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Knotch raises $25M to help marketers collect data about their content

Published January 29, 2019

Knotch announced yesterday that it has raised $25 million in Series B funding.

The round was led by New Enterprise Associates, with NEA’s Hilarie Koplow-McAdams joining the Knotch board of directors. Rob Norman, the former chief digital officer of ad giant GroupM is also joining the board.

“Brands have a desire to understand the effectiveness of their digital content across all channels, a gap that hadn’t been filled before Knotch,” Koplow-McAdams said in a statement. “Our conviction around the Knotch platform and team is driven by their impressive traction and comprehensive product offerings. We’re thrilled to partner with Knotch as they continue their growth trajectory, providing transformative marketing intelligence at scale.”

When we first wrote about Knotch back in 2012, it was a consumer product where people could share their opinions using a color scale. It might seem like a stretch go from that to a marketing and data company, but in fact Knotch still collects data using its color-based feedback system — now, it’s using that system to ask consumers about their response to sponsored content.

In addition, Knotch offers a competitive intelligence product, as well as Blueprint, which helps marketers find the best publishers for their sponsored content.

Knotch screen shot

“As [brands are building] their own content hubs and recognizing content as a really key piece of their marketing stack, as they’re turning to this space, there’s not a lot of great options for them to turn to and say, ‘Here’s a way to know in advance which creative themes and topics and formats [are going to resonate].’ Here’s how we optimize this content, here’s a way to benchmark what you’re doing,” founder and CEO Anda Gansca told me.

And it sounds like Gansca’s vision goes beyond sponsored content.

“In this convoluted landscape, you need a partner that is going to be your Switzerland of data, who’s aligned with you, collecting transparent digital performance data across paid and own channels,” she said.

Knotch has now raised a total of $34 million. Customers include JP Morgan Chase, AT&T, Ally Bank, Ford, Calvin Klein and Salesforce.

Apple’s global active install base of iPhones surpassed 900 million this quarter

Published January 29, 2019

It’s not surprising that Apple has a massive active install base of iPhones across the globe, but we now finally have an exact number to put behind it. During its Q1 earnings call, CFO Luca Maestri shared the install base for the first time.

“Our global active install base of iPhone continues to grow and has reached an all-time high at the end of December,” Maestri said. “We are disclosing that number now for the first time; it has surpassed 900 million devices.”

Apple has previously detailed the total active install base of its products. They updated the number today to 1.4 billion devices worldwide at the end of December 2018, up from 1.3 billion at the end of January 2018. It’s interesting that Apple has decided to break out iPhone device numbers even as it shies away from releasing unit sales in its earning calls from this point moving forward.

Maestri detailed that Apple would continue to offer updates on the iPhone install base and total install base on a “periodic basis.”

Apple seems to be seeking bright spots wherever they can find them; the Q1 2019 earnings didn’t deliver great news for the company despite beating already reduced market expectations. iPhone revenues were down 15 percent.

Apple posts Q1 revenue decline with iPhone sales down 15 percent

Startup investors should consider revenue share when equity is a bad fit

Published January 29, 2019

Allie Burns
Contributor

Allie Burns is managing director of Village Capital, and co-author of a recent report, “Capital Evolving: Alternative Investment Strategies to Drive Inclusive Innovation.”

There is plenty of blame to go around for tech’s monoculture of thought and ideas: VC firms stacked with Ivy League-educated white male partners; a reluctance by investors to seed businesses outside a few major cities on the U.S. coasts; investors’ obsession with a narrow set of capital structures.

The most common option for funding early-stage ventures in the U.S. is equity. But stepping back to take a look at the bigger picture of American entrepreneurship, it becomes apparent that equity is not the right fit for many businesses.

In July 2018, the Kauffman Foundation found that at least 81 percent of American entrepreneurs do not access venture capital — or, for that matter, a bank loan. This reflects not only the obstacles founders face when trying to access financing — debt often requires significant collateral, for example — but also the fact that not every company’s business model provides the scale and quick exit that investors expect with an equity investment.

But what alternatives are out there?

Quite a few, actually.

Over the course of 2018, we interviewed more than 200 investors and asset managers to gauge their interest in various alternative capital strategies. We looked at everything from new fund vehicles to alternative decision-making processes, but the one option that received the most interest from investors — with 63.1 percent willing to explore or co-create such a structure — was revenue-based financing.

What is revenue-based financing?

Revenue-based financing isn’t some groundbreaking new idea, at least outside of the venture world. A revenue-share deal typically involves a capital investment that is later repaid from a share in the revenue of a growing business. It has historically been used to invest in businesses with potentially predictable cash flow and high profit margins, from Hollywood movies to high-margin service businesses.

But the concept has been gaining steam in the venture capital industry. An increasing number of venture funds are actively deploying revenue-share tools. Novel GP has a $12 million fund focused on revenue-share investments in software-as-a-service companies. Indie.vc recently raised their second $30 million fund that invests through a “profit-sharing” structure by which the fund receives disbursements based on net revenue or net income, depending on which is greater. Candide Group, Adobe Capital and our affiliated fund VilCap Investments are a few more examples.

Why now? The past few years have seen a swell of criticisms of Silicon Valley’s insular culture and broken power dynamics, as well as several high-profile disasters, from Theranos to Bodega. There’s been a welcome uptick in investors looking to branch out to overlooked and under-capitalized communities and industries.

Revenue share is not a silver bullet for all investment opportunities.

These investors will soon find that equity can often be a square peg for a round hole. Equity investments can work quite well for businesses that have a clear path to scale and exit. But many investors told us they see a gap in the market for companies that do not meet the requirements for traditional financing structures, but do reach profitability faster and grow revenue more quickly. The main benefit of a revenue-based financing vehicle is that it can provide a risk/return profile in “the middle” of traditional debt or equity.

This could mean better returns. A recent Cambridge Associates report found that, over a 10-year period, the stock market yields slightly higher return on capital than the average (equity-dominant) venture capital fund.

How would a revenue-share fund perform? After backdating a hypothetical revenue-share investment in the 30 companies, we found that, on average, it would take around 4.4 years to realize a 3x return on the initial investment amount, which ranged from $20,000 to $100,000.

Revenue share is not a silver bullet for all investment opportunities. Any revenue-share fund will face challenges in implementation. And investors are taking on the risk that the companies they support will gain traction in the market; if the companies fail to generate revenue, positive cash flow or profit (depending on the structure), the investors may not be able to recover any capital at all.

The structure also presents some challenges to entrepreneurs. The repayment obligation of revenue-share agreements can prevent startups from reinvesting revenue back into the company’s growth. This obligation could also scare away investors who are unfamiliar with revenue share and reluctant to invest in companies with outstanding commitments on their capitalization tables — which includes several of the investors we interviewed.

Finally, based on the experience of VilCap Investments and other practitioners like Candide Group, we’ve found that revenue-share financing is generally only appropriate up to a certain size of investment, generally between $50,000 and $500,000, depending on the expected return multiple and timeline, and the company’s annual growth rate and traction at time of investment.

When we talk about innovation in venture capital, it’s generally in the context of the new and transformative products and services that the companies we support are building. But as those of us in the investment community branch out to support businesses that are more reflective of the diversity of American entrepreneurship, we need to start innovating in investment structures and processes themselves.

Yep, iPhone revenue is down

Published January 29, 2019

Apple’s Q1 earnings are in, and things don’t look too rosy for the iPhone. Revenue for the handset has declined 15 percent year over year for the quarter. It’s a pretty hefty drop for a device that’s been flying high for so long, but you can’t say Apple didn’t warn us. Earlier this month, Tim Cook noted that the company was lowering its guidance, thanks in no small part to smartphone figures.

In its earlier report, the company put much of the blame at the feet of the Chinese market. There are a lot of factors on that front, including slowing economic growth in the world’s largest smartphone market, and a general trend toward prolonged upgrade cycles, as users are holding onto devices for longer. That’s been a large part of the reason that smartphone sales are down nearly across the board, marking the first contraction of the category since analysts began tracking it.

Last year’s arrival of the XS marked a less dramatic refresh than the iPhone X, but Apple also introduced a new budget handset with the XR. That device has reportedly been a disappointment, though Apple has repeatedly noted that the device has been the best selling iPhone since its October launch.

Notably, those numbers are offset somewhat by growth in other categories. The iPad grew 17 percent on the strength of new models, while Mac/Wearables and Home/Accessories each grew, at 9 and 33 percent, respectively. Services, meanwhile, saw the biggest uptick at 19 percent to $10.9 billion — an all-time high for the category.

“While it was disappointing to miss our revenue guidance, we manage Apple for the long term, and this quarter’s results demonstrate that the underlying strength of our business runs deep and wide,” Cook said in a statement. “Our active installed base of devices reached an all-time high of 1.4 billion in the first quarter, growing in each of our geographic segments. That’s a great testament to the satisfaction and loyalty of our customers, and it’s driving our Services business to new records thanks to our large and fast-growing ecosystem.”

State Farm sponsors popular Fortnite streamer DrLupo

Published January 29, 2019

DrLupo, one of the biggest names and most recognizable voices in Fortnite streaming, has closed a sponsorship deal with State Farm.

Bejanmin “DrLupo” Lupo has nearly 3 million Twitch followers and often plays with the world’s most popular streamer, Tyler “Ninja” Blevins. Beloved for his talent and his personality alike, Lupo has also worked as a caster for various Fortnite tournaments and events. Last year, DrLupo held a charity stream for St. Jude’s Research Hospital and raised $1.3 million.

State Farm Marketing Director Ed Gold had this to say:

DrLupo is one of the world’s most followed Fortnite streamers. His philanthropic efforts and massive fanbase make him an ideal partner as we continue to amplify our esports programming and efforts with the gaming community.

This marks State Farm’s first sponsorship of an esports athlete. The sponsorship will include support of the stream through branded replays, live in-stream stunts and product integration (here’s me trying to imagine integrating insurance products into a video game stream), event-based remote streams, sponsored giveaways, and social content.

DrLupo announced the partnership on his stream, saying that he and his family have worked with State Farm for a long time and that he’s very thankful for the opportunity.

#ad I’m so excited to share that I’ll be working with @Statefarm. They’re a company that my family has counted on for many years to keep our minds at ease if something goes wrong. pic.twitter.com/9U0Zwvm9wv

— DrLupo (@DrLupo) January 29, 2019

Sponsorships are certainly not new in the esports world — Newzoo reported that some $359 million would be spent in 2018 on esports sponsorships. That said, this does mark a grown-up shift in an industry whose sponsors have traditionally included energy drink brands, Taco Bell and Totinos Pizza Rolls.

Part of that has to do with the fact that both the viewership and the popular content creators, particularly in Fortnite, have grown up. DrLupo is married with a child, and his family frequently appears on his stream. If his viewers aren’t already age appropriate for insurance products, they soon will be.

But more importantly, the relationship DrLupo (or any other popular streamer) has with his audience is very different from the one Sofia Vergara has with Modern Family fans/Head & Shoulders customers. Streamers spend anywhere from six to twelve hours a day with their audience, often simply shooting the shit. Moreover, viewers can interact through the chat, having actual conversations with the creator.

The potential for brands to harness and translate that influence through esports sponsorships could be quite powerful, but streamers will have to remain diligent to stay authentic considering their audience is a generation that has become entirely numb to and/or incredulous toward advertising.

Gmail on mobile gets a fresh coat of Material Design paint

Published January 29, 2019

Gmail on mobile will soon get a new look. Google today announced that its mobile email apps for iOS and Android are getting a redesign that is in line with the company’s recent Material Design updates to Gmail, Drive, Calendar and Docs and Site. Indeed, the new UI will look familiar to anybody who has ever used the Gmail web app, including that version’s ability to select three different density styles. You’ll also see some new fonts and other visual tweaks. In terms of functionality, the mobile app is also getting a few new features that put it on par with the web version.

Like on the desktop, you can now choose between the default view, as well as a comfortable and compact style. The default view features a generous amount of white space and the same attachment chips underneath the email preview as the web version. The comfortable view does away with those chips and the compact view removes a lot of the space between messages to show you more emails at a glance.

I’ve been testing the new app for a bit and quickly settled on the comfortable view, as I never found the attachment chips all that useful in day-to-day use.

In line with Google’s Material Design guidelines, all the styles feature relatively subtle but welcome animations that don’t take a lot of time but give you a couple of extra visual cues about what’s going on as you work your way to Inbox Zero.

Google also notes that the new design makes it a bit easier to switch between accounts. I’m not sure I agree (I definitely find the implementation of this in Inbox, which is sadly going away soon, easier to use), but if you regularly use this feature, it’s still easy enough to use. The switcher is now part of the search bar, though, which is a bit confusing and took me a moment to find.

One nice addition to the mobile app is that the large red phishing and scam warning box from the web version now also appears in the mobile app.

Say goodbye to Inbox by Gmail

Figma’s design and prototyping tool gets new enterprise collaboration features

Published January 29, 2019

Figma, the design and prototyping tool that aims to offer a web-based alternative to similar tools from the likes of Adobe, is launching a few new features today that will make the service easier to use to collaborate across teams in large organizations. Figma Organization, as the company calls this new feature set, is the company’s first enterprise-grade service that features the kind of controls and security tools that large companies expect. To develop and test these tools, the company partnered with companies like Rakuten, Square, Volvo and Uber, and introduced features like unified billing and audit reports for the admins and shared fonts, browsable teams and organization-wide design systems for the designers.

For designers, one of the most important new features here is probably organization-wide design systems. Figma already had tools to create design systems, of course, but this enterprise version now makes it easier for teams to share libraries and fonts with each other to ensure that the same styles are applied to products and services across a company.

Businesses can now also create as many teams as they would like and admins will get more controls over how files are shared and with whom they can be shared. That doesn’t seem like an especially interesting feature, but because many larger organizations work with customers outside of the company, it’s something that will make Figma more interesting to these large companies.

After working with Figma on these new tools, Uber, for example, moved all of its company over to the service and 90 percent of its product design work now happens on the platform. “We needed a way to get people in the right place at the right time — in the right team with the right assets,” said Jeff Jura, staff product designer who focuses on Uber’s design systems. “Figma does that.”

Other new enterprise features that matter in this context are single sign-on support, activity logs for tracking activities across users, teams, projects and files, and draft ownership to ensure that all the files that have been created in an organization can be recovered after an employee leaves the company.

Figma still offers free and professional tiers (at $12/editor/month). Unsurprisingly, the new Organization tier is a bit more expensive and will cost $45/editor/month.

Darkstore raises $7.5 million Series A round for its same-day fulfillment center

Published January 29, 2019

Darkstore, a technology-driven fulfillment solution for companies like Nike and others, has raised a $7.5 million Series A round. With the additional funding in hand, Darkstore plans to expand its fulfillment center into more categories.

Currently, Darkstore fulfills products for brands in the areas of footwear, home and consumer electronics. With the funding, Darkstore will expand into lifestyle, health and beauty and athletic leisure, Darkstore founder and CEO Lee Hnetinka told TechCrunch over the phone.

“There are other categories where we get inbound and turn it down,” Hnetinka said. Down the road, Hnetinka said he envisions additional categories, including groceries and perishables.

Darkstore works by exploiting excess capacity in storage facilities, malls and bodegas and enables them to be fulfillment centers with just a smartphone. The idea is that brands without local inventory can store it in a Darkstore and then ship out same-day. Darkstore charges brands across three areas: fulfillment, storage and delivery.

“Up until now, Darkstore has really been behind the scenes,” Hnetinka said. “We want to continue to do that and to be a superpower to our brands. Our mission is to enable the brands to be direct to consumer and we believe we can help them do that even better by creating what we call a branded movement.”

Specifically, Darkstore envisions creating a badge for brands to place on their websites to signal that it offers same-day delivery via Darkstore. Brands currently see Darkstore as a competitive advantage, Hnetinka said, so they’re unwilling to promote its use of Darkstore, but he hopes to change that. That change would ideally help brands to increase trust with its customers, while also undoubtedly providing more visibility and therefore more business for Darkstore.

Also on the docket for 2019 is to explore a new giving initiative. Tentatively called Darkstore Giving, the idea is to make it easier for brands to reduce return-driven waste. Instead of throwing away lightly used items, Darkstore could facilitate the donation of those items to nonprofit organizations.

Darkstore first launched in 2016, counting mattress startup Tuft & Needle as one of its first customers. To date, Darkstore has raised almost $10 million in funding.

Alphabet-backed Medicare Advantage startup Clover Health raises $500M

Published January 29, 2019

Despite a number of well-publicized hiccups, venture capitalists are betting another $500 million on health insurance provider Clover Health, TechCrunch has learned.

Existing investor Greenoaks Capital led the round, according to the startup, which confirmed it was closing a new round of capital in the coming weeks. Clover Health has raised a total of $925 million to date, garnering a valuation of $1.2 billion with a $130 million Series D funding in 2017. The company, backed by Alphabet’s venture arm GV, Sequoia Capital, Floodgate, Bracket Capital, First Round Capital and more, declined to disclose its latest valuation.

San Francisco-based Clover Health was founded in 2012 by chief executive officer Vivek Garipalli, the former founder of New Jersey healthcare system CarePoint Health; and Kris Gale, who served as the startup’s chief technology officer until transitioning into an adviser role in December 2017. As part of its latest funding round, the company told TechCrunch it’s promoting Andrew Toy, its chief technology officer since early 2018, to the role of president and CTO. He will also join its board of directors.

Varsha Rao, Airbnb’s former chief operating officer, joined the company in September 2017 as COO.

The tech-enabled health insurer differentiates itself from incumbents by collecting and analyzing health and behavioral data to lower costs and improve medical outcomes for its members. It’s part of a new cohort of heavily funded insurtech startups, including Devoted Health and Bright Health, both of which similarly provide Medicare Advantage plans. Devoted Health, backed by Andreessen Horowitz, raised a $300 million Series B funding round three months ago. Bright Health, for its part, brought in a $200 million Series C in late November at a $950 million valuation. It’s backed by Bessemer Venture Partners, Greycroft, NEA and Redpoint Ventures, among others.

Founded in 2012, Clover Health is years older than its aforementioned counterparts. The business, though supported by top-tier investors and plenty of capital, has struggled in the past to shrink its losses. In 2015, Clover Health posted a net loss of $4.9 million only to increase it 7x the following year to $34.6 million, according to financial documents obtained by Axios. At the time, Clover Health had 20,600 Medicare Advantage members, earning it $184 million in taxpayer revenue. According to reporting from CNBC, the company had initially planned to double its membership base each year but was only able to expand from 20,000 in 2016 to 27,000 in September 2017.

Clover Health currently has 40,000 members in Georgia, New Jersey, Arizona, Pennsylvania, South Carolina, Tennessee and Texas. The business earns roughly $10,000 in revenue per member from the Centers for Medicare and Medicaid Services, or currently about $400 million in annual revenue. As a Medicare Advantage plan, Clover Health makes a majority of its cash from the government.

“Clover’s continuously improving economic fundamentals have allowed us to build sustainably, thoughtfully enter new markets and increase our overall membership by 35 percent during the last 12 months, compared with nationwide growth of 8 percent for Medicare Advantage overall,” the company said in a statement provided to TechCrunch. “This has made Clover one of the fastest growing insurers in [Medicare Advantage] over the past three years. That said, there is much more to accomplish, which is why I am so excited about entering this next phase in our company’s history.”

With $300M in new funding, Devoted Health launches its Medicare Advantage plan in Florida

FanAI buys Waypoint Media to better track fan engagement for streaming monetization

Published January 29, 2019

FanAI, an audience analysis platform for esports and streaming, is buying New York-based Waypoint Media to improve its analytics tools for esports players and streamers.

The deal means that Waypoint’s Twitch Middleware API and the “Raven” tracking and URL shortener will be added to FanAI’s product portfolio. The middleware tech has the ability to track every unique registered Twitch viewer so streamers can monitor average watch time, median watch time and channel engagement.

Financial terms were not disclosed, but a person with knowledge of the deal called the acquisition a significant all-cash transaction. That likely means a nice outcome for Waypoint’s backers, the New York-based investment firm Grand Central Tech.

FanAI founder and CEO Johannes Waldstein said of the acquisition, “The way they are able to turn billions of data points into workable information is like nothing else available on the market. We will be able to provide a deeper look at audiences with the new tools and having someone like Kevin join us will cement the FanAI services at the top of the industry.”

Using the Raven URL shortener, FanAI customers can follow the ways in which users browse on online platforms, the company said in a statement.

As part of the acquisition, Waypoint’s chief product officer Kevin Hsu joins FanAI as head of Engineering, the company said.

“Combining forces with FanAI is a perfect fit; we work with the same client base and have complementary solutions to the same problem. Traditionally, FanAI has focused on more static information including social and purchasing data, while Waypoint worked to gather digital movements of the audience. Combined, we can provide the best service by giving access to even more detailed and actionable data for clients,” said Hsu, in a statement.