Argo AI, an autonomous vehicle startup backed by both Ford and Volkswagen, has laid off about 150 employees, as reported earlier by Bloomberg and The Wall Street Journal. The move is supposed to offset a period of rapid growth, in which the company hired more employees than needed.
“With incredible growth and progress made in our mission to deploy driverless vehicles, we are making prudent adjustments to our business plan to best continue on a path for success,” Argo AI said in an emailed statement obtained by Bloomberg. The Verge reached out to Argo AI with a request for comment but didn’t immediately hear back.
As noted by the WSJ, the layoffs make up about 6 percent of the Pittsburgh-based company’s 2,000-person team. Argo AI was founded in 2016 by Bryan Salesky, the former head of hardware development for Google’s autonomous vehicles (AVs), and Peter Rander, who previously served as an engineering lead for Uber’s self-driving branch. Ford injected $1 billion into the company in 2017, and Volkswagen followed up with a $2.6 billion investment in 2020.
“Argo is a critical partner of our self-driving service, and we will continue to support them and work together on developing the self-driving technology that will power our self-driving service,” Ford spokesperson Bradley Carroll said in a statement to The Verge.
Tiger Global, one of the biggest winners from the technology bull market, plans to decelerate the pace of its investments in startups for two quarters, the latest in a series of high-profile investors becoming cautious as the market embraces a downturn.
The New York-headquartered firm – which invested in 361 deals in 2021, according to PitchBook – is evaluating the market conditions and plans to limit the number of new checks it writes till December, Tiger Global partner Alex Cook told founders recently, according to sources familiar with those conversations.
Cook met several founders during his visit to Bengaluru earlier this month, offering advice and assuaging market concerns about the firm’s recent performance. Cook also assured that Tiger Global is sitting on dry powder and will continue to back “best internet-enabled” startups, the sources said.
The firm is also on track to raise a new fund later this year, Cook said, according to the sources.
Tiger Global had an eventful 2021.
The firm, which manages over $20 billion, benefitted from the rise of share prices of tech companies such as Zoom during the pandemic. But by May of this year, it had lost two-thirds of all the gains it made in the stock funds since its founding in 2001, according to multiple reports. TechCrunch reported in May that Tiger had nearly depleted its current fund, and in the same month, journalist Eric Newcomer reported that Tiger was looking to raise a $1 billion crossover fund.
Cook told founders that it was still a little early to say how much capital Tiger Global will be able to accumulate for its larger fund, the sources added, requesting anonymity as the conversations were private.
The slowdown on new investments comes as investors globally sound alarms and hit the brakes on making large backings as they scramble to assess the rout in the stock market that has sharply reversed much of the gains of the 13-year bull run.
Still, Tiger Global’s move is significant because it wrote more checks than any other U.S. investor last year, according to PitchBook.
Investors across the globe have become more selective in recent months and have slashed valuations of private firms across many tech sectors worldwide, including emerging markets. Indian startups raised $6.9 billion in the quarter that ended in June, down from $10.3 billion during the period between January and March this year, according to insight platform Tracxn.
(Some of the deals announced in the previous quarter were agreed upon and finalized as early as January, hence the Q2 figures don’t accurately reflect the deal-activity of the quarter, many investors said.)
Some investors — including reportedly Coatue — have cautioned that tech stocks may fall further and more painful days could be ahead for startups.
The tightening of valuations has additionally trickled down to startups across each stage, including those at Seed and Series A phases of life, according to several investors with whom TechCrunch spoke.
“We are in a ‘sliding knife’ market and things have only partially propagated into earlier and earlier companies. For example, series B/Cs have dropped 30-70% but the repricing is inconsistent. Some companies have been getting high valuations over the last few months while others can not fundraise at all. Series A valuations have dropped maybe 20-30% but likely should drop 50%+ from highs,” wrote Elad Gil, a prolific early-stage investor, in a recent blog post.
“Series seed rounds have come down some but will likely drop further as more series A reprice harder as investors seek each round to be 2-3X the valuation of the prior round (the traditional standard). Private tech is for some stages where public tech was towards the beginning of this year. Hitting a new startup market valuation stable point is likely to take another quarter or two barring a recession or additional public market drops. These things take some time to fully propagate to all stages, founders, and investors,” he added.
Previously best known for investing in growth and late-stage startups, Tiger Global made some apparent changes to its strategy in 2020 and made over six dozen investments in early-stage deals last year, according to an analysis by TechCrunch.
Some investors have publicly criticized late-stage investors’ growing interest in writing Seed and Series A deals, worrying that it’s unclear whether those funds will continue to remain as enthusiastic about supporting younger firms when the market takes a turn.
Cook told founders that the firm is bullish on identifying and supporting early-stage startups and will continue to back such deals in the future, the sources said.
A Tiger Global spokesperson declined to comment Sunday evening.
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GoHenry, the U.K.-based financial education app and pre-paid debit card provider for kids, has expanded into Europe for the first time with the acquisition of French startup Pixpay. Terms of the deal were not disclosed.
Founded out of London back in 2012, GoHenry has emerged as one of the preeminent fintech companies for children, targeting six to 18-year-olds with a digital platform that allows parents to allocate and control funds, while their children learn how to budget and gain insights into their spending habits. GoHenry expanded into the U.S. back in 2018, and today the company claims more than two millions users across these two markets — it also says that one-sixth of 12-year-olds now have a GoHenry debit card.
Pixpay, for its part, was founded out of Paris less than three years ago, and is a similar proposition to GoHenry but with more of a focus on slightly older children, starting from 10 years of age. The company had expanded into Spain back in November, helping to drive its membership to nearly 200,000 across the two markets.
GoHenry goes to Europe
In many ways, the Pixpay acquisition serves as the ideal vehicle for GoHenry to expand its horizons. The U.S., so far, has always been its priority after its domestic market, and when GoHenry raised a $40 million funding round 18 months ago the message at the time was very much about continued expansion in the U.K. and U.S. But GoHenry CEO Alex Zivoder told TechCrunch that Europe was never far from its thoughts.
“When we launched in the U.K. in 2012, we pioneered a new category in fintech, and therefore had to grow a whole category from scratch with noone to learn from before us,” he said. “Once we decided we were ready to expand internationally, our timing in Europe was always part of the plan. Our first step was to launch in the U.S., which we did in early 2018 and have experienced triple-digit year-on-year growth. Following our funding round in December 2020, we were looking for the right opportunity to expand into Europe.”
GoHenry: Mobile app and pre-paid debit card
While GoHenry has pretty much had to build itself up from scratch in the U.S., it’s clear that it’s adopting an entirely different approach for markets closer to home — and there are many advantages to buying an established brand with traction as it has done with Pixpay, perhaps chief among them being that GoHenry doesn’t have to concern itself as much with hiring, localization, and launch campaigns. Indeed, GoHenry said it has no plans to integrate the two companies, with their respective brands, leaderships teams, and headquarters remaining as they are.
“As an established leader in teen banking in France and Spain and a trusted brand, the acquisition of Pixpay made perfect sense to help accelerate growth across Europe, improve our competitive advantage, and cement our global leadership position,” Zivoder said.
That’s not to say that there won’t be some resource-pooling going on at some point, however.
“With Pixpay focused solely on teenagers and GoHenry catering for kids as young as six-years-old, this acquisition will allow us to combine our expertise in financial education to the benefit of our members,” Zivoder added.
Pixpay mobile app
Show me the money
GoHenry touts strong growth for 2021, claiming its revenue more than doubled to $42 million, something that Zivoder puts down to — you guessed it — the pandemic.
But what’s the correlation there, exactly? Well, while the company’s core offering is essentially a financial management product that helps parents give their kids some financial independence, it’s also very much about education. Through GoHenry, Kids can learn how to budget, while there are so-called “money missions” that deliver mini lessons on all-things financial.
Throw into the mix a broader societal shift away from cash, a movement that has accelerated over the past couple of years, and it seems that GoHenry was well-positioned to capitalize.
“Financial education is a crucial life skill and a secular trend, period,” Zivoder said. “But during the pandemic, the need to teach kids how to be good with money in a cashless world, magnified with social distancing measures and school closures driving more and more people online, and many store owners still no longer accepting cash.”
Money missions: GoHenry teaches kids money skills
The Pixpay acquisition makes sense for GoHenry in terms of powering its expansion plans without having to start from scratch in new markets. With this one deal, GoHenry immediately has two more markets under its wing, and another two scheduled for later this year as Pixpay gears up to launch in Italy and Germany.
And from Pixpay’s perspective, it also makes sense, given that GoHenry already has a significant foothold in two massive markets and ten times the number of members as Pixpay. Consolidation — rather than competition — makes both companies lives easier.
“It made sense to combine our expertise with that of GoHenry to boost our growth plans,” Pixpay CEO Benoit Grassin told TechCrunch. “With shared values and ambitions, we believe that this combination with GoHenry will enable us to go faster and further than if we had operated on our own.”
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The first two years of the pandemic boosted e-commerce, but Simon Wu, a partner at Cathay Innovation, has identified three factors that are now creating strong headwinds for online retailers:
Increasing economic uncertainty.
iOS social media privacy updates.
“A potential drop in discretionary spending.”
Even if one could set aside a looming recession, the fact that consumers have decided to share less personal information is eating into sales and raising customer acquisition costs.
Full TechCrunch+ articles are only available to members. Use discount code TCPLUSROUNDUP to save 20% off a one- or two-year subscription.
For sure, social media is a vehicle for driving sales, but community management is the engine. Wu offers multiple ideas for customer programs that promote loyalty and build traction organically while reducing your dependence on Facebook and other platforms.
“Diversifying customer acquisition channels and organic growth will take time, but the investment is worth it in the long run to build an enduring brand,” he writes.
Dear Sophie: How can we transfer a candidate’s H-1B and green card?
Image Credits: Bryce Durbin/TechCrunch
Dear Sophie,
My startup needs to hire an AI expert, and our top candidate has a complicated immigration situation.
She’s from India and has been on an H-1B for more than six years. Her current employer applied for an EB-2 green card on her behalf about four years ago through the PERM process.
She’s been waiting for a green card number since she was approved and says it may take several more years before she receives it.
She is asking us to transfer her H-1B and green card to our company. Can we do it? Do we have additional options to retain her?
— Advancing AI
4 negotiation points startup founders must focus on in a down market
I haven’t tracked this figure nationally, but the amount of venture capital invested in San Francisco-based startups reportedly fell by 65% between May and June 2022.
It’s hard to imagine any scenario where an investor doesn’t enjoy several advantages over a founder. Because VCs have money and prior experience on their side, information is your only equalizer.
To help level the playing field, John Weaver, CEO of angel firm 22 Ventures, shared his top four negotiation tactics for entrepreneurs in a downturn.
“This funding dip is temporary, but the terms you settle on at this moment could shape your company for years to come,” he writes.
In May, fintech startup Enduring Planet announced that it raised $5 million in debt and equity financing so it can extend revenue-based financing to clean tech startups that bring in at least $25,000 per month.
The company’s founders shared a lightly redacted version of their winning pitch deck with TechCrunch+, which, writes Haje Jan Kamps, includes useful templates for creating effective “problem” and “solution” slides.
Flipping the sales script: How to break biases and diversify sales teams
For most of his career, my dad was a sales executive at a company that sold business machines internationally. He built and managed internal teams, and I learned a lot about managing people from watching him.
He once replaced a top-performing account manager with a less-experienced salesperson after realizing that the hotshot only exceeded their revenue targets because they steered customers toward expensive systems they didn’t need.
Those customers tended not to renew when their contracts were up.
“Extroversion, charisma and alpha personality traits do not drive sales success,” writes Arwa Kaddoura, CRO of Influx Data. “This is ‘hero selling,’ and it does not scale or produce effective sales teams.”
Roe reversal weighs heavily on emerging tech cities in red states
Image Credits: venimo / Getty Images
The San Francisco Bay Area long ago lost its monopoly on launching disruptive technology: Today, every large American city has a number of startups.
But since the U.S. Supreme Court restricted the right to obtain an abortion, startups based in states that prohibit the procedure are at a disadvantage when it comes to hiring, found reporters Dominic-Madori Davis and Rebecca Szkutak.
“This has put our decision to build the company in Atlanta in a different light,” said Nile founder Khadijah Robinson.
“We’ve already seen in Georgia where decisions that are regressive impact the business community,” she said. “It’s going to be hard to ask women to come to a place where they might very well be risking their lives.”
The art of the pivot: Work closely with investors to improve your odds
For her latest TC+ post, we asked veteran investor Marjorie Radlo-Zandi to share her playbook for helping first-time founders steer their companies through a pivot.
Changing direction is a massive undertaking, but she breaks the process down into several steps that will help entrepreneurs get buy-in from investors (and employees).
“There’s no shame in pivoting,” writes Radlo-Zandi. “On the contrary, it’s a sign of strength.”
Coalition, a San Francisco-based startup that combines cyber insurance and proactive cybersecurity tools, is preparing to expand outside of the U.S. for the first time following a mega $250 million Series F investment that takes its valuation to $5 billion.
The investment, backed by Allianz X, Valor Equity Partners and Kinetic Partners, comes less than a year after the company’s $205 million Series E raise in September, which valued the company at $3.5 billion. Since then, the company has more than tripled its customer base, from 52,000 to 160,000, Joshua Motta, CEO and co-founder of Coalition, tells TechCrunch, and has seen an almost 200% increase in revenue growth.
This, Motta tells us, is a result of the booming cyber insurance market. While many in the cybersecurity industry are starting to feel the effects of the economic storm, the cyber insurance market grew an estimated $7.5 billion in 2021 and is expected to continue growing at 25% year on year. Coalition, which classes AIG, Beazley and Hiscox as its fiercest competitors, tells TechCrunch that it remains “one of the largest providers” in the market thanks to its “unique combination” of tech, data and insurance.
“This expertise allowed Coalition to build a strategic underwriting advantage by actively analyzing data we’ve accumulated through public web scans, infosec capability and through our own claims and incident tracking,” Motta tells TechCrunch. “We use all this data not only to select better risk but also to help spot and prevent cyber threats for our policyholders.”
As a result of the startup’s recent growth and a recent partnership with international financial services provider Allianz, Coalition tells TechCrunch that for the first time since its founding in 2017, it’s planning to offer its cyber insurance policies in the U.K. Until now, its services have been available only in the U.S. and Canada.
“This funding will be critical in powering our international presence, and reaching more communities with our tools,” Motta said, adding that the company will also use the $250 million investment for hiring and retaining talent.
However, Motta wouldn’t be pressed on whether this will be the company’s last raise before Coalition plots its exit, despite telling TechCrunch back in September that its Series E raise could be its final funding round before the startup prepares to go public.
One of the stunning facts that’s emerged over the last few years — especially as VCs and startups have turned their attention toward the climate crisis — is that our cities produce an enormous amount of CO2: In fact, buildings are responsible for around 40% of global CO2 emissions. But of course, the problem is that cities are unlikely to stop building, and growiing.
Some estimates say that if global urban growth continues at its current pace, then we’d build a New York City every month for the next 40 years. So if we could reduce this amount or transition, this growth to “net zero” (or better), we’d would do to a lot alleviate the impending, and disastrous, affects of climate change. This is why we are seeing so many new climate funds appear, which are concentrating on the built environment.
A large part of this problem is that concrete and steel are just not sustainable materials, unlike (say) timber.
Now, “011h“, based out of Barcelona, thinks it might have the answer.
Currently, the building processes that use manual labor and usustainalble materials don’t pass muster, so if you can standardize and digitize the building process to make it repeatable and scalable (says 011h) while shifting sustainable materials — like mass timber — you can allow architects, builders, developers and investors to make net-zero buildings faster, cheaper and more sustainable.
It all sounds lovely in theory, but in fact 011h says it has already completed such a project with Renta Corporación, a publicly traded developer, where the “embodied carbon” of the building was reduced by more than 90% compared to conventional methods, while construction timelines were reduced by 35%. This has led to three more major projects being commissioned.
No doubt partly as a result of this, 011h has now raised a significant €25 million in Series A funding. The funding round was led by Redalpine, accompanied by Seaya Andromeda and Breega, with the participation of Aldea Ventures, among others. Previous investors also joined the round, including Giuseppe Zocco, Foundamental and A/O Proptech, which accelerates 011h’s ambition to create a sustainably built world.
The funding will be used to further develop 011h’s platform, building system and team, initially focusing on Spain, then internationally.
Lucas Carné, co-founder and co-CEO of 011h, said the impact of reducing the carbon footprint of building can’t be iunderestimated: “If the embodied carbon of every building were reduced by more than 90%, this would reduce 10% of annual global CO2 emissions, this is equivalent to three gigatonnes of CO2 every year. In real terms, this is almost 2x more carbon than completely transitioning from petrol to electric vehicles; and is equivalent to eliminating 1 billion domestic gas boilers,” he told me.
Harald Nieder, general partner of Redalpine, added in a statement: “At Redalpine, we believe that there are massive opportunities around sustainability. In fact, the opportunities are such that we are not looking for marginal improvements of the status quo. We are looking for teams that are aiming to have a real impact, worthy of the global challenges we are facing. Construction is both one of the most unsustainable industries and one of the least digital and the 011h vision is exactly what we were looking to support.”
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Startups and their financial backers went a bit nuts last year, raising too much money, often at unsustainable prices. We’re now watching a collective hangover work its way through the global startup markets.
You know all of that. This afternoon, we’re looking at a related matter. Yes, charts that once only pointed up are now only pointing down, but when did we reach the local maximum? Both startup and venture capital reached an activity zenith at some point in the last few quarters — but when?
The answer is actually a bit less clear than we anticipated. Leaning on some new data from Crunchbase News, let’s try to figure out when the music really did stop and reality descended.
The latest such fund to emerge on the scene is Climentum Capital, which today announced the first close of its inaugural €150 million ($157 million) fund, which is designed to help curb CO2 emissions and “accelerate Europe’s green transition,” the company said.
TechCrunch caught up with founding partner Yoann Berno to get the lowdown on what Climentum is striving to achieve, and how it sets itself apart from the incumbents in the space.
Sustainable investment
The driving force behind Climentum’s investment philosophy is Europe’s new Sustainable Finance Disclosure Regulation (SFDR), which came into force last year. SFDR is designed to improve transparency in the sustainable investment sphere, so finance companies are more accountable for specific claims they make around their sustainability credentials — it’s partly to do with preventing greenwashing. Climentum, specifically, is focused on being a so-called “Article 9 fund,” which means that it’s making sustainable investments and carbon emission reduction a core investment objective. And in the process, it gives the fund’s backers access to all the relevant data they need to report on their own ESG (environmental, social, and governance) targets.
Climentum’s operations are spread across three core Northern European hubs in Denmark (Copenhagen), Sweden (Stockholm), and Germany (Berlin), with backing from a host of Nordic pension funds and Europe-based conglomerates. This includes chemical giant BASF’s venture capital arm, which sees Climentum as a conduit to achieving its own climate-focused goals.
“We are backed by BASF which sees in us a strategic investment to get closer to their decarbonization objectives, and a source of intel to guide their corporate strategy in the coming decade,” Berno continued.
Berno was also keen to stress that two of Climentum’s five founding general partners are female (one of whom has yet to be formally announced), which he sees as a positive differentiator in an industry dominated by men.
“We are 40% female, which is as good as it gets in the industry — [it’s] still not at full parity, but we will continue pushing our gender equality agenda,” Berno explained.
Climentum Capital: Morten Halborg, managing partner (Copenhagen); Yoann Berno, investment partners (Berlin); Dörte Hirschberg, investment partners (Berlin); and Stefan Mård, impact partner (Copenhagen). One more partner is to be announced, based out of Stockholm.
Climentum has currently only secured around half of the targeted €150 million for its first close, but it expects to close the full fund by the year’s end. In the longer term, it’s looking to make some 25 investments across Europe from late-seed stage to series A, with individual figures ranging from around €1 million to €5 million. The six core focus categories that Climentum will target for reducing CO2 will be next-gen renewables; food and agriculture; industry and manufacturing; buildings and architecture; transportation and mobility; and waste and materials.
Climentum said that it is already close to finalizing three investments which are currently at the due-diligence stage, which are focused on material recycling, alternative protein production, and insect farming.
So far, so good. But in a field teeming with climate-focused investors and a seemingly insatiable appetite for startups promising to help repair Planet Earth, Climentum is touting tough thresholds in terms of how the team benefit financially from their collective investments. In essence, it has to overcome two stringent hurdles as part of what it’s calling a “dual carry” investment model.
“The first hurdle is financial with a competitive return target of three-times over the fund’s lifetime,” Berno said. “The second [hurdle] is a [climate] impact hurdle with an ambitious CO2 emissions reduction target, which will be measured at the portfolio level at the end of the fund.”
In other words, Climentum is measuring success not purely on how much of a return they get for their backers, but how much of an impact their investments have on their climate goals.
“Sweden, Germany, and Denmark are in the top five countries in the world in terms of forward environmental regulations and public mandate to accelerate the green transition,” Berno explained. “[And] the three capital cities are some of the most active startup hubs in Europe, with a disproportionate amount of climate tech startups.”
A climate of change
It’s also worth looking at the timing of Climentum’s fund launch, which looks pretty good from myriad standpoints. With growing pressure on the energy markets due to the war in Ukraine, and many countries trying to reduce their reliance on Russian gas, this bodes well for “alternative” energy sources, as well as technologies that promise to help nations reduce their energy consumption. On top of that, supply chain issues are causing a shortage of food such as protein, which places emerging startups focused on insect farming, for example, in a strong position.
Moreover, the broader economic downturn also puts investors such as Climentum in a good position, including the terms they may now be able to agree with startups.
“The current economic slowdown has stopped the euphoria on the VC market and caused a significant reduction in startup valuations and amounts deployed,” Berno said. “As an investor, we are liquidity provider to a market that desperately needs more liquidity to continue financing rapidly evolving innovation.”
When everything is thrown together into a giant melting pot, it seems clear that now is as good a time as there ever has been for climate-tech startups to flourish. There is demand from consumers and corporations alike, while governments are cooking up policies that make society-wide green philosophies much more than a “nice-to-have” — any business that wants to function in today’s world needs to take its climate responsibilities seriously.
“The climate tech companies that have a real solution to some of the world’s biggest problems already have pent up demand from consumers, corporates and governments,” Berno said. “This phenomenon justifies some of the high valuations which will be amplified by the demand for acquisitions from corporates desperate to meet their 2030 emission targets.”
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A rout in the stock market is causing troubles for private equity as valuations fall, The Wall Street Journal wrote Monday (July 4) — and many companies are delaying their plans to go public.
The valuations aren’t down all the way across the board, though venture capitalists say the situation is worse for a lot of companies. Investors are becoming more selective.
Asheem Chandna, partner with Greylock Partners, said inflation, along with the potential for a recession, “have spilled over to the venture-capital industry, and multiples on mid- and late-stage valuations are rapidly compressing.”
Chandna said business plans are drawing more scrutiny now and investors have been looking for more evidence of financial health.
This all comes as dealmaking slows down in the U.S. overall, with venture capital funds investing around $47.5 billion in 2,251 deals during the second quarter through June 15. That’s compared to $70 billion in 3,369 deals in the first quarter, per data from CB Insights.
And some venture capitalists have been telling companies in their portfolios to shore up their balance sheets, focusing more on sustained growth in order to be ready for whatever rocky economic waters are ahead.
This also comes with some venture capitalists rethinking strategies, with the lagging valuations making some of them put more money into earlier-stage companies to help diversify portfolio risk.
Jack Dorsey, CEO of Block and founder of Twitter, has been skeptical of the plans for Web3 thus far — so he wants to put his energy into something better, which he calls Web5.
He thinks the current version of the blockchain-based internet is unlikely to work, calling it “something of a fraud.”
Instead, he thinks Web3 is doomed not to escape the venture capitalists that have funded its development, calling it “ultimately a centralized entity with a different label.”
A rout in the stock market is causing troubles for private equity as valuations fall, The Wall Street Journal wrote Monday (July 4) — and many companies are delaying their plans to go public.
The valuations aren’t down all the way across the board, though venture capitalists say the situation is worse for a lot of companies. Investors are becoming more selective.
Asheem Chandna, partner with Greylock Partners, said inflation, along with the potential for a recession, “have spilled over to the venture-capital industry, and multiples on mid- and late-stage valuations are rapidly compressing.”
Chandna said business plans are drawing more scrutiny now and investors have been looking for more evidence of financial health.
This all comes as dealmaking slows down in the U.S. overall, with venture capital funds investing around $47.5 billion in 2,251 deals during the second quarter through June 15. That’s compared to $70 billion in 3,369 deals in the first quarter, per data from CB Insights.
And some venture capitalists have been telling companies in their portfolios to shore up their balance sheets, focusing more on sustained growth in order to be ready for whatever rocky economic waters are ahead.
This also comes with some venture capitalists rethinking strategies, with the lagging valuations making some of them put more money into earlier-stage companies to help diversify portfolio risk.
Jack Dorsey, CEO of Block and founder of Twitter, has been skeptical of the plans for Web3 thus far — so he wants to put his energy into something better, which he calls Web5.
He thinks the current version of the blockchain-based internet is unlikely to work, calling it “something of a fraud.”
Instead, he thinks Web3 is doomed not to escape the venture capitalists that have funded its development, calling it “ultimately a centralized entity with a different label.”
Sisters Gini and Eccie Newton didn’t plan on working together — they fell into it.
Eccie, who was 23 at the time and working as a chef, saw an opportunity to create a sustainable lunch delivery service in London back in 2014. She roped in her little sister Gini and the business, Karma Kans, was born.
Something about being in business together just clicked. In 2018 the sisters went on to found Karma Kitchen, a shared and private kitchen space provider, which last summer raised£252m in Series A funding after the initial aim of £3m —one of thelargest VC roundsraised across Europe in recent years.
So while investors have been hesitant to backmarried cofoundersbefore, the same hesitation doesn’t seem to apply to family members.
The Newton sisters aren’t the only siblings in Europe who have chosen to go into business together — with the toughandwonderful things that entails. But what is a family-run tech business really like?
Absolute trust
While the early days of founding a company can be difficult and stressful — with a sibling, you know they’re not just going to quit on you.
Eccie Newton, with her sister Gini
“What’s different about a sibling-cofounder relationship to a normal cofounder relationship is the absolute trust you have in each other,” says Eccie, as well as a knowledge of how that person approaches work and how much stress they can handle.
“I’ve known people who have gone into business with friends who have been shocked by what people are like in business, and how easy people quit. But as siblings, you know they’re not going to just go elsewhere and take a better offer for money, because there’s a loyalty that you have to stick it out,” explains Gini.
The other benefit of starting a business with a sibling is that you know each other inside out, say brothers James and Conor McCarthy, who cofounded food ordering platform Flipdish in 2015.
“Investors should invest in siblings because it’s a proven relationship.”
“I think investors should invest in siblings because it’s a proven relationship. Whereas if you’re investing in two people who didn’t know each other previously, and got together to build a business, there’s no guarantee that they’re going to get along,” says James, adding that he and his brother’s first business endeavour was selling bootleg DVDs at school.
“We’ve spent all our lives together,” Conor chimes in. “We’ve been stuck sitting next to each other during eight-hour car journeys, we’ve been on holidays together, been through school and exams together. So I guess we learned a lot about each other. And we would already know whether starting a business together would be a terrible idea.”
The benefit of knowing each other through and through, of course, is that sometimes just a look from one sibling to another can communicate a lot.
Sometimes you give me a look in a meeting and I just know that you’re thinking: ‘you have said all of the wrong things,” says Eccie, turning to Gini. “You can read each other’s expressions so easily. It can be quite distracting.”
Complementary skill sets
Being good at different things is what makes any cofounder relationship great.
Niklas Kouparanis, who founded Farmako — a wholesale pharmaceutical company which later exited to Canadian pharmaceutical cannabis giant AgraFlora — in 2018, says his sister Anna-Sophia was the number one person he wanted on his team, as he knew she’d be a great executor and skilled at operations, a complement to his big ideas and visions.
Fresh out of university, Anna-Sophia became Farmako’s first employee, heading up business development and European expansion. The duo went on to cofound a cannabis telehealth company, Bloomwell Group, in 2020.
“I remember when I was 10 and Anna was 6, she’d follow me wherever I went. I was more of the thrill-seeker, risk-taker kind of child and Anna was always the more careful one — reminding me not to do dangerous things and always trying to protect me.”
Bloomwell Group founders, from left, Samuel Menghistu, Niklas Kouparanis, Julian Wichmann and Anna-Sophia Kouparanis
“I never thought that Niklas and I were naturally suited to working together. But, thinking about it now, Niklas does come up with the visions and I execute them. And I still, to this day, remind him to wear a helmet,” adds Anna-Sophia, recalling advice that she gave Niklas when they were children when he wanted to climb the highest tree in their village.
However, as with any cofounder relationship, it’s important that each sibling recognises their own strengths and weaknesses, and has their own patch to work on.
In the early days of Karma Kans, Eccie (a chef) and Gini (not a chef) were both working as cooks in the kitchen. There was way too much overlap, and way too many squabbles for the arrangement to be sustainable.
“Eccie put so much coriander in everything and I hate coriander… We’d have these full on fights over little things like this,” adds Gini, rolling her eyes. (Eccie once threw a can of chickpeas at her head — which luckily smashed on the wall.)
“I think what we’ve cracked now is divide and conquer,” says Eccie. “Like, we both know where our strengths are — like I’m strategy and Gini’s commercial — and play to them, and then trust the other person to do the same.”
Niklas agrees:“It’s very important to have different opinions and ways of doing things, as that is what makes a company successful. I trusted my sister to do her job well, and I knew that she would become the great person she is today from the beginning. That’s why I started two companies with her.”
Drawing the line
One thing that many cofounders — siblings or not — have to be conscious about is not letting their work seep too much into family settings, says Conor McCarthy. In other words, partners and families of sibling founders don’t always want to have business chatter at birthday parties or while on holiday.
Flipdish founders brothers Conor and James McCarthy
Anna-Sophia agrees that the line between business and family can be hard to draw.
“There are always times where our work personalities and normal personalities merge together — especially when we’re at home and our parents ask questions about the business,” she says. The one place where business talk is forbidden, however, is during dinner — as this time is “sacred” for the Kouparanis family.
Putting family first, however, could, for Anna at least, mean sacrificing her career.
“As soon as we feel like our personal life and family life are being affected negatively, I will be the one to resign”
“I told Niklas from the very beginning: I will be your employee and I will support you and help you make this company as successful as I can. But as soon as we feel like our personal life and family life are being affected negatively, I will be the one to resign,” she explains.
For Eccie and Gini, work doesn’t tend to interfere with their sisterly relationship. In fact, sometimes it’s the sisterly relationship that seeps into the working environment.
“It’s taken us a long time to learn who we are in the business context,” says Gini. “There are still times when our professional side slips and the sibling side comes out — which all of our investors know and they love it.”
Their sibling silliness, they think, is what makes running a business together all that more enriching.
“When you’re having a big investment meeting and everyone feels super uncomfortable and you’re asking them for, I don’t know, a hundred million, you can just make the whole experience fun,” says Eccie.
“I think it’s that dynamic that makes our company such a fun place to come and visit and hang out in — both for investors and team members.”
Bastian Hasslinger is an investor at Picus Capital. He is building Picus’ Berlin office focusing on early-stage technology ventures.
Under normal circumstances, the higher the valuation of a startup, the better it is for all stakeholders involved. High valuations indicate success and the potential of a business; they attract new customers and new talent; they build a reputation.
And, provided a company’s valuation continues to increase, everyone will benefit.
As such, founders and investors have always been incentivized to believe in optimistic estimates of a company’s true worth.
Post-money valuations were inflated by market expectations in 2021, but they were also inflated by the underlying mechanics of the valuation model itself.
In order to navigate the impending challenges of a normalizing market, founders need to understand the impact of both levers.
The miracle year of 2021
New investors in a business will always look to limit their risk as much as possible.
For founders, employees and VCs alike, 2021 must’ve seemed like a miracle year. The initial caution that gripped hearts at the beginning of the COVID-19 pandemic had faded, valuations were rising and funding was once again flowing freely.
However, as the transition from 2020 to 2021 showed us, things can change rapidly.
In 2022, public tech companies’ share prices and market caps are in sharp decline due to rising interest rates, geopolitical developments and normalizing technology conditions. In a normalizing market like this one, once-inflated valuations can become a big problem, particularly for founders, employees and early investors.
Why startups are, by definition, overvalued
To understand why inflated valuations are an issue, we need to first look at one of the underlying mechanics at work.
Unlike publicly listed companies, whose valuations are constantly rising and falling, the valuation of a startup will typically only change after the close of a new funding round. The calculation for the startup’s new value is fairly straightforward:
New valuation = (share price at latest round) x (total number of company shares)
This is known as the post-money valuation model and is commonly accepted as the industry standard.
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Never be the smartest person in the room. If you are, then you're in the wrong room. That's one piece of advice I would give to all entrepreneurs.
As a founder, the talent you hire at your startup is crucial. While difficult to attract and retain any employees at all, the individuals you bring on board should ideally be more knowledgeable than you in their respective domains. After all, startups are built by generalists and scaled by specialists.
It's no secret that entrepreneurs are expected to be versed in many areas. Nonetheless, with so many aspects to building a business, founders often hire employees to fill gaps in their knowledge or experience. Top talent isn't cheap, however, which leads us to an advisory board.
Below I discuss the importance of having advisors, steps to ensuring the right fit, typical terms offered and ways to leverage the most value from these relationships.
An advisory board is a group of individuals whom you trust, as the leader of a startup, to provide valuable business advice. The role of an advisor is, in essence, to serve as a mentor for both you and your company.
For the most part, advisors typically offer suggestions or guidance in the following areas:
Finding investors
Building company culture
Implementing growth tactics
Acquiring and retaining employees
Planning or executing an exit strategy
Your board should be diverse. Whether it's a CMO who can coach you on marketing or a lawyer to help navigate legal challenges, advisors are meant to be complementary to you as a founder. Relationships with these individuals will often be personal, and at times informal, leaving both sides to communicate via text, email or video chat.
The most common question asked is: Does the return of an advisory board justify its cost?
I generally recommend that all entrepreneurs recruit advisors as the foresight of these individuals is often invaluable. Many founders initially balk at the idea of giving up equity, however, seldom regret this decision as they progress.
With prior experience to offer, advisors allow entrepreneurs to eliminate countless mistakes that could very well prove fatal to any startup. It only takes a few occasions to see an advisory board investment return tenfold, and on that note, let's look at some of the benefits of having advisors.
Ability to fill knowledge gaps and improve your performance as a founder and CEO
Serve as a testimonial for your business to foster trust among investors and customers
Offer advice around critical business functions to help accelerate your startup's growth
Establish credibility if lacking in the eyes of both internal and external stakeholders
Once you decide that an advisory board is suitable, it's time to begin your search.
Finding people is easy, but finding the right people is tough. Here are some tips to consider as you look to fill spots on your advisory board.
Assess your needs: What areas do you lack most in terms of knowledge? For example, if it's your first time raising capital, you may seek an advisor that has experience dealing with investors. Once you establish your needs, you can then narrow the search.
Leverage personal relationships: Ideally, an advisor will act as a close confidant, providing advice on short notice when required. Consider whether you have any personal relationships in your network that could add value to you and your business.
Screen candidates thoroughly: Always do your due diligence. Make sure to research the prior roles of a candidate and obtain testimonials, if possible. Additionally, determine if a candidate has potential conflicts of interest that may cloud their judgement.
Go to entrepreneurial hotspots: Sometimes the best place to find advisors are geographic hotspots where other startups are located. Many of these cities have conferences, conventions, and shared workspaces where entrepreneurs and alike come together to network.
Once you have advisors in mind, both parties should align on the expectations prior to commencing a working relationship. Typically, this is set forth in a written agreement that explicitly outlines the tasks, responsibilities, and compensation of an advisor. Here are a few items that should be included:
Meetings: Will advisors be expected to meet regularly or ad hoc when necessary?
Confidentiality: Prevents a leak of information that could be detrimental to success.
Equity: Compensation often varies from 0.25 to 1.50% of your total shares per individual.
Vesting: Contracts range in length from two to four years and equity is dispersed accordingly.
Cliff: Advisors can be terminated within six months, for example, and you'd retain all equity.
Non-compete: Restricts advisors from offering similar services to companies in your space.
Ownership: Any ideas or developments put forth by either party belong to the company.
Disclosure: Do you want advisors to disclose their relationship with your startup publicly?
Tips for managing an advisory board
Connect regularly: Scheduling meetings consistently and in advance is often best. It not only allows advisors to prepare for discussions ahead of time but gives you the opportunity to pinpoint areas in which you need help.
Create an agenda: Draft an outline of topics for each discussion and share it with your advisors beforehand. Make sure to follow up on issues that you don't get around to discussing and save particular topics for specific advisors.
Be open and transparent: If you're not fully open and honest with advisors, they won't be able to offer valuable advice. Remember, they're part of your team and are rooting for your success. Don't just share the highs, but the lows as well.
Foster each relationship: There's a strong chance that whatever you're working on does not pan out. Startups fail every day for a million different reasons. Establishing a strong connection with each advisor may lead to future collaborations down the line.
As any successful entrepreneur can attest, the people whom you surround yourself with determine your success. Building an advisory board can accelerate your company's growth in more ways than one and help navigate that oh-so-treacherous early startup phase, where most businesses are doomed to fail.
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Though the image of perfecting a pitch deck and then presenting your concept to investors and VCs is central to our common conception of being a founder and entrepreneur, many of the largest and most valuable tech companies in the world – from MailChimp to Shutterstock to Hewlett-Packard – bootstrapped their way to success.
Although funding obviously provides additional resources and risk mitigation – not to mention an established support system made up of experienced industry veterans – bootstrapping is not without its own advantages, particularly in terms of the freedom and control to steer your new company as you see fit.
Among local companies that forged this path to success in Los Angeles, one standout is digital marketing agency GR0. We spoke with co-founder and CEO Kevin Miller about his own bootstrapping journey, and what advice he’d pass down to his fellow founders.
While he concedes the natural downsides to funding your startup yourself – particularly as it concerns the strain on a founder’s personal time and resources – for Miller, the bootstrapping process itself was its own reward.
“Seeing your company grow, getting to see new hires weekly, and building out an office space is so rewarding,” Miller said. “I can’t believe I can go to my own office now and employees are there working hard and taking their careers seriously. The fact that we are now a company that people look to and learn from is so satisfying.”
Here are some of Miller and GR0’s top suggestions for starting and growing your own business from scratch:
Set Priorities
For bootstrapping founders, keeping expenses low is absolutely essential in order to conserve resources. “When you raise $10 million in equity, you can go hire whoever you want and invest in whatever platforms and tools you need,” Miller pointed out. “But with bootstrapping, every dollar counts.”
He recommends splitting expenses into two groups – must-haves vs. “nice-to-have” expenditures – and then ruthlessly focusing on the must-haves alone. As an example, Miller cites having an office space as only “nice-to-have” for GR0’s first few months; instead, he worked out of his own living room, which freed up funds to pay for a “must-have” legal adviser.
Though missing out on important resources like a full-time designer or other key hires may end up costing the founder time and aggravation, ultimately it pays off by freeing up future budget restrictions.
Don’t Sweat the Small Details
It’s probably not possible for a bootstrapping startup founder to remain cool, confident, and relaxed at all times. This is a difficult abstract to even envision. Still, Miller suggests “looking at the big picture and flying at 30,000 feet” as an important overall mindset and strategy.
“Just focusing on the bigger picture and knowing you are working toward something bigger will help get you through it,” Miller advises. “Are you moving closer to the bigger dream you have? If so, don’t sweat it.”
Finding the Right Co-Founders and Early Hires
When seeking out collaborators for a new startup project, it can be tempting to look for complementary skill sets, to ensure the company has a balanced and experienced team. But for Miller and GR0, an individual’s personal outlook proves just as important as their background and on-paper qualifications.
“The most ideal traits are honesty, trustworthiness, and integrity,” Miller said. “There will be times where you and a co-founder will have differing opinions, but if you approach every situation with integrity and honestly, then you will be able to get through those times.”
He recommends seeking out new hires based on their positive outlook, enthusiasm, and eagerness to dig in to the relevant details at hand.
“The most important trait you can have is a can-do attitude,” Miller noted. “In the beginning, we didn’t have the budget to build out a full team yet. So having someone come in with a can-do attitude and up for any challenge is so impactful.”
Getting To Your Minimum Viable Product (MVP)
The minimum viable product (or MVP) was first introduced as part of the “Lean Startup” methodology devised by Eric Ries. Essentially, this is a no-frills version of the product or service your startup will provide, allowing the team to begin working with customers and learning more about the industry and business, with the least amount of up-front effort and cost.
Though it’s important to develop and launch an MVP as quickly as possible, it’s also important that the offering speaks to and aligns with the company’s overall goals. If it’s not attracting users the company hopes to convert into long-term customers, and it’s not providing specific and valuable feedback and data to the team, it’s not providing full and robust benefits to the company at large.
Miller suggests waiting until the company has an MVP that can handle a full sales cycle independently.
“If it can go through every step and intake a customer,” he said, “then it’s ready to launch.”
