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Oso announces $8.2M Series A to simplify authorization for developers
When we think about getting access to an application, we tend to focus on the authentication side — granting or denying people (or devices) entry. But there is another piece to this, and that’s authorization. This is related to what you can do once you are inside the application, and Oso, an early-stage startup, has created an open-source library for developers to make it easier to build authorization in their applications.
Today, the company announced an $8.2 million Series A led by Sequoia with participation from SV Angel, Company Ventures, Highland Capital and numerous angel investors. When combined with a $2.7 million seed round from 2019, it brings the total raised to $10.9 million.
Company co-founder and CEO Graham Neray says that developers have benefited from tools like Stripe and Twilio to normalize the use of third-party APIs to offload parts of the application that aren’t core to the value prop. Oso does the same thing, except for authorization.
“We help developers to speed up their authorization roadmaps by up to 4x, and the way that we do that is by providing this library, which comes with pre-built integrations, guides and an underlying policy language,” Neray explained.
He says that authorization is a misunderstood concept, and as though to confirm this, when I tried to explain Oso to a colleague, his first thought was that it is an Okta competitor. It’s not. As Neray explains, authorization and authentication are related, but are in fact different and require a different set of tools.
While tools like Okta grant you access, authorization determines what buttons can you click, what pages can you see, what data can you access. Most developers handle this manually by writing the authorization code themselves, linking it to Active Directory (or a similar tool) and fashioning a permissions matrix. Oso’s goal is to remove that burden and provide a set of tools to abstract away most of the complexity.
The tool is open source and the startup is concentrating on building a community of users for now to build developer interest. Over time, they fully intend to build a commercial company on top of that, but are still thinking about how that will look.
For now, the company, which launched in 2018, has nine employees with plans to triple that over the next 18 months. Neray and co-founder and CTO Sam Scott are thinking carefully about how to build a diverse, inclusive and equitable company as they grow. That means hiring from underrepresented groups, treating them fairly and making them feel like they belong. Neray says at this point, he is doing all of the hiring.
“I make a concerted effort to ensure that our pipeline is as diverse as I want the team to be — full stop — and that’s the only way to do it,” he said.
He adds that while building a diverse workforce is the morally right thing to do for him and his co-founder, there is also a practical business side to this too. “We don’t want to build an echo chamber with people from the same background, the same thought process and all the same upbringing,” he said.
When the company can return to the office, the plan is to have a home base, but let folks work where they want and how they want. “The plan is we will have an office in New York, and we will have remote team members. So in one form or another it will be hybrid,” Neray said.
Early Stage is the premier “how-to” event for startup entrepreneurs and investors. You’ll hear firsthand how some of the most successful founders and VCs build their businesses, raise money and manage their portfolios. We’ll cover every aspect of company building: Fundraising, recruiting, sales, product-market fit, PR, marketing and brand building. Each session also has audience participation built-in — there’s ample time included for audience questions and discussion. Use code “TCARTICLE at checkout to get 20% off tickets right here.
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SoftBank-backed Indian insurance platform Policybazaar raises $75 million
Policybazaar has raised $75 million as the Indian online insurance platform looks to expand its presence in UAE and Middle East.
Sarbvir Singh, chief executive of Policybazaar, told TechCrunch that the startup had raised $75 million, but didn’t elaborate. Falcon Edge Capital led the new tranche of investment in the Indian startup, which has raised about $630 million to date, according to research firm Tracxn.
The 12-year-old startup, which counts SoftBank Group’s Vision Fund and Tiger Global among its investors, is among a handful of startups that is attempting to upend India’s insurance market, which is largely commanded by state and bank-backed insurers.
Policybazaar serves as an aggregator that allows users to compare and buy policies — across categories including life, health, travel, auto and property — from dozens of insurers on its website without having to go through conventional agents.
A screengrab of Policybazaar website
In India only a fraction of the nation’s 1.3 billion people currently have access to insurance and some analysts say that digital firms could prove crucial in bringing these services to the masses. According to rating agency ICRA, insurance products had reached less than 3% of the population as of 2017.
An average Indian makes about $2,100 in a year, according to World Bank. ICRA estimated that of those Indians who had purchased an insurance product, they were spending less than $50 on it in 2017.
In a recent report, analysts at Bernstein estimated that Policybazaar commands 90% of share in the online insurance distribution market. The platform also sells loans, credit cards and mutual funds. The startup says it sells over a million policies a month.
“India has an under-penetrated insurance market. Within the under-penetrated landscape, digital distribution through web-aggregators like Policybazaar forms <1% of the industry. This offers a large headroom for growth,” Bernstein analysts wrote to clients.
The startup, which is working on an initial public offering slated for next year, said it will use the fresh investment to expand its presence across the UAE and Middle East regions.
“PolicyBazaar has shown stellar innovation, execution, and relentlessness in establishing itself as the market leader in online insurance aggregation in India. We believe the playbook it has established over the last 10 years in being the most efficient sales channel for insurance manufacturers, can act as a catalyst to gain market leadership in the GCC,” said Navroz Udwadia, co-founder of Falcon Edge Capital, in a statement.
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Squarespace raises $300M at a staggering $10B valuation
Squarespace has raised $300 million in a round of funding that values the company at a staggering $10 billion valuation.
New backers include Dragoneer, Tiger Global, D1 Capital Partners, Fidelity Management & Research Company, funds and accounts advised by T. Rowe Price Associates, Inc. and Spruce House. Existing backers Accel and General Atlantic also participated.
Squarespace founder & CEO Anthony Casalena said the fresh capital will advance the company’s growth initiatives and help it scale its product suite.
The move comes less than two months after the company filed confidentiality to go public via a direct listing or initial public offering.
Squarespace, which has helped millions create their own websites, was founded in 2003 and bootstrapped until a $38.5 million Series A in 2010 that was co-led by Accel and Index Ventures.
The online website creation and hosting service — which has now expanded into e-commerce by hosting online stores — then raised another $40 million round in 2014. But it is perhaps best known for its epic 2017-era $200 million secondary round that General Atlantic financed. That round was raised at a $1.5 billion pre-money valuation. That means it has effectively upped its valuation by more than five times in just over three years.
At that time, TechCrunch reported that Squarespace was a profitable company, with revenues increasing 50% in the prior year, to about $300 million. Execs are declining to comment on the company’s latest funding round beyond a post on its website.
New York City-based Squarespace has over 1,200 employees spread across its headquarters and offices in Dublin, Ireland; Portland, Oregon; and Los Angeles, California.
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Socure raises $100M at $1.3B valuation, proving identity verification is hotter than ever
The COVID-19 pandemic has accelerated digital adoption in a way that no one could have ever anticipated, and as more people conduct more services online and via mobile devices, businesses have had to work even harder to validate users and security. One company working to serve that need, Socure — which uses AI and machine learning to verify identities — announced Tuesday that it has raised $100 million in a Series D funding round at a $1.3 billion valuation.
Given how much of our lives have shifted online, it’s no surprise that the U.S. digital identity market is projected to increase to over $30 billion by 2023 from just under $15 billion in 2019, according to One World Identity. This has led to skyrocketing demand for the services provided by identity verification companies.
The founding team set out on a mission to be able to verify 100% of “good IDs” in real-time while “completely eliminating” identity fraud across the internet.
Historically, Socure has been focused on the financial services industry, but it plans to use its new capital to further expand into “every consumer-facing vertical” including online gaming, healthcare, telco, e-commerce and on-demand services.
The startup’s predictive analytics platform applies artificial intelligence and machine-learning techniques with online/offline data intelligence (from email, phone, address, IP, device, velocity and the broader internet) to verify that people are, in fact, who they say they are when applying for various accounts.
Today, Socure has more than 350 customers including three top five banks, six top 10 card issuers, a “top” credit bureau and over 75 fintechs such as Varo Money, Public, Chime and Stash.
In 2020, Socure grew its customer base by over 85% year over year and expanded its workforce by over 50% to about 240 people today.
Accel led Socure’s latest financing, which included participation from existing backers Commerce Ventures, Scale Venture Partners, Flint Capital, Citi Ventures, Wells Fargo Strategic Capital, Synchrony, Sorenson, Two Sigma Ventures and others.
The round comes less than six months after the company raised $35 million in a round led by Sorenson Ventures, and brings the New York-based company’s total raised to $196 million since its 2012 inception.
Socure founder and CEO Johnny Ayers says his company’s identity management products can help B2C enterprises achieve know-your-customer (KYC) auto-approval rates of up to 97%. This means that financial institutions can more easily capture fraud, for example, via Socure’s single API. The company also claims that by more easily verifying thin-file (those without much credit history) and young consumers, it can help reduce the underbanked population.
The pandemic and resulting shutdowns resulted in a massive demand for trusted digital identity, Ayers believes.
“This growth tracks with a larger trend marked by the broad migration of businesses to accept applications and onboard new customers online, with many companies accelerating their transformation from digital-first to digital-only,” he told TechCrunch.
Overall fraud attempts among Socure’s existing customer base nearly doubled in the second quarter of 2020 — with certain segments seeing rises as high as 150%, according to Ayers.
“These instances did not involve actual fraud but instead were flagged by Socure as suspicious and blocked prior to inflicting damage,” he said.
Looking ahead, the company plans to use its new capital to also enhance its product offering as it continues to develop patents.
Accel partner Amit Jhawar will join Socure’s board as part of the funding round.
In a blog post, Jhawar described Socure as “a purpose-built solution designed to handle the wave of new online users because its machine learning models have learned from every identity it has already seen.”
As former COO at Braintree and general manager at Venmo, Jhawar knows a thing or two about the importance of identity verification, especially in the financial services space.
He wrote: “I knew immediately that the Socure solution would be a game-changer because the solution can be used in every step of the customer lifecycle, from account creation to login to transaction.”
Socure also has hinted that it has an IPO in its future.
In a written statement, Ayers said: “We are incredibly grateful for the chance to innovate and partner to solve this problem with some of the greatest companies in the world and are energized for the opportunities that lay ahead for Socure, especially as we make our march to a potential IPO.”
Via email, he told TechCrunch that the company will “potentially” look at public markets in 2022 or 2023, when it feels “the time is right for the business.”
The story was updated post-publication with live comments from Socure
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Docker nabs $23M Series B as new developer focus takes shape
It was easy to wonder what would become of Docker after it sold its enterprise business in 2019, but it regrouped last year as a cloud native container company focused on developers, and the new approach appears to be bearing fruit. Today, the company announced a $23 million Series B investment.
Tribe Capital led the round with participation from existing investors Benchmark and Insight Partners. Docker has now raised a total of $58 million including the $35 million investment it landed the same day it announced the deal with Mirantis.
To be sure, the company had a tempestuous 2019 when they changed CEOs twice, sold the enterprise division and looked to reestablish itself with a new strategy. While the pandemic made 2020 a trying time for everyone, Docker CEO Scott Johnston says that in spite of that, the strategy has begun to take shape.
“The results we think speak volumes. Not only was the strategy strong, but the execution of that strategy was strong as well,” Johnston told me. He indicated that the company added 1.7 million new developer registrations for the free version of the product for a total of more than 7.3 million registered users on the community edition.
As with any open-source project, the goal is to popularize the community project and turn a small percentage of those users into paying customers, but Docker’s problem prior to 2019 had been finding ways to do that. While he didn’t share specific numbers, Johnston indicated that annual recurring revenue (ARR) grew 170% last year, suggesting that they are beginning to convert more successfully.
Johnston says that’s because they have found a way to turn a certain class of developer in spite of a free version being available. “Yes, there’s a lot of upstream open-source technologies, and there are users that want to hammer together their own solutions. But we are also seeing these eight to 10 person ‘two-pizza teams’ who want to focus on building applications, and so they’re willing to pay for a service,” he said.
That open-source model tends to get the attention of investors because it comes with that built-in action at the top of the sales funnel. Tribe’s Arjun Sethi, whose firm led the investment, says his company actually was a Docker customer before investing in the company and sees a lot more growth potential.
“Tribe focuses on identifying N-of-1 companies — top-decile private tech firms that are exhibiting inflection points in their growth, with the potential to scale toward outsized outcomes with long-term venture capital. Docker fits squarely into this investment thesis [ … ],” Sethi said in a statement.
Johnston says as they look ahead post-pandemic, he’s learned a lot since his team moved out of the office last year. After surveying employees, they were surprised to learn that most have been happier working at home, having more time to spend with family, while taking away a grueling commute. As a result, he sees going virtual first, even after it’s safe to reopen offices.
That said, he is planning to offer a way to get teams together for in-person gatherings and a full company get-together once a year.
“We’ll be virtual first, but then with the savings of the real estate that we’re no longer paying for, we’re going to bring people together and make sure we have that social glue,” he said.
Early Stage is the premier “how-to” event for startup entrepreneurs and investors. You’ll hear firsthand how some of the most successful founders and VCs build their businesses, raise money and manage their portfolios. We’ll cover every aspect of company building: Fundraising, recruiting, sales, product-market fit, PR, marketing and brand building. Each session also has audience participation built in — there’s ample time included for audience questions and discussion. Use code “TCARTICLE at checkout to get 20% off tickets right here.
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Overwolf raises $52.5M for its platform to build, distribute and monetize in-game, user-generated content
Roblox, the gaming company that went public this month with a strong debut, changed the game (so to speak) for the role that creative input can play in making a game more loved, more engaging and even more enterprising. Today, a startup that is taking a version of that model — focused on in-game apps and modifications — is announcing some funding and the launch of a new toolkit to double down on that opportunity.
Today, a startup called Overwolf, which has built a popular platform for gaming fans to build modifications (mods) and additional tools for all kinds of PC games, is announcing $52.5 million in growth funding and the launch of a new content creation SDK — underscoring its growth and more specifically the demand in the market to bring more user-generated content variations into the gaming universe.
The company’s platform has some 30,000 creators, 90,000 mods and add-ons and 18 million monthly users across thousands of games, including Fortnite, World of Warcraft and Minecraft. In the last year, which has seen a surge of gaming activity as more people stay home throughout the pandemic, Overwolf’s revenue has grown by 300%, it said.
“We want to be what YouTube is for YouTubers,” said Uri Marchand, the CEO and co-founder of Tel Aviv-based Overwolf, in an interview with TechCrunch. “Just as YouTube is a one-stop shop for video, we want to be a one-stop shop for creating apps and mods.”
The Series C is being co-led by Insight Partners and Griffin Gaming Partners, a VC that specialises in gaming content. Other investors in the round include Ubisoft, Warner Music Group, Meg Whitman and Gen.G co-founder, Kevin Chou. Valuation is not being disclosed.
Importantly, alongside the funding, Overwolf is introducing a new service called CurseForge Core, an SDK that can be integrated directly into a game itself to make it easier for gaming enthusiasts and developers to build user-generated content for it. CurseForge Core is essentially the next iteration of CurseForge, the mods platform that Overwolf acquired from Amazon’s Twitch last year for an undisclosed sum.
The buyer and acquirer here continue to have a close relationship, even as Overwolf also looks to work more closely with others like Discord, which says something about what makes up the bigger ecosystem of communication and activity among gamers outside of the core experience of a game itself.
Prior to launching this SDK, Overwolf already had built out a large community of users — both on its own steam and by way of its acquisition of CurseForge. While that is entirely focused on PC games at the moment, the plan will be to expand its reach to other platforms, including Macs, console games and mobile gaming, in the next year.
The gap in the market that Overwolf has identified and built for is the demand from avid gamers for more tools to improve their experience of the game, sometimes very specific ones that might not be core to everyone’s experience but definitely wanted by enough people to merit their creation.
These can be, for example, maps to navigate your way around a game, or dashboards or leaderboards to keep better track of various statistics of characters and other players, tools to modify characters, or apps to communicate with other players when you’re inside a game. Marchand points out that he first got into this world as a mod maker himself, years ago creating a Skype app for World of Warcraft.
“We pivoted from making mods to making a platform for others to make mods and additions,” he said. “When you think about all the aspects that need to be addressed — they include telemetry, the interactive UI, analytics, installers — they can be very complicated. So we provided platform essentials to help developers figure it all out.”
While games developers might have a very specific vision of how they would like their games to look at play, as Marchand described it to me, it’s also a big part of PC gaming culture to be able to play around with those experiences to make them unique to each player. But handling the work of third-party ecosystems is not typically in their core competencies.
“The scale and diversity of that content makes it impossible for a game maker to capture and do it all,” said Marchand. “History has proven that while game makers would like to encourage UGC they can’t and that is why we exist.”
Even if building an SDK that sits inside games themselves is a logical next step, it also represents a kind of increased trust between Overwolf and games publishers.
“Overwolf is developing the holy grail of frameworks for UGC for both publishers and in-game creators. Enabling all major publishers like us, to allow the creation of mods in a safe, secure, authorized, and profitable manner; is a game changer for all creators and IP holders,” said Oscar Navarro, head of Corporate Development for Ubisoft, in a statement.
Indeed, the trade-off for games publishers are more tools that will potentially keep users further engaged. The SDK will cover tools such as cross-platform modding, to let players discover and install mods in-game, across all platforms and storefronts; an analytics dashboard to have better visibility on how well various mods are performing; moderation tools to better vet what third-party content gets submitted; and monetization tools to bring in more creators. As with other platforms that incentivize creators, these include an Author Rewards Program, fund investments, developer contests and hackathons.
“We’ve been following UGC in gaming for many years and believe Overwolf has established itself as a leader in this category,” said Teddie Wardi, MD at Insight Partners, in a statement. “AAA game studios will want to allow creators to build and express themselves, and Overwolf is positioned as the platform to make this possible by ensuring that creators are recognized for their contributions, and easily integrating creations into games. Overwolf has proved themselves to be strong champions of the creator community and we look forward to helping them scale up in 2021.”
Financial incentives will continue to stand out for these creators, who today make most of their money not from paid mods and apps, but from in-mod or in-app advertising, a network that is run by Overwolf itself. Marchand said that the most successful developers can bring in revenues of $100,000 each month.
While Marchand likens Overwolf aims to YouTube, investors see a parallel in Unity, another key toolkit for the games developer community.
“Similar to how developers use Unity to build a game, we see Overwolf as the framework for everything UGC related to games. Overwolf allows for one of the only means of monetization for the thousands of creators, in turn, this translates to increased engagement for the publishers and more content for gamers. Services like Overwolf set the stage for the industry to see a new generation of user-generated content and we are excited to invest in the leading company moving this space forward,” commented Nick Tuosto, co-founder of Griffin Gaming Partners and managing director at LionTree, in a statement.
Early Stage is the premier “how-to” event for startup entrepreneurs and investors. You’ll hear firsthand how some of the most successful founders and VCs build their businesses, raise money and manage their portfolios. We’ll cover every aspect of company building: Fundraising, recruiting, sales, product-market fit, PR, marketing and brand building. Each session also has audience participation built-in — there’s ample time included for audience questions and discussion. Use code “TCARTICLE at checkout to get 20% off tickets right here.
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Rising Team, with $3 million seed, is a platform that combines management tools with training
Jennifer Dulski has held her fair share of leadership positions, from being president and COO of Change.org to serving as head of product for Google’s shopping and product ads to leading the team responsible for Facebook Groups.
But she’s identified a problem that most people managers will all too clearly understand: training and tools to be a great manager are at a shortage.
That’s why she founded Rising Team, which is today announcing the raise of a $3 million seed round led by Female Founders Fund, with participation from Peterson Ventures, Burst Capital, Xoogler Ventures, 500 Startups, Roble Ventures, Supernode Ventures and several angels.
Dulski explained that there are some tools for managers, like surveys from Gallup and Glint, and there are training options, like executive coaches. But there aren’t many options out there that combine the two.
“I was lucky enough to have the benefit of getting executive coaches or being sent to training, and those felt like being taught how to fish,” said Dulski. “But then it was like being dropped off at the lake with no fishing pole or bait, because I had learned all these things about how to be a good leader but I had no tools to implement what I had learned.”
Rising Team is a platform that combines tools and training to help managers motivate, organize and ultimately effectively lead their team.
The first layer of the platform is the tools suite, which includes proprietary assessments and 1:1 templates. Most employee surveys focus so heavily on the actual job, with questions about where employees can do their best work. With Rising Team, the assessments are geared toward who team members are personally, with a look at how they want to be appreciated or what they believe their talents and skills are.
This helps managers understand how to pair team members together, what tasks they should be assigned to and truly grasp what motivates each individual that works for them. Alongside these assessment tools, Rising Team also offers training in the form of videos, articles and audio resources. In the future, the company plans to add AI-based custom training tips that are powered by data from the assessments.
Rising Team is also building out a community that lets managers communicate with one another.
Interestingly, the startup is taking a bottom-up approach when it comes to revenue, pricing the product in a way that will allow individual managers to personally purchase the software, hopefully spreading the word to the rest of their team. But the door is open for organizations to get their full employee base on the product as well.
For now, Rising Team is in a free beta, so pricing has not yet been announced.
The team is currently made up of eight people, 60% of whom are female and 50% of whom are BIPOC.
“It’s really, really important to me and to our team as a whole that we build a diverse team from the start,” said Dulski. “I believe in that so firmly and all the data is really clear that more diverse teams are more successful.”
Early Stage is the premier “how-to” event for startup entrepreneurs and investors. You’ll hear firsthand how some of the most successful founders and VCs build their businesses, raise money and manage their portfolios. We’ll cover every aspect of company building: Fundraising, recruiting, sales, product-market fit, PR, marketing and brand building. Each session also has audience participation built-in — there’s ample time included for audience questions and discussion. Use code “TCARTICLE” at checkout to get 20% off tickets right here.
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Cyware nabs $30M to help organizations detect and stop advanced cyberattacks
Malicious hacking has become a pernicious and dogged fact of life for more organizations, and it’s a threat that has seemingly grown more complicated and sophisticated over time. One effective approach to tackling that has been collaboration: not just applying an array of services to address the issue, but creating environments to help those building cybersecurity to work better together. Today one of the startups building tools to do just that is announcing a round of funding, underscoring the opportunity and its own growth within that.
Cyware, a New York startup that has created a platform for organizations to build and operate virtual “cyber fusion centers” — spaces for people to share threat intelligence, run end-to-end security automation and orchestrate and execute 360-degree threat responses — has picked up $30 million in funding, a Series B that it will use to continue growing its business.
The funding is being co-led by Advent International and Ten Eleven Ventures. Advent made some waves in the cybersecurity industry last year when it partnered with Crosspoint to acquire Forescout for $1.9 billion. Ten Eleven, meanwhile, is a VC that specializes in cybersecurity startups. Prelude Fund (the venture practice at Mercato Partners), Emerald Development Managers, Great Road Holdings and cloud security firm Zscaler — a mix of financial and strategic investors — also participated. Before this, the startup had raised around $13 million, and it is not disclosing its valuation.
The story of the last year in the world of business has been about how everything has gone online: people and their companies have been working remotely; consumers are browsing, buying and entertaining themselves over the internet and with apps. Digital is where all the traffic is.
Unsurprisingly that has also played out in the world of cybersecurity: the threat landscape has grown, and so cybersecurity responses have grown with them. Cyware said that in the last year it saw 120% year-over-year growth in annual recurring revenue — although it doesn’t disclose actual revenue figures. Its customers are a mix of large enterprises, but also those that both collaborate with others to manage cybersecurity, such as information sharing communities (ISACs), as well as organizations that manage cybersecurity on behalf of a number of others, such as managed security service providers and computer emergency response teams.
Although many might have in their heads a stereotype of a malicious hacker who sits alone in a darkened room with a determined look in his/her eye, the reality is more likely to be a collaboration between a number of people, providing tips, technology and threads that are developed, and so on. Cyware, in its focus on providing a platform for collaboration and creating operations centers, seems to take the same approach in what it has built, a platform to make collaborating easier and part of the solution.
It does so through security orchestration, automation and response (known as SOAR), used by teams to collaborate better and make more informed threat scoring, and to respond better to threat alerts. Indeed, a key part of the challenge for a lot of security services is that they cross multiple parts of organizations, including IT, compliance, trust and safety, and indeed security itself. One aim of Cyware is to create a platform for these all to meet and exchange information that could be helpful to others in one place.
“Over the past decade, security operations teams have had difficulty with trying to sift through copious amounts of threat data and lacked the humans’ role as part of their security orchestration strategies,” said Anuj Goel, PhD, co-founder and CEO of Cyware, in a statement. “Our goal with our Virtual Cyber Fusion platform is to help our customers unite their security teams to efficiently respond to high-priority threats by connecting the dots in their environments, and the momentum we’re experiencing is proof that we are executing on that mission. This Series B financing will help us continue to overdeliver for customers, expand our team, improve our platform and truly revolutionize how security operations and threat intelligence teams work together.”
Goel, who co-founded the company with CTO Akshat Jain, cut his teeth in a big security team, as head of global cyber strategy for Citi. He is also an advisor for the Centre for Strategic Cyberspace in London and has worked with other organizations on collaborative approaches to the problem and consequences of malicious hacking.
Investors will have not just been looking at the company’s growth, but also the list of customers — themselves also leaders in cyber — that are trusting Cyware.
“In our increasingly connected environment, companies of all sizes are demanding new and innovative cybersecurity solutions,” said Eric Noeth, principal, Advent International, in a statement. “Cyware’s early traction among leading enterprises and major ISACs reflects its unique ability to bring together all key security functions to seamlessly anticipate, contextualize and remediate threats. We look forward to drawing on our experience in this sector to help the talented Cyware team make its Virtual Cyber Fusion platform the gold standard technology for enterprises around the world.”
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Sherpa raises $8.5M to expand from conversational AI to B2B privacy-first federated learning services
Sherpa, a startup from Bilbao, Spain that was an early mover in building a voice-based digital assistant and predictive search for Spanish-speaking audiences, has raised some more funding to double down on a newer focus for the startup: building out privacy-first AI services for enterprise customers.
The company has closed $8.5 million, funding that Xabi Uribe-Etxebarria, Sherpa’s founder and CEO, said it will be using to continue building out a privacy-focused machine learning platform based on a federated learning model alongside its existing conversational AI and search services. Early users of the service have included the Spanish public health services, which were using the platform to analyse information about COVID-19 cases to predict demand and capacity in emergency rooms around the country.
The funding is coming from Marcelo Gigliani, a managing partner at Apax Digital; Alex Cruz, the chairman of British Airways; and Spanish investment firms Mundi Ventures and Ekarpen. The funding is an extension to the $15 million Sherpa has already raised in a Series A. From what I understand, Sherpa is currently also raising a larger Series B.
The turn to building and commercializing federated learning services comes at a time when the conversational AI business found itself stalling.
Sherpa saw some early traction for its Spanish voice assistant, which first emerged at a time when efforts from Apple in the form of Siri, Amazon in the form of Alexa, and others hadn’t really made strong advances to address markets outside of those where English is spoken.
The service passed 5 million users as of 2019 — customers using its conversational AI and predictive search services include the Spanish media company Prisa, Volkswagen, Porsche and Samsung.
But as Uribe-Etxebarria describes it, while that assistant business is still chugging along, he came up against a difficult truth: the biggest players in English voice assistants eventually did add Spanish, and the conversational AI investments they would make over time would make it impossible for Sherpa to keep up in that market longer-term on its own.
“Unless we did a big deal with a company, we wouldn’t be able to compete against Amazon, Apple and others,” he said.
That led the company to start exploring other ways of applying its AI engine.
It came on to federated privacy, Uribe-Etxebarria said, when it started to look at how it might expand its predictive search services into productivity applications.
“A perfect assistant would be able to read emails and know which actions to take, but there are privacy issues around how to make that work,” Uribe-Etxebarria said. Someone suggested to him to look at federated learning as one way to “teach” its assistant to work with email. “We thought, if we put 20 people to work, we could build something to read and respond to emails.”
The platform that Sherpa built, Uribe-Etxebarria said, worked better than they had anticipated, and so a year later, the team decided that it could use it for more than just triaging email: it could be productized and sold to others as an engine for training machine learning models with more sensitive data in a more privacy-compliant way.
It’s not the only company pursuing this approach: TensorFlow from Google also uses federated learning, as does Fate (which includes cloud computing security experts from Tencent contributing to it), and PySyft, a federated learning open-source library.
Sherpa is working with several companies under NDAs in areas like healthcare, and Uribe-Etxebarria said it plans to announce customers in other areas like telecoms, retail and insurance in the near future.
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Gumroad wants to make equity crowdfunding mainstream
Gumroad, a startup that helps creators sell their work, is raising $6 million at a $100 million valuation. While $1 million of that total is reserved for AngelList co-founder Naval Ravikant and Basecamp founder Jason Fried, the remaining $5 million is being raised with a twist: anyone willing to fork over at least $100 bucks can invest in the round.
Founded by Sahil Lavingia, Gumroad is using a new SEC regulation, passed today, that increases the maximum amount of money that can be raised in an equity crowdfunding campaign. Now, investors and founders can raise up to $5 million per year from crowdfunding, up from $1.07 million the year prior.
The increase might not turn heads in a world of $90+ billion valuations, but Lavingia thinks the new rules could revitalize a path to raising capital for venture capitalists and founders alike. Unaccredited investors — whether its users, friends or non-accredited investors — could become the new limited partners.
“If this works, startup founders will start to be able to go direct more frequently,” Lavingia said.
Despite venture capital growing as an asset class, alternative ways to raise are becoming increasingly popular to help founders maintain ownership and to access capital.
Up until this point, Gumroad has raised more than $8 million from investors, including Kleiner Perkins, First Round, Max Levchin and SV Angel, as well as others, since 2011. But today marks what Lavingia views as a long-term shift in how Gumroad raises capital. If all goes well, Gumroad will continue raising via crowdfunding on an annual basis until it goes public.
Now that companies can raise $5 million per year through crowdfunding, platforms like WeFunder, StartEngine, SeedInvest and Republic, which Lavingia is using, have a better chance to shake up the modern fundraise.
So far, Gumroad has raised $3.4 million of its $5 million goal across commitments from 3,458 investors. Investors in the crowdfund include part-time creators on Gumroad, Lavingia’s Twitter followers, YouTubers, as well as Figma founder Dylan Field and partners from VC firms. In order to promote a diversity of investors, Gumroad has capped total investments from individuals at $1,000 for the first few days.
The startup is giving up 6% of ownership as part of the financing event, and the investors will only receive equity stakes once the SAFE note turns into a round. This process could take a year, Lavingia said. The conversion round to make it happen could be an IPO, acquisition or $10 million priced round. The priced round will likely happen next year through a Reg A round, the annual limit of which is $75 million, the founder said.
The SAFE’s cap is placed at a present-day 3.5x revenue multiple. In 2020, Gumroad brought in $9.2 million in net revenue, up 87% from the year prior, generating $1.08 million in net profit, up 286% from the year prior.
Background
The new, higher crowdfunding investing cap has some downsides, according to institutional investors. A simple one is that it is an administrative burden to give hundreds of people equity in your company for a small amount of money. Another issue, one investor told TechCrunch, is that institutional investors are sometimes experts in investment areas, which is helpful in a way hundreds of smaller investors might not be. Finally, the max of crowdfunding is still $5 million a year, so the method may be less effective for later-stage companies like, say, Stripe, which needs traditional investors to buy in.
Despite these concerns, the recent Gumroad raise is a continuation of two trends of which Lavingia has been on the forefront: building in public and the democratization of venture capital. He livestreams every Gumroad board meeting through Clubhouse and Zoom, and shares business metrics that most private companies decline to report, such as revenue and profit. (In fact, I knew about this plan to raise months ago after reading one of his newsletters.)
Readers will also remember that Lavingia was one of the first people to use the AngelList platform to create a rolling fund, which uses a 506(c) SEC regulation that allows investors to publicly solicit investments on an ongoing basis. The move was met with controversy at first, since venture capital funds have historically been raised behind closed doors.
“People were upset at the rolling fund, so imagine when they see that you are cutting out the whole industry [of venture capital],” Lavingia said, referring to a conversation he had with AngelList’s Ravikant.
One thing to be wary of, Lavingia says, is the Testing the Waters dynamic. Under Reg CF and A+, startups are able to differentiate between offering and selling securities. Offering simply allows a founder to “test the waters” and see if interest is there for a crowdfunded round. Despite this guardrail, commitments aren’t capital. For example, a startup could get $1 million in commitments but wind up only raising $100,000, Lavingia said. The conversion rate for intended buys versus actual buys could leave some founders in a thorny spot.
His way for combating this is to be obvious about red flags and transparent, which is already in line with Gumroad’s thesis.
“I preceded this fundraise with a blog post that I’m the only person who works on Gumroad as an employee,” he said. “I want to scare off anyone who is like this is weird [from investing].”
Other than Lavingia, Backstage Capital’s Arlan Hamilton has used Republic to crowdfund her firm’s operating fees. Hamilton made history earlier this month when she raised $1 million in eight hours for her fund. Today, she similarly opened up investments in her firm in light of the new cap and has already closed $2.4 million.
When Hamilton spoke about the raise at TC Sessions: Justice, she said she expects another asset class to be born because venture is a “broken” and “old” system.
“I’ll probably pivot Backstage, we’ll find ways and we’ve already started,” she said. “If you look at our raise we did in the Republic, it didn’t exist the way we wanted it to exist, this ability to go to the crowd as a fund.”
2014: income <$10,000
2016: raised first $1.2M fund
2020: deployed first $1M “check”
2021: raised $1M in 8 hoursDon’t give up.
— Arlan
(@ArlanWasHere) March 15, 2021
“The way it starts is not by a normal person doing it,” Lavingia said. “It’s by someone who is at the tip of the spear, someone who has an interesting angle, and then it gets sort of democratized over time.”
The fact that a founder turned part-time venture capitalist is using crowdfunding to raise money for his own company is a meta headache on its own. But the founder sees this as an opportunity to make crowdfunding mainstream and an attractive asset class.
Long-term, a public crowdfunding round in startups could be just a small drop in a startup’s financing pre-exit, but one that could empower thousands of normal people to own startup equity for the first time.
“I’m basically trying to become a private-market Chamath,” he said, referring to the billionaire behind Social Capital credited with the recent boom in popularity around SPACs. “I want to build a huge brand associated with investing in private equities, startups, and having an army of people that I can use and wield in different ways.”
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