Startups Weekly: #CodeCon, the ‘techlash’ and ill-prepared CEOs

Hello and welcome back to Startups Weekly, a newsletter published every Saturday that dives into the week’s noteworthy venture capital deals, funds and trends. Before I dive into this week’s topic, let’s catch up a bit. Last week, I wrote about Peloton’s upcoming initial public offering. Before that, I noted the proliferation of billion-dollar companies. 

Remember, you can send me tips, suggestions and feedback to [email protected] or on Twitter @KateClarkTweets. If you don’t subscribe to Startups Weekly yet, you can do that here

Now I know this newsletter is supposed to be about startups, but we’re shifting our focus to Big Tech today. Bear with me.

I spent the better part of the week in Scottsdale, Ariz. where temperatures outside soared past 100 and temperatures inside were icy cold. Both because Recode + Vox cranked the AC to ungodly levels but also because every panel, it seemed, veered into a debate around the “techlash” and antitrust.

If you aren’t familiar, the Financial Times defines the techlash as “the growing public animosity toward large Silicon Valley platform technology companies.” Code Conference has in the past been an event that underscores innovation in tech. This year, amid growing tensions between tech’s business practices and the greater good, things felt a little different.

The conference began with Peter Kafka grilling YouTube’s CEO Susan Wojcicki. Unfortunately for her, CodeCon took place the week after an enormous controversy struck YouTube. You can read about that here. Wojcicki wasn’t up to the task of addressing the scandal, at least not honestly. She apologized to the LGBTQ community for YouTube’s actions but was unable to confront the larger issue at hand: YouTube has failed to take necessary action toward eliminating hate speech on its platform, much like other social media hubs.

From there, … Read the rest

VCs are failing diverse founders; Elizabeth Warren wants to step in

Elizabeth Warren, who earlier this year confirmed her intent to run for president in 2020, has an ambitious plan to advance entrepreneurs of color.

In a series of tweets published this morning, the Massachusetts senator proposed a $7 billion Small Business Equity Fund to provide grants to Black, Latinx, Native American and other minority entrepreneurs, if she’s elected president. The initiative will be covered by her “Ultra-Millionaire Tax,” a two-cent tax on every dollar of wealth above $50 million the presidential hopeful first outlined in January.

The fund would be managed by the Department of Economic Development, a new government entity to be constructed under the Warren administration. With a goal of creating and defending American jobs, the Department of Economic Development would replace the Commerce Department and “subsume other agencies like the Small Business Administration and the Patent and Trademark Office, and include research and development programs, worker training programs, and export and trade authorities like the Office of the U.S. Trade Representative,” Warren explained.

The Small Business Equity Fund will exclusively issue grant funding to entrepreneurs eligible to apply for the Small Business Administration’s existing 8(a) program and who have less than $100,000 in household wealth, aiming to provide capital to 100,000 new minority-owned businesses, creating 1.1 million new jobs.

Founders of color receive a disproportionate amount of venture capital funding. There’s insufficient data on the topic, but research from digitalundivided published last year suggests the median amount of funding raised by black women, for example, is … Read the rest

How to negotiate term sheets with strategic investors

Three years ago, I met with a founder who had raised a massive seed round at a valuation that was at least five times the market rate. I asked what firm made the investment.

She said it was not a traditional venture firm, but rather a strategic investor that not only had no ties to her space but also had no prior investment experience. The strategic investor, she said, was looking to “get their hands dirty” and “get in on the ground floor.”

Over the next 2 years, I kept a close eye on the founder. Although she had enough capital to pivot her business focus multiple times, she seemed to be at odds, serving the needs of her strategic investor and her customer base.

Ultimately, when the business needed more capital to survive, the strategic investor didn’t agree with the founder’s focus, opted not to prop it up, and the business had to shut down.

Sadly, this is not an uncommon story as examples abound of strategic investors influencing startup direction and management decisions to the point of harm for the startup. Corporate strategics, not to be confused with dedicated funds focused on financial returns like a traditional venture investor like Google Ventures, often care less about return on investment, and more about a startup’s focus, and sector specificity. If corporate imperatives change, the strategic may cease to be the right partner or could push the startup in a challenging direction.

And yet, fortunately, as the disruptive power of … Read the rest

Lightspeed Venture Partners doubles its growth practice

Lightspeed Venture Partners, a firm behind the likes of BetterUp, Aurora, Goop and dozens of others, will allocate more capital to mature companies with the hiring of three new partners.

Adam Smith, Amy Wu and Arsham Memarzadeh join the Menlo Park-headquartered venture capital fund’s growth practice. The team is led by longtime partner Will Kohler and Brad Twohig, who joined LSVP in 2018 to amp up the firm’s late-stage efforts, leading a $1.25 billion investment in Epic Games only months after arriving from Insight Venture Partners.

“I think we will continue to add to the team as we see the market opportunity ahead of us, so we can better understand when and where to invest,” Twohig tells TechCrunch. “They are going out and helping us identify interesting new opportunities. We are really looking for outlier businesses. We aren’t trying to invest in any company. We want outlier founders, outlying companies with outlying performance.”

The new hires double the size of LSVP’s late-stage team and come shortly after the firm closed on $1.8 billion for two new funds. Last year, LSVP announced Lightspeed Venture Partners XII, a $750 million early-stage vehicle, and Lightspeed Venture Partners Select III, a $1.05 billion fund for late-stage follow-on fundings.

Lightspeed, historically an early-stage fund, has continued to move downstream as deal sizes swell across all stages. With fresh capital to deploy, LSVP is not only continuing to invest in existing portfolio companies but also backing companies for the first time as late as the Series E.

“We still think there are great opportunities to make investments with a strong return profile even at the late-stage,” Kohler tells TechCrunch, citing the buzzworthy financial technology business Carta as an example. “[Carta is] an exceptional company even at a growth-stage investment because it has so much potential Read the rest

Creative Destruction Lab’s second Super Session is an intense two-day startup testbed

Canadian startup program Creative Destruction Lab (CDL) escapes succinct description in some ways — it’s an accelerator, to be sure, and an incubator. Startups show up and present to a combined audience of investors, mentors, industry players (some of whom, like former astronaut Chris Hadfield, verge on celebrity status) — but it’s not a demo day, per se, and presentations happen in focused rooms with key, vertically aligned audience members who can provide much more than just funding to the startups that participate.

North founder Stephen Lake onstage at CDL’s Super Session 2019

Seven years into its existence, CDL really puts on a show for its cornerstone annual event (itself only two years old), and clearly shows the extent to which the program has scaled. From an inaugural cohort of just 25 startups with a focus on science, CDL has grown to the point where it’s graduating 150 startups spanning cohorts across six cities associated with multiple academic institutions. It has consistently added new areas of focus, including a space track this year, for which Hadfield is a key mentor, as is Anousheh Ansari, the first female private space tourist to pay her own way to the International Space Station and the co-founder and CEO of Prodea Systems.

The ‘Super’ in Super Session

This is the second so-called “Super Session” after the event’s debut in 2017. It includes roughly 850 attendees, made up of investors, mentors, industry sponsors and the graduating startups themselves. As CDL Fellow Chen Fong put it in his welcoming remarks, CDL’s Super Session is an opportune moment for networking, mentorship and demonstration of the companies the program has helped foster and grow.

A keynote track included talks by Ansari and Hadfield, as well as from Celmatix CEO and founder Piraye Beim, and a fireside chat with … Read the rest