Editor’s note
Due to bad travel logistics (thanks SFO), I wasn’t able to get the mid-week edition of the Extra Crunch roundup newsletter out. Sorry about that. Instead, here is everything we published this week on Extra Crunch in one fell swoop — and my, we covered a lot of ground. Hope you enjoy some great weekend reading.
Y Combinator Demo Day Coverage-a-palooza
Much like the equinoxes that synchronize Earth’s calendar, Y Combinator’s biannual demo days are a key fixture of the Silicon Valley calendar. This year was no different, with 166 companies presenting from the summer batch (and occasionally from previous batches if they chose to delay their presentation).
We had a full squad on site not only covering the 84 companies from day one and 82 companies from day two, but our team also put their collective heads together to identify the top companies from each set exclusively for Extra Crunch members.
The 11 best startups from Y Combinator’s S19 Demo Day 1
Read our favorite 11 startups from day one, which included:
PopSQL provides collaborative SQL query editing. You can store SQL queries you run regularly, grouping them into folders that can be kept private or shared amongst your team. Version history tracks changes so it can be reverted if/when something breaks. It currently has more than 100 paying companies, and is making $13K per month. It plans to build a marketplace for apps that run on top of your company’s database.
Why it’s one of our favorites: SQL database queries can be a nightmare, especially if they’re not something you’re used to dealing with every day. PopSQL lets you hammer on queries collaboratively until they’re working exactly as you want — then you can save them for future use and share them amongst your team members. And when you’ve spent the last 45 minutes trying to figure out why your query isn’t working only for a team mate to fix it in thirty seconds, you can use version control to see exactly what they changed. PopSQL says its product has already found customers in companies like Instacart, Redfin, and DoorDash.
Our 12 favorite startups from Y Combinator’s S19 Demo Day 2
Read our favorite 12 startups from day two, which included:
Business Score is helping companies automate background checks on other businesses. The startup is looking to stamp out tired manual processes that largely mean picking up the phone and scouring documents. The single API taps data sources across the web to build out real-time profiles that can help customers scan businesses in an effort to prevent fraud, qualify leads and onboard new clients.
Why it’s one of our favorites: Though it’s yet another startup in the batch catering to other startups, we thought Business Score stood out. The company integrates with thousands of data providers to help companies verify other startups and enterprises they are considering doing business with, using a system they’ve dubbed “the business passport.” There’s an opportunity here to create a tool essential to company-building across industry.
YC is doubling down on these investment theses in its most recent batch
Finally, amidst all the zany craziness of watching 166 companies present over two days (there should be a YC company for unmelting your brain), our venture capital reporter Kate Clark stepped back to assess what all the various companies in the batch indicated about the accelerator’s strategy these days.
YC knows its sweet spot: enterprise SaaS. One might go as far as to say it’s transitioning into a full-on SaaS incubator. Why? Because one of the greatest advantages of going through YC is the network of alumni companies you can tap into. Many successful B2B companies have emerged from the program, raised boat loads of venture capital funding and rocketed to the moon (hello Stripe, Brex, Gusto and Atrium). With that in mind, YC is doubling down on its resources for startups that sell products to other startups, which brings us to our first piece of news.
YC chief executive officer Michael Seibel and president Geoff Ralston announced this week that the accelerator has implemented something called CTO and HR demo days. In short, CTO and HR demo days are an opportunity for B2B startups to pitch their products to YC alum companies’ CTO and/or head of HR. Seibel and Ralston said 60 CTOs attended the event, as well as 30 HR heads. In total, 42 startups presented and we’re guessing a bunch of those companies booked a few customers.
All you wanted to know about revenue-based investing (i.e. no dilution capital)
Venture capitalists generally invest capital in exchange for (preferred) equity. But that isn’t the only way that investors can gain from a startup’s success. An alternative is revenue-based investing, where VCs invest dollars in exchange for fixed percentages of revenues up to a cap.
We have an entire series underway analyzing all aspects of this approach from HOF Capital venture partner David Teten.
A new wave of Revenue-Based Investors are emerging who are using creative investing structures with some of the upside of traditional VC, but some of the downside protection of debt. I’ve been a traditional equity VC for 8 years, and I’m now researching new business models in venture capital.
I believe that Revenue-Based Investing (“RBI”) VCs are on the forefront of what will become a major segment of the venture ecosystem. Though RBI will displace some traditional equity VC, its much bigger impact will be to expand the pool of capital available for early-stage entrepreneurs.
Be sure to check out all segments of the series, with a handful of more to come:
- Revenue-based investing: A new option for founders who care about control
- Should your new VC fund use revenue-based investing?
- Should you raise equity venture capital or revenue-based investing VC?
How Dropbox, Nike, Salesforce, MailChimp, Google and Pepsi welcome their new hires
This was a fun post. Vladimir Polo has spent years collecting the swag that comes in the welcome kits of major companies (and also runs a SaaS-based onboarding tool called AcademyOcean). He has compiled images and data as well as interviewed the onboarding teams from more than a dozen startups and large companies in order to discuss how to make employees feel meaningful when they first sit down at their desks. (Plus, some companies apparently give Bacardi rum, so there is that).
MOZ is a service that offers a set of tools for marketers and analysts. It was founded in 2004 by an unusual team: a mother and son. Today, more than 300 people work for MOZ.
Their welcome kit looks kind of chaotic, but it actually has a lot of cool things in it. For one, they’re the only company on this list that gives their employees a towel. There’s a chance that there’s a hat from the SEO Mom (as the founder calls herself) at the bottom of the canvas bag.
A trio of Verified Expert profiles of growth marketing firms
Yvonne Leow is continuing her swing through top growth marketing firms for our Verified Experts series. Growth is the most important goal of every startup, and we have worked to find the absolute magicians of growth in the industry from founder recommendations. See a full list of profiles here.
Verified Expert Growth Marketing Agency: 3Q Digital
Read our profile of 3Q Digital:
David’s proudest accomplishment: “We’ve not only survived in Silicon Valley for 11 years, we’ve grown massively. We are one of the largest performance marketing agencies in the San Francisco Bay Area, with over 100 people locally. We continue to get referrals from founders who used us for their first start-up and now have come back to us for their second or third. The same is true for many venture capital partners who rely on us again and again.”
Verified Expert Growth Marketing Agency: We Are Off The Record
Read our profile of We Are Off The Record
Unlike most agencies, We Are Off The Record’s (WAOTR) mission is to advise and train in-house growth teams to scale their business. CEO and founder Bas Prass prides his team’s “train and transfer method” because it has allowed them to work with tech startups and giant corporations from all around the world. WAOTR is based in the Netherlands.
Verified Expert Growth Marketing Agency: Torch
Read our profile of Torch:
CEO Jeremy OBriant never intended to create Torch, an agile growth marketing agency based in San Francisco. He started his career as a CPA, but after leading a growth team at Sidecar and running growth projects on his own, forming Torch was the most obvious thing to do. He now leads a team that implements “agile growth,” an iterative approach that involves setting clear goals and running smaller experiments over the course of monthly sprints.
Is Knotel poised to turn WeWork from a Unicorn into an Icarus?
One of the facets of the WeWork S-1 that is perhaps most up-for-debate is whether WeWork truly has network effects that will protect it from competition. Our very own Mike Butcher takes a look at one of those competitors, Knotel, and how it factors into WeWork’s future.
But the mistake Stratechery made was to assume WeWork has no competition.
Knotel, which has this week raised $400 million, giving it unicorn status, has done a few things differently. It’s now raised a total of $560 million, and is now valued at more than $1 billion.
It’s reversed the WeWork “co-working” model and instead of “WeWork” branding everywhere, simply leases buildings, takes a small office for its staff and then kits out the building with modular furniture a company can just move straight into and call their own. Companies can flex up or down in size as they please, all with their name on the front of the building, not Knotel.
Instead of expanding everywhere, as WeWork seems intent on doing, it’s going after only the world’s 30 largest cities, and going in as deep as possible into each one.
How Pivotal got bailed out by fellow Dell family member, VMware
VMware made two major acquisitions this week, grabbing Pivotal Software and Carbon Black in multi-billion dollar deals. Our enterprise reporter Ron Miller looks at what the Pivotal transaction means, and how it fits into the Dell EMC constellation.
Pivotal went public last year, and sometimes struggled, but in June the wheels started to come off after a poor quarterly earnings report. The company had what MarketWatch aptly called “a train wreck of a quarter.”
How bad was it? So bad that its stock price was down 42% the day after it reported its earnings. While the quarter itself wasn’t so bad, with revenue up year over year, the guidance was another story. The company cut its 2020 revenue guidance by $40-$50 million and the guidance it gave for the upcoming 2Q 19 was also considerably lower than consensus Wall Street estimates.
The stock price plunged from a high of $21.44 on May 30th to a low of $8.30 on August 14th. The company’s market cap plunged in that same time period falling from $5.828 billion on May 30th to $2.257 billion on August 14th. That’s when VMware admitted it was thinking about buying the struggling company.
Tumblr’s next step forward with Automattic CEO Matt Mullenweg
Tumblr tumbled out of TechCrunch parent company Verizon Media’s portfolio last week, selling for pennies on the dollar to WordPress.com owner Automattic. TechCrunch editor Brian Heater sat down with Automattic founder and CEO Matt Mullenweg to discuss what the transaction means for the future of Tumblr and Automattic’s strategy in general.
Heater:Do you think that the adult content [restriction] was a wrong move?
Mullenweg:I think that it’s really important and everyone would agree that you want to keep inappropriate content from people who shouldn’t be doing it, including minors. That’s really, really important and I don’t think there’s any controversy there. Now I do think there are some bugs in the implementation, that caught up a lot of content that they weren’t trying to block. So there’s, like I said, there are a few issues built into there, and any bugs we’re going to try to fix up as soon as possible.
It’s a very difficult problem. It’s also one that with WordPress.com we have a ton of experience in. WordPress.com also does not allow pornography, and we’ve been fine. Instagram doesn’t allow porn. It’s been fine. This is not an unusual stance and I don’t think it’s going to hold back the company’s growth. They’re just… You have to do it right. Blocking legitimate content, that’s a terrible user experience.
Frontier technologies are moving closer to the center of venture investment
We’ve heard about so-called frontier tech for a long time, but now it seems that VCs are becoming amenable to investment in the sector (outside of the few like Lux Capital and Founders Fund who have centered their investment theses in this area). Our LA-based editor Jon Shieber interviews a number of VCs and founders to get the lay of this new land.
“There’s a motivation from a group of LPs to really back the type of investors who want to back world-changing companies,” Saenko says. “Possibly it’s hubris but it’s largely well-placed and there seems to be a movement to invest in… world-positive technologies.”
Fund of fund investors are embracing frontier technology investments as a strategy.
Adding fuel to the fire is the changing nature of limited partners. Many new family offices have become unbelievably wealthy on the back of technology innovation and these new money billionaires want to put their investment dollars to work in companies that have a broader vision. Perhaps it takes the fantastically wealthy to invest in companies that are trying to make science fiction and fantasy a reality?
Can healthtech startups ever create true value for users?
We have covered a lot of the rise of healthtech, but we haven’t looked as much at some of the downsides when you combine disruptive technologies with people’s health. Stanford and NYU medical researcher Eli Cahan investigates what it will take for these startups to start adding fundamental value to patients and healthtech users.
There is also emerging evidence of potential harm wrought by these types of innovations. Researchers have discovered measurement errors and validation failures across many domains in digital health, including products made by prominent companies such as Omron, Garmin, MisFit and Withings.
Researchers have also documented major safety and reliability concerns. For instance, an application produced by Pfizer inaccurately measured blood glucose levels, leading the application to recommend administration of inappropriate doses of insulin — recommendations which can be life-threatening.
Additionally, when it comes to AI/ML technologies specifically, researchers have identified intrinsic racial and socioeconomic biases. Melanoma detection, for instance, often demonstrates markedly poorer performance in dark-skinned individuals when using AI/ML. Far from improving health outcomes for all patients, these ingrained biases could worsen health disparities if left uncorrected.
Two podcast transcripts on building your startup
Finally this week, we have two podcast transcripts we thought were interesting enough to share with Extra Crunch members:
- ‘Breaking Into Startups’: Torch CEO and Well Clinic founder Cameron Yarbrough on mental health & coaching
- ‘This is Your Life in Silicon Valley’: The League founder and CEO Amanda Bradford on modern dating, and whether Bumble is a ‘real’ startup
Thanks
To every member of Extra Crunch: thank you. You allow us to get off the ad-laden media churn conveyor belt and spend quality time on amazing ideas, people, and companies. If I can ever be of assistance, hit reply, or send an email to danny@prod22.techcrunch.com.
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