SexTech, Kobalt, sales efficiency, philanthropy and ethics, Brexit, and startup growth tactics

Tech startups want to destigmatize sex

Sex, despite being one of the most fundamental human experiences, is still one of those businesses that some advertisers reject, banks are hesitant to financially support and some investors don’t want to fund.

That’s TechCrunch’s Megan Rose Dickey discussing the rise of “sextech”, a movement among technologists and product designers to open up one of the most fundamental human experiences to technological innovation. Yet, the often puritanical nature of business means that while some innovations are widely received and lushly funded, other startups remain adrift, struggling to advertise and secure funding.

Megan talks with a range of founders and investors in the space, finding the positive stories along with a heap of frustrating ones. There is a lot more work to do here.

But in reality, it’s hard to say how big that market really is, Founders Fund Partner Cyan Banister, who has invested in a handful of sextech startups, tells TechCrunch.

“It’s hard to gauge and the reason why is these businesses aren’t capable of operating at the same scale a normal business could operate at,” Banister says. “They’re kind of cut off at the knees by not being able to advertise. They can’t be on Twitter, Facebook and Instagram in the way other businesses could… It’s hard to know how big these companies could be if we could change the social norms and stigmas associated with these products.”

Banister has invested in O.School using personal funds, and in Unbound via venture firm Founders Fund. Unbound, a sexual wellness startup for women, focuses on sex toys, accessories and jewelry that doubles as pleasure products. In December 2017, Unbound raised $2.7 million from Founders Fund, Slow Ventures and others.

“The objective has always been to take the category mainstream like Viagra,” Unbound CEO Polly Rodriguez tells TechCrunch.

How Kobalt is simplifying the killer complexities of the music industry

Extra Crunch media columnist Eric Peckham is back with the next part of his three-part EC-1 looking at music infrastructure startup Kobalt. In part one, Eric talked about how a former Swedish saxophonist built and grew what has become one of the most important music industry startups to arise from Europe since Spotify.

In this new part, Eric looks at how Kobalt is strategically positioned in the complicated copyright management and collections industry, and how the company has used technology to radically alter the economics of its business. Kobalt is a pretty classic case of disruption, but it also a reminder that even in 2019, there are whole industries that still haven’t had technological innovation.

Kobalt is as much a compliance tech company as it is a music company: it has built a quasi “operating system” to more accurately and quickly handle this using software and a centralized approach to collections, upending a broken, inefficient system so everything can run more smoothly and predictably on top of it. The big question is whether it can maintain its initial lead in doing this, however.

Calculating sales efficiency in a start-up: The magic number that will help you scale

How do you know whether your sales organization is efficient? There are a variety of metrics to choose from, but Ryan Floyd, the founding managing director of Storm Ventures, offers his analysis of what he looks for in startups. Calculating sales efficiency is as simple as dividing annual recurring revenue by sales and marketing costs, and Floyd says that “Generally speaking for a SaaS business, if you can spend $1 to generate $1 of new ARR, you’re on your way. Ideally, your ratio should be 1 or greater.”

If your sales efficiency is greater than 1, congratulations: you’re doing great. Caveat: just about everyone’s sales efficiency is >1 early on, because you have almost no costs. You’ll find that number sinking very quickly as the best salespeople (typically the founders) no longer scale and you need to add more; at that point, almost everyone goes below 1.

How the Valley can get philanthropy right with former Hewlett Foundation president Paul Brest

Our new contributing writer Scott Bade, who was formerly a speechwriter for Michael Bloomberg, is launching a mini-series discussing the future of tech and philanthropy. In this inaugural conversation, Scott interviews Paul Brest, who is the dean of Silicon Valley philanthropists, having run the Hewlett Foundation for many years.

Bade: A lot of philanthropy has traditionally been focused locally. Is there a special responsibility for tech donors to focus on local issues in the Bay Area given their outsize impact here? Or do they have broader obligations as global firms?

Brest: There’s a fundamental argument on this issue. There’s a paper written a couple of years ago by Alexa Cowell and a colleague [Heather McCleod Grant] called The Giving Code which essentially argues that Silicon Valley philanthropists are not giving as much as they should to local causes.

Partly because it’s their community, partly because the wealth in the Valley may be creating more problems for poor people in the Valley. That’s one side.

The other side would be the effective altruism argument. There’s the Open Philanthropy Project created by Dustin Moskovitz and Cari Tuna, who say that money should go where it is going to do the most good for the people in greatest need.

…

I guess, to the extent that the mechanisms by which the wealth was created have actually exasperated problems for the poor, then I think there’s an obligation to try to remediate the problems that they have caused. I think even if you’re an effective altruist, that there are moral obligations to not cause harm, or to remedy harms you’ve caused that may either take precedence over, or at least compete with the more general utilitarian effective altruist argument.

The MIT Media Lab controversy and getting back to ‘radical courage’, with Media Lab student Arwa Mboya

Meanwhile, our resident tech ethicist Greg Epstein tracked down and interviewed Arwa Mboya, who at 25 “was among the first public voices (arguably the very first) to forcefully and thoughtfully call on [MIT Media Lab director Joi Ito] to step down from his position.” Greg and Mboya discuss what it takes to fight for what’s right even against extreme adversity, and how her background prepared her for the rapid series of events that have transpired the past few weeks.

Mboya: Then the Tech [MIT’s student newspaper] reached out. I wrote it out rapid-fire. I just had all these feelings. like, “Ah, I’ve got to do it.” What was more frustrating than Joi’s silence was the ‘brush it under the rug’ attitude a lot of fellow students and faculty had. I totally get that people were afraid to speak up. I was afraid too. I totally get that people didn’t want to ruin the shine of the Media Lab.

This doesn’t look good for all of us. It’s not fun, it’s not comfortable. We could have done what Harvard did, like, “Wup, we’re not saying anything. Done.” The Tech agreed, they published it, and that was the beginning of the craziness.

Despite Brexit, UK startups can compete with Silicon Valley to win tech talent

Hired CEO Mehul Patel writes in with a useful corrective to the narrative that the UK’s startup ecosystem could be globally competitive but with the exception of Brexit. The reality, he writes:

Another important factor that impacts a company’s ability to attract and retain tech workers is earning potential. Salary is a critical part of the conversation. We recently analyzed 420,000 interview requests and job offers from the past year facilitated through Hired’s marketplace and collected survey responses from more than 1,800 global tech candidates on the Hired platform. Our goal was to share salary trends by market and understand how compensation affects job satisfaction and personal fulfillment for tech talent across the globe.

This data collection culminated in our latest State of Salaries Report which revealed that London tech talent earns £62K ($79K) a year on average. This is 67% higher than the average London salary of £37.1K.

However, earning potential is much higher in US tech hubs — San Franciscan tech workers earn 83.5% more than London techies, with an average salary of $145K. Even in places that have not traditionally been considered tech hubs such as Austin, Texas, techies are paid a salary of $125K. With this in mind, it is no surprise that talent is tempted to look beyond the UK.

How to work with top influencers and avoid ad blockers

Finally, we are starting a new series called the Growth Report from Julian Shapiro of BellCurve.com looking at the range of techniques and tactics that founders use for growing their startups. We unlocked this debut article for all TechCrunch readers, and the next two columns will be published this weekend exclusively for Extra Crunch members, so be on the lookout.

Tips for effectively working with influencers

Based on insights from Barron Caster of Rev.

Create a referral system for influencers: Influencers who sign up others get a % of their sales or signups. This makes a mini-pyramid structure and turns your influencers into a salesforce. Why is this important? Some influencers don’t actually sell products, but just sign up tons of other influencers. Find these people.

Get everything you can out of an engagement (e.g. permission to use them as a testimonial for emails, social proof, etc.).

ICYMI: Earlier this week:

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@techcrunch.com.