TechCrunch+ roundup: Alternative financing, Web3 adoption, India’s hot Q3 fundraising

Web3 is still taking shape, so it is hard to define.

At TechCrunch Disrupt, Houseparty founder Ben Rubin emphasized decentralization as Web3’s central feature. In today’s Web 2.0, individuals give money and personal data to network operators in exchange for access to information.

“In Web3 there is a possibility — not saying that it’s going to actually 100% gonna happen — but there is a possibility where the network owns the network,” said Rubin. “And that’s, I think, the simplest way, the shortest way I can explain it.”

In conversation with reporter Taylor Hatmaker, Rubin said NFTs show that individuals can benefit from Web3 adoption, while decentralized finance and cryptocurrency trading are more commercialized forms.

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“It’s not going to be perfect, but it’s going to be a better incentive alignment than we have right now. And that will create competition on incentive alignments with their users,” said Rubin.

It’s an interesting discussion that helped me better understand the topic, although I will admit that the notion of public networks where everyone is presumed to be trustworthy is still a bit of a mind-bender.

We have many more Disrupt recaps to come in the next few days, so stay tuned.

On a personal note: I celebrated my second anniversary at TechCrunch yesterday, and I’d like to thank the incredible team I work with for making all of this possible!

Thanks very much for reading,

Walter Thompson
Senior Editor, TechCrunch+

Early Q3 indications show India’s startup ecosystem is going gangbusters

It’s the beginning of Q4, so Alex Wilhelm couldn’t help but get an early start on parsing Q3 data. For Thursday’s Exchange, he looked at preliminary data out of India and China.

“The trendlines appear clear,” he writes.

“One more great quarter from India and a modest decline in China could see the former dethrone the latter for second place in the global startup market fundraising ranks.”

Scaling across Series A to C

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

It’s hard to find actionable, proven advice for scaling startups.

That’s because only 7% of the startups that raise seed rounds are able to grow their companies enough to land a Series C investment, according to a Dealroom study.

To create a framework for founders who are charting a path from $1 million to $25 million in annual revenue, Arthur Nobel, a principal at Knight Capital, conducted 47 interviews with founders and investors who’ve taken startups from Series A to C.

More than an overview, the article offers approaches for navigating the challenges of T2D3 (triple, triple, double, double, double) growth, specific hiring recommendations and other strategic insights.

As a bonus, the post also includes steps and visualizations you can use to create your own scaling roadmap.

“The takeaway is to initially figure out in which stage your company and departments are in and only do what is required for that stage,” writes Nobel.

Which form of venture debt should your startup go for?

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Startup founders have more options than in years past when it comes to fundraising, thanks in large part to a surplus of liquidity. Besides traditional VC, crowdfunding, venture banks and venture debt funds are all viable options.

In a detailed overview of venture debt options, Andy Weyer, managing director of technology at Runway Growth Capital, shares three use cases depicting how debt capital can benefit borrowers hoping to retain leverage for future rounds or access working capital.

“Think of capital availability as a spectrum, from low risk and low return (venture banks) to high risk and high return (venture capital), with venture debt funds sitting somewhere in the middle,” advises Weyer.

3 questions startups must answer before taking on their largest competitors

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There is no level playing field in capitalism, but it is easier than ever for a scrappy startup to go head-to-head with industry leaders.

Warby Parker is reshaping consumer expectations about eyewear, just as Poshmark and ThredUp made a direct run at eBay and the luxury resale market.

In a world where customers are more loyal to value than branding and 18-month roadmaps are the norm, startups that develop solid competitive plans have an advantage, says Sudheesh Nair, CEO of business intelligence company ThoughtSpot.

“Successful startups will inevitably draw the attention of powerful incumbents in their industry,” he writes for TechCrunch+. “They will fight you, but if you are positioned well for the challenge there has never been a better time to prevail.”

The death of identity: Knowing your customer in the age of data privacy

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End users and regulators are increasingly unhappy about how tech companies slice and dice our personal data. Many countries and regions have been enforcing new privacy guidelines, and consumers are embracing privacy features that make it harder to track them for targeted advertising and market research.

According to Ted Schlein, a general partner at Kleiner Perkins who focuses on cybersecurity and enterprise software, companies should consider shifting to pattern analysis.

“Thanks to rapid advances in artificial intelligence (AI) and machine learning (ML), companies can process and interpret first-party data in real time and develop actionable behavioral intelligence,” he says.

“Real-time analysis can help companies identify patterns of behavior to understand how customers engage, and why — all while protecting their privacy.”

What Amplitude’s direct listing says about IPO pops (and how startups can avoid them)

Alex Wilhelm could not be more clear about the audience for this edition of The Exchange:

“What follows is a dive into the IPO pricing issue and how startups are looking to get around the matter through alternative listing mechanisms,” he writes, adding that the column closes with notes from an interview with Amplitude CEO Spenser Skates.

“If you care about the value of private companies and how they are priced, this is for you. If you do not, please read anything else; you are going to be bored out of your socks.”

NBA Top Shot creator on the NFT craze and why Ethereum still isn’t consumer-friendly

Roham Gharegozlou has been betting on the potential success of NFTs for years. This year, it happened.

Gharegozlou and the team at his startup, Dapper Labs, shipped the blockchain world’s first popular game, CryptoKitties, back in 2017.

The startup then launched NBA Top Shot late last year, and it promptly caught fire and brought worldwide attention to the crypto collectibles space.

Lucas Matney caught up with the Dapper Labs CEO at TechCrunch Disrupt 2021 last week to discuss the challenges facing the crypto space, the future of Ethereum and how quickly NFTs blew up this year.

“I knew it would be fast, but NBA Top Shot went from 4,000 to 400,000 users in a matter of weeks,” Gharegozlou said.

Employers are consumer edtech’s next beta test

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Two things are true: Edtech companies are looking for ways to grow their valuations, and a strikingly high percentage of employees are dissatisfied in their current jobs and hope to make a change.

“Employers are under fresh pressure to retain talent, which has made some turn to more comprehensive and creative benefits,” writes Natasha Mascarenhas in an article about new offerings from MasterClass and Outschool meant to help workers develop soft skills.

“Think a class on the art of negotiation by Chris Voss, former FBI hostage negotiator, or a lesson on effective and authentic communication by Robin Roberts, a ‘Good Morning America’ anchor,” she reports. “The value proposition, therefore, is more about complementary skills that could develop or upskill a workforce.”

Warby Parker makes it clear that direct listings are unicorn-friendly

Image Credits: Warby Parker

Alex Wilhelm takes a look at direct-to-consumer eyewear company Warby Parker, which direct listed this week.

“The company not only listed, but did so at a price point that was above its final private-market valuation, and its shares appreciated rapidly during its first day of trading,” Alex writes.

“For the DTC market, the results partially combat the odor that 2020’s ill-fated Casper IPO left lingering around the startup business model category.”

Dear Sophie: Any advice for getting media coverage for my startup?

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Image Credits: Bryce Durbin/TechCrunch

Dear Sophie,

I’m an entrepreneur working on building up my qualifications for the EB-1A green card (or maybe an O-1A).

Toward that goal, I’ve been trying to get media coverage about my startup, but it’s competitive out there! Any advice?

— Craving Coverage

Startups have more options than ever to lower their reliance on venture capital

Following last week’s TechCrunch Disrupt event, Alex Wilhelm and Anna Heim considered startups’ various options for fundraising beyond venture capital.

They pulled notes from a Disrupt panel on revenue-based financing “to help frame our thinking around venture capital investment, and when startups may want to pursue other methods of funding.”

“With alternative capital concerns like Pipe attracting top talent while expanding to new markets, and Clearbanc rebranding to Clearco while raising $100 million earlier this year, it’s clear that the market for funds outside of traditional venture checks is maturing. Let’s talk about it.”