 2.0 properties that include community creation and social interaction are superior to what we’ve yet seen from the crypto team.

Amplify’s newest general partner

Roughly 1,000 years ago, a startup named Mattermark hired me to build an independent news room for their company. It was a great learning experience, frankly, and had the added edge of introducing me to some lifetime friends. Kevin Liu now of TechStars, for example.

Sarah Catanzaro was another standout from the Mattermark team. Her work on the company’s data team was later translated into work in venture, first at Canvas Ventures, and later Amplify Partners. Amplify, for reference, last announced a fund in late 2020 worth $275 million. Given that timeframe, I expect the group to announce a new capital vehicle in short order.

At Amplify, Catanzaro went from principal, to partner, to, most recently, general partner. Her journey from the lowest ranks of the VC world to its top-tier has been enjoyable to watch. And, she told TechCrunch during a call the other week, she’s the first woman to reach her level at Amplify. I highlight that to remind myself that promotions in the yet-cottage industry of venture capital are unlike startup level gains in their pace.

Regardless, Catanzaro told us something that I wanted to write down here, so that we can circle back to it later on. We discussed her firm’s investment approach, check size targets, and how often they enter companies at seed versus Series A maturity levels. Per the newly minted GP, Series A rounds have gotten much bigger without a commensurate decrease in risk. This is something that I have had as a hunch for some time, but hadn’t heard someone say out loud before.

This means that Series A risk, from a venture perspective, is going up as more capital is put to work at the startup stage. The math could work out in the end, provided that enough mega-exits are made in the coming years. But with the market in free-fall, and Concern now getting more column inches than Unbridled Enthusiasm, well, I wonder a bit.

The pride of Rhode Island

Living as I do in the Ocean State, I am slightly afield from the best-known technology hubs in the United States. But that doesn’t mean that fascinating tech companies are being built here in my small state. TechCrunch has spilt ink, to pick an example, on Pangea, a startup founded in Providence that is building a freelance labor marketplace for college kids.

Another startup in Lil Rhody is The Wanderlust Group, which has built Dockwa, a software platform for marinas and boaters. In short, the world of managing boat slip reservations was stuck floating in the world of pen and paper, and Wanderlust decided to to modernize it through software.

We last touched on the company in 2020 when it raised $14.2 million. At that time, CEO Mike Melillo told TechCrunch that his company had merely been on the hunt for $7 million, a figure that it doubled.

So I was not surprised to hear from the company recently that it has raised again. This time Wanderlust has raised a $30 million Series C at a $150 million pre-money valuation. The funding event was led by Thursday Ventures.

Happily for you and I, Wanderlust was willing to share ARR growth for 2021, which came in at 71%. More fun, after moving to a four-day workweek, the company saw its ARR expand 100% from June 2020 to June 2021; there’s a real datapoint for one of the more interesting labor experiments I am tracking in startup-land.

But most interesting from the company is that it’s building a fund. Not another corporate venture capital fund, but something else. Called Wanderfund, the company is funding the vehicle with $300,000 this year for what it describes as “environmental causes at the national and local level.” It’s starting, in part, with putting money in its local Boys & Girls Club to help kids get out of the house and into nature.

The company is building a Dockwa-like product for camping, so the “go outside” theme is pretty core to what the aptly named Wanderlust Group is building.

Miscellania and Various

  • The Acorns SPAC deal is off, which caught our eye. It’s not a huge shock given how poor some SPACs have performed post-combination, but we had honestly been looking forward to Acorns as a public company.
  • Acorns S-1, please.
  • And the Robinhood experiment with making the financial market more open to regular folks through IPO access and corporate democracy has good sides, and sharper edges worth keeping in mind.

Ok that’s enough for now. Chat you all next week!

Alex

Venture water, biotech investing and 2021’s carnage

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

Welcome back to the working world, friends, I hope that you survived the return to the desk in good stead and are both warm and healthy. The current boom in COVID cases is a huge bummer, but perhaps this is the last year we’ll have to drag ourselves back to productivity under the specter of lockdowns, mass death and a lack of hugs. I hope so.

Regardless, today we have a lot of fun stuff that should keep your mind off the state of the world for a few minutes.

Kicking off today, let’s talk about Liquid Death. The excellently named company kills thirst with water, hence its name. That’s really the company in a nutshell. Liquid Death sells water in a can, a business around which it has tailored an anti-plastic stance and a general heavy metal vibe. It’s neat.

But Liquid Death also raised $75 million this week, which has me wondering why everything is so expensive to build these days. Why does a water company need to raise a whole pre-seed fund in a single investment? What does it need the money for? Research? It’s selling water!

There was a general perspective a few years ago that it was cheaper than ever to build a startup. With off-the-shelf software, cloud computing and modern fintech back ends, putting together the building blocks of modern business was becoming faster and less expensive. Apart from the high costs of hiring software developers, it seemed that startups would be able to do more with less.

And yet. Startups are raising more money than ever. The Exchange is diving into venture capital data next week, but it’s clear that the venture and startup classes are still moving funds around with great relish. So much so that Liquid Death has raised over $130 million to date, per Crunchbase data.

Square the circle of lower startup costs, and mega-rounds for me if you can. Are we seeing marketing spend raised through equity capital sources? If so, that makes me worry a bit!

(Note that Liquid Death could be a kickass business with great margins and lovely economics; I don’t know its numbers. But why does it need $75 million if it’s in such good shape? What are we missing here?)

Level raised money

From deep in the notes docs, a brief note on Level. Level is a company that I covered back in February of 2021. The company had just closed a $1.5 million round for work we described as bringing “credit to workers who might not be able to tap it from traditional sources, using their current income from freelance work to back the advance.”

It was a neat model, as lending based on assets over cash flow is a bit silly in a world where lots of folks work but don’t live asset-heavy lifestyles. (That’s a polite way of dissing NIMBY boomers, of course).

Anyway, Level raised another round as 2021 closed, this time a $7 million Series A. Anthos Capital led the funding, with NextView Ventures and other prior inventors also kicking in cash. The capital came after the company grew its size by “10x,” per its own data.

What I find most notable in the Level news item is not that the company raised more money — more that its goal set is super big. Per the company, it wants to build a “financial OS for microbusinesses.”

I dig that because tiny businesses are not the sorts of companies that get lots of attention from traditional financial institutions. Fintech should be, in my view, a method of applying tech to break down walls and bring more value to more folks. Level seems to be working along those lines, while also building a venture-ready business. Neat!

PsyMed raises a biotech fund

On the heels of news that a16z has put together $9 billion in new funds for venture, growth and biotech investing it’s easy to forget that there are smaller funds in the market as well. And some that are quite new, in fact.

On the biotech front PsyMed Ventures is busy raising a $25 million fund, the first close of which ($8 million) is in the bank. I chatted with the group Friday to dig in a bit more to their model.

First, basics. PsyMed has three investing partners: Dina Burkitbayeva, Greg Kubin and Matias Serebrinsky. As you can work out from its first fund size target, it will be investing on the earlier side of things in the psychedelic medical space, along with a few related areas. The group isn’t new to working together, having previously formed an investing group using AngelList tech to invest around $15 million to date.

A few thoughts about PsyMed. First, I am hype that we’re expanding the boundaries of what we’re testing for medical use. Prudishness in my home country has held back this sort of work, to our detriment. Second, the biotech investing space is interesting to me as the companies founded go public a lot earlier than what we tend to see in, say, the enterprise software market. So, you get to see more about companies, more quickly and more frequently.

For venture investors in biotech companies, this can also mean earlier liquidity possibilities than what is often seen in today’s unicorn era.

Talking with Burkitbayeva, Kubin and Serebrinsky gave me the impression that we’re nearing a confluence point in terms of regulatory, scientific and medical progress that could unlock a lot of neat new treatments for some sticky human matters. Things like PTSD, treatment-resistant depression and my personal favorite, substance-use disorder.

All this is to say that I’ll be keeping out an eye for where the group puts its new fund to work and how quickly they can boost early-stage pharma startups into the public markets. Here’s to reading more biotech S-1s this year and next, I suppose!

The weekend

And that’s what I have for now — don’t forget that Equity is back to its regular thrice-weekly cadence next week, so I’ll chat with you on your podcasting app of choice in short order! Hugs!

Alex