Amid record dry powder, VCs are determined to fund anything but you

If you had to sum up the 2022 venture capital market in one word, that word could be contradictions.

Venture funds have record dry powder — deployable capital on hand — and yet funding continues to steadily decline. There is seemingly more talk of backing women and people of color in the industry than ever, and yet the numbers are headed in the opposite direction. VCs said publicly that they were focusing on companies on the path to profitability, but that wasn’t true for even a minute.

So while many venture firms said they are largely sitting out investing this year as they wait for valuations to fall, it is, again, largely untrue.

What does seem to be true, though, is that some VCs are using this year’s uncertainty as an excuse to avoid doing the work it takes to discuss valuations and assess TAM on potential investments into companies with real customer bases. Because they aren’t backing no one — they’re just backing everyone but you.

Amid record dry powder, VCs are determined to fund anything but you by Rebecca Szkutak originally published on TechCrunch

https://techcrunch.com/2022/11/11/amid-record-dry-powder-vcs-are-determined-to-fund-anything-but-you/

TechCrunch+ roundup: H-1B worker advice, managing remote teams, pitch deck teardown

I once managed an office where the CEO and I were the only two people who weren’t on the engineering team. We occupied a pod in a co-working space, so we all sat around one large table.

Outside of our group lunches, the developers rarely spoke to each other, as most communication took place via Slack, Jira and GitHub. Today, that team works remotely.

In a post for TC+, entrepreneur and angel investor Kuan Wei (Greg) Soh shared his top suggestions for managing distributed engineering teams, which includes mandatory standups and at least three hours each day when everyone is available to chat.

“We expect Slack messages to be replied to within an hour, that everyone be reachable if we call them, and that we would work responsibly with our assigned partners,” he says.

According to layoffs.fyi, more than 23,000 tech workers have been laid off so far this month. For comparison, the site tracked 12,463 layoffs in October.

Facebook’s parent company Meta announced the first major job cuts in its history this week, eliminating 11,000 jobs. Like Twitter, Stripe, Brex, Lyft, Netflix and other tech firms based in the Bay Area, many of the employees impacted are immigrants here on worker visas.

An unexpected layoff introduces an element of chaos into anyone’s life, but when an H-1B worker loses their job, a very loud clock starts clicking: unless they can land a new position or change their immigration status within 60 days, they’ll need to leave the country. And because tech companies at every size are enacting hiring freezes and planning more cuts, their ability to live and work in the U.S. is suddenly in question.

Earlier today, I hosted a Q&A with immigration lawyer Sophie Alcorn for H-1B workers who have been laid off (or think they might be).

“You either get a new job, you leave, or you figure out some other way to legally stay in the United States, but you have to take some action within those 60 days.” Start looking now for new opportunities, she advised, as it will take new employers time to submit paperwork to U.S. Citizenship and Immigration Services.


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“The best-case scenario would be that this new company files your new change of employer petition and USCIS receives the paperwork on or before the 59th day since your last day of employment,” said Alcorn.

“It takes at least three weeks to prepare everything,” which means candidates and employers must move quickly as the days count down. “You probably need a signed offer around day 33,” she said.

A lot of the information Alcorn provided was just as relevant for hiring managers as it was for workers who’ve been laid off: any number of factors can combine to further complicate a process that’s already hard to puzzle out. For example, what happens to H-1B workers who get laid off while they’re out of the country? Can getting married actually solve an immigration problem? (Definitely not!)

Because so many people have been laid off during a season when it’s traditionally hard to land a new position, I asked Alcorn whether she thought the layoffs would cause an exodus of tech talent from Silicon Valley.

“The American Dream is still really important to immigrants,” she said. “A lot of people are going to fight to find a way to stay here, even if it’s not necessarily in the in the Bay Area with the high cost of living. They still want what America represents and they’re going to reevaluate their relationship with Big Tech and the nature of work.”

3 tips for managing a remote engineering team

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

I once managed an office where the CEO and I were the only two people who weren’t on the engineering team. We occupied a pod in a co-working space, so we all sat around one large table.

Outside of our group lunches, the developers rarely spoke to each other, as most communication took place via Slack, Jira and GitHub. Today, that team works remotely.

In a post for TC+, entrepreneur and angel investor Kuan Wei (Greg) Soh shared his top suggestions for managing distributed engineering teams, which includes mandatory standups and at least three hours each day when everyone is available to chat.

“We expect Slack messages to be replied to within an hour, that everyone be reachable if we call them, and that we would work responsibly with our assigned partners,” he says.

Use IRS Code Section 1202 to sell your multimillion-dollar startup tax-free

Piggy bank with sunglasses on the beach at the seaside

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

Founding teams usually select a corporate structure like an LLC or S-Corp, but those who hope to exit for $10 million for more should consider starting up as a Qualified Small Business (QSB) C-Corporation, advises tax attorney Vincent Aiello.

Under IRS Code Section 1202, founders who hold QSB stock for five years or longer will be exempt from paying capital gains tax after a sale.

“It constitutes a significant tax savings benefit for entrepreneurs and small business investors,” Aiello says.

“However, the effect of the exclusion ultimately depends on when the stock was acquired, the trade or business being operated, and various other factors.”

Revenue-based financing: A new playbook for startup fundraising

Image Credits: Cocoon / Getty Images (Image has been modified)

Revenue-based financing can make early-stage startups less dependent on investors so they can hold onto more equity.

With terms that usually range from 12-24 months, many teams use these funds for short-term projects, like sales and marketing campaigns.

“Because the return on these activities may be higher than the cost of revenue-based financing, startups should use revenue-based financing to fund initiatives that will bear fruit soon,” advises Miguel Fernandez, CEO and co-founder of Capchase.

Pitch Deck Teardown: Syneroid’s $500K seed deck

Stolen-vehicle recovery systems have been available for decades, but a lost pet has higher emotional stakes.

According to Syneroid, a startup that makes smart tags, 10 million pets are lost each year in the United States, but “less than 30% are returned home.”

After raising a $500,000 seed round at a a $3.9 million valuation, the company’s founders shared their 12-slide pitch deck with TechCrunch for a review. “No information has been redacted or omitted,” writes Haje Jan Kamps.

TechCrunch+ roundup: H-1B worker advice, managing remote teams, pitch deck teardown by Walter Thompson originally published on TechCrunch

https://techcrunch.com/2022/11/11/techcrunch-roundup-h-1b-worker-advice-managing-remote-teams-pitch-deck-teardown/

Answers for H-1B workers who’ve been laid off (or think they might be)

According to layoffs.fyi, more than 23,000 tech workers have been laid off so far this month. For comparison, the site tracked 12,463 layoffs in October.

Facebook’s parent company Meta announced the first major job cuts in its history this week, eliminating 11,000 jobs. Like Twitter, Stripe, Brex, Lyft, Netflix and other tech firms based in the Bay Area, many of the employees impacted are immigrants on worker visas.

An unexpected layoff introduces an element of chaos into anyone’s life, but when an H-1B worker loses their job, a loud clock starts clicking: unless they can land a new position or change their immigration status within 60 days, they are required to leave the country.

And because tech companies at every size are enacting hiring freezes and planning more cuts, their ability to live and work in the U.S. is suddenly in question.

Earlier today, I hosted a Q&A for foreign tech workers who have been laid off (or think they might be) with Silicon Valley-based immigration lawyer Sophie Alcorn.

Alcorn, who writes “Dear Sophie,” a weekly advice column for TechCrunch+, shared general information for visa workers and hiring managers who are looking for talent. If you’re a visa holder who’s been laid off, your first priority is to “find a lawyer and figure out your last day of employment, because that’s when you need to start counting the 60-day grace period,” said Alcorn.

“You either get a new job, you leave, or you figure out some other way to legally stay in the United States, but you have to take some action within those 60 days.” Start looking now for new opportunities, she advised, as it will take a new employer time to submit paperwork to U.S. Citizenship and Immigration Services.

“The best-case scenario would be that this new company files your new change of employer petition and USCIS receives the paperwork on or before the 59th day since your last day of employment,” said Alcorn.

“It takes at least three weeks to prepare everything,” which means candidates and employers must move quickly as the days count down. “You probably need a signed offer around day 33,” she said.

Based on her experience, Alcorn estimated that 15% of the people laid off from Bay Area startups are immigrants, 90% of which are H-1B holders. Below, you’ll find answers to several of the questions we received [edited for space and clarity].

I was laid off while I was abroad, but my lawyer advised me to travel back on ESTA, which I did. Does the 60-day grace period still apply?

Sophie Alcorn: If you’re in the United States on ESTA after being laid off while abroad, you’re not in H-1B status anymore. You need to leave the country to get a new H-1B and try to come back in and start working.

You don’t have the 60-day grace period anymore; you’ve abandoned it. The only thing you can do to change or extend your status if you’re in the United States on the Visa Waiver Program for 90 days on ESTA is get married to a U.S. citizen and have them sponsor you for a green card.

It needs to be a real, good-faith marriage. You have to intend to share a life together, you have to demonstrate that your families know each other, that you do romantic comedy things together and have the photos to prove it. And the government’s going to check in two years to see if you’re still married.

I am currently on an OPT and have an H-1B approved, but not activated. Can I change employers without going through the lottery right away? Or would my H-1B need to be activated first?

You can actually change employers without [doing so]. When you’re interviewing for jobs, you need to make it very clear to the HR person that you think you are eligible for an H-1B change of employer, and you really need their immigration lawyers to take a close look, because essentially, what you will need is a change of status from F-1 or OPT to H-1B within the United States, as well as a change of employer.

Answers for H-1B workers who’ve been laid off (or think they might be) by Walter Thompson originally published on TechCrunch

https://techcrunch.com/2022/11/11/answers-for-h-1b-workers-whove-been-laid-off-or-think-they-might-be/

Crypto’s white knight was a black hat all along and other TC news

This week, I talk with Dom-Madori Davis about the coalition of VCs that are standing for reproductive rights. And Jacquelyn Melinek comes on to break down the FTX/Binance saga that’s unfolded over the past week (and that continues to develop). And as always, we break down the biggest stories in tech.

Articles from the episode:

Other news from the week:

Crypto’s white knight was a black hat all along and other TC news by Darrell Etherington originally published on TechCrunch

https://techcrunch.com/2022/11/11/techcrunch-podcast-ftx-sbf-crypo/

Can proof-of-reserves prevent future crypto exchange collapses?

A number of crypto exchanges are rushing to publish proof-of-reserves in a seeming attempt to reassure investors their funds are safe as fellow exchange FTX melts down.

Proof-of-reserves (PoR) are independent audits by third parties that aim to provide transparency and evidence that a custodian holds the assets it claims to own on behalf of its clients. Auditors then aggregate balances into something called a Merkle tree, which entails all client balances.

FTX exploded this week following a CoinDesk report that showed a June 30 balance sheet of its affiliate trading firm, Alameda Research, was largely made up of FTX’s native token, FTT. This all could have been avoided with PoR, Sergey Nazarov, co-founder of Chainlink, said to TechCrunch.

“There was a balance sheet issue and it became known to many depositors all at once,” Nazarov said. “And because it was a surprise, there was a bank run that led to insolvency.”

But imagine if depositors knew what FTX and Alameda Research’s balance sheets were from the beginning.

Can proof-of-reserves prevent future crypto exchange collapses? by Jacquelyn Melinek originally published on TechCrunch

https://techcrunch.com/2022/11/11/can-proof-of-reserves-prevent-future-crypto-exchange-collapses/

Musk’s lawyer tells Twitter staff they won’t be liable if company violates FTC consent decree

Following a warning shot from the FTC to Twitter yesterday, TechCrunch has obtained an internal email sent by Elon Musk’s lawyer, Alex Spiro, to all remaining employees — in which he seeks to calm staffers’ concerns by claiming that they do not have individual liability for upholding the requirements of the FTC consent decree.

We’ve reproduced the full text of the email (sic) below — which was sent by Spiro to Twitter staff at 5:21PM, November 10:

Elon – questions have arisen today regarding the consent decree in effect at the time you took over the company.

We have our first upcoming compliance check with the ftc since taking over and we will handle it.

The only party to the decree is Twitter- not individuals who work at Twitter. It is Twitter itself (not individual employees) who is a party and therefore only Twitter the company could be liable.

I understand that there have been employees at Twitter who do not even work on the ftc matter commenting that they could to to jail if we were not in compliance- that is simply not how this works. It is the company’s obligation. It is the company’a burden. It is the company’s liability.

We spoke to the FTC today about our continuing obligations and have a constructive ongoing dialogue.

We will of course remain in compliance with the consent decree and the legal department is handling it and happy to answer any questions

Thanks

Alex

The 2011 consent decree required Twitter to establish and maintain a program to ensure and regularly report that its new features do not further misrepresent “the extent to which it maintains and protects the security, privacy, confidentiality, or integrity of any nonpublic consumer information.”

In a note (first reported by The Verge) posted in Twitter’s internal slack and visible to all employees, a departing internal attorney said that in fact, individual engineers do engender “personal, professional and legal risk,” seemingly in contradiction to what Spiro sent in the above email.

On Thursday, key Twitter executives including the company’s Head of Trust and Safety Yoel Roth, as well as its Chief Information Security Officer Lea Kissner, Chief Compliance Officer Marianne Fogarty and Chief Privacy Officer Damien Kieran all abruptly departed the company. The FTC noted that they are watching with “deep concern” the ongoing situation at Twitter in light of the consent decree.

The FTC fined Twitter $150 million earlier this year after finding a breach of the settlement related to user data provided for security purposes being used for ad targeting.

We’ve reached out to the FTC for clarification regarding the consent decree and individual employee liability and will update if we receive more information.

Musk’s lawyer tells Twitter staff they won’t be liable if company violates FTC consent decree by Natasha Lomas originally published on TechCrunch

https://techcrunch.com/2022/11/11/musks-lawyer-tells-twitter-staff-they-wont-be-liable-if-company-violates-ftc-consent-decree/

Framework Ventures co-founder says DeFi gives hope following FTX collapse

FTX’s downfall will heighten the need for regulation but also pique long-term interest from venture capitalists looking to invest in decentralized finance (DeFi), according to Michael Anderson, co-founder of Framework Ventures.

“It just seems obvious that DeFi is the only way that we can continue to do these types of financial services operations in the crypto ecosystem,” Anderson said to TechCrunch. “It gives us hope and strengthens our resolve that the things we’re pushing for are the right things to be working on.”

In April, Framework Ventures launched its third fund at $400 million, with about half of it earmarked for web3 gaming. Anywhere from half to 70% of pitches the firm gets are gaming-related companies, Anderson said. But the recent situation with FTX has the firm “doubling and tripling down on everything we believe in,” which includes DeFi and regulation of centralized finance (CeFi).

And while some firms like Multicoin have seemingly lost capital stored on FTX’s crypto exchange, Vance Spencer, co-founder of Framework Ventures, said the firm had no exposure.

“Regulation is not something we should be against or preventing,” Anderson said. “Sensible regulation makes sense and now that [former FTX CEO Sam Bankman-Fried] has been removed from the table, we can move forward and get more vocal about centralized finance versus DeFi and the pros and cons of each.”

Framework Ventures co-founder says DeFi gives hope following FTX collapse by Jacquelyn Melinek originally published on TechCrunch

https://techcrunch.com/2022/11/11/framework-ventures-co-founder-says-defi-gives-hope-following-ftx-collapse/

SpaceX, Relativity and others urge FCC to stay in its lane

Major space companies, including SpaceX and Relativity, are urging the U.S. Federal Communications Commission (FCC) to stick to its purview — spectrum usage — as it looks to potentially update its rules for in-space servicing, assembly and manufacturing (ISAM) missions.

There is plenty that the FCC could — and should do — to support ISAM missions that sit squarely within its regulatory bounds, the companies said. SpaceX and others, as well as startups like Orbit Fab, which wants to build refueling depots in space, and Starfish Space, which is developing a satellite servicing vehicle, submitted recommendations related to spectrum and ISAM. The commission also heard from Blue Origin, Lockheed Martin, United Launch Alliance and other space companies and industry groups.

“The biggest chunk of this proceeding is the question of, do we need new spectrum allocation for ISAM?” Brian Weeden, executive director of The Consortium for Execution of Rendezvous and Servicing Operations (CONFERS), explained to TechCrunch in a recent interview. “And that is absolutely within the FCC’s existing authority.”

The FCC requested comments from industry after it opened a new proceeding on ISAM in August. In a statement, the commission said it specifically sought to understand how it could “update, clarify, or modify its rules and licensing processes” to support these emerging capabilities in space. SpaceX, Relativity and others said in their responses that the FCC should bring its considerable authority to bear on issues related to spectrum use and licensing — and only issues related to spectrum use and licensing.

“The Commission must handle this potentially important but still nascent industry with care, exercising caution not to unintentionally stifle innovation by stepping outside the authority expressly delegated to it by Congress,” SpaceX said.

Relativity Space and the industry association Commercial Spaceflight Federation separately argued that the FCC’s involvement in issues outside of those related to spectrum could result in duplicative approvals processes. These could be especially challenging for smaller startups and newer space entrants to navigate.

The new proceeding is one of a handful of actions the commission has taken in recent months to keep pace with the growing commercial space industry. In September, the FCC also updated rules related to spacecraft deorbiting and orbital debris management, voting that satellite operators must deorbit satellites in low Earth orbit five years after their mission conclusion, rather than 25.

But such actions have raised questions as whether the FCC has sufficient authority to pass such rules. As of yet, Congress has made no gesture toward expanding or extending that authority.

FCC Chairwoman Jessica Rosenworcel appeared to tacitly acknowledge these concerns in a speech to the Satellite Industry Association, announcing that the FCC will establish a new bureau dedicated to handling space activities.

“The changes I am announcing today are not about taking on new responsibilities at the FCC,” she said. “They are about performing our existing statutory responsibilities better and freeing up resources to focus on our mission.”

SpaceX, Relativity and others urge FCC to stay in its lane by Aria Alamalhodaei originally published on TechCrunch

https://techcrunch.com/2022/11/11/spacex-relativity-and-others-urge-fcc-to-stay-in-its-lane/

Pixxel’s Awais Ahmed talks going hyperspectral in dual-use at TC Sessions: Space

Orbital imagery is becoming commonplace in industries and defense, but looking beyond the visible spectrum has yet to break through into the mainstream. Pixxel is poised to change that with its hyperspectral imaging satellites, and co-founder Awais Ahmed will join us at TC Sessions: Space in Los Angeles on December 6 to tell us why this tech matters.

Hyperspectral imagery includes wavelengths well beyond what people and traditional cameras see, allowing satellites to detect things like polluting gases, the hydration level of soil or concentrations of desirable minerals. Pixxel’s approach is modern and adaptable, with a new imaging stack that slices the wider spectrum into extremely thin slices, allowing very specific detections that would normally take a spectrometer or science mission.

Pixxel raised a $25 million A round earlier this year, a coup for the young founders, Ahmed and Kshitij Khandelwal, his fellow graduate from BITS Pilani in Rajasthan, India. The two set out to change orbital imagery and are now in pole position as numerous industries, the military, and climate-monitoring authorities are all seeing the benefits of hyperspectral image data.

Ahmed told TechCrunch recently that the new push toward ESG, as well as a large new tranche of federal funding for climate solutions, is reinforcing existing interest from stakeholders in this area, from climate activists to gas and oil companies. And of course the strategic importance of this type of data is easy to see, which is why Ahmed will be joining us for a discussion of the evolving dual-use sector where startups like Pixxel have twice the opportunity — but also double the responsibility.

TC Sessions: Space takes place on December 6 in Los Angeles. Buy your pass today, and then join us to see and learn about the latest space tech from the industry’s most beautiful minds, network for opportunities and build a stronger startup to the stars.

Is your company interested in sponsoring or exhibiting at TC Sessions: Space? Contact our sponsorship sales team by filling out this form.

Pixxel’s Awais Ahmed talks going hyperspectral in dual-use at TC Sessions: Space by Devin Coldewey originally published on TechCrunch

https://techcrunch.com/2022/11/11/pixxels-awais-ahmed-talks-going-hyperspectral-in-dual-use-at-tc-sessions-space/

Pet insurance startups chase the market as pet ownership booms among Gen Z and Millennials

Walk through any public park these days and you will see a hell of a lot more dogs than you might have done three years ago. The loneliness of the pandemic lockdowns led to an explosion in pet ownership. Plus, The demographic of pet ownership has shifted. Whereas previously it was Granny or Grandpa who tended to be the pet owner, now, Gen Z and Millennials represent around 70% of pet owners, according to some statistics. This has created a big fight between insurers over this new market, and has of course predictably led to new startups in the arena.

In the UK you can find UK ManyPets, Waggle, PetPlan, while in the US there’s Lemonade, Figo, ManyPets and Trupanion. Over in the EU you’ll find Dalma (France), Lassie (Sweden) and ManyPets (Sweden).

Meanwhile, pet insurance start-up Napo has decided to take a particular angle on this topic, not only offering pet insurance but also pet health prevention information, pet ownership education, and additional services.

It’s now raised a £15m Series A funding round, led by DN Capital, and with the participation of the petcare-focussed Companion Fund as well as Helvetia Venture Fund, M Tech Capital, Picus Capital, dmg ventures, Sarona Partners, T0 Ventures and FJ Labs.

Napo claims to have insured over 35k pets in the year since its launch last December. It offers access to 24/7 online vet consultations, obesity awareness resources, and access to expert-led live classes to help puppy train their dogs.

In a statement, co-founder and CEO Jean-Philippe Doumeng said: “Our mental model is fundamentally different from traditional pet insurance. We are aligning all stakeholders to look in the same direction by helping people to take better care of their pets.”

Guy Ward Thomas, who led the deal at DN Capital, added: “We met all of the ‘neo pet-insurers’ in Europe… What set Napo apart was their focus on building a virtuous circle between educating owners, providing veterinary care and improving pet health – all leading to lower claims, lower premiums and happier customers in the long-term.”

Pet insurance startups chase the market as pet ownership booms among Gen Z and Millennials by Mike Butcher originally published on TechCrunch

https://techcrunch.com/2022/11/11/pet-insurance-startups-chase-the-market-as-pet-ownership-booms-among-gen-z-and-millennials/