Tag: cofounder

Get Bigger, Go Faster: How Venture Capital Markets Won By Tossing Out Their Rulebooks In 2021

Mark Goldberg knows how much the venture capital market has changed in recent years. A partner at Index Ventures, Goldberg remembers the days when investors would meet up on Monday mornings to sip cappuccinos, pore over pitch decks and dig into due diligence. But in today’s record-breaking market, things look a little different.

At his firm, lengthy investor meetings have been replaced with blocked calendar slots in case a partner has to sign a last-minute term sheet quickly. “The whole way that we have organized has changed to adapt to the market, ” Goldberg says. “Now capital is on demand. You can get a round done in 24 hours from a traditional VC fund and a host of new entrants.”

The due diligence process for a potential startup investment is extensive and entails gathering market data, rifling through documents of financial data and getting to know a company’s founders and customers through interviews.

This exercise used to take months on average, but in today’s market, venture capitalists have a week or two for the process — if they are lucky. Most are left to cram months of diligence into a weekend or in some cases, a single day. VCs have adapted streamlined strategies built on efficiency — all while attempting to avoid sacrificing quality. 

For many that has meant making the process more fluid than formal. VCs aren’t waiting for companies to come pitch to them, instead they are constantly tracking and gathering insight on startups that could be potential portfolio companies in the future.

Multi-stage firm Felicis Ventures even hired a head of research in 2021 to assist with this. Frontloading the work gives VCs a “prepared mind” — as multiple investors put it — allowing them to move quickly when presented with a term sheet. “We’ve done months and months of work that is invisible to the founder,” Goldberg says. “The diligence is more intensive now. It’s just you have to pick and choose your battles and be ready on a minute’s notice to say yes. You need to make a decision three months ahead.”

Seed-focused micro fund Bowery Capital says its small team has managed to fit the process into two to three weeks but can push really hard to get things done faster if needed. Bowery general partner Mike Brown tells Forbes that operating on an expedited timeline has pushed the firm to give more weight to new areas of due diligence.

“We really over-index on the team and clear their prior execution ability,” Bowery says, noting that as a seed investor these decisions surround a potential 10-year plus relationship. “If there is one thing we can’t get wrong with this stuff, it’s picking the wrong founders.”

As a solo general partner, Nisha Desai, the founder and managing partner at Andav Capital, says last year forced her to be incredibly disciplined with her time to make sure she gives herself enough time to properly research and prepare. Thankfully though, she thinks founders have also leaned into the dynamic.

“I will say founders have gotten smarter about due diligence. I rarely get deep or even do a first call, until I have enough information,” she says. “That’s something founders should recognize for solo GPs, our biggest asset and most valued asset is our time. We are only going to spend time with you if we think something is there.”

The compression of due diligence comes in lockstep with a huge new influx of capital into the venture world. On the seed level, the number of firms has grown from about 120 in 2013, when Pejman Nozad started his firm Pear, to “thousands” today, he says. Solo shops like Desai’s Andav Capital are also picking up steam. In some cases, angel investors have “morphed into more of an institutionalized firm,” says Defy Partners founder Neil Sequeria.

The abundance of capital has, in turn, allowed companies to raise money at an unprecedented rate, says IVP general partner Jules Maltz. Hopin, a virtual events startup in which Maltz’s firm invested, has raised four funding rounds since June 2020, in the process growing its valuation to $7.8 billion from $245 million. “Historically, 18 months was a good time period between one round and the next round,” Maltz says.

Although the most active investors in 2020 were blue chip venture firms, the first half of 2021 saw crossover funds Tiger Global and Insight Partners take pole position, according to data from Crunchbase. “The hedge funds and public investors who’ve come into the private markets have pushed the existing private investors like us to start upping our game on how we do diligence,” Maltz says.quintex-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-2-1-1-1-1-2-2-1-1-1-1-1-1-1-1-768x114-1-1-2-1-1-4-1-2-2-1-2-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-2-1-1

But while venture shops have been forced to adjust to the hedge fund playbook in some ways, they are also changing the industry on their own terms. “One thing I think Andreessen Horowitz started, which isn’t often attributed to them, is this investing strategy where you put massive amounts of money into a seed deal which has nothing substantial yet to validate the valuation.

Yanev Suissa, managing partner of SineWave Ventures, a firm which specializes in public sector guidance for startups. The logic for these heavyweights, with whom SineWave often co-invests, is that one huge success in the portfolio is enough to validate all the high-risk bets.

“I think the other traditional bigger venture funds are going to be forced to follow that trend,” Suissa says. “They’re already starting to, and they’re going to keep doing it even if there isn’t a ton of financial discipline associated with it. That will be a problem going forward that every venture fund is going to have to navigate.”

Forbes reported in December that data connector startup Airbyte raised funds at a $1.5 billion valuation despite its annual recurring revenue not yet reaching $1 million. Another example in Andreessen Horowitz’s own portfolio is the data infrastructure startup Anyscale, which raised at a $1 billion valuation in December despite reports that its annual recurring revenue was below $5 million.

Cofounder Ion Stoica contends the company’s open source origins justified its valuation markup because it created a market even before sales commenced. He points to successful open source companies like Databricks and Confluent as precedent; even still, both firms were valued at half the price of Anyscale at the same funding stage.

In the case of Databricks, the company had $12 million in revenue ahead of its raise. To Ben Horowitz, who has invested in both Databricks and Anyscale, the influx of unicorns is simply a sign that VC is finally starting to reflect the market reality.

“I do think people get confused by the numbers when you look at them versus historical valuations,” Horowitz says. “In some ways, everything was undervalued in venture capital by a lot in that we were doing deals for very cheap for things that could be worth $100 billion. Pricing is catching up to what’s actually going on in the world.”

Rebecca Szkutak

Rebecca Szkutak

I’m a reporter covering venture capital, startups and investors out of New York. I was previously a reporter at the Venture Capital Journal and Private Debt Investor. I graduated from Emerson College in 2017 with a degree in journalism. Follow me on twitter at @rebecca_szkutak or send me an email at rszkutak@forbes.com. 

Kenrick Cai

Kenrick Cai

I am a senior reporter for technology, covering venture capital and startups with a focus on Silicon Valley and the greater West Coast. I am based out of Forbes’ San Francisco bureau, where I previously covered tech billionaires as a wealth reporter, and wrote about artificial intelligence as an assistant editor for technology. I graduated from Duke University, where I spent time as news editor for The Chronicle, the university’s independent news organization. Follow me on Twitter at @kenrickcai and email me at kcai [at] forbes.com.

Source: Get Bigger, Go Faster: How VCs Won By Tossing Out Their Rulebooks In 2021

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Pinterest Asks Court To Dismiss Influencer’s Claim That She’s An Uncredited Cofounder

Pinterest wants a lawsuit brought by a woman claiming to be an uncredited cofounder dismissed, saying she played no role in the company’s start.

Christine Martinez, who has long operated as a popular influencer on Pinterest, originally filed against Pinterest in September, alleging breach of implied contract, idea theft, unjust enrichment and unfair business practices. Martinez maintains she helped the company’s acknowledged founders Ben Silbermann and Paul Sciarra get Pinterest going in 2009 when the two were shifting focus from a shopping app to what became the social media company.

Pinterest went public in 2019, and its stock has proposed during the pandemic as more users browsed its app while at home. Silbermann remains the company’s CEO. Sciarra left soon after the company began. Both still hold lucrative stakes in the company worth more than $1 billion.

In a new legal filing in California Superior Court, Pinterest further presses for dismissal by arguing that Martinez waited too long to bring this up, her claims falling outside the statutes of limitation. Martinez hasn’t specified exactly how much she thinks she’s entitled to, though a stake in Pinterest similar to Silbermann’s and Sciarra’s would be worth over a billion dollars.

It’s unclear why Martinez waited more than a decade to press her claims, while former and current employees at Pinterest have said they have little to no recollection of her. She is not described in any previous news coverage of the company as a cofounder, and in her 2012 book how to succeed on Pinterest, The Complete Idiot’s Guide to Pinterest Marketing, she describes herself only as an “early adopter.”

The battle between Martinez and Pinterest is made complicated by several things. While she may or may not have been a cofounder, what’s clear is that she and Silbermann were once friends, reportedly close enough to appear in Silbermann’s wedding party. Further, Pinterest was hit last year by complaints from several employees that it mistreated female staff and people of color.

Last month, it pledged to spend $50 million on diversity initiatives within the company, ending litigation brought by Pinterest shareholders. In 2020, it agreed to pay $22.5 million to former Chief Operating Officer Françoise Brougher, who had brought a case alleging racial and gender discrimination.

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Abram Brown

Abram Brown

I’m a senior editor at Forbes, where I cover social media, creators and internet culture. In the past, I’ve edited across Forbes magazine and Forbes.com.

Source: Pinterest Asks Court To Dismiss Influencer’s Claim That She’s An Uncredited Cofounder

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Critics:

Pinterest has settled a lawsuit brought against it by shareholders who claimed that the company’s workplace discrimination against women and racial minorities hurt its reputation, according to NBC News. The company reportedly agreed to spend $50 million on improving its diversity and equity, and will let former employees talk about racial or gender discrimination they experienced, even if they were bound by a non-disclosure agreement. Other financial details of the settlement weren’t disclosed.

The lawsuit was filed against the company’s executives in November 2020, with shareholder claiming that the company was acting irresponsibly by doing nothing to address “widespread claims of race and gender discrimination.” The complaint also accused the company’s CEO of “surrounding himself with yes-men and marginalizing women who dared to challenge Pinterest’s White, male leadership clique.”

That year, multiple women reported that Pinterest paid them less than male employees, and some reported racial discrimination and retaliation for speaking out. The Verge also reported on discrimination within the company’s finance team. Separately, the company paid out $20 million to its former COO Françoise Brougher after she alleged that the company paid her less than male colleagues, didn’t invite her to important meetings, and fired her after she brought up the issues.

LinkedIn Co-Founder Reid Hoffman on ‘Blitzscaling’ and Unintended Consequences

“You can’t anticipate everything. You can’t prep for everything,” said LinkedIn co-founder and former CEO Reid Hoffman during an interview Thursday at the 2021 Inc. 5000 Vision Conference. Entrepreneurship, he adds, is like “running really fast through the fog,” so the best thing you can do is equip yourself with learned wisdom from others who have been down the path before you.

Hoffman, who today is a partner at the venture capital firm Greylock, has had a hand in many fast-growth companies that have achieved enormous scale. In addition to LinkedIn, he was a top executive at PayPal, along with Peter Thiel, Elon Musk, and others who’ve gone on to become household names. And he’s been an investor in Facebook and Airbnb, among others.

Hoffman also is a three-time bestselling author whose newest book, Masters of Scale: Surprising Truths From the World’s Most Successful Entrepreneurs, which he co-wrote with June Cohen and Deron Triff, builds on the success of their podcast by the same name. Both the podcast and the book feature stories and lessons drawn from deep interviews with dozens of famous founders, along with tales from Hoffman’s own career. In short: Few people understand the art of scaling a business better than Hoffman.

In his conference appearance, Hoffman highlighted a few of the top takeaways from the new book and discussed the ethics of Silicon Valley-style blitzscaling at a moment when the type of tech giants he has helped create have come under increasing scrutiny.

Beware unintended consequences

One of the most memorable moments of Hoffman’s presentation came when he addressed the ethical complications that can come when scaling as quickly as possible brings unintended consequences. Especially as a growing organization moves “from single-threaded to multi-threaded,” Hoffman says, it can be hard as a leader to both maintain the speed to scale and keep on top of all the new threads–let alone anticipate all potential scenarios.

He recommends hiring “somebody whose responsibility is to say, ‘What could possibly go wrong? What would have the wrong impact with our customers or with society, and what are the things we could do now to prep against it?'” Nothing is fail-safe, he cautions, but the more you think ahead, the more nimbly you can respond when necessary–“because if things start going wrong at scale, that can be even more challenging.”

Let some fires burn

As Hoffman knows well, running a fast-growth company can feel like an exercise in constant crisis management. Rather than trying to put out every fire immediately, he advises, establish a triage system that allows you to, in his words, “let some fires burn.” An entrepreneur should ask herself a series of questions: “Which thing is most likely to kill us first, or limit our scale? Which thing, if we don’t start now, won’t be controllable later?”

The answers aren’t always obvious, he points out–some fires, though harder to control later, will be manageable because you’ll have more resources as you grow. “Generally speaking, you have a limited amount of resources to focus on some fires,” he says. “If you try to do them all at the same time, maybe you won’t get any of them sufficiently.”

It all comes back to mission

It’s not enough, Hoffman says, for your company to provide jobs or for people to love your product. “Those are important things, true, but sometimes your product might be questionable–like cigarettes.” So you should also ask, “Why is society better with your product in it?”–and invest in growing that direction.

That isn’t anti-business, he adds, it’s long-term brand building. It builds cohesion and clarifies decision-making in the company. It’s great for attracting talent. “It can be great capitalism. I think it’s really fundamental to great entrepreneurship and helps through the entire company,” he says.

By Tom Foster, Editor-at-large, Inc.@tomfoster2

Source: LinkedIn Co-Founder Reid Hoffman on ‘Blitzscaling’ and Unintended Consequences | Inc.com

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Keeping Up With E-commerce: Last-Mile Delivery Service Deploys ‘Ninjas’ In Online Shopping Boom

Packages are piled higher than people at Ninja Van’s biggest sorting center at a freight facility near Singapore’s Jurong port. Southeast Asia’s big e-commerce operator, Shopee, has just finished its “9/9” online shopping sale and says it got a record 17 million orders in one day. Ninja Van now has the task of delivering most of those orders. “We spend months preparing for how much capacity they require, making sure that we change our processes and have enough drivers,” says Ninja Van’s 32-year-old founder Lai Chang Wen.

Today, Ninja Van delivers on average one million parcels a day around the region, deploying some 20,000 full-time delivery staff, who are dubbed ninjas. Ninja Van’s sales in 2017 rose 9% from a year ago to $13 million and Singaporean Lai was inducted into Forbes 30 Under 30 Asia in 2016.

Ninja Van has so far raised $140 million from a group of investors that includes B Capital and super app Grab. “They’ve really been a leader in last-mile delivery. They are today, we believe, the best service in terms of delivery rates. Everything they’ve achieved using technology is driven to increase customer satisfaction,” says B Capital cofounder Eduardo Saverin, who is a director on the company’s board (and cofounder of Facebook).

Today In: Asia

Lai cofounded Ninja Van in 2014 after a stint as a derivatives trader at Barclays and then setting up Marcella, a custom menswear shop based in Singapore. Monk’s Hill Ventures Managing Partner Lim Kuo-Yi remembers passing on Lai’s pitch to invest in Marcella, but was intrigued by Lai’s proposed solution to the firm’s delivery hurdles.

That proposal is now Ninja Van. Its value proposition is providing a more effective way for Southeast Asia’s small and midsized enterprises to deliver their products as e-commerce in the region explodes. Over 150 million Southeast Asians are now buying and selling online, triple the number from 2015, according a recent report by Bain, Google and Temasek. “What Ninja Van has shown in the last four or five years is the ability to grow the business threefold year-on-year,” says Lim.

Ninja Van is one of a slew of companies offering logistics services for e-commerce deliveries such as Lalamove, GoGoVan and UrbanFox. Competing on cost, speed and reliability isn’t enough, Lai says. Ninja Van also works with SMEs to cut costs and expand their markets. Ninja Van in September introduced a program in Indonesia called Ninja Academy that teaches SME owners about social marketing, inventory management, procurement and sales strategy. “A big part of the question around Ninja Van is how do I evolve my customer base to enable the long tail of commerce,” says Saverin.

Ninja Van entered the logistics scene at an opportune time. Photo: Sean Lee for Forbes Asia

Sean Lee for Forbes Asia

Ninja Van also mines its data to find hidden efficiencies. For example, when multiple merchants are buying the same raw material or product, Ninja Van can then broker a deal to buy in bulk for a lower price on behalf of several customers. The same goes for freight space. “We are the biggest purchaser of air cargo across Indonesia,” says Lai.

With as much as 70% of its transactions still cash on delivery, Ninja Van processes more than a billion dollars in payments a year. While processing those payments, it’s sitting on a massive pool of liquid capital. “There’s opportunity there to extend some level of working capital financing to bridge that gap,” says Lim.

Grab’s investment in Ninja Van is the culmination of an ongoing discussion about collaboration. “We kept finding ways to work together,” says Lai, who first started talking with Grab’s cofounder Anthony Tan four years ago about merging their fleets to improve efficiency.

The two eventually decided that having separate, specialized fleets was more efficient than a combined one, but they have developed a special partnership. Grab customers can access Ninja Van on Grab’s app depending on the kind of delivery. Grab deploys its drivers for on-demand pickups and deliveries, but offers Ninja Van as a discount option for less urgent, next-day courier service to SMEs. Grab has already integrated Ninja Van into its service offering in Indonesia and the Philippines, and plans to do so in Vietnam later this year.

Lai, meanwhile, spends much of his time now in Malaysia and Indonesia, where Ninja Van launched in 2015. “The landscape is very exciting right now, comprised of a lot of small merchants selling on marketable channels,” Lai says. But the real prize, he says, lies beyond Southeast Asia. “There’s a lot more global flow,” he says. Lai won’t name any potential partners, but says the U.S. is “definitely a target.”

Pamela Ambler

Pamela covers entrepreneurs, wealth, blockchain and the crypto economy as a senior reporter across digital and print platforms. Prior to Forbes, she served as on-air foreign correspondent for Thomson Reuters’ broadcast team, during which she reported on global markets, central bank policies, and breaking business news. Before Asia, she was a journalist at NBC Comcast, and started her career at CNBC and Bloomberg as a financial news producer in New York. She is a graduate of Columbia Journalism School and holds an MBA from Thunderbird School of Global Management. Her work has appeared in The New York Times, Washington Post, Yahoo, USA Today, Huffington Post, and Nasdaq. Pamela’s previous incarnation was on the buy side in M&A research and asset management, inspired by Michael Lewis’ book “Liar’s Poker”. Follow me on Twitter at @pamambler

Source: Keeping Up With E-commerce: Last-Mile Delivery Service Deploys ‘Ninjas’ In Online Shopping Boom

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Sick of online shopping deliveries that go MIA or take forever? Ninja Van’s Lai Chang Wen saw how traditional couriers were spoiling the experience – so he jumped in to spoil the market. Even though he had zero experience. Catch the series Game Changers on Monday, 8pm SG/HK. Watch catch-up episodes on Toggle http://bit.ly/2nRyB7Q

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