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The 2020s promise better tech solutions to humanity’s biggest problems
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Let’s think beyond Monday, for a minute, to the trends playing out in technology this coming decade. While humanity’s problems have never been greater, our tools have never been better. Here’s more, from Danny Crichton:
The 2010s were all about executing on the dreams of mobile, cloud, and basic data. Those ideas had historical antecedents going back in some cases decades or more (Vannevar Bush’s description of the internet dates to the 1940s, for instance). But for the first time, we had the infrastructure and the users to actually build these products and make them useful. It was quite possibly the most extensive greenfield opportunity in the history of technology.
Yet, that greenfield is increasingly fallow. Business has cycles and seasonality as much as media reporting does. The easy stuff has been done. Building an app to text people has been done by dozens before. There are a multitude of analytics packages, and payroll providers, and credit card issuers, and more. What’s required this decade is to start to encroach on the harder questions, topics like how we build a better society, make people more empowered to do deep and creative work, and how we can build a more resilient and sustainable planet for all.
None of these topics have pure point solutions — but that is what is going to make this coming decade so damn interesting. It’s going to take intense collaboration, multiple inventions and products, as well as legal and cultural changes, to realize these next improvements. If you have grown sick (as I have) of the latest apps and SaaS products du jour, this decade is going to be an amazing one to experience and build.
In a companion article for Extra Crunch, he explores five key areas of the future, that he calls: Wellness, Climate, Data Society, Creativity and Fundamentals. Here’s an excerpt from the Data Society part:
Data may be ubiquitous, but it’s amazing how much work it can still be to calculate an LTV, or the return on an advertising campaign. No-code tools solve some of these problems, but what we need is a whole revolution in our data tools. We need to be able to sketch out lines of inquiry and have our tools augment our thinking from data. What are we missing? What gaps in our thinking should we be filling in? What data am I lacking to make a fully-formed decision? Am I overly biased toward one statistic versus a more holistic depiction of my situation? From personal decisions to business strategy, we need better tools to abstract the complexity of today’s modern society.
We also need better thinking around how to network knowledge. Roam Research and some other tools are starting to get better at helping users think in terms of a knowledge graph, but there is an incredible amount of potential if these ideas can be democratized and packaged into easier-to-use interfaces. How do we handle the increasing depth of most fields of knowledge and allow more people to get to the frontiers as quickly as possible?
Finally, we need to further our understanding of complexity and chaos and build those theories into the fundamental structures of our society. How do we make governance more adaptable and resilience, so that when massive crises like COVID-19 happen, we don’t see a complete breakdown in our society? Can we create more flexible systems around ownership and property that can create more diverse housing, or material ownership, or intellectual property? Empowering technology (“blockchain!” but could be all kinds of things) coupled with legal changes could dramatically evolve these core elements of our society.
Even today, we are still locked into a mental model built around paper, titles, and maybe if you are lucky, an Excel spreadsheet. There is so much work to be done to empower each of us through data this decade.
Data education
The building blocks of the Data Society concept are getting remade faster than ever this year, as the pandemic has shuttered traditional commerce and education, and forced open alternative approaches. For example, somebody starting a small business today basically has to use a lot of software. But crossing this initial barrier means they can do things like automatically track the lifetime value of each customer. Previous generations of small businesses simply did not have the resources and skills to do such things with the low-tech options available.
That’s the generational power of no-code, as Danny detailed separately on TechCrunch:
In business today, it’s not enough to just open a spreadsheet and make some casual observations anymore. Today’s new workers know how to dive into systems, pipe different programs together using no-code platforms and answer problems with much more comprehensive — and real-time — answers.
It’s honestly striking to see the difference. Whereas just a few years ago, a store manager might (and strong emphasis on might) put their sales data into Excel and then let it linger there for the occasional perusal, this new generation is prepared to connect multiple online tools to build an online storefront (through no-code tools like Shopify or Squarespace), calculate basic LTV scores using a no-code data platform and prioritize their best customers with marketing outreach through basic email delivery services. And it’s all reproducible, as it is in technology and code and not produced by hand.
There are two important points here. First is to note the degree of fluency these new workers have for these technologies, and just how many members of this generation seem prepared to use them. They just don’t have the fear to try new programs, and they know they can always use search engines to find answers to problems they are having.
Second, the productivity difference between basic computer literacy and a bit more advanced expertise is profound. Even basic but accurate data analysis on a business can raise performance substantially compared to gut instinct and expired spreadsheets.
How do we realize this future? Zooming in from the generational perspective, Natasha Mascarenhas takes a closer look at how school teachers are adapting to the pandemic — and the emerging online education world they are entering. Some, at least, seem to be moving into supplemental part-time teaching. While the educational experience is not the same as in-person, it clearly has its own value. Here’s one company as an example:
Outschool is a platform that sells small-group classes led by teachers on a large expanse of topics, from Taylor Swift Spanish class to engineering lessons through Lego challenges. In the past year, teachers on Outschool have made more than $40 million in aggregate, up from $4 million in total earnings the year prior.
CEO Amir Nathoo estimates that teachers are able to make between $40 to $60 per hour, up from an average of $30 per hour in earnings in traditional public schools. Outschool itself has surged over 2,000% in new bookings, and recently turned its first profit.
Outschool makes more money if teachers join the platform full-time: teachers pocket 70% of the price they set for classes, while Outschool gets the other 30% of income. But, Nathoo views the platform as more of a supplement to traditional education. Instead of scaling revenue by convincing teachers to come on full-time, the CEO is growing by adding more part-time teachers to the platform.
Maybe one day soon, a class about online business will be a graduation requirement for a high school diploma. And we’ll see that sort of education drive more success in the next generation of your local Main Street.
The problems of the coming decade might be harder than ever, but the solutions are there for the making.
Image Credits: Intpro / Getty Images
How to execute a bottom-up SaaS growth plan
The combination of consumer tech product skills and enterprise revenue models fueled this decade’s explosion of SaaS success stories. This week, Caryn Marooney and David Cahn of Coatue management distilled the lessons of this model into a popular how-to article for Extra Crunch. Here’s an excerpt, showing how market leaders approach key metrics and pricing:
The MAP customer value framework:
Metrics: What are the key metrics the customers care about? Is there a threshold of value associated with this metric? Metrics can include things like minutes, messages, meetings, data and storage. Examples:
- Zoom — Minutes: Free with a 40-minute time limit on group meetings.
- Slack — Messages: Free until 10,000 total messages.
- Airtable — Records: Free until 1,200 records.
Activity: How do your customers really use your product? Are they creators? Are they editors? Do different customers use your product differently? Examples:
- Figma — Editors versus viewers: Free to view, starts changing after two edits.
- Monday.com — Creators versus viewers: Free to view, creators are charged $30+/month.
- Smartsheet — Creators versus viewers: Free to view, creators are charged $10+/month.
People: How do your customers fit into a broader organization? Are they mostly individuals? Groups? Part of an enterprise? Examples:
Superhuman — Individuals only: No free version, $30/month.
Asana — Small team versus bigger teams: Teams of <15 people can use the product free.
Atlassian — Free versus team versus enterprise: Pricing scales with size of team.
Image Credits: Nigel Sussman (opens in a new window)
Root keeps the IPO market warm
The stock market was off this week, but not entirely. Root Insurance was the big IPO this week, ending at $24 per share. That’s a bit below its aggressive $27 opening price per share, but is still in the range of its target pricing from the other week. It is, in other words, a success already for the company — and we’ll see what happens when the entire market stops gyrating around the elections.
“For the Midwest, Ohio-based Root’s IPO is a win,” Alex Wilhelm wrote for Extra Crunch. “The company shows that it is possible to build high-growth technology companies worth billions of dollars far from coastal hubs. For the broader insurtech space, Root’s IPO is a win. The company follows Lemonade to the public markets, setting a strong valuation mark again for the neo-insurance startup market. For similar companies like Clearcover, MetroMile and all startups that related to Root and Lemonade, it’s a good day.”
It’s still looking good for any software company with a growth story, as Alex goes on to say, and it’s looking good for more IPOs this year. Like Airbnb.
But enough about IPOs this year — Alex also built on previous coverage to explore Databricks going public next year, which sounds quite likely at this point.
Across the week
TechCrunch
Why you have to pay attention to the Indian startup scene
Yale may have just turned institutional investing on its head with a new diversity edict
Cloud infrastructure revenue grows 33% this quarter to almost $33B
We need new business models to burst old media filter bubbles
Former Facebook and Pinterest exec Tim Kendall traces ‘extractive business models’ to VCs
Extra Crunch
Good and bad board members (and what to do about them)
New GV partner Terri Burns has a simple investment thesis: Gen Z
As venture capital rebounds, what’s going on with venture debt?
In the ‘buy now, pay later’ wars, PayPal is primed for dominance
Dear Sophie: Any upgrade options for E-2 visa holders interested in changing jobs?
#EquityPod
Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast (now on Twitter!), where we unpack the numbers behind the headlines.
A few notes before we get into this. One, we have a bonus episode coming this Saturday focused on this week’s earnings reports. And, second, we did not record video this week. So, if you like watching the show on YouTube, this is not the week for that!
Right, here’s what Natasha, Danny and your humble servant got into this week:
- The huge COVID-related hit that public markets took this week, with tech getting hit extra hard.
- An antitrust brouhaha! As the Vista-Plaid deal (and others) gets a hard look, we wondered what it could all mean for startups a bit more suited for M&A than an IPO.
- Up next we dug into how founders are raising money before they even quit their jobs, a trend that Natasha is digging into.
- From there it was a Danny segment, riffing on his 2020s piece, and diving into where he sees the most ripe chances for startups to truly change the world. We just hope the capital follows the opportunities.
- Then it was time to talk accelerators, with Natasha detailing on the Indie Bio class, and my taking of the show through some recent Techstars companies.
- VCs raised too, with the three of us talking about The Engine and Impact America raising fresh new funds.
- And then we chatted about the Yuanfudao round, and a Series B that The Wanderlust Group just put together.
We capped off with the latest from r2c, and then got the hell off the mics. Catch you all Saturday, and then back to regular programming on Monday morning.
Equity drops every Monday at 7:00 a.m. PDT and Thursday afternoon as fast as we can get it out, so subscribe to us on Apple Podcasts, Overcast, Spotify and all the casts.
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Equity shot: Boo! It’s the Halloween earnings special!
Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast (now on Twitter!), where we unpack the numbers behind the headlines.
As promised, the whole gang is back, this time to chew on the biggest, baddest, worstest, and most troubling earnings reports from the current cycle. This week saw Amazon and Alphabet and Microsoft and Apple and Facebook report, along with a host of smaller companies.
Spoiler alert: there were more tricks than treats.
- Danny, Natasha and Alex wanted to get to the bottom of the big tech results, asking what really mattered from each of them?
- Then it was time to dig into themes. We saw plan price increases coming from Netflix and Spotify, advertising getting a boo-st from politics and 2020’s overall meltdown, and boo-ming billions of consumer interest in…desktops.
- After that, a dive into the results of smaller SaaS and cloud companies, picking out trends that might help us see around the corner a bit; is the tech boom slowing, or is corporate growth merely failing to keep up with inflated investor expectations?
- This week felt like a shudder ran through the spine of our economy. The earnings paint a neutral picture, which isn’t exactly an exhale to rejoice over. The coronavirus continues to be a threat that poses a risk to public businesses. For startups, that could mean a less frothy exit market nad lower valuations. And for the public, it means that the uncertain is still ahead of us. So wear a mask.
And with that, the show is back Monday morning. Have a good weekend, everyone.
Equity drops every Monday at 7:00 a.m. PDT and Thursday afternoon as fast as we can get it out, so subscribe to us on Apple Podcasts, Overcast, Spotify and all the casts.
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Here’s how to start a venture fund if you’re not rich
For years — decades, even — there was little question about whether you could become a venture capitalist if you weren’t comfortable financially. You couldn’t. The people and institutions that invest in venture funds want to know that fund managers have their own “skin in the game,” so they’ve long required a sizable check from the investor’s own pocket before jumping aboard. Think 2% to 3% of the fund’s total assets, which often equates to millions of dollars.
In fact, five years ago, I wrote that the real obstacle to becoming a venture capitalist has less to do with gender than with financial inequality. I focused then on women, who are paid less (especially Black and Hispanic women), and who possess less wealth. But the same is true of anyone of lesser means.
LPs: The ≧1% of a fund capital commitment you expect from GPs makes it hard for POCs to raise funds.
Consider that “for a $20M fund, a 2% commitment with 2 GPs is still a $200K commitment for each partner.” This is out of reach for many of us. https://t.co/bguXpa3CiY
— lolitataub (@lolitataub) October 29, 2020
Thankfully, things are changing, with more ways to help aspiring VCs raise that initial capital commitment. None of these approaches can guarantee success in raising a fund, but they’re paths that other VCs have effectively used and are good to understand better.
First, find investors, i.e. limited partners, who are willing to take less than 2% or 3% and maybe even less than 1% of the overall fund size being targeted. You’ll likely find fewer investors as that “commit” shrinks. But for example Joanna Rupp, who runs the $1.1 billion private equity portfolio for the University of Chicago’s endowment, suggests that both she and other managers she knows are willing to be flexible based on the “specific situation of the GP.”
Says Rupp, “I think there are industry ‘norms,’ but we haven’t required a [general partner] commitment from younger GPs when we have felt that they don’t have the financial means.”
Bob Raynard, founder of the fund administration firm Standish Management, echoes the sentiment, saying that a smaller general partner commitment in exchange for special investor economics is also fairly common. “You might see a reduced management fee for the LP for helping them or reduced carry or both, and that has been done for years.”
Explore management fee offsets, which investors in venture funds often determine to be reasonable. These aren’t uncommon, says Michael Kim of Cendana Capital, a firm that has stakes in dozens of seed stage funds, because they also offer tax advantages (though the IRS has talked about doing away with these).
How do these work? Say your “commit” was $1 million over 10 years (the standard life of a fund). Instead of trying to come up with $1 million that you presumably don’t have, you can offset up to 80% of that, putting in $200,000 instead but reducing your management fees by that same amount over time so that it’s a wash and you’re still getting credit for the entire $1 million. You’re basically converting fee income into the investment you’re supposed to make.
Use your existing portfolio companies as collateral. Kim had at least two highly regarded managers launch a fund not with a “commit” but rather by bringing to the table ownership stakes in startups they’d funded as angel investors.
In both of these cases, it was a great deal for Kim, who says the companies were quickly marked up. For the fund managers’ part, it meant not having to put more of their own money into the funds.
Make a deal with wealthier friends if you can. When Kim launched his fund of funds to invest in venture managers after working for years as a VC himself, he raised $1 million in working capital from six friends to get it off the ground. The money gave Kim, who had a mortgage at the time and young children, enough runway for two years. Obviously, your friends have to be willing to gamble on you, but sweeteners certainly help, too. In Kim’s case, he gave his friends a percentage of Cendana’s economics in perpetuity.
Get a bank loan. Rupp said she would be uncomfortable if a GP funded his or her commit through a bank loan for several reasons. There’s no guarantee a fund manager will make money from a fund, a loan adds risk on top of risk, and should a manager need liquidity related to that loan, he or she might sell a strongly performing position too early.
That said, loans aren’t uncommon, says Raynard. He says banks with venture capital relationships like Silicon Valley Bank and First Republic are typically happy to lend a fund manager a line of credit to help him or her make capital calls, though he says it does depend on who else is involved with the fund. “As long as it’s a diverse group of LPs,” the banks are comfortable moving forward in exchange for winning over a new fund’s business, he suggests.
Consider the merits of so-called front loading. This is a technique with which “more creative LPs can sometimes get comfortable,” says Kim. It’s also how investor Chris Sacca, now a billionaire, got started when he first turned to fund management. How does it work? Some beginning managers blend their annual management fee of 2.5% of assets under management and pay themselves a higher percentage — say 5% for each of its first three years — until by the end of the fund’s life, the manager is receiving no management fee at all.
That could mean no income if you aren’t yet seeing profits from your investments. But presumably — especially given pacing in recent years — you, the general partner, have raised another fund by the time that happens so have resources coming in from a second fund.
These are just a few of the ways to get started. There are other paths to take, too, notes Lo Toney of Plexo Capital — which, like Cendana Capital — has stakes in many venture funds. One of these is to use a self-directed IRA to finance that GP commit. Another is to sell a portion of the management company or sell a greater percentage of your carry and use those proceeds to pay your commit. (VCs Charles Hudson of Precursor Ventures and Eva Ho of Fika Ventures avoided that path and suggested that first-time managers do the same if they can.)
Either way, suggests Toney, a former partner with Alphabet’s venture arm, GV, it’s important to keep in mind that there’s no one right way to raise a fund — and no disadvantage in using these strategies. Said Toney via email this week: “I have not seen any data on the front end of a VC’s career that wealth indicates future success.”
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Dear Sophie: Would a Trump win abolish the H-1B visa lottery?
Sophie Alcorn is the founder of Alcorn Immigration Law in Silicon Valley and 2019 Global Law Experts Awards’ “Law Firm of the Year in California for Entrepreneur Immigration Services.” She connects people with the businesses and opportunities that expand their lives.
Here’s another edition of “Dear Sophie,” the advice column that answers immigration-related questions about working at technology companies.
“Your questions are vital to the spread of knowledge that allows people all over the world to rise above borders and pursue their dreams,” says Sophie Alcorn, a Silicon Valley immigration attorney. “Whether you’re in people ops, a founder or seeking a job in Silicon Valley, I would love to answer your questions in my next column.”
Extra Crunch members receive access to weekly “Dear Sophie” columns; use promo code ALCORN to purchase a one- or two-year subscription for 50% off.
Dear Sophie:
I heard the randomness of the H-1B lottery is going away. What will this mean for our startup’s ability to get an H-1B visa for one of our co-founders?
— Curious in Cupertino
Dear Curious:
Lots going on in immigration this week (as usual!). First, good news for green card applicants: the November 2020 Visa Bulletin did not change from October, when the dates for filing for Adjustment of Status sped up significantly for individuals born in India and China.
About the H-1B lottery: The Department of Homeland Security (DHS), which oversees U.S. Citizenship and Immigration Services (USCIS), this week proposed a rule that ends the random H-1B lottery; instead, USCIS will determine who can apply for an H-1B visa based on the highest salary. DHS says this change will “incentivize employers to offer higher wages.”
The number of H-1B visas issued each year is capped at 85,000. Currently, when demand for H-1Bs outstrips the annual supply, which has been the case since 2013, USCIS uses an electronic random lottery to determine who can apply for an H-1B. For the first time this year, sponsoring companies electronically registered each H-1B candidate for the lottery in March.
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Join Greylock’s Asheem Chandna on November 5 at noon PST/3 pm EST/8 pm GMT to discuss the future of enterprise and cybersecurity investing
The world of enterprise software and cybersecurity has taken multiple body blows since COVID-19 demolished the in-person office, flinging employees across the world and forcing companies to adapt to an all-remote productivity model. The shift has required companies to rethink not only collaboration software, but also the infrastructure that powers it and the best way to protect assets once their security perimeters have been destroyed.
The pandemic has also dramatically increased the usage of digital services, forcing cloud providers to keep up with crushing demands for performance and reliability.
In short — it’s never been a better time to be an enterprise investor (or, possibly, a founder).
So I’m excited to announce our next guest in our Extra Crunch Live interview series: Asheem Chandna from Greylock, one of the top enterprise investors of the past two decades who has worked with multiple important founding teams from whiteboard to IPO. We’re scheduled for Thursday, November 5 at noon PST/3 p.m. EST/8 p.m. GMT (check that daylight savings time math!)
Login details are below the fold for EC members, and if you don’t have an Extra Crunch membership, click through to sign up.
For nearly two decades, Asheem Chandna has invested in enterprise and security startups at Greylock, with massive investment wins in Palo Alto Networks, AppDynamics and Sumo Logic. These days, he continues to invest in cybersecurity with companies like Awake Security and Abnormal Security, data platforms like Rubrik and Delphix, and the stealthy search engine company Neeva. As a leading early-stage investor and mentor in the space, he’s seen a multitude of companies transition from inception to product-market fit to IPO.
We’ll talk about what all the turbulence in enterprise means for the future of startups in the space, how cybersecurity is evolving given the new threat landscape and also discuss a bit about how the public markets and their aggressive multiples for Silicon Valley enterprise startups is changing the strategy of venture capitalists. Plus, we’ll talk about company building, developing founders as leaders and more.
Join us next week with Asheem on Thursday, November 5 at noon PST/3 p.m. EST/8 p.m. GMT. Login details and calendar invite are below.
Event Details
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Nestlé acquires healthy meal startup Freshly for up to $1.5B
Nestlé USA just announced that it has acquired Freshly for $1.5 billion — $950 million plus potential earnouts of up to $550 million based on future growth.
Founded in 2015, Freshly is a New York City-based startup that offers healthy meals delivered to your home in weekly orders, which can then be prepared in a few minutes in your microwave or oven. So you get the benefit of fresh, healthy meals but — unlike signing up with a meal kit startup — you don’t have to spend a lot of time cooking them yourself.
If anything, this sounds even more appealing now, as so many of us are spending most of our time at home, doing our best to cook for ourselves. According to Nestlé’s press release, Freshly is now shipping more than 1 million meals per week across 48 states, with forecasted sales of $430 million for 2020.
The startup raised a total of $107 million from investors, including Highland Capital Partners, White Star Capital, Insight Venture Partners and Nestlé itself, which led the Series C in 2017. Today’s announcement describes the earlier investment as giving the food and beverage giant a 16% stake in Freshly and serving as “a strategic move to evaluate and test the burgeoning market.”
“Consumers are embracing ecommerce and eating at home like never before,” said Nestlé USA Chairman and CEO Steve Presley in a statement. “It’s an evolution brought on by the pandemic but taking hold for the long term. Freshly is an innovative, fast-growing, food-tech startup, and adding them to the portfolio accelerates our ability to capitalize on the new realities in the U.S. food market and further positions Nestlé to win in the future.”
In a note to customers, Freshly co-founder and CEO Michael Wystrach said that as a result of the acquisition, his team has plans to triple the number of menu items offered each week. Beyond that, however, he suggested that things won’t change too dramatically:
I can assure you that your meals, pricing, and subscription will remain just as you know them. Freshly will continue to operate as a standalone business to accomplish our core mission to remove the barriers to healthy eating with convenient, nutritious and delicious meal solutions, backed by the power of Nestlé to open new doors for a fresher, faster food delivery to your door. We will continue to maintain our own strict standards and maintain complete control of our products. Our meals will not be changing, and there are no plans to change ingredients or integrate Nestlé products into Freshly meals, but we are excited about potential opportunities for the future.
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New GV partner Terri Burns has a simple investment thesis: Gen Z
In 2015, then-Twitter product manager Terri Burns penned a piece about staying optimistic despite the sexism and racism that exists expansively within tech. “America has broke my heart countless times, but I believe that technology can be a tool to mend some of the woes of the world and produce tools to better humanity,” she wrote.
“It’s hard to continue to believe this when the industry holding this power takes so little interest in the basic rights of women and people of color. I actively choose to remain hopeful under the belief that myself and many of the incredible people also working toward equality and justice in technology and in America will make a difference.”
Burns left Twitter in 2017 to join GV, formerly known as Google Ventures. Her hope has now been met with recognition. GV has promoted Terri Burns to partner, making her the first Black woman to hold that role — and the youngest ever. Making history comes with its own set of pressures and spotlight, but Burns seems focused on simply finding a new place to put her optimism and hope: Gen Z.
Read on for a Q&A with Burns about her investment thesis, role change and plans as partner.
TechCrunch: Before you were in venture, you held product roles at Venmo and Twitter. When did you know that computer science was the right field for you?
Terri Burns: I grew up in Southern California, in Long Beach. And I think I’ve always just been a really curious kid. For me, I always spent a ton of time just asking questions and I always liked science. But, I actually did not have any interest in computer science until college.
I went to NYU and I remember thinking my freshman year, major-wise, that I’m not entirely sure what it is that I want to do. By chance, I happened to apply to this program called Google BOLD. It was a week-long program for people that are a little bit too young for a full-time internship. There we just talked about all the opportunities at Google that were not engineering.
It’s funny, I grew up in California, but growing in Long Beach, I didn’t know anything about Silicon Valley whatsoever. College was really the first time I had an introduction to Silicon Valley, to technology, to entrepreneurship, to Google. Even though [Google BOLD] was a nontechnical program, I was “I want to know what this coding thing is about.” So my sophomore year, when I went back to campus, I took my first computer science class. And that was the beginning.
What’s the most effective way to get on your radar without knowing you prior? Any anecdotes for how out of network founders grabbed your attention?
Yes! In fact, I met Suraya Shivji, the CEO of HAGS, through Twitter. I knew people who were buzzing about the company on Twitter, and I proactively reached out to her to do a virtual coffee. Social media, networking events and warm intros are pretty good paths. For what it’s worth, I read every cold email I receive as well; I’m just not able to respond to all of them!
What kind of companies will you always take a meeting with?
Mobile consumer and consumer in general is definitely what my background is in, and so I’ll always have a natural inclination
in consumer. I recognize that that’s broad, but I think software consumer companies are ones that I know and I understand. So that’s something I’m always going to lean into. One of the things that I really love about GV is that we are a generalist firm, which has also been a theme for me personally and something that I definitely want to uphold as an investor. Some other things that I’m interested in [are] fintech on the enterprise side and [ … ] enterprise collaboration tools.
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Teachers are leaving schools. Will they come to startups next?
It wasn’t the lingering exhaustion that made Christine Huang, a New York public school teacher, leave the profession. Or the low pay. Or the fact that she rarely had time to spend with her kids after the school day due to workload demands.
Instead, Huang left teaching after seven years because of how New York City handled the coronavirus pandemic in schools.
“Honestly, I have no confidence in the city,” she says. Tensions between educators and NYC officials grew over the past few weeks, as school openings were delayed twice and staffing shortages continue. In late September, the union representing NYC’s principals called on the state to take control of the situation, slamming Mayor de Blasio for his inability to offer clear guidance.
Now, schools are open and the number of positive coronavirus cases are surprisingly low. Still, Huang says there’s a lack of grace given to teachers in this time.
Huang wanted the flexibility to work from home to take care of her kids who could no longer get daycare. But her school said that, while kids have the choice on whether or not to come into class, teachers do not. She gave her notice days later.
There are more than 3 million public school teachers in the United States. Over the years, thousands have left the system due to low pay and rigid hours. But the coronavirus is a different kind of stress test. As schools seesaw between open and closed, some teachers are left without direction, feeling undervalued and underutilized. The confusion could usher numbers of other teachers out of the field, and massively change the teacher economy as we know it.
Teacher departures are a loss for public schools, but an opportunity for startups racing to win a share of the changing teacher economy. Companies don’t have the same pressures as entire school districts, and thus are able to give teachers a way to teach on more flexible hours. As for salaries, edtech benefits from going directly to consumers, making money less of a budget challenge and more of a sell to parents’ wallets.
There’s Outschool, which allows teachers to lead small-group classes on subjects such as algebra, beginner reading or even mindfulness for kids; Varsity Tutor, which connects educators to K-12 students in need of extra help; and companies such as Swing and Prisma that focus on pod-based learning taught by teachers.
The startups all have different versions of the same pitch: they can offer teachers more money, and flexibility, than the status quo.
Underpaid and overworked teachers
There’s a large geographic discrepancy in pay among teachers. Salaries are decided on a state-by-state and district-by-district level. According to the National Center for Education Statistics, a teacher who works in Mississippi makes an average of $45,574 annually, while a teacher in New York makes an average of $82,282 annually.
Although cost of living factors impacts teacher salaries like any other profession, data shows that teachers are underpaid as a profession. According to a study from the Economic Policy Institute, teachers earn 19% less than similarly skilled and educated professionals. A 2018 study by the Department of Education shows that full-time public school teachers are earning less on average, in inflation-adjusted dollars, than they earned in 1990.
The variance of salaries among teachers means that there’s room, and a need, for rebalancing. Startups, looking to get a slice of the teacher economy, suddenly can form an entire pitch around these discrepancies. What if a company can help a Mississippi teacher make a wage similar to a New York teacher?
Image: Bryce Durbin / TechCrunch
Reach Capital is a venture capital firm whose partners invest in education technology companies. Jennifer Carolan, co-founder of the firm, who also worked in the Chicago Public School system for years, sees coronavirus as an accelerator, not a trigger, for the departure of teachers.
“We have an education system where teachers are underpaid, overworked, and you don’t have the flexibility that has become so important for workers now,” she said. “All these things have caused teachers to seek opportunity outside of the traditional schooling system.”
Carolan, who penned an op-ed about teachers leaving the public school system, says that new pathways for teachers are emerging out of the homeschooling tech sector. One of her investments, Outschool, has helped teachers earn tens of millions this year alone, as the total addressable market for what it means to be “homeschooled” changed overnight.
Gig economy powered by startups
Education technology services have created a teacher gig economy over the past few years. Learning platforms, with unprecedented demand, must attract teachers to their service with one of two deal sweeteners: higher wages or more flexible hours.
Outschool is a platform that sells small-group classes led by teachers on a large expanse of topics, from Taylor Swift Spanish class to engineering lessons through Lego challenges. In the past year, teachers on Outschool have made more than $40 million in aggregate, up from $4 million in total earnings the year prior.
CEO Amir Nathoo estimates that teachers are able to make between $40 to $60 per hour, up from an average of $30 per hour in earnings in traditional public schools. Outschool itself has surged over 2,000% in new bookings, and recently turned its first profit.
Outschool makes more money if teachers join the platform full-time: teachers pocket 70% of the price they set for classes, while Outschool gets the other 30% of income. But, Nathoo views the platform as more of a supplement to traditional education. Instead of scaling revenue by convincing teachers to come on full-time, the CEO is growing by adding more part-time teachers to the platform.
The company has added 10,000 vetted teachers to its platform, up from 1,000 in March.
Outschool competitor Varsity Tutors is taking a different approach entirely, focusing less on hyperscaling its teacher base and more on slow, gradual growth. In August, Varsity Tutors launched a homeschooling offering meant to replace traditional school. It onboarded 120 full-time educators, who came from public schools and charter schools, with competitive salaries. It has no specific plans to hire more full-time teachers.
Brian Galvin, chief academic officer at Varsity Tutors, said that teachers came seeking more flexibility in hours. On the platform, teachers instruct for five to six hours per day, in blocks that they choose, and can build schedules around caregiver obligations or other jobs.
Varsity Tutors’ strategy is one version of pod-based learning, which gained traction a few months ago as an alternative to traditional schooling. Swing Education, a startup that used to help schools hire substitute teachers, pivoted to help connect those same teachers to full-time pod gigs. Prisma is another alternative school that trains former educators, from public and private schools, to become learning coaches.
Pod-based learning, which can in some cases cost thousands a week, was popular among wealthy families and even led to bidding wars for best teacher talent. It also was met with criticism, suggesting the product wasn’t built with most students in mind.
The reality of next job
A tech-savvy future where students can learn through the touch of a button, and where teachers can rack in higher earnings, is edtech’s goal. But that path is not accessible for all.
Some tutoring startups could create a digital divide among students who can pay for software and those who can’t. If teachers leave public schools, low-income students are left behind and high-income students are able to pay their way into supplemental learning.
Still, some don’t think it’s the job of public school teachers, the vast majority of which are female, to work for a broken system. In fact, some say that the whole concept of villainizing public school teachers for leaving the system comes with ingrained sexism that women have to settle for less. In this framework, startups are both a bridge to a better future for teachers and a symptom of failures from the public educational systems.
Huang, now on the job hunt, says that the opportunities that edtech companies are creating aren’t built for traditional teachers, even though they’re billed as such. So far, she has applied to curriculum design jobs at educational content website BrainPop, digital learning platform Newsela, math program company Zearn and Q&A content host Mystery.org.
“What I’m finding is that a lot of edtech companies don’t seem to value our skills as teachers,” she said. “They’re not looking for teachers, they’re looking for coders.”
Edtech has been forced to meet increasing demand for services in a relatively short time. But the scalability could inherently clash with what teachers came to the profession to do. Suddenly, their work becomes optimized for venture-scale returns, not general education. Huang feels the tension in her job interviews, where she feels like recruiters don’t pay attention to creativity, knowledge and human skills needed for managing students. She has created 30 different versions of her resume.
The lack of suitable jobs made Huang decide to go on childcare leave instead of quitting the education system entirely, in case she needs to return to the traditional field. She hopes that is not the case, but isn’t optimistic just yet.
“I haven’t gotten a whole lot of interviews, because people see my resume; they see that I’m a teacher, and they automatically write me off,” she said.
Image Credits: Bryce Durbin (opens in a new window)
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E.ventures opens new office in Paris
VC firm e.ventures is expanding its footprint in Europe with a new office in Paris, as well as a new Paris-based partner. Jonathan Userovici, who previously worked for Idinvest Partners, is joining e.ventures as partner and head of the Paris office.
Originally founded in the U.S. 20 years ago, e.ventures has been expanding to new geographies over the past few years. It has offices in San Francisco, Berlin, Beijing, Tokyo, São Paulo and now Paris.
Last year, the firm raised two new funds — the first was a $225 million U.S.-focused fund and the second was a $175 million fund based in Berlin and focused on Europe. The Paris team will deploy some capital in French startups with a sweet spot between €1 million and €10 million.
Over the past two decades, e.ventures has handled around 200 investments. Some of the most successful investments include funding rounds in Farfetch, Groupon, Sonos and Segment.
As for Jonathan Userovici, after five years at Idinvest Partners, he has been involved with some promising French startups. For instance, he is a board member at Swile and Ornikar.
Thanks to e.ventures’ distributed team, the VC firm hopes it can spot good investment opportunities in Europe and help them scale globally. The firm already has connections in the U.S., which should help French entrepreneurs when it comes to signing new deals and international expansion.
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Daimler invests in lidar company Luminar in push to bring autonomous trucks to highways
Daimler’s trucks division has invested in lidar developer Luminar as part of a broader partnership to produce autonomous trucks capable of navigating highways without a human driver behind the wheel.
The deal, which comes just days after Daimler and Waymo announced plans to work together to build an autonomous version of the Freightliner Cascadia truck, is the latest action by the German manufacturer to move away from robotaxis and shared mobility and instead focus on how automated vehicle technology can be applied to freight.
The undisclosed investment by Daimler is in addition to the $170 million that Luminar raised as part of its merger with special purpose acquisition company Gores Metropoulos Inc. Luminar will become a publicly traded company through its merger with Gores, which is expected to close in late 2020.
Daimler is taking two tracks on its mission to commercialize autonomous trucks. The company has been working internally to develop a truck capable of Level 4 automation — an industry term that means the system can handle all aspects of driving without human intervention in certain conditions and environments such as highways. That work has accelerated since spring 2019 when Daimler took a majority stake in Torc Robotics, an autonomous trucking startup that had been working with Luminar the past two years. Lidar, the light detection and ranging radar that measures distance using laser light to generate a highly accurate 3D map of the world around the car, is considered a critical piece of hardware to deploy automated vehicle technology safely and at scale.
The plan is to integrate Torc’s self-driving system, along with Luminar’s sensors, into a Freightliner Cascadia truck as well as build out an operations and network center to run automated trucks. Daimler Trucks’ and Torc’s integrated self-driving product will be designed for on-highway hub-to-hub applications, especially for long-distance, monotonous transport between distribution centers, according to Daimler.
Meanwhile, Daimler Trucks is developing a customized Freightliner Cascadia truck chassis with redundant systems to allow Waymo to integrate its self-driving system. In this case, the software development stays in house at Waymo; Daimler is just concentrating on the chassis development.
This dual approach puts Daimler’s ambitions at center stage, which is to have series-production L4 trucks on highways globally. The deal also provides a clearer view of Luminar’s strategy of focusing on what its founder Austin Russell believes are the most likely and shortest paths to commercialized automated vehicles, and in turn, a profitable company.
“Our focus has really been always centered around highway autonomy use cases, which are specifically applicable to passenger vehicles as well as trucks,” Russell said in a recent interview, adding that the aim is to have a product that you can put into series production in a cost-effective capacity.
Luminar has already publicly announced one deal with an automaker to pursue the passenger vehicle use case. Volvo said in May it will start producing vehicles in 2022 that are equipped with lidar and a perception stack developed by Luminar that the automaker will use to deploy an automated driving system for highways. This deal with Daimler locks in the second use case.
“I absolutely do believe that autonomous trucking is an incredibly valuable business model that’s going to be larger than robotaxis and probably closer to being on par with consumer vehicles for the foreseeable future,” Russell said.
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