Monthly Archives: May 2021

News: Daily Crunch: Lemonade says website security flaw that exposed customer data is ‘by design’

• May 13, 2021
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Hello friends and welcome to Daily Crunch, bringing you the most important startup, tech and venture capital news in a single package.

To get a roundup of TechCrunch’s biggest and most important stories delivered to your inbox every day at 3 p.m. PDT, subscribe here.

I interrupt your regularly scheduled Daily Crunch to announce that your regularly scheduled writer, one Alex Wilhelm, is out sick today. If the effects of his second shot subside by tomorrow, then he’ll be back with his commas. In the meantime, I have taken the reins and hope to be at least half as spirited. Let’s get on with it, shall we? — Henry

TechCrunch Top 3

Lemonade “DGAF”: Activist short seller Carson Block wrote a letter to the CEO of insurance marketplace Lemonade saying that he “accidentally discovered” a security flaw that exposed customers’ account data. Block told Zack that his firm is shorting the company’s stock “because it is clear Lemonade does not give a fuck about securing its customers’ sensitive personal information.” Strong words!

Google’s gotta pay in Italy: Natasha writes about the most recent European trouble Google finds itself in. Italy’s antitrust watchdog group slapped the company with a €100 million (or about US$123 million) for its Android Auto practices. Specifically, the AGCM says Google has prevented Enel X Italia, the maker of electric car charging app JuicePass, from inclusion in the platform. Google says it didn’t do anything wrong. Shrug.

Space adventures afoot: Japanese entrepreneur and billionaire Yusaku Maezawa will be passing the moon aboard a SpaceX Crew Dragon by 2023. But he can’t wait to leave Earth. So to whet his space-travel whistle, Maezawa will head to the International Space Station as a client of Space Adventures on a Russian Soyuz rocket set to take off from Kazakhstan on December 8. And he’s taking his production assistant, Yozo Hirano, with him. That’s dedication.

Startups and VC

Vietnamese flexible pay startup Nano raises $3M seed round: Nano Technologies, a startup that lets workers in Vietnam access their earned wages immediately through an app called VUI, has raised $3 million in seed funding.

Legionfarm, pairing pro gamers with amateurs, raises $6 million Series A: The gaming platform that lets gamers play with pro players in their favorite games announced a $6 million Series A round.

Chef Robotics raises $7.7M to help automate kitchens: Chef Robotics raised a combined $7.7 million pre-seed and seed round, with the goal of helping automate certain aspects of food preparation. The company says its robotics and vision system is destined to increase production volume and enhance consistency, while removing some food waste from the process. Fast casual restaurants appear to be a key focus for this sort of tech.

Sylvera grabs seed backing from Index to help close the accountability gap around carbon offsetting: The U.K.-based startup is using satellite, radar and lidar data-fueled machine learning to bolster transparency around carbon offsetting projects in a bid to boost accountability and credibility. And it’s just grabbed $5.8 million in seed funding to do it.

SpecTrust raises millions to fight cybercrime with its no-code platform: Risk defense startup SpecTrust is emerging from stealth today with a $4.3 million seed raise to “fix the economics of fighting fraud” with a no-code platform that it says cuts 90% of a business’ risk infrastructure spend that responds to threats in “minutes instead of months.”

BluBracket nabs $12M Series A to expand source code security platform: The early-stage startup focuses on keeping source code repositories secure, even in distributed environments.

Alba Orbital’s mission to image the Earth every 15 minutes brings in $3.4M seed round: Alba Orbital raised the money to get its next satellites into orbit to provide Earth observation at intervals of 15 minutes rather than hours or days.

The hamburger model is a winning go-to-market strategy

Software startups that fail to reach product-market fit simply fade away, memorialized only by an inactive Twitter account and perhaps a stenciled sign in a now-vacant co-working space.

All product-led growth companies will reach the stage where their founders must figure out how to crack the code that allows them to vault to the next level and become a billion-dollar company. That’s where the “hamburger” go-to-market comes in.

The bottom bun is bottom-up GTM, the top bun represents enterprise sales and your product? That’s the meat.

(Extra Crunch is our membership program, which helps founders and startup teams get ahead. You can sign up here.)

Big Tech Inc.

Google Analytics is preparing for life after cookies by using its machine learning systems to model user behavior when cookies are not available. During her first interview as the new head of Google Analytics, Vidhya Srinivasan tells Frederic that this is the only way to go.

Amazon’s back with its Echo Buds, and this time, Brian’s not as unimpressed as he was last time. Progress! Read his review here.

When Discord launched its own Clubhouse-like voice event rooms, Stage Channels, in March, it set the stage for connecting folks to live events beyond their own communities. Today, the company announced all the pieces are in place to start helping people discover live events and the servers that host them. Think open mic nights and book clubs, says Taylor.

Elon Musk, the self-dubbed Technoking, is backpedaling on the company’s stance about bitcoin, writes Kirsten and Rebecca. The Tesla CEO announced yesterday in a tweet that he has suspended purchases of its electric vehicles with the cryptocurrency. The shift comes just weeks after the Tesla CFO said the company believes in the longevity of bitcoin, despite its volatility.

Acquisition corner: Walmart acquires virtual try-on startup Zeekit and PayPal buys returns logistics business Happy Returns.

Community

Polls are fun and we like hearing and learning from you. What have we learned this week? You’re not that excited about going back to an office, and you’re not too keen on Bird’s upcoming SPAC. Next up? Let us know what you think about Tesla’s move to pause accepting bitcoin as payment (then come chat about all of it on our Discord server).

News: Substack acquires team from community consulting startup People & Company

• May 13, 2021
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New media poster child Substack announced today that they’ve added a small community-building consultancy team to its ranks, acquiring the Brooklyn-based startup People & Company. The small firm has been working with clients to build up their community efforts and its team will now be tasked with building up some of the newsletter company’s upstart

New media poster child Substack announced today that they’ve added a small community-building consultancy team to its ranks, acquiring the Brooklyn-based startup People & Company.

The small firm has been working with clients to build up their community efforts and its team will now be tasked with building up some of the newsletter company’s upstart efforts for writers in its network.

In a blog post, Substack co-founder Hamish McKenzie said that the company had previously used the People & Co. team to consult on their fellowship and mentorship programs and that members of the team would now be working on a variety of new efforts from scaling programs to help writers with legal support and health insurance to community-guided projects like workshops and meetups to help crowdsource insights.

“These people are the best in the world at what they do, and now they’re not only working for Substack, but they’re also working for you,” McKenzie wrote.

Beyond Substack, previous partners with People & Company include Porsche AG, Nike and Surfrider.

Substack has been blazing ahead in recent months, adding new partners and raising cash as it aims to bring on more and more subscribers to its network. The firm shared back in late March that it had raised a $65 million round at a reported valuation around $650 million according earlier reporting by Axios.

News: Even startups on tight budgets can maximize their marketing impact

• May 13, 2021
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A startup’s best marketing asset is its story. The knowledge and expertise of its team, together with the why and the how of its offering provides the most compelling content.

Search engine optimization, PR, paid marketing, emails, social — marketing and communications is crowded with techniques, channels, solutions and acronyms. It’s little wonder that many startups strapped for time and money find defining and executing a sustainable marketing campaign a daunting prospect.

The sheer number of options makes it difficult to determine an effective approach, and my view is that this complexity often obscures the obvious answer: A startup’s best marketing asset is its story. The knowledge and expertise of its team, together with the why and the how of its offering provides the most compelling content.

Leveraging this material with best practice techniques enables any startup, no matter how limited its budget, to run an effective marketing campaign.

I know this approach works, because this is exactly what I did with my co-founder Alex Feiglstorfer when we set up Storyblok. To be clear, we are developers not marketers. However, our previous experience building CMS systems taught us that the main driver of organic engagement for most businesses was customer conversations around content.

Specifically, sharing experiences, expertise and what we learned. We had committed nearly all of our available cash to developing our product, so we knew that the only way to market Storyblok was to do it all ourselves.

As a result, we focused solely on problem-solving content. This took the form of tutorials on web development and opinion pieces on headless CMS and other topics within our areas of expertise. The trick was that what we published wasn’t made just for marketing, it was based on our own internal documentation of problems we encountered as we developed our product. In essence, we were “learning in public.” Through this approach we were able to acquire thousands of customers in our first year.

Retelling this story isn’t to blow my own trumpet, it’s to make clear that you don’t have to be a marketer by training or commit a huge amount of time and resources to successfully market your startup. So, how do you get started?

Getting your structure and technology right

Although there’s no one-size-fits-all approach to how you organize your startup’s marketing function, there are some basic principles that apply in nearly every situation. A recent survey of 400+ executives from CMS Wire helpfully identified the following factors as the “top digital customer experience challenges” for businesses:

1. Limited budget/resources.
2. Siloed systems and fragmented customer data.
3. Limited cross-department alignment/collaboration.
4. Outdated/limited technology, operations or processes.
5. Lack of in-house expertise/skills.

Challenges two to four are the pitfalls that we can focus on avoiding. They are directly related to how a startup produces, organizes and distributes its content.

With regard to the siloing of systems and fragmentation of customer data, the overriding goal is to ensure all your systems are integrated and speak to one another. In practice, this means that the data gathered in different departments — whether its feedback from sales, engagement on your website, customer service responses or product development information — is collected in a uniform and methodical manner and is readily accessible across the business.

News: Three students sue coding bootcamp Lambda School alleging false advertising and financial shenanigans

• May 13, 2021
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Lambda School has attracted a lot of attention, and raised some $130 million in venture funding from an impressive list of investors, for its novel approach to coding education: offering six-month virtual computer science courses for $30,000, with the option of paying for the courses in installments based on a sliding scale that only kicks in

Lambda School has attracted a lot of attention, and raised some $130 million in venture funding from an impressive list of investors, for its novel approach to coding education: offering six-month virtual computer science courses for $30,000, with the option of paying for the courses in installments based on a sliding scale that only kicks in after you land a job that makes at least $50,000.

But it turns out that the startup is attracting a a lot of controversy, too. In the latest development, three students have filed lawsuits against the company in California, claiming misleading financial and educational practices.

The suits — which are being brought by the National Student Legal Defense Network on behalf of Linh Nguyen, Heather Nye and Jonathan Stickrod — go back to a period of between 2018 and 2020, and they focus on four basic claims.

First, that Lambda School falsified and misrepresented job placement rates. Second, that Lambda School misrepresented the true nature of its financial interest in student success (specifically, there are question marks over how Lambda handles its ISA contracts and whether it benefits from those). Third, that it misrepresented and concealed a regulatory dispute in California that required the school to cease operations. And fourth, that it enrolled and provided educational services and signed ISA contracts in violation of that order.

The filings for the three cases are embedded below.

The three students are all currently on the hook for their Lambda tuitions, which they opted to pay back in installments by way of the school’s income share agreement (ISA) model. The suits do not disclose how much the three individuals are seeking in damages.

For those who have been following news of Lambda School over the last several years, the claims detailed in the suit will sound familiar. The inflated job placement rates; and the fact that it wasn’t legally allowed to operate, yet was still accepting students, signing ISA deals, and teaching, for example, were all reported over that period of time, along with other criticisms about how CEO and founder Austen Allred, a self-proclaimed “growth hacker“, leveraged his and Lambda’s other Twitter accounts to hype up the school.

Some of the issues that are raised in the lawsuits have also been resolved since then. For example, the prominent display of over 80% of students finding jobs can no longer be found on the Lambda site, and in California you no longer get an ISA but a retail installment contract (similar but different). But as is the way of litigation, lawsuits based on past issues from people who were impacted by them when they were still active, are, in many ways, the next logical, unsurprising step.

There is also a specific strategy behind these three cases being filed the same time.

Alex Elson, the co-founder of the National Student Legal Defense Network, told TechCrunch in an interview that the ISA contracts that students sign at Lambda have arbitration clauses that preclude students from arbitrating against Lambda in groups, ie class action suits. The idea is that by bringing three nearly identical individual cases simultaneously against the school, the defendants can both expose the widespread practices of Lambda, and pave the way for broader relief for others similarly impacted. (The Student Defense Network’s co-counsel in the case is CalebAndonian PLLC and Cotchett Pitre & McCarthy LLP.)

Originally incubated at Y Combinator and backed by a long list of investors that include GV (Google Ventures), Gigafactory (ex-Founders Fund partners), GGV, and more, Lambda School has had a tough time of it in the last year, a period that has seen the Covid-19 pandemic have a disproportionate and impact on some parts of the economy but not others.

Edtech has largely been seen as a huge growth area, but that may not have been the case for edtech startups specifically focused on vocational, technology jobs, given that the tech world has seen a lot of hiring freezes, and layoffs, as companies sought to keep down costs in the face of the unknown.

Lambda went through two sets of layoffs in the space of a year, and it seems that in one of them it also changed its teaching model, doing away with TLs (team leads), paid mentors who helped assess students, and instead moved to a model where students mentored each other and assessed themselves. It has also changed the courses themselves, shortening them to six months from their original nine- and 18-month formats — but not reducing the prices for those courses.

And it’s not quite past all of its regulatory issues, either.

Just two weeks ago, California’s Department of Financial Protection and Innovation (DFPI) announced a settlement with the school over the language that it uses in financing contracts with students.

Specifically, the DFPI took issue with how it said Lambda falsely described its financial arrangement with students as a “qualified educational loan… subject to the limitations on dischargeability contained in… the United States Bankruptcy Code.” (Educational loans are usually exempt from bankruptcy discharge — when a debtor is not required to pay a debt because that debtor is bankrupt, it’s a bankruptcy discharge; typically educational loans are not covered by this, so the issue here was the Lambda School was claiming that even if a student files for bankruptcy that student would still have to pay back Lambda.)

“The language violates the new California Consumer Financial Protection Law (CCFPL), which took effect this year and prohibits companies from engaging in practices that are unlawful, unfair, deceptive, or abusive,” the DFPI noted.

The settlement requires Lambda to notify students that the bankruptcy dischargeability provision language is not accurate; retain a third party to review the terms of the school’s finance contract to ensure that it complies with all applicable laws; and undergo a review of its marketing materials to ensure that the information is accurate and not likely to mislead consumers.

You could say that all of these issues are the table stakes of being a startup and trying something new: the school is moving fast, breaking things, and iterating along the way to figure it all out. But for a service that can leave students liable for paying back $30,000, it’s a big price for others to pay when those things don’t quite work as advertised.

Still, despite all that, Lambda also continues to have a lot of supporters and partners. Just last month, for example, it announced a new backend engineering program that it developed with Amazon. And while it doesn’t seem guaranteed taking the problem will get you an instant open door to a job with the tech giant, it’s a sign of where there remains interesting value in the idea.

We have also reached out to the company’s CEO and founder Austen Allred, and the company itself, for a response and we will update this post as we learn more.

Suits here:

News: After another canceled year in the desert, Burning Man plans for a virtual event

• May 13, 2021
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Last month, the organization behind Burning Man announced that the festival/experience would not be returning to the desert of Nevada this year due to the COVID-19 pandemic and would instead be attempting a virtual event once again aiming to bring attendees access to a handful of web-based experiences. Today, the Burning Man org released tickets

Last month, the organization behind Burning Man announced that the festival/experience would not be returning to the desert of Nevada this year due to the COVID-19 pandemic and would instead be attempting a virtual event once again aiming to bring attendees access to a handful of web-based experiences.

Today, the Burning Man org released tickets for its online events taking place between August 22 and September 7.

There have been few illusions for attendees that a virtual event is any substitute for the real thing, but organizers have tried to get creative when it comes to the social web experiences so that attendees can reclaim some of the camaraderie. While the organization won’t be setting up an official presence, some camps have already committed to hosting an unofficial return to the desert.

Last year, TechCrunch profiled the Burning Man org as they struggled to pull together a virtual event that captured the feeling of the in-person experience using virtual reality, mobile apps, and virtual experimental theater.

Most of the creators behind last year’s experience are back this year including a few VR-centric experiences and a handful of live-streaming and Zoom-based apps designed to spice things up a bit. This year’s apps include the VR-based BRCvr, interactive chat platform Build-a-Burn, 3D world Dusty Universe, ‘photo-realistic’ simulation The Infinite Playa, video chat Sparkleverse and livestream platform Burn Week.

This year, the apps have a reserve ticketing system set up for “early bird tickets” and they are all charging different prices based on the experience type. The most aggressive pitch is from Infinite Playa which is offering tickets ranging from a $16 two-hour pass to an $88 unlimited pass. Others are adopting donation-based pricing tiers, while the Burn Week livestream is offering a free stream to all viewers alongside a $29 “extended experience.”

News: Alba Orbital’s mission to image the Earth every 15 minutes brings in $3.4M seed round

• May 13, 2021
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Orbital imagery is in demand, and if you think having daily images of everywhere on Earth is going to be enough in a few years, you need a lesson in ambition. Alba Orbital is here to provide it with its intention to provide Earth observation at intervals of 15 minutes rather than hours or days

Orbital imagery is in demand, and if you think having daily images of everywhere on Earth is going to be enough in a few years, you need a lesson in ambition. Alba Orbital is here to provide it with its intention to provide Earth observation at intervals of 15 minutes rather than hours or days — and it just raised $3.4M to get its next set of satellites into orbit.

Alba attracted our attention at Y Combinator’s latest demo day; I was impressed with the startup’s accomplishment of already having 6 satellites in orbit, which is more than most companies with space ambition ever get. But it’s only the start for the company, which will need hundreds more to begin to offer its planned high-frequency imagery.

The Scottish company has spent the last few years in prep and R&D, pursuing the goal, which some must have thought laughable, of creating a solar-powered Earth observation satellite that weighs in at less than one kilogram. The joke’s on the skeptics, however — Alba has launched a proof of concept and is ready to send the real thing up as well.

Little more than a flying camera with the minimum of storage, communication, power, and movement, the sub-kilogram Unicorn-2 is about the size of a soda can, with paperback-size solar panel wings, and costs in the neighborhood of $10,000. It should be able to capture up to 10 meter resolution, good enough to see things like buildings, ships, crops, even planes.

Image Credits: Alba Orbital

“People thought we were idiots. Now they’re taking it seriously,” said Tom Walkinshaw, founder and CEO of Alba. “They can see it for what it is: a unique platform for capturing datasets.”

Indeed, although the idea of daily orbital imagery like Planet’s once seemed excessive, in some situations it’s quite clearly not enough.

“The California case is probably wildfires,” said Walkinshaw (and it always helps to have a California case). “Having an image once a day of a wildfire is a bit like having a chocolate teapot… not very useful. And natural disasters like hurricanes, flooding is a big one, transportation as well.”

Walkinshaw noted that they company was bootstrapped and profitable before taking on the task of launching dozens more satellites, something the seed round will enable.

“It gets these birds in the air, gets them finished and shipped out,” he said. “Then we just need to crank up the production rate.”

Image Credits: Alba Orbital

When I talked to Walkinshaw via video call, ten or so completed satellites in their launch shells were sitting on a rack behind him in the clean room, and more are in the process of assembly. Aiding in the scaling effort is new investor James Park, founder and CEO of FitBit — definitely someone who knows a little bit about bringing hardware to market.

Interestingly, the next batch to go to orbit (perhaps as soon as in a month or two, depending on the machinations of the launch provider) will be focusing on nighttime imagery, an area Walkinshaw suggested was undervalued. But as orbital thermal imaging startup Satellite Vu has shown, there’s immense appetite for things like energy and activity monitoring, and nighttime observation is a big part of that.

The seed round will get the next few rounds of satellites into space, and after that Alba will be working on scaling manufacturing to produce hundreds more. Once those start going up it can demonstrate the high-cadence imaging it is aiming to produce — for now it’s impossible to do so, though Alba already has customers lined up to buy the imagery it does get.

The round was led by Metaplanet Holdings, with participation by Y Combinator, Liquid2, Soma, Uncommon Denominator, Zillionize, and numerous angels.

As for competition, Walkinshow welcomes it, but feels secure that he and his company have more time and work invested in this class of satellite than anyone in the world — a major obstacle for anyone who wants to do battle. It’s more likely companies will, as Alba has done, pursue a distinct product complementary to those already or in the process of being offered.

“Space is a good place to be right now,” he concluded.

News: Advanced tax strategies for startup founders

• May 13, 2021
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Here are some advanced equity planning strategies that you can implement at different stages of your company life cycle to reduce tax and optimize wealth for you and your family.

As an entrepreneur, you started your business to create value, both in what you deliver to your customers and what you build for yourself. You have a lot going on, but if building personal wealth matters to you, the assets you’re creating deserve your attention.

You can implement numerous advanced planning strategies to minimize capital gains tax, reduce future estate tax and increase asset protection from creditors and lawsuits. Capital gains tax can reduce your gains by up to 35%, and estate taxes can cost up to 50% on assets you leave to your heirs. Careful planning can minimize your exposure and actually save you millions.

Smart founders and early employees should closely examine their equity ownership, even in the early stages of their company’s life cycle. Different strategies should be used at different times and for different reasons. The following are a few key considerations when determining what, if any, advanced strategies you might consider:

1. Your company’s life cycle — early, mid or late stage.
2. The value of your shares — what they are worth now, what you expect them to be worth in the future and when.
3. Your own circumstances and goals — what you need now, and what you may need in the future.

Some additional items to consider include issues related to qualified small business stock (QSBS), gift and estate taxes, state and local income taxes, liquidity, asset protection, and whether you and your family will retain control and manage the assets over time.

Here are some advanced equity planning strategies that you can implement at different stages of your company life cycle to reduce tax and optimize wealth for you and your family.

Irrevocable nongrantor trust

QSBS allows you to exclude tax on $10 million of capital gains (tax of up to 35%) upon an exit/sale. This is a benefit every individual and some trusts have. There is significant opportunity to multiply the QSBS tax exclusion well beyond $10 million.

The founder can gift QSBS eligible stock to an irrevocable nongrantor trust, let’s say for the benefit of a child, so that the trust will qualify for its own $10 million exclusion. The founder owning the shares would be the grantor in this case. Typically, these trusts are set up for children or unborn children. It is important to note that the founder/grantor will have to gift the shares to accomplish this, because gifted shares will retain the QSBS eligibility. If the shares are sold into the trust, the shares lose QSBS status.

Image Credits: Peyton Carr

In addition to the savings on federal taxes, founders may also save on state taxes. State tax can be avoided if the trust is structured properly and set up in a tax-exempt state like Delaware or Nevada. Otherwise, even if the trust is subject to state tax, some states, like New York, conform and follow the federal tax treatment of the QSBS rules, while others, like California, do not. For example, if you are a New York state resident, you will also avoid the 8.82% state tax, which amounts to another $2.6 million in tax savings if applied to the example above.

This brings the total tax savings to almost $10 million, which is material in the context of a $40 million gain. Notably, California does not conform, but California residents can still capture the state tax savings if their trust is structured properly and in a state like Delaware or Nevada.

Currently, each person has a limited lifetime gift tax exemption, and any gifted amount beyond this will generate up to a 40% gift tax that has to be paid. Because of this, there is a trade-off between gifting the shares early while the company valuation is low and using less of your gift tax exemption versus gifting the shares later and using more of the lifetime gift exemption.

The reason to wait is that it takes time, energy and money to set up these trusts, so ideally, you are using your lifetime gift exemption and trust creation costs to capture a benefit that will be realized. However, not every company has a successful exit, so it is sometimes better to wait until there is a certain degree of confidence that the benefit will be realized.

Parent-seeded trust

One way for the founder to plan for future generations while minimizing estate taxes and high state taxes is through a parent-seeded trust. This trust is created by the founder’s parents, with the founder as the beneficiary. Then the founder can sell the shares to this trust — it doesn’t involve the use of any lifetime gift exemption and eliminates any gift tax, but it also disqualifies the ability to claim QSBS.

The benefit is that all the future appreciation of the asset is transferred out of the founder’s and the parent’s estate and is not subject to potential estate taxes in the future. The trust can be located in a tax-exempt state such as Delaware or Nevada to also eliminate home state-level taxes. This can translate up to 10% in state-level tax savings. The trustee, an individual selected by the founder, can make distributions to the founder as a beneficiary if desired.

Further, this trust can be used for the benefit of multiple generations. Distributions can be made at the discretion of the trustee, and this skips the estate tax liability as assets are passed from generation to generation.

Grantor retained annuity trust (GRAT)

This strategy enables the founder to minimize their estate tax exposure by transferring wealth outside of their estate, specifically without using any lifetime gift exemption or being subject to gift tax. It’s particularly helpful when an individual has used up all their lifetime gift tax exemption. This is a powerful strategy for very large “unicorn” positions to reduce a founder’s future gift/estate tax exposure.

For the GRAT, the founder (grantor) transfers assets into the GRAT and gets back a stream of annuity payments. The IRS 7520 rate, currently very low, is a factor in calculating these annuity payments. If the assets transferred into the trust grow faster than the IRS 7520 rate, there will be an excess remainder amount in GRAT after all the annuity payments are paid back to the founder (grantor).

This remainder amount will be excluded from the founder’s estate and can transfer to beneficiaries or remain in the trust estate tax-free. Over time, this remainder amount can be multiples of the initial contributed value. If you have company stock that you expect will pop in value, it can be very beneficial to transfer those shares into a GRAT and have the pop occur inside the trust.

This way, you can transfer all the upside gift and estate tax-free out of your estate and to your beneficiaries. Additionally, because this trust is structured as a grantor trust, the founder can pay the taxes incurred by the trust, making the strategy even more powerful.

One thing to note is that the grantor must survive the GRAT’s term for the strategy to work. If the grantor dies before the end of the term, the strategy unravels and some or all the assets remain in his estate as if the strategy never existed.

Intentionally defective grantor trust (IDGT)

This is similar to the GRAT in that it also enables the founder to minimize their estate tax exposure by transferring wealth outside of their estate, but has some key differences. The grantor must “seed” the trust by gifting 10% of the asset value intended to be transferred, so this approach requires the use of some lifetime gift exemption or gift tax.

The remaining 90% of the value to be transferred is sold to the trust in exchange for a promissory note. This sale is not taxable for income tax or QSBS purposes. The main benefits are that instead of receiving annuity payments back, which requires larger payments, the grantor transfers assets into the trust and can receive an interest-only note. The payments received are far lower because it is interest-only (rather than an annuity).

Image Credits: Peyton Carr

Another key distinction is that the IDGT strategy has more flexibility than the GRAT and can be generation-skipping.

If the goal is to avoid generation-skipping transfer tax (GSTT), the IDGT is superior to the GRAT, because assets are measured for GSTT purposes when they are contributed to the trust prior to appreciation rather than being measured at the end of the term for a GRAT after the assets have appreciated.

The bottom line

Depending on a founder’s situation and goals, we may use some combination of the above strategies or others altogether. Many of these strategies are most effective when planning in advance; waiting until after the fact will limit the benefits you can extract.

When considering strategies for protecting wealth and minimizing taxes as it relates to your company stock, there’s a lot to take into account — the above is only a summary. We recommend you seek proper counsel and choose wealth transfer and tax savings strategies based on your unique situation and individual appetite for complexity.

News: New Relic is bringing in a new CEO as founder Lew Cirne moves to executive chairman role

• May 13, 2021
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At the market close this afternoon ahead of its earnings report, New Relic, an applications performance monitoring company, announced that founder Lew Cirne would be stepping down as CEO and moving into the executive chairman role. At the same time, the company announced that Bill Staples, a software industry vet, would be taking over as

At the market close this afternoon ahead of its earnings report, New Relic, an applications performance monitoring company, announced that founder Lew Cirne would be stepping down as CEO and moving into the executive chairman role.

At the same time, the company announced that Bill Staples, a software industry vet, would be taking over as CEO. Staples joined the company last year as chief product officer before being quickly promoted to president and chief product officer in January. Today’s promotion marks a rapid rise through the ranks to lead the company.

Cirne said when he began thinking about stepping into that executive chairman role, he was looking for a trusted partner to take his place as CEO, and he found that in Staples. “Every founder’s dream is for the company to have a long lasting impact, and then when the time is right for them to step into a different role. To do that, you need a trusted partner that will lead with the right core values and bring to the table what the company needs as an active partner. And so I’m really excited to move to the executive chairman role [and to have Bill be that person],” Cirne told me.

For Staples, who has worked at large organizations throughout his career, this opportunity to lead the company as CEO is the pinnacle of his long career arc. He called the promotion humbling, but one he believes he is ready to take on.

“This is a new chapter for me, a new experience to be a CEO of a public company with a billion dollar plus value valuation, but I think the experience I have in the seat of our customers, as well as the experience I’ve had at Microsoft and Adobe, very large companies with very large stakes running large organizations has really prepared me well for this next phase,” Staples said.

Cirne says he plans to take some time off this summer to give Staples the space to grow as the leader of the company without being in the shadow of the founder and long-time CEO, but he plans to come back and work with him as the executive chairman moving forward come the fall.

As he step into this new role, Staples will be taking over. “Certainly I have a lot to learn about what it takes to be a great CEO, but I also come in with a lot of confidence that I’ve managed organizations at scale. You know I’ve been part of P&Ls that were many times larger than New Relic, and I have confidence that I can help New Relic grow as a company.”

Hope Cochran, managing director at Madrona Ventures, who is also the chairman of the New Relic Board said that the board fully backs of the decision to pass the CEO torch from Cirne to Staples. “With the foundation that Lew built and Bill’s leadership, New Relic has a very bright future ahead and a clear path to accelerate growth as the leader in observability,” she said in a statement.

The official transition is scheduled to take place on July 1st.

News: Shopify helps customers build online shops, but it’s minting tech founders and investors, too

• May 13, 2021
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Last month, Jean-Michel Lemieux, the chief technology officer of Shopify, and chief talent officer Brittany Forsyth announced on Twitter that they are stepping down from their roles. Chief legal officer Joe Frasca is also set to step down, with all three ending their tenures next month. In their new chapters, all seem keen to advise, invest

Last month, Jean-Michel Lemieux, the chief technology officer of Shopify, and chief talent officer Brittany Forsyth announced on Twitter that they are stepping down from their roles. Chief legal officer Joe Frasca is also set to step down, with all three ending their tenures next month.

In their new chapters, all seem keen to advise, invest in, or even launch startups, joining a growing number of former Shopify executives and employees to do the same.

For a company of Shopify’s size — the 15-year-old, 7,000-person, Ottawa-based outfit boasts a $130 billion market cap — that’s not a surprise. Still, because of the wealth that Shopify has helped create, its former employees look to have an impact on the Canadian entrepreneurial ecosystem like no other before it.

Meanwhile, Shopify’s focus in part on the climate and sustainability — among other things it invests $5 million per year in startups that fight climate change, and publishes annual sustainability reports — could also have positive ripple effects.

Is there someone that needs a hand, pep talk, career advice? How can I help?

— Jean-Michel Lemieux (@jmwind) May 13, 2021

Take Craig Miller, for example, formerly the chief product officer, of Shopify, who left the company back in October. He’d already invested in several venture funds that are focused on clean tech and Canada while still working full time; now, he’s investing both his money and time in individual companies that he thinks “have a real shot at making a big social impact.”

Some of these include tools that enable people to run their own businesses, including Housecall Pro; and startups looking to reverse climate change, like the carbon capture startup Planetary Hydrogen.

Miller says the time investment is more compelling to the founders, which include former Shopify colleagues. “Raising money is important, but there’s already more than enough people willing to invest money in them. Most of my value comes in talking” with teams that need insights into how to scale up their startups, Miller says.

“There are so few people that know how to drive huge growth in a company, have seen a company [grow] from $100 million to $100 billion plus, that know how to think about scaling a product to millions of users. This is the case globally but especially so in Canada where there are basically no role models.”

Outsiders might be surprised by the extent to which Shopify actively educated its employees, suggests Miller, who says “one of the things that I loved most was how open we were. All employees knew the roadmap, could look at the code, they could access the data . . . we even shared our board presentation with the entire company. Doing so let people who were interested in how to build an incredible company take notes.”

Seemingly, plenty of people had their pens out. Among those who’ve left Shopify to spin up their own business are Michael Perry, who left Shopify last year to build an app that helps organize busy families called Maple; Helen Tran, who left Shopify in 2017 to start Jupiter, which makes software for beauty and personal care brands; Andrew Peek, who started the investment advisory Delphia; and Effie Anolik, whose startup, Afterword, helps the bereaved to plan both virtual and offline memorial services.

Another founder and proud Shopify alum is former director of product marketing Arati Sharma, who calls Shopify a “special place” that taught a lot of people how to scale a business and to do it in a very Shopify-specific way.

Because Shopify is the first company of its size in Canada,  it didn’t have a “fixed mindset” about “how companies of our size should be run” and it wasn’t “beholden to playbooks of the past,” she says.

Sharma admits there are practical limits to how much the company could teach her about starting her own company, Ghlee, a ghee-based skincare brand based in Toronto that she launched in 2019. “Though I’ve had the opportunity to build from scratch inside of Shopify, being in the founder seat is a whole new ballgame,” she says.

But as with Miller, Sharma credits Shopify with many learnings, including “how culture and commerce intersect so deeply,” and says that “whether you join [Shopify] as a former founder or you catch the entrepreneurial bug while working there, it’s remarkable how many employees run their own businesses.”

Some are actually running them on the side of continuing to work at Shopify.  Atlee Clark, for example, founded a children’s clothing company called Pika Layers, while remaining a full-time director with the company.

Others have launched investment firms. Among these: a former VP of product, Andrew McNamara, today runs Ramen Ventures, an impact angel fund, with another former Shopify colleague, Joshua Tessier.

Very notably, Sharma is herself an active angel investor, even cofounding a collective of 10 investors earlier this year called Backbone Angels to “optimize for speed and to move quickly on a couple of deals that are coming our way.”

All the members of Backbone Angels are women. All are former Shopify employees, including outgoing chief talent officer Brittany Forsyth. All are focused on increasing the number of women and non-binary investors on cap tables, with the belief that doing so will change how boards will look going forward and how companies are built.

Thanks in part to Shopify, there is apparently no shortage of opportunities to fund. Though Sharma began investing earlier on with her husband, she says that of the more than 30 startups she has funded altogether, nine of those investments came together just this year.

News: Pinterest to test live-streamed events this month with 21 creators

• May 13, 2021
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Pinterest is expanding into live events. The company is planning to host a three-day virtual event that will feature live-streamed sessions from top creators, including big names like Jonathan Van Ness and Rebecca Minkoff, among others. The virtual event will run inside the Pinterest app from May 24th through May 25th, and will serve as

Pinterest is expanding into live events. The company is planning to host a three-day virtual event that will feature live-streamed sessions from top creators, including big names like Jonathan Van Ness and Rebecca Minkoff, among others. The virtual event will run inside the Pinterest app from May 24th through May 25th, and will serve as the company’s first public test of directly streaming creator content to its over 475 million global users.

The rise of the creator economy and a pandemic-fueled demand for virtual events led Pinterest to explore the idea of live streaming. Last fall, it began testing a “class communities” feature that allowed users to sign up for Zoom classes through Pinterest, while creators used Pinterest’s boards to organize materials, notes, and other resources. These communities also included a group chat option and shopping features.

The new live-streamed sessions will operate a bit differently.

For starters, they’re not directing users off-site to Zoom for the sessions. Instead, users will launch the live-streaming experience directly inside Pinterest mobile app and remain there during the sessions. Pinterest users can also comment to interact with the creator during their stream, but there is no longer any shopping functionality, Pinterest tells TechCrunch.

Image Credits: Pinterest

The live streams allow up to five “guests” and an unlimited number of viewers. Meanwhile, moderators — which may include Pinterest employees, during this test — will help to control the experience. They will also have the ability to remove people from the chat if they do not uphold Pinterest’s Community Standards.

The forthcoming event’s lineup will focus a variety of topics, including food, design, cooking, style, and more.

Jonathan Van Ness‘ session will discuss morning rituals and self-care routines. Fashion designer Rebecca Minkoff will teach Pinterest users how to style their summer wardrobe. Others featured during the event include food creators GrossyPelosi and Peter Som, who will showcase favorite recipes; Women’s Health magazine will talk about using vision boards to achieve your goals; Jennifer Alba will show how to communicate the Zodiac through sign language; and Hannah Bronfman will offer ideas for creating an at-home spa night.

In total, Pinterest will feature around 21 creators throughout the three-day event, with around 7 different session per day. Users will be directed to the live event via a new “Live” tab inside the Pinterest app for iOS and Android, where they can view the schedule and join sessions.

Image Credits: Pinterest

x”As a visual platform, people discover billions of ideas on Pinterest every day, and we’re always looking for new ways to help them bring those ideas to life,” says David Temple, Pinterest’s Head of Creators.

Temple notes Pinterest has integrated with third-party live-streaming technologies and built its own in-house messaging systems to power live interactions.

“We’re excited about the opportunity to respond to Pinner feedback for more dynamic and timely events as new interests like cooking have emerged for many in quarantine, and trends like beauty, fashion, and home renovation are on all-time highs as we move into a post-pandemic world,” Temple adds.

However, Pinterest isn’t discussing how it views the potential for live events longer-term. For the time being, it’s not offering tools that could woo creators away from other platforms where they can monetize their fans through features like donations, tips, virtual gifts, paid ticketing, subscriptions, or brand partnerships via a creator marketplace. Without such options, Pinterest could have a hard time competing for creators’ attention.

Image Credits: Pinterest

Nearly every big tech platform today is making a play for creators, and some are even willing to throw cash at them to win them over. Facebook, Instagram, YouTube, TikTok, and Twitter are all building out features that let creators do more than build an audience to monetize through ads or brand deals. Now, fans can send creators money during or after streams, subscribe for exclusive content, pay for access and more, depending on the platform.

New types of creator services are emerging, too, including the audio chat room experience pioneered by Clubhouse (and being cloned by everyone else), as well as dozens of virtual events startups hoping to win the market.

Pinterest’s attraction among such heavy competition isn’t clear, but the company will use this experiment to learn more about what works for its own community.

Pinterest tested its live streaming technology with employees a few weeks ago, but this will be the first time the feature will be available to the public.

While the event lineup can be viewed on the web, the live streams themselves will only run inside the Pinterest app for iOS and Android starting May 24th.