Category: TECHNOLOGY
How fintech startups are navigating the extension-round rush
As the fintech venture market goes, so goes the venture market itself. Why? Because fintech investment has historically made up around one-fifth of every venture dollar invested — at least in recent years. And after both fintech investing and venture capital itself went a bit bonkers last year, both are dealing with a new, more conservative reality.
For fintech startups, the downturn is real, and many upstart companies — we learned during our recent fintech investor survey — are looking to avoid de-novo rounds that include a new valuation (no one wants to raise a down round!). Therefore, extension rounds are an attractive option for many founders.
But as TechCrunch has reported, while extension rounds are popular even beyond fintech today, there are often more startups hunting for the round type than there are checks. So, to better understand the market for fintech extension rounds today, we have one more set of answers from a group of fintech venture investors we surveyed. Here’s the question we posed:
How popular are extension rounds proving? Are you seeing more companies opt to raise extensions rather than new rounds compared to, say, 2021 and 2020?
Eight investors answeredPaul Stamas of General Atlantic, Alda Leu Dennis of Initialized Capital, Michael Gilroy of Coatue, Justin Overdorff of Lightspeed Venture Partners, Addie Lerner of Avid Ventures, David Jegen of F-Prime Capital, Nik Milanović of The Fintech Fund, Jay Ganatra of Infinity Ventures. (Their answers have been lightly edited for clarity.)
Michael Gilroy, general partner and co-head of fintech, Coatue
https://techcrunch.com/2022/07/31/how-fintech-startups-are-navigating-the-extension-round-rush/
Volunteer at TechCrunch Disrupt and attend all three days for free
It takes a veritable army to make TechCrunch Disrupt — which takes place October 18–20 in San Francisco — the well-oiled experience that savvy startuppers have come to know and love. And we couldn’t do it nearly as well without our incredible volunteers.
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You’ll work hard, play hard and get free access to all three days of Disrupt. Whether you dream of becoming a startup founder, marketer or event coordinator, this is a great way to see what it takes to produce a world-renowned tech startup conference.
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A tale of two surveys: Fintech VCs change tune on investment landscape
Welcome to The Interchange! If you received this in your inbox, thank you for signing up and your vote of confidence. If you’re reading this as a post on our site, sign up here so you can receive it directly in the future. Every week, I’ll take a look at the hottest fintech news of the previous week. This will include everything from funding rounds to trends to an analysis of a particular space to hot takes on a particular company or phenomenon. There’s a lot of fintech news out there and it’s my job to stay on top of it — and make sense of it — so you can stay in the know. — Mary Ann
What a difference a few months makes. In mid-February, we published a survey of 10 fintech investors with questions on topics such as what areas they are excited about and their outlook for the future. Here we are, not even six months later, and the vibe from the responses of our latest survey — this time of eight fintech investors — is a very different one.
A few examples…
When asked in February what differences in the landscape he saw in 2021 and if deals were much more competitive, Accel partner Ethan Choi responded: “On the investing side, deals were definitely more competitive and valuations certainly reflect that, even despite a correction in public fintech comps.”
And SoftBank Investment Advisers’ managing partner Munish Varma, in response to the same question, said: “The heightened level of funding has increased competition, especially for high-quality companies.”
In July, when asked the same question, Lightspeed Venture Partners’ Justin Overdorff said: “Seed hasn’t changed that much, but Series A and Series B round sizes have definitely compressed. Companies are raising less money at lower valuations than in 2021, which reflects the market sentiment.”
And Avid Ventures’ founder and managing partner Addie Lerner said: “Last year…given very low interest rates, investors were seeking yield anywhere they could find it and paying a premium for growth. Now, in a rising interest rate environment, investors across stages are valuing companies based on fundamentals and prioritizing capital-efficient growth, while looking more closely at public market comps for valuation guidance.”
Bottom line is that earlier this year, the sentiment was more of: “Woo hoo — everything is amazing and 2021 was a stellar year in the world of fintech.” And today, it’s more like: “We’re proceeding very, very cautiously — and you should too.”
I have to say that both my editors and I were very impressed with the thoughtfulness in the responses of these surveys. The VCs who responded — which this time around included Paul Stamas of General Atlantic, Alda Leu Dennis of Initialized Capital, Michael Gilroy of Coatue, Justin Overdorff of Lightspeed Venture Partners, Addie Lerner of Avid Ventures, David Jegen of F-Prime Capital, …read more
https://techcrunch.com/2022/07/31/fintech-vcs-change-tune-on-investment-landscape/
Gmail gets a new look, Instagram trips while trying to be TikTok and India blocks Battleground Mobile
Hello hello! Welcome back to Week in Review, the newsletter where we do a quick rundown of the most-read TechCrunch stories from the past week. The idea: When you’ve had a busy few days, you should be able to skim Week in Review and still have a good idea of what’s up lately in tech. Want it in your inbox? Sign up here.
The most read story this week was about Battlegrounds Mobile India, a popular battle royale title that has found an audience of tens of millions in India. Players woke up to find the game suddenly blocked from both Google Play and Apple’s App Store by order of the Indian government. Why? That’s…not exactly clear yet, but Manish has the breakdown of everything we know so far.
other stuff
New Gmail for all: Use Gmail? Don’t be surprised if it looks different soon. The company announced this week that the “Material You” interface overhaul it has been testing will roll out to all users in the coming weeks. Don’t like the new styling? For now, at least, you can find a toggle hidden in the settings menu to switch it back.
Instagram’s bad move(s): As best anyone can tell, TikTok seems to be eating Instagram’s lunch. Is the answer for Instagram to become more like TikTok? Recent updates — like a focus on full-screen video and more content from people you don’t follow — have made the Insta interface feel more and more TikTok-y…and, well, the complaints have been loud. Instagram is at least pretending to listen, though, and says it’ll be walking back many of said changes. Maybe.
Rivian layoffs: Rumors earlier this month suggested layoffs were looming at Rivian; sure enough, the company confirmed this week that it’s laying off around 6% of its workforce as part of a “restructuring plan.”
A penny for your prompts?: OpenAI’s DALL-E 2 can generate incredible art seemingly out of thin air, but sometimes getting the exact results you want can require some…finesse. This startup wants to “sell strings of words that net predictable results” on DALL-E 2 and other such systems. An interesting story made all the better by its oh-so-Seussian opening image, which I’ll note was created by an actual human (and a lovely one at that).
Meta shutters Tuned: Did you know Meta had a social app for couples? Probably not! Called Tuned, it was part of Meta’s New Product Experimentation efforts, and it seems this particular experiment is over. Meta announced this week that Tuned will go away on September 19. The app was meant to help couples communicate and “create a shared scrapbook” of photos/videos/etc. It doesn’t help that it was launched right at the beginning of the pandemic, when many couples probably had no trouble keeping in touch because they probably weren’t going anywhere anyway.
audio stuff
Is cutting …read more
Can VCs game crypto out of this downturn?
Welcome back to Chain Reaction.
Last week, we looked at Musk holding onto doge. This week, we’re talking about where all of this crypto VC money is possibly gonna go.
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maybe, it’s all a game?
A weekly dispatch from the desk of TechCrunch crypto editor Lucas Matney:
The reality is that the dreams of web3 investors and founders are facing a bit of a jam — a crypto downturn generally means less hype, fewer conversations between friends and generally less organic consumer onboarding to consumer experiences. This is far from ideal for VCs who saw a consumer web dream within grasp, but fortunately they’ve got some deep pockets thanks to recently raised mega funds with crypto bets as their sole focus.
Still, it’s a rough time for consumer crypto’s core audience though, with recently minted acolytes down bad and many likely discouraged from sinking more time, money or effort into new web3 projects. The question becomes how to put this VC money to work in a bear cycle; plenty will take the period of reduced attention to dump into infrastructure and the “picks and shovels” toolsets. Others might go insular, backing consumer projects that are further disconnected from the broader worlds of crypto but expose users to synthetic economies, wallets and digital goods, an arena served particularly well by crypto-infused games.
Gaming does seem like a great consumer beachhead for crypto and I’d expect plenty of these dedicated crypto funds to dump a significant quantity of their funds into studios and platforms pursuing this. There are a lot of substantial challenges, including generally negative user sentiment and getting platform buy-in — given that NFTs are still treated with a high-degree of hostility by app stores and gaming platforms.
The self-contained worlds of gaming titles with dedicated tokens disconnected from the more self-referential corners of crypto may be the easiest place to find new eyeballs. And as customer acquisition costs across the board climb, VCs may be more willing to subsidize customers directly as part of user acquisition, returning to the gig economy days of VCs bribing new users to sign-up.
It’s been a weird bull cycle for crypto gaming. While plenty of money flowed into play-to-earn titles and pixelated SNES-quality DeFi-infused games, it’s fair to say that there wasn’t anything that emerged that was actually good. Most games over-indexed on profit and clearcut ponzinomics that juiced growth to the most extreme ends without a concern for stability. Great games take time to build, and fun games take a level of user concern that’s hard to optimize for when you’re trying to maximize near-term profit on both ends of the deal.
the latest pod
We thought winter was already here for crypto, but U.S. regulators just made it seem a lot colder. First, the U.S. Department of Justice …read more
https://techcrunch.com/2022/07/30/can-vcs-game-crypto-out-of-this-downturn/
This Week in Apps: Instagram backlash, TikTok gaming, Snapchat+ makes millions
Welcome back to This Week in Apps, the weekly TechCrunch series that recaps the latest in mobile OS news, mobile applications and the overall app economy.
Global app spending reached $65 billion in the first half of 2022, up only slightly from the $64.4 billion during the same period in 2021, as hypergrowth fueled by the pandemic has slowed down. But overall, the app economy is continuing to grow, having produced a record number of downloads and consumer spending across both the iOS and Google Play stores combined in 2021, according to the latest year-end reports. Global spending across iOS and Google Play last year was $133 billion, and consumers downloaded 143.6 billion apps.
This Week in Apps offers a way to keep up with this fast-moving industry in one place with the latest from the world of apps, including news, updates, startup fundings, mergers and acquisitions, and much more.
Do you want This Week in Apps in your inbox every Saturday? Sign up heretechcrunch.com/newsletters
Top Stories
Users demand the TikTok-ification of Instagram must stop
How do you modernize an app like Instagram, whose roots are in iconic iPhone photography, to support users’ growing engagement with short-form video? If you’re one of the many increasingly frustrated Instagram users, you simply wish it would not attempt this pivot at all. You’re sick of the app’s constant changes, its clutter, its ads, its force-fed recommendations, and you’re not a fan of its TikTok ambitions. You just want to see your friends’ posts.
This issue finally came to a head this week when celeb sisters and Instagram top creators Kylie Jenner and Kim Kardashian shared a petition that demanded Instagram to “stop trying to be tiktok.” The day after, Instagram head Adam Mosseri posted a video addressing the concerns and said the app would temporarily roll back some of its recent changes, including the test of a full-screen TikTok-like experience and the increase in “recommended” posts.
The company has brought this user backlash on itself, of course, with its continual “tests” of new UIs and its desperate admissions about how TikTok is eating its lunch, forcing it to adapt or die. Plus, Instagram claims video is what people want even when they’re saying otherwise. It insists its own data supports that video has been growing faster as mobile networks got faster and data became cheaper.
While that may be true, Instagram has been throwing out the baby with the bathwater as it attempts to prioritize elements of TikTok in its own app. People want different experiences from their social platforms — and Instagram is trying to do it all, without acknowledging that the real threat from TikTok is not the video content itself, necessarily, but rather TikTok’s addictive algorithm that increases users’ time spent in the app. TikTok has figured out how to recommend posts that users welcome, while Instagram’s attempt to do the same has fallen flat. Combined with TikTok’s ability …read more
The bootstrapped are coming, the bootstrapped are coming
The layoffs continue
There were a number of significant layoffs this week, not limited to but including:
Welcome to Startups Weekly, a fresh human-first take on this week’s startup news and trends. To get this in your inbox, subscribe here.
Bootstrapped startups, or companies that use their own revenue or existing cash flow to fund growth instead of relying on external capital sources, sit in a very separate box than venture-backed startups. By nature of asset class, bootstrapped startups prioritize revenue to keep alive, while venture-backed startups prioritize growth to keep investor buy-in for future runway needs. Bootstrapped companies follow less of an exponential growth curve, while venture-backed companies need to be an outlier.
Enter a downturn and both sides get a tad more interesting. The built-in business discipline of bootstrapped startups may feel especially downturn-proof as the overfunded companies announce rounds of layoffs. As venture starts to be more interested in the stable fundamentals of the startup bunch, is it the bootstrapper’s time to swing big?
For Healthie, a payments processor for healthcare companies, now felt like the right time to get on the “treadmill” of venture capital after six years of bootstrapping, according to co-founder Cavan Klinsky.
“If you’re a bootstrapped company who is not yet on the [venture] treadmill, you have that kind of optionality or that ability to choose when to get on,” he said. “Once you’ve already raised a bunch of ventures, you’re kind of building a business for venture scale, whereas if you are bootstrapped … you can be really really opportunistic about what that right time is.
For my full take, read my TechCrunch+ columnWill once-bootstrapped startups turn to venture during a watershed moment?
In the rest of this newsletter, we’ll get into a play on Honey for the real world and behind some significant layoffs happening in tech. As always, you can support me by forwarding this newsletter to a friend or following me on Twitter.
Deal of the week
If Pogo had its way, you’d get paid every time you stroll down Market Street in San Francisco. Or check your email. Or open its app. The only catch is that you give your personal data to the consumer-focused fintech in return. Put differently, Pogo wants to give users cash in return for their data.
I dug into the startup, which just raised a $12.3 million seed round led by Josh Buckley and a previously unannounced $2.5 million pre-seed round, and its goals for TechCrunch this week.
Here’s why it’s important: Pogo is going to have an intimate window into someone’s life, from where they live to their favorite coffee shop to just how many subscriptions they own. It’s similar to what a bank would see, but it’s a venture-backed startup that it wants you to trust.
The Electronic Frontier Foundation, a nonprofit that has defended civil liberties in the digital world since 1990, describes the idea of exchanging data for money as “data dividends.” In an essay, the organization urges consumers to rethink if getting money for their data really fixes the existent imbalance between users and …read more
https://techcrunch.com/2022/07/30/the-bootstrapped-are-coming-the-bootstrapped-are-coming/
It really does take a village to keep you secure in the cloud
As I walked the halls of the massive Boston Convention Center this week for AWS re:Inforce, the division’s annual security event, I spoke to a number of vendors, and one theme was clear: Cloud security really is a shared responsibility.
That idea has been around for some time, but it particularly hit home this week as I listened to various AWS security executives talk about it at the event keynote and through the ensuing conversations I had during the week.
At a very high level, the cloud vendor has the first level of responsibility for security. It has to make sure that the data centers it runs are secure to the extent that it is within its control. Yet at some point, there is a gray area between the company and the customer. Sure, the vendor can secure the data center, but it can’t save the customer from leaving an S3 bucket exposed, whatever the reason.
Security is such a complex undertaking that no one entity can be responsible for keeping a system safe, especially when user error at any level can leave a system vulnerable to clever hackers. There have to be communication channels across every level of the organization, with customers and with concerned third parties.
When an external event like the Log4J vulnerability or the Solarwinds exploit impacts the entire community, it’s not one single vendor’s problem. It’s everyone’s problem.
The idea is that everyone has to communicate when problems pop up, share the best practices and pull together as a community to the extent possible to prevent or mitigate security events.
https://techcrunch.com/2022/07/30/it-really-does-take-a-village-to-keep-you-secure-in-the-cloud/
Stocks with friends
Welcome to The TechCrunch Exchange, a weekly startups-and-markets newsletter. It’s inspired by the daily TechCrunch+ column where it gets its name. Want it in your inbox every Saturday? Sign up here.
Several startups want to make it easier and friendlier for individuals to buy stocks. But isn’t pandemic-era stock picking just a bad habit that’d better be left behind? And what would safer bets look like? Let’s jump in. — Anna
Connecting new retail investors
From Netflix to Peloton, companies that enjoyed strong tailwinds at the peak of the pandemic aren’t exactly doing great right now. And yet, investors don’t seem to think that neobrokers will follow the same path.
Gaming vets promise to make blockchain games fun and sustainable
The runaway success of Axie Infinity and StepN has convinced a flurry of entrepreneurs that web3 gaming, where the ownership of in-game assets is in the hands of users via blockchain adoption rather than a centralized platform, is the future.
Some of the biggest hits in the space to date reward users with tokens that can be cashed out in what’s known as the “play-to-earn” model. While P2E games have attracted millions of players and billions of dollars from investors, veterans of the gaming industry argue that they are fundamentally unsustainable.
These games are the brainchild of financial engineers aiming to get rich quickly rather than experienced developers building time-honored works, they say.
Axie Inifity’s dramatic rise and fall is telling. After peaking at $754 million in November when bitcoin hit all-time high, the game’s monthly sales volume plummeted to $4.5 million in July.
“Most GameFi developers are not game developers,” says Maciej Burno, who’s spearheading the new metaverse business of Polish gaming studio Reality.
Burno is among a spate of blockchain-believing gaming veterans around the world trying to take blockchain games to the mainstream. Their vision is to counter the public impression that web3 games, popularized by P2E, are all scammy and trashy. Instead, they want to build games that are both fun and sustainable, while introducing cryptocurrencies as a novel way to incentivize gamers as well as creators.
Is it a game?
The problem with P2E, as seen by See Wan Toong, a former senior technical director at Electronic Arts and CTO of web3 gaming startup Red Door Digital, is that users have to spend money upfront to start playing.
In Axie Infinity, users buy and breed cute blob-like creatures called Axies in the form of non-fungible tokens that are authenticated on the blockchain. Sales from the NFTs then go towards funding rewards for those who earn tokens by playing, and the tokens, the game’s native cryptocurrency, can in turn be cashed out.
That means for the game to be sustainable, it must have a constant influx of new users or it loses its financing source. That’s why critics compare P2E games to pyramid schemes.
Many of the P2E titles aren’t really games by strict definition, Toong argues. They are more akin to decentralized finance, or DeFi, products with gamified features. Hardcore gamers dismiss Axie Infinity as “simple” or even “boring”, not unlike the free-to-play, mindless mobile games that they have opposed for years.
But for those living in developing countries, the prospect of making several hundred dollars per month by clicking on a computer screen can be tempting. That’s largely why Axie Infinity took off in countries like the Philippines during the pandemic when many people lost jobs. To them, the game is more like work than fun.
“I think there is a bit of elitism in it,” Simon Davis, CEO of Mighty Bear Games, a Singapore-based web3 gaming studio that just raised $10 million in a token sale, says of Axie Infinity critics.
“There is a tendency …read more