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Venture investment in esports looks light as Q1 races to a close

Published March 19, 2020

Hello and welcome back to our regular morning look at private companies, public markets and the gray space in between.

Today we’re taking a look at the world of esports venture capital investment, largely through the lens of preliminary data that we’ll caveat given how reported VC data lags reality. That phenomenon is likely doubly true in the current moment, as COVID-19 absorbs all news cycles and some venture rounds’ announcements are delayed even more than usual.

All the same, the data we do have paints a picture of a change in esports venture investment, one sufficient in size to indicate that an esports VC slowdown could be afoot. As with all early looks, we’re extending ourselves to reach a conclusion. But… no risk, no reward.

We’ll start by looking at Q1 2020 esports venture totals to date, compare them to year-ago results, and then peek at Q4 2019’s results and its year-ago comparison to get a handle on what else has happened lately in the niche. The picture that the quarters draw will help us understand how esports investing is starting a year that isn’t going as anyone expected.

Venture results

Today we’re using Crunchbase data, looking at both global and U.S.-specific venture totals in both round and dollar volume. To get a picture of the competitive gaming world, we’re examining investments into companies that are tagged as “esports” related in the Crunchbase database. Given that this is a somewhat wide cut, the data below is more directional than precise and should be treated as such.

Female-led Robin Games raises $7M to combine lifestyle content with fantasy gaming

Published March 19, 2020

As a former Jam City executive, Jill Wilson led teams behind some of the top-grossing gaming franchises, like Cookie Jam and Panda Pop. Now she’s running her own startup, Robin Games, where a team of mostly women is working to create a new niche in mobile entertainment they’re calling “lifestyle gaming.” As the name implies, the idea is to create a mobile gaming experience — in this case, fantasy gaming — that’s more like the sophisticated and stylish lifestyle content that’s popular today.

Robin Games is backed by $7 million in seed funding, the company announced on Thursday, as it made its public debut. The round was led by early-stage fund LVP, which has invested in other to game companies including Supercell, Playfish, and NaturalMotion . Additional investors in the oversubscribed round include 1Up Ventures, Alpha Edison, Everblue Management, firstminute Capital, Greycroft Tracker Fund, Hearst Ventures, and Third Kind Venture Capital.

“Traditionally in gaming, when you say ‘fantasy,’ you mean dragons and other mythical creatures, disproportionately built women, armies and battles and explosions and glory,” explained Wilson, Robin Games’ sole founder and CEO. “As a lifelong gamer, I love (most) of these themes, but traditional gamers are no longer in the majority. Thanks to the smartphone, everyone now has access to a gaming console in their pockets. We are expanding the definition of “fantasy” for this modern wave of gamers, whose fantasies are just as diverse as they are,” she added.

Wilson clarified that she’s not meaning to stereotype women as not enjoying fantasy games about things like warriors and dragons. Instead, Robin Games aims to expand the types of fantasies being explored through gaming — including those mobile gaming has yet to include.

While the company isn’t yet announcing its first titles or specific details, like launch dates, the games are said to cover content you’d typically find in a lifestyle magazine, on an Instagram influencer’s profile or on a lifestyle blog for example.

“We are focused on developing games that are deeply sophisticated under the hood, with an elevated, real-world, approachable style that reflects more of the lifestyle content you’d previously see outside of gaming,” Wilson told TechCrunch .

All this will be wrapped up in the free-to-play business model that powers most top-grossing games. In addition, Robin Games’ strategy will allow it to expand to include a partnership strategy, which will diversify its revenue streams further down the road.

Wilson said the idea for Robin Games was something she had in mind for some time, as she was personally looking for games to like this to play herself — only to find they didn’t exist.

“I’ve always designed products for myself first and foremost, which allows me to deeply connect with what the end-user really wants — since the end-user is me,” said Wilson. “Recently, I realized that not only did we have a unique answer to a pretty major gap in the market, but also that the timing was right and, most importantly, that we could pull together the exact right team to execute this vision.”

The startup is currently a team of nine based in Venice Beach. Management is 80% women and everyone had worked together to make hit games in years prior. In terms of hiring, the company is focused on building out a diverse team in order to better realize its vision, Wilson said, and, more broadly, change the face of the gaming industry as it stands today.

“Our mission goes beyond filling a gap in the market. We’re really looking to shake up the games industry, not only redefining what a modern game team looks like, but also changing the definition itself of what it means to be a gamer,” noted Wilson.

In previous studies, female players have been shown to prefer match-3 and social farming games, among others, with fantasy and MMOs further down the list, and sports and shooting games last. But the types of games Robin Games is proposing don’t really fit into any one category that exists today, so it’s still unknown how female gamers will respond.

However, it makes sense to target this underserved market, given that women account for 46% of all U.S. game enthusiasts.

“Jill Wilson and her incredible team are already further along than most developers starting out,” added Are Mack Growen, partner at LVP and member of Robin Games’ Board of Directors, about the firm’s investment. “This team has developed and operated some of the world’s most successful games for a decade, and now they have assembled to bring premium experiences to the massively underserved audience of women. In addition to their industry expertise, they fundamentally understand their audience and the ingredients for powerful entertainment. We are proud to have led their seed round and look forward to helping them redefine what it means to be a gamer.”

Storj brings low-cost decentralized cloud storage to the enterprise

Published March 19, 2020

Storj, a startup that developed a low-cost, decentralized cloud storage solution, announced a new version today called Tardigrade Decentralized Cloud Storage Service.

The new service comes with an enterprise service level agreement (SLA) that promises 99.9999999% file durability and over 99.95 percent availability, which it claims is on par with Amazon S3.

The company has come up with an unusual system to store files safely, taking advantage of excess storage capacity around the world. They are effectively doing with storage what Airbnb does with an extra bedroom, enabling people and organizations to sell that excess capacity to make extra money.

It’s fair to ask if that wouldn’t be a dangerous way to store files, but Storj Executive Chairman Ben Golub says that they have come up with a way of distributing the data across drives on their network so that no single file would ever be fully exposed.

“What we do in order to make this work is, first, before any data is uploaded, our customers encrypt the data, and they hold the keys so nobody else can decrypt the data. And then every part of a file is split into 80 pieces, of which any 30 can be used to reconstitute it. And each of those 80 pieces goes to a different drive on the network,” Golub explained.

That means even if a hacker were able to somehow get at one encrypted piece of the puzzle, he or she would need 29 others, and the encryption keys, to put the file back together again. “All a storage node operator sees is gibberish, and they only see a portion of the file. So if a bad person wanted to get your file, they would have to compromise something like 30 different networks in order to get [a single file], and even if they did that they would only have gibberish unless you also lost your encryption keys,” he said.

The ability to buy excess capacity allows Storj to offer storage at much lower prices than typical cloud storage. Golub says his company’s list prices are one-half to one-third cheaper than Amazon S3 storage and it’s S3-compatible.

The company launched in 2014 and has 20,000 users on 100,000 distributed nodes today, but this is the first time it has launched an enterprise version of the cloud storage solution.

The 20 best startups from Y Combinator’s W20 Demo Day

Published March 18, 2020

With world events overtaking the tech world’s preferences to meet for coffees and convene at events, Y Combinator skipped its famous two-day live Demo event and went for a radical experiment: no demos at all, but instead a long list of the nearly 200 startups in its Winter 2020 batch, with links to their sites and one-page slides. We’ve done the legwork for you in giving you a full rundown of who does what, and we have also come together on a group video chat on Zoom to talk through our takeaways of the format this year (missed it? here’s the recording). Now, in no particular order, here is our shortlist of some of our overall favorites.

Listen to the TechCrunch staff’s YC Demo Day wrap-up call here

Published March 18, 2020

It’s been a bonkers week in the world, with markets gyrating, companies fretting, investors tweeting and founders re-cutting their 2020 forecasts. But for one collection of startups, the past few days weren’t about work crises or the latest Slack share price. Instead, for Y Combinator’s Winter batch, it was Demo Day week.

TechCrunch has covered Y Combinator companies since time immemorial. And we’ve been present throughout a number of format changes over the years. We’ve been around for things like the old single-day events in the South Bay computer history museum, and we’ve been around for the SF era. Hell, we were there for the two-stage concept.

But this year’s Demo Day brought with it something altogether new: No in-person pitches and demos. Yep, in response to COVID-19, Y Combinator made its demo day virtual, even scooting up its presentations by a full week. Obviously we tuned in en masse, writing a host of posts about the presenting companies (read them here, here, here and here). We also caught up with CEO of Y Combinator, Michael Seibel, to here his take on what’s ahead for the accelerator.

Given the scale of change, however, we weren’t content with just those entries. So, we gathered the TechCrunch crew, hopped on a Zoom, invited in our friends until our Zoom account maxed out (we didn’t know that that was a thing; more capacity coming) to chat over observations and the most interesting startups. We didn’t even miss the usual slew of Y Combinator live tweets — for the most part.

Hit the jump and we’ve got the recording for you. And see which companies the TechCrunch staff liked the most.

The Chat

Focused on health in the home, Novi lands $1.5M to help CPG companies source clean, safe ingredients

Published March 18, 2020

Kimberly Shenk has been focused for a while now on “clean” products that are made without harmful chemicals. In 2017, Shenk and friend Jaleh Bisharat launched NakedPoppy, a site that curates and sells cosmetics that have been vetted by chemists (including some of its own products).

Interestingly, as the young startup was announcing $4 million in seed funding last summer from Cowboy Ventures, among others, Shenk — who remains on the board of Naked Poppy — was splitting off to launch a second company. Called Novi, it hopes to address the same need that Shenk and Bisharat discovered, but it plans to go much broader.

Specifically, Novi is developing a platform that it hopes will eventually become a go-to service for beauty brands, as well as a lot of other businesses that sell to the growing number of consumers concerned about what, exactly, is in their homes. Think carpet sellers, medical device makers, developers of house cleaning products like detergents. If it needs to be formulated, Novi wants to assess it and give it its stamp of approval.

It’s not an easy thing to pull together, concedes Shenk, a graduate of the United States Air Force Academy and MIT who spent several years as the head of Eventbrite’s data science operation. Just one of the many steps involved is building connections to far-flung and disparate raw suppliers, like makers of the surfactants used for cleansing, foaming, thickening and other special effects in cosmetics. The reason: Novi will need to learn about and certify as safe their manufacturing processes.

It’s a major piece of the overall puzzle, and it’s harder than it might sound to nail down, as many manufacturers are hesitant to share information that they view as proprietary.

Still, Novi thinks it can persuade them to be more forthcoming by touting an AI-driven platform that it says can ingest and manage manufacturers’ proprietary data at scale — and make it easier, in turn, for consumer companies that are focused on using vetted ingredients and chemicals to find them. Indeed, where Novi will really shine, suggests Shenk, is in data management.

Investors who know her seem to think she has what it takes. Brian Rothenberg, a partner at Defy Partners who helped scale Eventbrite across six years before he joined the world of venture capital, just led a $1.5 million seed round for Novi. (“We see a groundswell of consumer consciousness in this area,” Rothenberg said in an emailed statement to us.)

The startup further has the backing of Eventbrite co-founders Kevin and Julia Hartz.

Also working in its favor: Novi says it’s already working with a large beauty retailer that likes the results it has seen as a customer of Novi’s software-as-a-service. (Shenk declines to name the outfit, but she says another reason she had to split off from NakedPoppy was the high likelihood that Novi would be working with competitors to the company.)

It’s certainly progress, considering that Novi is still fairly nascent, with a team of just four people as it ramps up.

In addition to Shenk, it’s run by Bisharat, who remains CEO of NakedPoppy but is also a co-founder of Novi and a board member; an engineer; and a chemist who previously worked for another “clean” beauty company, called Beautycounter.

Why is Blue Apron’s stock skyrocketing?

Published March 18, 2020

Back in 2017, a formerly hot, formerly profitable company called Blue Apron went public. It didn’t go well. Today as the global stock market continues to fall, shares in the former venture darling are soaring, up more than 140% in midday trading.

Before its IPO, the company had to reduce its price range from $15 to $17 per share to $10 to $11 per share. That pricing change limited the company’s worth, and reduced the capital it raised in its debut. The meal kit delivery company finally priced at $10 per share. It opened up a hair, but closed the day a mere penny above its IPO price.

Then things got worse. In fact, Blue Apron’s share price decline got so bad that in mid-2019 Blue Apron had to execute a 1-for-15 reverse split. In most stock splits, a company’s share price gets too high for comfort. So, the firm decides to give its investors the same value of the company, but in new, smaller chunks. So a concern trading for $1,000 per share that wanted to split would normally give, say, its investors 10 new shares worth $100 apiece in exchange for their single $1,000 share.

As Uber and Lyft continue to melt, the 2019 unicorn class loses its shine

A reverse split is the other way. You get fewer shares at a higher per-share value. It’s what you do if you need to avoid slipping under $1 per share, or other, similar fates.

Time passed, and everyone forgot about Blue Apron in the same manner as they did Grubhub, companies that came, made an impact, went public and then slowly dissolved.

The latest

Until now. Suddenly Blue Apron is the hottest stock in the world, skyrocketing as other companies shed value. Today in regular trading, American indices fell so far that they triggered protective circuit breakers. At the same time, Blue Apron was doing this (via Google Finance):

Bear in mind that we are looking at the company after its reverse split. So, no, the company is not worth 60% more than its IPO price of $10 per share. It’s worth far less. Indeed, Blue Apron is worth just $211 million today including its day’s gains, according to Google Finance.

Blue Apron was worth about $1.9 billion when it went public, for reference.

Anyway, why is the company skyrocketing? TechCrunch thinks it figured it out. Walk with us:

Everyone is looking for something to buy that will go up as everything else goes down
Blue Apron makes meal kits that folks can make at home
Over the weekend, many U.S. cities began shutting down
That meant less dine-in service
So people are now, putatively, cooking more
That means Blue Apron might benefit!
Enter a hilarious momentum trade in a low-cap stock
Kaboom goes its share price

Don’t pop the champagne. Blue Apron is still worth about what it raised as a private company; its market cap is only about 40% of the money it raised while private in addition to its IPO haul. This company is still priced like it’s on life support.

And that makes some sense. Here are some facts from its Q4 and full-year 2019 report:

1.62 million Q4 orders, down from both Q3 2019 (1.73 million) and Q4 2018 (2.42 million)
$94.3 million in Q4 revenue, down 33% compared to the year-ago period
A net loss of $21.9 million

Not great! Perhaps Blue Apron will explode, beating guidance and earning its newly resurrected share price. Maybe. But before you pile into the company, pause, and then probably don’t.

Big opening for startups that help move entrenched on-prem workloads to the cloud

Published March 18, 2020

AWS CEO Andy Jassy showed signs of frustration at his AWS re:Invent keynote address in December.

Customers weren’t moving to the cloud nearly fast enough for his taste, and he prodded them to move along. Some of their hesitation, as Jassy pointed out, was due to institutional inertia, but some of it also was due to a technology problem related to getting entrenched, on-prem workloads to the cloud.

When a challenge of this magnitude presents itself and you have the head of the world’s largest cloud infrastructure vendor imploring customers to move faster, you can be sure any number of players will start paying attention.

Sure enough, cloud infrastructure vendors (ISVs) have developed new migration solutions to help break that big data logjam. Large ISVs like Accenture and Deloitte are also happy to help your company deal with migration issues, but this opportunity also offers a big opening for startups aiming to solve the hard problems associated with moving certain workloads to the cloud.

Think about problems like getting data off of a mainframe and into the cloud or moving an on-prem data warehouse. We spoke to a number of experts to figure out where this migration market is going and if the future looks bright for cloud-migration startups.

AWS is sick of waiting for your company to move to the cloud

Cloud-migration blues

It’s hard to nail down exactly the percentage of workloads that have been moved to the cloud at this point, but most experts agree there’s still a great deal of growth ahead. Some of the more optimistic projections have pegged it at around 20%, with the U.S. far ahead of the rest of the world.

Chinese cloud infrastructure market generated $3.3B in Q42019

Published March 18, 2020

Research firm Canalys reports that the Chinese cloud infrastructure market grew 66.9% to $3.3 billion in the last quarter of 2019, right before the COVID-19 virus hit the country. China is the second largest cloud infrastructure market in the world, with 10.8% share.

The quarter puts the Chinese market on a $13.2 billion run rate. Canalys pegged the U.S. market at $14 billion for the same time period, with a 47% worldwide market share.

Alibaba led the way in China, with more than 46% market share. Like its American e-commerce giant counterpart, Amazon, Alibaba has a cloud arm, and it dominates in its country much the same way AWS does in the U.S.

Tencent was in second, with 18%, roughly the equivalent of Microsoft Azure’s share in the U.S., and Baidu AI Cloud came in third, with 8.8%, roughly the equivalent of Google’s U.S. market share.

Slide: Canalys

Matthew Ball, an analyst at Canalys, says the fourth quarter numbers predate the medical crisis due to the COVID-19 outbreak in China. “In terms of growth drivers for Q4, we have seen the ongoing demand for on-demand compute and storage accelerate throughout 2019, as private and public organizations embark on digital transformation projects and start building platforms and applications to develop new services.”

Ball says gaming was a big cloud customer, as was healthcare, finance, transport and industry. He also pointed to growth in facial recognition technology as part of the smart city sector.

As for next year, Ball says the firm still sees big growth in the market despite the virus impact in Q12020. “In addition to the continuation of digital projects once business returns to normality, we anticipate many businesses new to using cloud services during the crisis will continue use and become paying customers,” he said. The cloud companies have been offering a number of free options to businesses during the crisis.

“The overall outcome of current events around the world will be that companies will assess their business continuity measures and make sure they can continue to operate if events are ever repeated,” he said.

TikTok brings in outside experts to help it craft moderation and content policies

Published March 18, 2020

In October, TikTok href=”https://techcrunch.com/2019/10/15/tiktok-taps-corporate-law-firm-kl-gates-to-advise-on-its-u-s-content-moderation-policies/”> tapped corporate law firm K&L Gates to advise the company on its moderation policies and other topics afflicting social media platforms. As a part of those efforts, TikTok said it would form a new committee of experts to advise the business on topics like child safety, hate speech, misinformation, bullying and other potential problems. Today, TikTok is announcing the technology and safety experts who will be the company’s first committee members.

The committee, known as the TikTok Content Advisory Council, will be chaired by Dawn Nunziato, a professor at George Washington University Law School and co-director of the Global Internet Freedom Project. Nunziato specializes in free speech issues and content regulation — areas where TikTok has fallen short.

“A company willing to open its doors to outside experts to help shape upcoming policy shows organizational maturity and humility,” said Nunziato, of her joining. “I am working with TikTok because they’ve shown that they take content moderation seriously, are open to feedback and understand the importance of this area both for their community and for the future of healthy public discourse,” she added.

TikTok says it plans to grow the committee to around a dozen experts in time.

According to the company, other committee members include:

Rob Atkinson, Information Technology and Innovation Foundation, brings academic, private sector, and government experience as well as knowledge of technology policy that can advise our approach to innovation

Hany Farid, University of California, Berkeley Electrical Engineering & Computer Sciences and School of Information, is a renowned expert on digital image and video forensics, computer vision, deep fakes, and robust hashing

Mary Anne Franks, University of Miami Law School, focuses on the intersection of law and technology and will provide valuable insight into industry challenges including discrimination, safety, and online identity

Vicki Harrison, Stanford Psychiatry Center for Youth Mental Health and Wellbeing, is a social worker at the intersection of social media and mental health who understands child safety issues and holistic youth needs

Dawn Nunziato, chair, George Washington University Law School, is an internationally recognized expert in free speech and content regulation

David Ryan Polgar, All Tech Is Human, is a leading voice in tech ethics, digital citizenship, and navigating the complex challenge of aligning societal interests with technological priorities

Dan Schnur, USC Annenberg Center on Communication and UC Berkeley Institute of Governmental Studies, brings valuable experience and insight on political communications and voter information

Nunziato’s view of TikTok — of a company being open and willing to change — is a charitable one, it should be said.

The company is in dangerous territory here in the U.S., despite its popularity among Gen Z and millennial users. TikTok today is facing a national security review and a potential ban on all government workers’ phones. In addition, the Dept. of Defense suggested the app should be blocked on phones belonging to U.S. military personnel. Its 2017 acquisition of U.S.-based Musical.ly may even come under review.

Though known for its lighthearted content — like short videos of dances, comedy and various other creative endeavors — TikTok has also been accused of things like censoring the Hong Kong protests and more, which contributed to U.S. lawmakers’ fears that the Chinese-owned company may have to comply with “state intelligence work.”

TikTok has also been accused of having censored content from unattractive, poor or disabled persons, as well as videos from users identified as LGBTQ+. The company explained in December these guidelines are no longer used, as they were an early and misguided attempt to protect users from online bullying. TikTok had limited the reach of videos where such harassment could occur. But this suppression was done in the dark, unasked for by the “protected” parties — and it wasn’t until exposed by German site NetzPolitik that anyone knew these rules had existed.

In light of the increased scrutiny of its platform and its ties to China, TikTok has been taking a number of steps in an attempt to change its perception. The company released new Community Guidelines and published its first Transparency Report a few months ago. It also hired a global General Counsel and expanded its Trust & Safety hubs in the U.S., Ireland and Singapore. And it just announced a Transparency Center open to outside experts who want to review its moderation practices.

TikTok’s new Advisory Council will meet with the company’s U.S. leadership to focus on the key topics of importance starting at the end of the month, with an early focus on creating policies around misinformation and election interference.

“All of our actions, including the creation of this Council, help advance our focus on creating an entertaining, genuine experience for our community by staying true to why users uniquely love the TikTok platform. As our company grows, we are focused on reflection and learning as a part of company culture and committed to transparently sharing our progress with our users and stakeholders,” said TikTok’s U.S. general manager, Vanessa Pappas. “Our hope is that through thought-provoking conversations and candid feedback, we will find productive ways to support platform integrity, counter potential misuse, and protect the interests of all those who use our platform,” she added.