Tag Archives: Blog

News: Trillion-dollar horses, surfeit funding rounds and Future’s future

• July 10, 2021
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Welcome back to The TechCrunch Exchange, a weekly startups-and-markets newsletter for your weekend enjoyment.

Welcome back to The TechCrunch Exchange, a weekly startups-and-markets newsletter. It’s inspired by what the weekday Exchange column digs into, but free, and made for your weekend reading. Want it in your inbox every Saturday? Sign up here.

It’s the end of a short week, but instead of not having much to chat about we have a lot. But it’s all very good fun, so let’s enjoy ourselves!

First, let’s talk about expensive four-legged beasts.

Trillion-dollar horse?

The Exchange started digging into the Q2 2021 venture capital market this week. Thanks to Anna’s help our first piece came out pretty well, I think. We have a lot more coming soon. But the unicorn stats really grabbed me by the nape. Consider:

• 136 unicorns were minted in Q2 2021, an all-time record.
• As CB Insights notes, that’s “nearly 6x the 23 unicorns born a year ago in Q2’20, and already higher than the 128 unicorns born in all of 2020.”

The result of this boom in the horned equestrian population is that there are now 750 unicorns in the world. When former TechCruncher and excellent human Katie Roof tweeted that stat, my first thought was shit, that means unicorns are worth more than $1 trillion.

I was way off. The real number is nearly $2.4 trillion (CB Insights data). Which is a shatteringly high figure. In comparative terms, the un-exited unicorn population of the world is worth nearly precisely what Apple is worth today — $2.42 trillion, per Yahoo Finance.

Perhaps I am overreacting to the amount of unicorn equity that is currently sitting, largely frozen, in the private markets. Especially when unicorn exits are up. But are even today’s elevated exit levels enough to clear this particular ledger over time? No, I don’t think so. Not when we are minting 1.5 unicorns per day in Q2, counting weekends and the like and the unicorn count is ever-increasing.

Funding rounds

I only wrote about one funding round this week — this r2c round that was pretty interesting — mostly because I had a bunch of other things to chew through. But I’ve also seen my inbound venture capital round pitches slow since declaring that I’d not cover rounds that didn’t include more detailed financial information.

It is not clear yet if pitch volume is down due to the holiday week, or if I have scared everyone off. But I do use my inbound volume of funding round pitches both in aggregate, and in sector–directional terms to help gauge what’s going on. So, here’s hoping that (1) people will send me stuff and (2) they will do so and also share a lot more information at the same time.

SPACs in space

Y Combinator is a neat entity. One of its recent companies was Albedo, a startup that is hoping to build a network of low-orbit satellites that will take super high-res photos of the planet. To do so is hard af, as Natasha would say, but perhaps possible thanks to off-the-shelf (kinda) satellite parts, in-orbit refueling and a bunch of other new stuff.

Albedo and its ilk are why I still trot out every year to watch Demo Day. I get to see what could be coming, and that’s very good, illustrative fun.

All that’s to say that when two satellite imaging companies announced that they were going public via SPACs this week I was intrigued. Turns out they are not really in competition with what Albedo wants to do, as they offer lower-resolution images. But they are … notable for other reasons.

Satellogic for having this simply artful series of charts (be sure to observe the dates in each chart):

Image Credits: Satellogic

And Planet for the following, namely a look into how the economics of satellite tech are pretty heavily weighted toward the future:

Image Credits: Planet

The company’s long-term gross margin target is 80% to 85% (COGS of 15%-20%, per the deck), but you can see how long it takes to get there. This poses an interesting issue for the venture capital world.

Namely that companies like Albedo are going to need a lot of time and money to build out their constellations and get to scale. And, I presume, to scale to the sort of gross margins that software companies can generate from their first day selling product.

This is one reason why there is so much money chasing software products with even a hint of durable growth; high-margin recurring revenue is the business equivalent of a cheat code when it comes to value creation. Thus every investor wants to shovel money into it. Satellite tech, while super fucking critical in general, simply is more expensive and slower-burn.

My question: Is software so good at generating venture capital returns that other forms of startup work will struggle to compete for attention and capital? Are they already?

Future

Finally, Future. Or more precisely, Future’s future. I am curious about the a16z publication.

Since it launched I’ve checked in a few times each week, hoping to see what was coming out of the venture capital firm’s collective mind. I do so not only because I am a huge dweeb — I am! — but also because after all the hand-wringing that I’ve had to read about how the media hates tech — nope! — I was curious what a cosmically well-funded venture group would build. It has hired some great people, after all.

It appears that we are in between publishing cycles at the Future blog. The last pieces of Main Content came out nearly a month ago, and its most recent entry is dated June 25th. And that piece is just a note promising more content in July.

It all feels a bit flat? Given the budget, promise, fancy domain and number of people in the a16z world who should have things to say? Why not make more words appear? Let’s see what July brings.

Ok that’s enough from me for the week. Hugs, and talk to you Monday morning on the pod.

Your friend,

— Alex

News: The case for funding fusion

• July 10, 2021
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Now is the time to go all-in on decarbonization. Funding fusion with its breakthrough potential must be part of that effort.

Digital technologies have disrupted the structure of markets with unprecedented breadth and scale. Today, there is yet another wave of innovation emerging, and that is the decarbonization of the global economy.

While governments still lack the conviction necessary to truly fight the climate crisis, the overall direction is clear. The carbon price in Europe rose from below $10 to over $50 per ton. Shell was handed a resounding defeat by a Dutch court. The major blackout in Texas at the beginning of the year revealed the fragility of the existing energy supply even in a highly industrialized country. We must urgently invest more into developing and deploying reliable, clean electricity generation technologies to make decarbonization a reality.

Forward-thinking investors understand this. Global investment in low-carbon technologies climbed to $500 billion in 2020, according to Bloomberg. Renewable energy accounted for around $300 billion of that, followed by electrification of transport ($140 billion) and heating ($50 billion).

However, we remain far from the finish line. According to the International Energy Agency, global emissions of CO2 this year are set to jump 1.5 billion tons over 2020 levels. And more than 80% of global energy consumption is still made up of coal, oil and gas.

That’s why we need to continue backing new technologies with breakthrough potential. Of particular promise is nuclear fusion. Fusion, the process that powers the stars, could be the cleanest energy source for humanity. We are already indirectly harvesting the power of fusion through solar energy. Being able to build fusion reactors would give us an “always on” version, independent of weather conditions.

But why fund fusion at all, given that we don’t yet know how to do it? First, this isn’t an either-or proposition. We can afford to build out renewable energy and investigate new forms of energy production at the same time because the latter — at least at this early stage of development — will require a comparatively trivial amount of money. The U.S. government’s latest plan is to spend $174 billion over 10 years on the electrification of car transport alone, so to invest $2 billion to create a fusion power plant seems doable.

Second, we are about to need a lot more electricity than we ever have. The global demand for carbon-free energy sources is set to triple by 2050, driven by increasing urbanization, the electrification of industrial processes, the loss of biodiversity and the increase in energy consumption in emerging markets.

Third, there’s been tremendous progress in the necessary supporting technologies. Superconducting magnets for the magnetic-confinement approach to fusion have become much cheaper, lasers for inertial confinement fusion have become much more powerful, and breakthroughs in material science have made nanostructured targets available, which enable the use of completely new approaches to fusion, such as the low-neutronic fuel pB11.

Thankfully, there is a growing number of entrepreneurial efforts from world-class teams to try and build fusion. At least 25 startups around the world are targeting fusion right now, approaching the problem with a wide range of technologies. The amount invested in private fusion companies across the world increased tenfold to almost $1 billion in 2020, according to Crunchbase.

The upside of successful fusion is nearly unlimited. The clean energy generation market represents a trillion-dollar opportunity. An estimated 26 TW of primary energy capacity needs to be built globally from 2030 to 2050 to serve the rising global energy needs, according to Materials Research Society. Just 1 TW of capacity will generate $300 billion in revenue, and a 15% market share from 2030 to 2050 would yield more than $1 trillion in annual revenue.

We need many shots on goal here, which is why Susan Danziger and I have personally invested in three different fusion startups already (Zap Energy and Avalanche in the United States and Marvel Fusion in Germany).

But it is not primarily the potential for financial upside that motivates us: There is an opportunity to make an indelible difference in the trajectory of human history. If even a small fraction of the large wealth accumulated by entrepreneurs and investors in the last couple of decades is invested here, the likelihood of successful fusion rises dramatically. That, in turn, will unlock much more investment from both venture funds and governments.

Now is the time to go all-in on decarbonization. Funding fusion with its breakthrough potential must be part of that effort.

News: Beyond ‘Netflix Party’: startups and their VCs bet we’ll browse more of the web together

• July 10, 2021
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Last year, during the pandemic, a free browser extension called Netflix Party gained traction because it enabled people trapped in their homes to connect with far-flung friends and family by enabling them to watch the same Netflix TV shows and movies simultaneously. It also enabled them to dish about the action in a side bar

Last year, during the pandemic, a free browser extension called Netflix Party gained traction because it enabled people trapped in their homes to connect with far-flung friends and family by enabling them to watch the same Netflix TV shows and movies simultaneously. It also enabled them to dish about the action in a side bar chat.

Yet that company — later renamed Teleparty — was just the beginning, argue two young companies that have raised seed funding. One, a year-old upstart in London that launched in December, just closed its round this week led by Craft Ventures. The other, a four-year-old, Bay Area-based startup, has raised $3 million in previously undisclosed seed funding, including from 500 Startups.

Both believe that while investors have thrown money at virtual events and edtech companies, there is an even bigger opportunity in developing a kind of multiplayer browsing experience that enables people to do much more together online. From watching sports to watching movies to perhaps even reviewing X-rays with one’s doctor some day, both say more web surfing together is inevitable, particularly for younger users.

The companies are taking somewhat different approaches. The startup on which Craft just made a bet, leading its $2.2 million seed round, is Giggl, a year-old, London-based startup that invites users of its web app to tap into virtual Chrome sessions, which it calls “portals,” to which they can invite friends to browse content together, as well as text chat and call in. The portals can be private rooms or public so that anyone can join.

The company was founded by four teenagers who grew up together, led by 19-year-old CEO Tony Zog, and the startup is fairly nascent. Indeed, it only recently graduated from the LAUNCH accelerator program. Now it plans to use its new funding to build its own custom server infrastructure to minimize downtime and reduce its costs.

It’s somewhat of a field-of-dreams strategy, with just 60,000 people signed up currently on Giggl, one third of them monthly active users, Zog tells us. But the idea is to build a stickier product that works in all kinds of scenarios and is available in both free and paid versions. For example, people can right now chat while surfing social media with friends, or while watching events together like Apple Worldwide Developers Conference. Eventually, however, Giggl plans to charge consumers for more premium features, as well as sell enterprise subscriptions to outfits that are looking for more ways to collaborate. (You can check out a demo of Giggl’s current service below.)

The other “multiplayer” startup — the one backed by 500 Startups, along with numerous angel investors — is Hearo.live, which is the brainchild of Ned Lerner, who previously spent 13 years as a director of engineering with Sony Worldwide Studios and a short time before that as the CTO of an Electronic Arts division.

Hearo has a more narrow strategy in that the company is “all about watching,” says Lerner. “We’re kind of a special case in that you can’t browse absolutely anything” as with Giggl. Instead, Hearo enables users to access upwards of 35 broadcast services in the U.S. (from NBC Sports to YouTube to Disney+), and it relies on data synchronization to ensure that every user sees the same original video quality.

Hearo has also, unsurprisingly, focused a lot of its efforts on sound, aiming to ensure that when multiple streams of audio are being created at the same time — say users are watching the basketball playoffs together and also commenting — not everyone involved is confronted with a noisy feedback loop.

Instead, he says, through echo cancellation and other “special audio tricks” that Hearo’s small team has developed, users can enjoy the experience without “noise and other stuff messing up the experience.” (“Pretty much we can do everything Clubhouse can do,” says Lerner. “We’re just doing it as you’re watching something else because I honestly didn’t think people just sitting around talking would be a big thing.”)

Like Giggl, Hearo Lerner envisions a subscription model; it also anticipates an eventual revenue split with sports broadcasters and says it’s already working with one in Europe, the European Broadcasting Union, on that front.

While interesting in their respective ways, the startups aren’t the first to focus on watch-together type experiences. Rabbit, a company founded in 2013, enabled people to remotely browse and watch the same content simultaneously, as well as to text and video chat all the while.

Notably, Rabbit eventually ran aground. Lerner says that’s because the company was screen-sharing other people’s copyrighted material and so couldn’t charge for its service. (“Essentially,” observes Lerner, “you can get away with some amount of piracy if it’s not for your personal financial benefit.”)

Still, the the degree to which people are interested in “online watch parties” isn’t yet clear, even if, through their own tech offerings,  Hearo and Giggl have viable paths to generating revenue. Like Giggl, Hearo’s users numbers are conservative by most standards, with 300,000 downloads to date of its app for iOS, Android, Windows, and macOS, and 60,000 actively monthly users. While the company has been hard at work building its tech instead of marketing, it’s probably fair to wonder in what direction those numbers will move, particularly as people reintegrate into the physical world post-pandemic.

For his part, Lerner isn’t worried about at all about demand. He points to a generation that is far more comfortable watching video on a phone than elsewhere. He also notes that screen time has become “an isolating thing,” when it could easily become “an ideal time to hang out with your buddies.” He thinks it’s inevitable, in fact.

“Over the last 20 years, games went from single player to multiplayer to voice chats showing up in games so people can actually hang out,” he says. “We think the same is going to happen to the rest of the media business because mobile is everywhere and social is fun. And it’s nothing more complicated than that.”

Zog echoes the sentiment. “It’s obvious that people are going to meet up more often” as the pandemic winds down, he says. But all that real-world socializing “isn’t really going to be a substitute” for the kind of online socializing that’s already happening in so many corners of the internet.

Besides, he adds Giggl wants to “make it so that being together online is just as good as being together in real life. That’s the end goal here.”

News: Growth marketing roundup: cool SaaS, marketing lies, VR ads and more

• July 10, 2021
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TechCrunch is searching for the best growth marketers for founders to work with. Click through to learn about some of our favorites.

One might think that a short week due to a U.S. holiday calls for a short weekly recap, but we have plenty to share about growth marketing from our coverage over the week. With the help of your recommendations, this week we were able to interview Peep Laja and Lucy Heskins, and publish multiple guest columns on growth-related topics including homepage testing, marketing lies to watch out for, VR ad opportunities, company-naming and ad compliance.

TechCrunch is collecting responses in this survey to find the best growth marketer for founders to work with. We’ve included some of our favorites, below the links.

This early-stage marketing expert says ‘B2B SaaS is actually very, very cool now’: Extra Crunch reporter Anna Heim interviews Wales-based growth marketer Lucy Heskins about her experience working with start-ups, how content marketing is best used, and more!

Navigating ad fraud and consumer privacy abuse in programmatic advertising: Did you know that “ad fraud exceeded $35 billion last year, a figure expected to rise to $50 billion by 2025”? Jalal Nasir, CEO of marketing compliance startup Pixalate, lends his thoughts about how business leaders and brands can ensure they don’t fall victim to the problem.

To stay ahead of your competitors, start building your narrative on day one: Anna also sat down with Peep Laja to discuss the importance of a startup being the one to write their own narrative and how it can mature with the company.

Demand Curve: How to double conversions on your startup’s homepage: Head of content Nick Costelloe looks at when it’s good to be unique, and when it’s best to stick to the status quo when working to double conversions on your homepage.

(Extra Crunch) Demand Curve: 10 lies you’ve been told about marketing: For subscribers, Costelloe goes through 10 lies you’ve heard about marketing, and what to try instead to create better results.

(Extra Crunch) Can advertising scale in VR?: Have you been on the fence about VR advertising for your company? AR/VR analyst Michael Boland lists out the pros and cons in this article.

(Extra Crunch) What I learned the hard way from naming 30+ startups: Naming a start-up might require more thought than you imagined. Marketing executive Drew Beechler takes us through what should be considered when picking out a name, like strategic alignment.

As always, please let us know if you can recommend a top-tier growth marketer who works with startups by filling out this quick survey.

Marketer: Nikita Vorobyev

Recommender: Ruby Club

Testimonial: “Nikita & his company, Buildrbrand, have worked tirelessly to bring my idea to life and did everything in his power to get it to the level it is today. He & his team created a world-class conditional quiz visual experience that I think would be really cool for him to share with the industry. He doesn’t know I nominated him, but I definitely wanted to give back to him in any way I can since I believe his agency creates some of the best brands going viral online right now.”

Marketer: Max van den Ingh, Unmuted

Recommender: Harry Willis, ShopPop

Testimonial: “They [have] shown considerable and demonstrable growth marketing success at various companies. One of them being MisterGreen, a Dutch Tesla-leasing company that had grown 10x under Max’s leadership.”

Marketer: Patricia (Patty) Spiller, Chief

Recommender: Livongo

Testimonial: “Hired her to lead Product Marketing and she identified the opportunity to do growth in a much different way, which could significantly accelerate our company’s growth. So, she founded the Growth Marketing team and scaled the team from 1 person to 30 people in less than 2 years, based on all the success they had in growing our member base.”

News: Daily Crunch: European Union demands $1B penalty from VW, BMW for hiding emissions

• July 9, 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.

Hello and welcome to Daily Crunch for July 9, 2021. We’ve made it to Friday, y’all, be proud. But we can’t relax just yet — there’s quite a lot to get through today. From deceitful auto companies now posing as tech companies to the current venture capital frenzy, we have it all. Let’s go! — Alex

The TechCrunch Top 3

• Startups have never had it so good: That’s our read of the Q2 2021 venture capital market. Records were smashed around the world, a record number of unicorns were born and valuations ticked up. If you are a founder considering raising capital, now is probably a good time to do so.
• Biden takes on megacorps: We jokingly call the public-company section of this newsletter Big Tech because, well, the most famous technology companies are freakin’ massive. And that has a lot of folks worried that some firms have become so large that they should be broken up to engender more competition. Tech companies disagree, naturally. Regardless, the noise from the U.S. government regarding goliath companies is starting to result in action.
• What’s ahead for European startups? We usually reserve these three slots for the biggest news of the day, but I wanted to share an essay written by a German venture capitalist about his country. The investor is bullish, but has two ideas regarding where the country could do better: employee stock options and regulations regarding spinoffs. It’s worth reading if you want to consider why some countries wind up with more active startup communities than others.

Startups/VC

First, key startup news:

• Korean grocery startup Kurly raises $200M: The online grocer is now worth more than $2 billion. Even more, its plans for an IPO in the United States are kaput. Instead, the company will look to list locally in the future. Chop from the Didi mess or something else? Whatever the case, the company is one to keep an eye on.
• Today’s Tiger round? Brazilian HR startup Flash: The company just put together a $22 million Series B that the hyper-caffeinated venture capital group led. The São Paulo-based startup provides a new way to offer benefits in the country.
• $500M more for Ola: The ride-hailing market’s insatiable appetite for capital was fed another half-billion today with news that India’s Ola has raised new funds from “Temasek and an affiliate of Warburg Pincus,” per TechCrunch. Maybe the Didi fiasco is being viewed by investors as a one-off, at least when it comes to the world of on-demand rides.

Second, from the venture capital side of the market:

• TechCrunch’s Ron Miller wrote a profile of The Artemis Fund, which is worth reading. The investing group, which was founded by women and often invests in women, has “ invested in 11 companies with plans to invest in 4-5 more [before raising its] the next fund.”
• DN Capital has raised a $350 million fund after several of the startups that it backed went public. The firm invests mostly in Europe as opposed to the U.K., a market where its partners say more U.S.-based venture capitalists show up.
• Three venture capitalists banded together to write up some tips for robotics-focused startups. So, if you are building hardware that moves, this is for you.

3 analysts weigh in: What are Andy Jassy’s top priorities as Amazon’s new CEO?

Now that he’s stepping away from AWS and taking over for Jeff Bezos, what are the biggest challenges facing incoming Amazon CEO Andy Jassy?

Enterprise reporter Ron Miller reached out to three analysts to get their take:

• Robin Ody, Canalys
• Sucharita Kodali, Forrester
• Ed Anderson, Gartner

Amazon is listed second in the Fortune 500, but it’s not all sunshine and roses — maintaining growth, unionization, and the potential for antitrust regulation at home and abroad are just a few of his responsibilities.

“I think the biggest to-do is to just continue that momentum that the company has had for the last several years.,” said Kodali. “He has to make sure that they don’t lose that. If he does that, I mean, he will win.”

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

Big Tech Inc.

Wrapping up the newsy portion of today’s missive, two final entries. First, a dig into why the EU just fined a number of automakers. Rebecca reports:

As environmental issues really came of age in the 1990s, certain German automakers were meeting in secret groups to make sure their cars would continue to industriously contribute to greenhouse gas emissions. According to the European Union, Volkswagen, Audi, Porsche, BMW and Mercedes-Benz parent company Daimler have been illegally colluding to restrict competition in emission cleaning for new diesel passenger cars, essentially slowing the deployment of cleaner emissions tech.

Yes, you can be very mad about that.

Finally, from the world of Facebook, good news for all you WhatsApp users out there. You will be able to select an option to send higher-quality images and videos, getting around what TechCrunch called the service’s “iffy image compression.” See, not all news is bad news!

TechCrunch Experts: Growth Marketing

Image Credits: SEAN GLADWELL (opens in a new window) / Getty Images

We’re reaching out to startup founders to tell us who they turn to when they want the most up-to-date growth marketing practices. Fill out the survey here.

Read one of the recommendations we’ve received below!

Name of marketer: Nikita Vorobyev

Name of recommender: Ruby Club

Recommendation: “Nikita and his company, Buildrbrand, have worked tirelessly to bring my idea to life and did everything in his power to get it to the level it is today. He and his team created a world-class conditional quiz visual experience that I think would be really cool for him to share with the industry. He doesn’t know I nominated him, but I definitely wanted to give back to him in any way I can since I believe his agency creates some of the best brands going viral online right now.”

News: Cloud security platform Netskope boosts valuation to $7.5B following $300M raise

• July 9, 2021
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Netskope, focused on Secure Access Service Edge architecture, announced Friday a $300 million investment round on a post-money valuation of $7.5 billion.

Netskope, focused on Secure Access Service Edge architecture, announced Friday a $300 million investment round on a post-money valuation of $7.5 billion.

The oversubscribed insider investment was led by ICONIQ Growth, which was joined by other existing investors, including Lightspeed Venture Partners, Accel, Sequoia Capital Global Equities, Base Partners, Sapphire Ventures and Geodesic Capital.

Netskope co-founder and CEO Sanjay Beri told TechCrunch that since its founding in 2012, the company’s mission has been to guide companies through their digital transformation by finding what is most valuable to them — sensitive data — and protecting it.

“What we had before in the market didn’t work for that world,” he said. “The theory is that digital transformation is inevitable, so our vision is to transform that market so people could do that, and that is what we are building nearly a decade later.”

With this new round, Netskope continues to rack up large rounds: it raised $340 million last February, which gave it a valuation of nearly $3 billion. Prior to that, it was a $168.7 million round at the end of 2018.

Similar to other rounds, the company was not actively seeking new capital, but that it was “an inside round with people who know everything about us,” Beri said.

“The reality is we could have raised $1 billion, but we don’t need more capital,” he added. “However, having a continued strong balance sheet isn’t a bad thing. We are fortunate to be in that situation, and our destination is to be the most impactful cybersecurity company in the world.

Beri said the company just completed a “three-year journey building the largest cloud network that is 15 milliseconds from anyone in the world,” and intends to invest the new funds into continued R&D, expanding its platform and Netskope’s go-to-market strategy to meet demand for a market it estimated would be valued at $30 billion by 2024, he said.

Even pre-pandemic the company had strong hypergrowth over the past year, surpassing the market average annual growth of 50%, he added.

Today’s investment brings the total raised by Santa Clara-based Netskope to just over $1 billion, according to Crunchbase data.

With the company racking up that kind of capital, the next natural step would be to become a public company. Beri admits that Netskope could be public now, though it doesn’t have to do it for the traditional reasons of raising capital or marketing.

“Going public is one day on our path, but you probably won’t see us raise another private round,” Beri said.

News: Is the US labor shortage the big break AI needs?

• July 9, 2021
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Misconceptions about AI in the workplace have long been a barrier to widespread adoption — but companies experiencing labor shortages should consider where it can make their employees’ lives better.

The tectonic shifts to American culture and society due to the pandemic are far from over. One of the more glaring ones is that the U.S. labor market is going absolutely haywire.

Millions are unemployed, yet companies — from retail to customer service to airlines — can’t find enough workers. This perplexing paradox behind Uber price surges and waiting on an endless hold because your flight was canceled isn’t just inconvenient — it’s a loud and clear message from the post-pandemic American workforce. Many are underpaid, undervalued and underwhelmed in their current jobs, and are willing to change careers or walk away from certain types of work for good.

It’s worth noting that low-wage workers aren’t the only ones putting their foot down; white-collar quits are also at an all-time high. Extended unemployment benefits implemented during the pandemic may be keeping some workers on the sidelines, but employee burnout and job dissatisfaction are also primary culprits.

We have a wage problem and an employee satisfaction problem, and Congress has a long summer ahead of it to attempt to find a solution. But what are companies supposed to do in the meantime?

At this particular moment, businesses need a stopgap solution either until September, when COVID-19 relief and unemployment benefits are earmarked to expire, or something longer term and more durable that not only keeps the engine running but propels the ship forward. Adopting AI can be the key to both.

Declaring that we’re on the precipice of an AI awakening is probably nowhere near the most shocking thing you’ve read this year. But just a few short years ago, it would have frightened a vast number of people, as advances in automation and AI began to transform from a distant idea into a very personal reality. People were (and some holdouts remain) genuinely worried about losing their job, their lifeline, with visions of robots and virtual agents taking over.

But does this “AI takes jobs” storyline hold up in the cultural and economic moment we’re in?

Is AI really taking jobs if no one actually likes those jobs?

If this “labor shortage” unveils any silver lining, it’s our real-world version of the Sorting Hat. When you take money out of the equation on the question of employment, it’s opening our eyes to what work people find desirable and, more evidently, what’s not. Specifically, the manufacturing, retail and service industries are taking the hardest labor hits, underscoring that tasks associated with those jobs — repetitive duties, unrewarding customer service tasks and physical labor — are driving more and more potential workers away.

Adopting AI in manufacturing accelerated during the pandemic to deal with volatility in the supply chain, but now it must move from “pilot purgatory” to widespread implementation. The best use cases for AI in this industry are ones that help with supply chain optimization, including quality inspection, general supply chain management and risk/inventory management.

Most critically, AI can predict when equipment might fail or break, reducing costs and downtime to almost zero. Industry leaders believe that AI is not only beneficial for business continuity but that it can augment the work and efficiency of existing employees rather than displace them. AI can assist employees by providing real-time guidance and training, flagging safety hazards, and freeing them up to do less repetitive, low-skilled work by taking on such tasks itself, such as detecting potential assembly line defects.

In the manufacturing industry, this current labor shortage is not a new phenomenon. The industry has been facing a perception problem in the U.S. for a long time, mainly because young workers think manufacturers are “low tech” and low paying. AI can make existing jobs more attractive and directly lead to a better bottom line while also creating new roles for companies that attract subject-matter talent and expertise.

In the retail and service industries, arduous customer service tasks and low pay are leading many employees to walk out the door. Those that are still sticking it out have their hands tied because of their benefits, even though they are unhappy with the work. Conversational AI, which is AI that can interact with people in a human-like manner by leveraging natural language processing and machine learning, can relieve employees of many of the more monotonous customer experience interactions so they can take on roles focused on elevating retail and service brands with more cerebral, thoughtful human input.

Many retail and service companies adopted scripted chatbots during the pandemic to help with the large online volumes only to realize that chatbots operate on a fixed decision tree — meaning if you ask something out of context, the whole customer service process breaks down. Advanced conversational AI technologies are modeled on the human brain. They even learn as they go, getting more skilled over time, presenting a solution that saves retail and service employees from the mundane while boosting customer satisfaction and revenue.

Hesitancy and misconceptions about AI in the workplace have long been a barrier to widespread adoption — but companies experiencing labor shortages should consider where it can make their employees’ lives better and easier, which can only be a benefit for bottom-line growth. And it might just be the big break that AI needs.

News: Extra Crunch roundup: NS1 EC-1, Pakistan’s tech ecosystem, SPACs bonanza

• July 9, 2021
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Just like NYC’s flooded subway system, internet infrastructure doesn’t attract much attention until there’s a notable failure.

Did you see the viral videos of yesterday’s flooding in New York City subways?

In one, riders waded through brown, waist-deep water; another video showed a cascade rushing down a flight of stairs to a subway platform where passengers waited for a train.

Infrastructure doesn’t attract much attention until it fails. Domain name services (DNS), the system that directs readers to techcrunch.com when they say or speak it into their web browser, are much the same way.

For the latest entry in a series of longform articles that explore the inner workings of notable startups, we looked at NS1, an internet infrastructure company best known for its software-defined DNS.

Since its founding in 2013, NS1 has raised more than $100 million to build an engineering team and robust product portfolio that’s expanded to include DDI, which helps companies manage internal networks.

If you’re curious about how NS1 transformed “a slumbering and dreary yet reliable aspect of the internet” into “a strategic moat and an enterprise win” in just eight years, read on.

Full Extra Crunch articles are only available to members.
Use discount code ECFriday to save 20% off a one- or two-year subscription.

Part 1: Origin story: how three engineers decided to rebuild the internet’s core addressing system.

Part 2: Product development and roadmap: experimentation, open-source efforts and expanding beyond DNS.

Part 3: Competitive landscape: a look at the broader internet infrastructure market.

Part 4: Customer development: how their top competitor’s stumble became “the gift that kept on giving.”

Thanks very much for reading Extra Crunch — have a great weekend!

Walter Thompson
Senior Editor, TechCrunch
@yourprotagonist

Startups have never had it so good

Image Credits: Nigel Sussman (opens in a new window)

Alex Wilhelm and Anna Heim didn’t mince words in today’s Exchange.

“The venture capital market is racing ahead, foot on the gas, middle finger out the window, hair on fire.”

That’s their hot take after analyzing the Q2 data released so far about how much money VCs deployed across the globe between April and the end of June.

Leaning on data from CB Insights, Crunchbase News and FactSet, Alex and Anna walk through the data from the U.S. and a few other regions — and promise deeper regional dives next week.

What I learned the hard way from naming 30+ startups

Image Credits: Juj Winn (opens in a new window) / Getty Images

If you’re starting a company, choosing a name can feel like a fraught choice. But actually, as long as you follow some basic guidelines, it shouldn’t lead to paralysis.

“The truth is that business names fall on a bell curve — you have a small number of outliers that actively contribute to your success and a small number of outliers that actively impair your ability to succeed,” Drew Beechler, who’s named more than 30 software startups, writes in a guest column. “The vast majority, though, fall somewhere in the middle in their impact on your business.”

Nextdoor’s SPAC investor deck paints a picture of sizable scale and sticky users

Image Credits: jhorrocks / Getty Images

The SPAC parade continued apace this week as Nextdoor announced it would go public via a blank-check company, with the community social network making its pitch based on scale, claiming users in one in three U.S. households.

Alex Wilhelm unpacks Nextdoor’s “clear-eyed look into [its] financial performance in both historical terms and in terms of what it might accomplish in the future,” noting that “our usual mockery of SPAC charts mostly doesn’t apply.”

Pakistan’s growing tech ecosystem is finally taking off

Image Credits: shan.shihan (opens in a new window)/ Getty Images

So far this year, startups in Pakistan are on track to raise more than in the previous five years combined, according to Mikal Khoso, an early-stage investor at Wavemaker Partners.

“Even more excitingly, a large portion of this capital is coming from international investors from across Asia, the Middle East and even famed investors from Silicon Valley,” he notes in a guest post for Extra Crunch.

He’s identified three factors that are fueling investor interest: rapidly expanding mobile connectivity, an improved security situation, and critical legal and regulatory changes that are making the country more startup- and VC-friendly.

Drawing a map of Pakistan’s tech ecosystem, Khoso identifies local companies trying to grab a slice of grocery delivery, e-commerce, ride-hailing and other sectors before examining the challenges still in place.

“The segments in Pakistan that are likely to attract the best entrepreneurs and most investor capital in the years to come will be fintech, e-commerce and edtech,” says Khoso.

Investors find European unicorns reluctant to join SPAC boom

Image Credits: Nigel Sussman (opens in a new window)

The nonstop news of startups partnering up with SPACs in the United States had Alex Wilhelm and Anna Heim wondering if the blank-check boom expanded to other countries.

“Unicorns are hardly unique to the U.S. startup ecosystem,” they write. “Are we seeing similar SPAC interest in Europe?”

Anna and Alex talked to investors to see why — or why not — European startups would take the SPAC path to become a public company.

For successful AI projects, celebrate your graveyard and be prepared to fail fast

Image Credits: Wachiwit (opens in a new window) / Getty Images

When you’ve invested a lot of time and energy in a project, it can be difficult to decide to shelve it — or worse, kill it.

But for AI projects, teams should be prepared to fail fast, Sandeep Uttamchandani, the chief data officer of Unravel Data, writes in a guest column.

“In order to fail fast, AI initiatives should be managed as a conversion funnel analogous to marketing and sales funnels,” he writes. “Projects start at the top of the five-stage funnel and can drop off at any stage, either to be temporarily put on ice or permanently suspended and added to the AI graveyard.”

Uttamchandani walks through the five stages of the funnel and offers suggestions for when to start digging a hole for your project in the graveyard.

Circle is a good example of why SPACs can be useful

Image Credits: Nigel Sussman (opens in a new window)

Yes, we’re all a bit over-SPAC-ed at this point. It’s just been a nonstop torrent of startups linking up with blank-check companies.

But Circle, a Boston-based technology company that provides API-delivered financial services and a stablecoin, is just “the sort of business that is correct for a SPAC-led debut,” Alex Wilhelm writes in The Exchange.

“It could not go public in a traditional manner in its current state of maturity,” he writes.

“But a SPAC can get it a huge slug of cash at a price that it has locked in, allowing it to complete its growth into corporate adulthood while public. A gamble, sure, but one that will be very fun to watch.”

Can advertising scale in VR?

Image Credits: da-kuk (opens in a new window) / Getty Images

It’s not hard to imagine how advertising could be valuable in VR: billboards on streetscapes, magazine covers on newsstands, cereal boxes in virtual kitchens.

But Facebook’s stab at experimental VR ads didn’t last very long; after an onslaught of negative feedback from players, the test was quickly scuttled.

That said, VR advertising has a ton of untapped potential — but it’s going to take a minute to reach profitable scale.

Achieving digital transformation through RPA and process mining

Image Credits: Jackie Niam (opens in a new window) / Getty Images

“Robots are not coming to replace us,” Alp Uguray is quick to note in a guest column about robotic process automation. “They are coming to take over the repetitive, mundane and monotonous tasks that we’ve never been fond of.”

That’s the good news. But RPA is still in the early stages, despite rapid growth through IPOs, acquisitions and funding rounds.

“Adoption of RPA and process mining in your organization will define the operational excellence of your firm,” he writes. “If you are behind in this race, just think of how your enterprise can continue to compete with fully digital peers. Your organization won’t want to be in the back of this race.”

Demand Curve: 10 lies you’ve been told about marketing

Image Credits: Abscent84 (opens in a new window) / Getty Images

In a guest column, Nick Costelloe, the head of content for Demand Curve, notes that the content you stumble across in a Google search might not be “intentionally misleading,” it might not lead you in the right direction.

Here, he debunks 10 common myths about marketing — and offers suggestions for what to do instead.

5 fundraising imperatives for robotics startups

Image Credits: Paper Boat Creative (opens in a new window) / Getty Images

This guest post from three contributors from Next47, MassRobotics and Lux Capital looks at best practices for robotics startups looking to raise cash.

“There has never been a better time to pursue funding for robotics startups, but you are more likely to succeed if you build a fundraising strategy that is marked by the same sophistication and informed understanding you already bring to many other aspects of your new business,” the writers say.

Here, they lay out five strategies to ensure robotics startups get the funding they need.

News: This early-stage marketing expert says ‘B2B SaaS is actually very, very cool now’

• July 9, 2021
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“There’s a bias for wanting to use what worked previously, but people forget … your customers and markets are totally different. You can’t just replicate.”

Doing more with less: This is what marketers get asked for when they join an early-stage startup. British consultant Lucy Heskins knows firsthand how overwhelming that can be, which is why her services can both replace and complement early in-house marketing staff. Either way, it often involves educating the founders about the job to be done.

“Too many people fail to realize that marketing is the process of understanding your customers, building appropriate channels to reach them and ultimately meeting their needs (profitability),” she wrote on her site, Oh, blimey.

TechCrunch is asking founders who have worked with growth marketers to share a recommendation in this survey. We’ll use your answers to find more experts to interview.

Having earned “scars and stripes” at various startups, Heskins recently joined “tech for good” company Big Lemon as a part-time head of growth, but still offers her services to other teams as a SaaS and early-stage startup marketing consultant. If you are a marketer yourself or thinking of hiring one, read on: She shared some compelling insights with TechCrunch.

(This interview has been edited for length and clarity.)

How do you collaborate with the startups you work with as a consultant?

Typically I will work with startups in two ways. The first will be project-based. So for example, when they want to explore a potential new customer market or introduce a freemium strategy.

The other way is as a mentor or extension to their marketer. Often I will work with marketers who’ve never worked in a startup and they can bounce ideas or strategies off me. It helps speed up their learning and time to deliver results.

How do your roles as an employee and as a consultant nourish each other?

I’ve experienced the very real pains/challenges/opportunities a startup presents, especially as an early-stage employee. I’ve come in, helped change business models, explored things like freemium and repositioned brands. It’s tough. So as a consultant, I can pass on my learnings (and mistakes). And I get to work with some great startups who are open to trying new things. Plus, having worked in four startups now, I get the pressure they’re facing and can adjust my approach accordingly. There’s a lot of plates spinning, and I get that.

What do early-stage startups typically misunderstand and need to know about startup marketers like you?

In my experience, there are a few mistakes startups often make.

The first is hiring a marketer too soon. I’ve come into startups, thinking I was coming in to set up their in-house function. However, very quickly you realize that they’ve jumped the gun and think they’ve got product-market fit when they are nowhere near it. This can cause conflict because the startup’s expecting one thing (say, revenue) but the marketer is missing a few basics to be effective (value proposition, an idea of how “painful” the problem is that they are solving, lack of involvement in areas like pricing).

The next mistake is not trusting their marketer. All too often I hear of marketers who’ve gone into a startup only to learn that their ideas are put on the back burner because the founder(s) — and this is typically first-time founders — don’t quite understand marketing and will push them to deliver short-term results (leads).

Lastly and probably the biggest mistake is applying what worked at a previous business. When joining a startup, you’re starting from scratch — new customers, new markets, go-to-market strategy. There’s a bias for wanting to use what worked previously, but people forget … your customers and markets are totally different. You can’t just replicate.

What should be the main focus of a startup’s first in-house marketer?

Of course, it depends really on the stage of the startup; however, whatever stage you’re at, it needs to be customer research/development. I’d be very wary of a marketer who doesn’t suggest this as one of their first activities.

You need to unlock why customers buy or subscribe to the startup’s product. This will determine your traction channels, your proposition, your pricing model — everything.

Why should startups consider hiring a freelancer or agency to help with their marketing instead of doing everything in-house?

I think it’s a great idea to outsource until the startup understands (1) if there’s an actual problem that needs solving and (2) whether there’s a market big enough to actually turn it into a business.

Whilst you’re in this period, you can’t afford to learn new skills — even though it may seem attractive/”cheap” to do it in-house, it really isn’t. It can actually set you back. Outsource the specifics and focus on what you do best. Once you’ve got a better idea of validation, then you can start to see which skills to bring in-house.

Have you worked with a talented individual or agency who helped you find and keep more users?

Respond to our survey and help us find the best startup growth marketers!

Why have you decided to focus on SaaS startups? What makes them different when it comes to marketing?

I love working in SaaS, especially B2B SaaS. What makes it different, for me, is that the role becomes part marketing, part product, part commercial. You get to look at the entire customer experience, and because many SaaS products are trial/subscription-based, your focus needs to be on retention. You’re only as good as your last month, so it forces you to work and think harder.

Plus, B2B SaaS is actually very, very cool now. Just because you work in B2B marketing doesn’t mean you need to be boring!

What are some key takeaways from your Early-Stage Startup Marketing Playbook?

I created the playbook because I sat in a board meeting and, when an investor was asking about the go-to-market strategy, I realized that there wasn’t a clear toolkit for helping early-stage startups to map out the market, nor think about the steps leading up to launching a product.

There are many takeaways, but I think the main one and the most valuable is providing clarity as to what specific steps go into a go-to-market strategy and how it all works together.

I talk you through how to speak to the customers who’ll actually buy from you — not those who tell you they love your product but run a mile when it’s time to pay — and how to determine which market channel is best to reach them.

What is customer-led growth? And how can it help startups adapt post-COVID?

Customer-led growth is a strategy that combines product, marketing and sales. It views your product through the lens of a customer with the aim of working out how value is delivered to them “whenever, wherever and however they need it.” It’s something I learned and studied from the co-founders of Forget the Funnel.

The idea is that you look at the entire customer journey, from the struggle stage right through to when they’re a customer, and you break each section down to where there’s an opportunity for growth. It’s really helpful for startups — especially post-COVID because chances are, your customers’ needs have changed.

How your customers derive value from your product changes all the time. This framework gives you a starting point.

How is content marketing best used?

I often say to startups, stop creating content for the sake of it. A lot of content that’s created doesn’t allow for where your customer may be in the buying process. It doesn’t consider what’s motivating them to solve their problem.

As a result, the results you get are skewed. Things take much longer than they should. Customers get confused about what it is your business actually is/does. Everyone starts to lose respect for marketing.

Again, you need to take it back to the customer and their journey and identify what content they need to overcome that particular problem that’s getting in the way of signing up/using your product.

Why is alignment with sales important, and what does it involve?

I’ve worked in startups that have been sales-led (so, complex products, long lead time) and it’s important to understand what sales needs to uncover to help move a customer to the next stage. Likewise, marketing can help sales to really dig into the proposition and understand what channels are best to convert leads.

I think when you work in a startup as a marketer, you have to roll up your sleeves and get involved in sales. It’ll help improve the content, strategy and revenue in the end.

So if you are working with a salesperson whose ultimate aim is to secure a call with a prospect, you can’t just go in and expect a prospect to say yes, immediately. There are a series of steps you and the salesperson need to go through in order to nurture and open up this relationship. It’s all about proving a set of hypotheses about your customer. Do they really hang out on LinkedIn? Are they bombarded with companies offering the same? Which proposition is working enough to get someone to agree to a call? Is that calendar link putting off prospects altogether?

I truly believe people do love to help, but it’s about working out what’s in it for them and how your product will make their life just that little bit easier.

News: Despite the hype, construction tech will be hard to disrupt

• July 9, 2021
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Construction technology users are more like general consumers. This means the technology ideally must be easy to use on the first try and adaptable to a wide variety of job site protocols.

From the outside looking in, the construction industry appears ripe for tech innovation. The industry represents 6.3% of the U.S. GDP. There are close to 1 million general contractors (GCs) in the country, and anywhere between 3 million and 5 million workers on job sites every day.

Meanwhile, there’s a common (if somewhat justified) belief that construction firms are slow to adopt technology and are behind the digital curve.

But not every construction company is a technology laggard. While GCs are historically slower to adopt new technologies, this doesn’t necessarily make them behind the times. About 60% of construction companies have R&D departments for new technology, and the largest construction firms have substantial R&D budgets. Yet 35.9% of employees are hesitant to try new technology, according to JB Knowledge.

One way to interpret this is that there is a strong interest and need to take advantage of newer construction-centric technologies, but only if they’re easy to use, easy to deploy or access while on a job site, and improve productivity almost immediately.

These factors have made construction tech appealing to investors, who have poured at least $3 billion into the sector. Is construction tech the “it” place right now? Is it ripe for disruption, the way VC investors find attractive? If that’s true, what went wrong at Katerra? Is Procore justified in losing $1 for every $4 in revenue? And why does so little investment go into improving productivity at the job site where GC money is made — or lost — compared to back-office operations?

My experience to date says that construction is different from other sectors because of the significant variation among projects that originates in the way projects are financed, how risks are managed and the factors that drive variation among projects. Construction’s differences are not easily mitigated via data processing, as compared to fintech, for example, where all money is data-amenable to software processing. Addressing project variations will be key to succeeding in construction tech beyond the back office. Here are the critical factors to consider.

Project financing makes capital investment more difficult. While the Commerce Department reported that construction spending in the U.S. reached a record high of $1.459 trillion in November 2020, this doesn’t mean there are unlimited opportunities for construction tech. The reality is that GCs make few capital investments because they must fund investments in technology out of operating cash flow.

Construction projects are typically funded incrementally in phases as the project demonstrates progress. Delays or accidents can have a huge effect on cash flow. Overhead and G&A cost burdens are hated. Asking a GC to license technology as a capital purchase doesn’t always make sense.

GC ownership and business structure also make large capital investment more difficult. Most GC firms were founded by tradespeople and either started as, or remain, family-owned firms. Borrowing what’s considered the “family’s money” is a much more risk-averse decision compared to the way larger corporations evaluate productivity investments and put assets at risk.