Mental Health Startup Uses Voice ‘Biomarkers’ To Detect Signs Of Depression And Anxiety

Young female character having a panic attack, an imaginary monster shadow silhouette, mental health issues, psychology

The quick brown fox jumps over the lazy dog,” Rima Seiilova-Olson says slowly and emphatically over Zoom.

The simple sentence holds enormous value for mental health care, she explains, smiling as if to acknowledge that it might be less than obvious how a silly phrase could be so meaningful to a computer programmer and leader of an artificial intelligence startup.

The short saying contains every letter of the alphabet and phoneme in the English language, says Seiilova-Olson, an immigrant from Kazakhstan who is cofounder and chief scientist of Kintsugi Mindful Wellness. Kintsugi believes these sounds offer invaluable insight that can help mental health providers better support people with depression and anxiety.

The Bay Area-based company is building AI software that analyzes short clips of speech to detect depression and anxiety. This so-called voice biomarker software is being integrated into clinical call centers, telehealth services and remote monitoring apps to screen and triage patients reaching out for support, helping providers more quickly and easily assess their needs and respond.

“There’s just not a lot of visibility as to who is severely depressed or anxious.”

Kintsugi CEO and co-founder Grace Chang

Seiilova-Olson, 36, first met co-founder and CEO Grace Chang, 40, a Taiwanese immigrant now based in Berkeley, in 2019 at an open AI hackathon in San Francisco. Surprised to cross paths at a male-dominated event, the women began comparing notes about their respective personal challenges trying to access mental health care:

Seiilova-Olson had struggled to secure a therapist during postpartum depression with her first child, and when Chang had needed her own support, she said it had taken months for anyone from Kaiser to call her back.

“Living in the Bay Area, you can push a button and a car can come to you or food can come to you,” Chang says. “But this was really a challenge.” As engineers, they viewed the dilemma differently than clinicians might.

“We saw this as an infrastructure problem, where you have so many people trying to jam through that front door,” Chang explains. “But there’s just not a lot of visibility as to who is severely depressed or anxious, who is low-to-moderate. And if we could provide this information to those frontline practitioners, then we’d maybe have an opportunity to greatly alleviate that bottleneck.”

Kintsugi was born out of that idea in 2019. It sits in a competitive space of health tech startups like Ellipsis Health and Winter Light Labs that are using voice biomarkers to detect mental health or cognitive issues, built on research showing that certain linguistic patterns and characteristics of a person’s voice can be correlated with psychiatric or neurological conditions.

Kintsugi last year raised $8 million in seed funding led by Acrew Capital, and in February, announced it had closed a $20 million Series A round led by Insight Partners, which valued the company at nearly $85 million, according to PitchBook.

In-person mental health facilities typically use questionnaires to gauge the severity of patients’ anxiety or depression, measures known as PHQ-9 and GAD-7 scores. But during telehealth visits or phone consults — where face-to-face interaction is lost, making it harder to pick up on symptoms — Kintsugi’s technology helps to fill that gap.

Nicha Cumberbatch, assistant director of public health at Spora Health, a provider focused on health equity and people of color, uses Kintsugi’s software to assess women in its all-virtual, doula-led maternal health program, Spora Mommas.

The voice analysis tool, which Spora began using for patient consultations a few weeks ago, has helped Cumberbatch identify women who are, or may be at risk of, experiencing anxiety and depression before, during or after their pregnancies. When a patient starts speaking to a Spora clinician or doula on Zoom, Kintsugi’s AI begins listening to and analyzing her voice.

After processing 20 seconds of speech, the AI will then spit out the patient’s PHQ-9 and GAD-7. The employee can then use that mental health score to decide what additional testing may be needed and how best to advise or direct the patient to resources — like a psychiatrist, cognitive behavioral therapist or obstetrician.

Cumberbatch says Kintsugi’s technology is allowing her to “​​keep a more watchful eye” on her patients “and then move forward with proactive recommendations around mitigating their symptoms.” And while it’s not meant to replace clinicians or formal medical evaluations, she adds, it can be used as a screening tool to “allow us to have a more well-rounded, 360-view of the patient when we don’t have them in front of our face.”

“That technology… [allows] us to have a more well-rounded, 360-view of the patient when we don’t have them in front of our face.”

Nicha Cumberbatch, assistant director of public health at Spora Health

Dr. ​​Jaskanwal Deep Singh Sara, a Mayo Clinic cardiologist who has collaborated with Ellipsis and led research on potential uses of voice biomarkers for cardiology, cautions that while the technology is promising for health care, the field has a long way to go to ensure that it’s accurate, safe and beneficial for patients and clinicians alike.

“It’s not ready for primetime by any stretch of the imagination yet,” Dr. Sara says. Studies in psychiatry, neurology, cardiology and other areas have shown an association between voice biomarkers and various conditions or diseases, but they haven’t shown how this relationship can be used to improve clinical outcomes, he says.

Such research is “not the same as saying, ‘How can we instrumentalize it in clinical practice, and how feasible is it? How effective is it in gauging an individual’s medical trajectory?’” he explains. “If it doesn’t provide any benefits in terms of how we manage them, then the question is: why would you do it?”

He says addressing those questions is “one of many next steps that we have to undertake on this” and that larger clinical trials are needed to answer them. “If it makes health care delivery cheaper or more efficient, or if it improves outcomes for patients, then that’s great,” he adds. “But I think we need to demonstrate that first with clinical trials, and that hasn’t been done.”

To address these issues and validate its software, Kintsugi is conducting clinical studies, including with the University of Arkansas for Medical Sciences, and the National Science Foundation has awarded Kintsugi multiple grants to ramp up its research. The company is also pursuing FDA “de novo” clearance and continuing to build its own dataset to improve its machine learning models.

(Data and insights from Kintsugi’s voice journaling app, as well as conversations with call centers or telehealth providers and clinical collaborations with various hospitals, all become part of an enormous dataset that feeds Kintsugi’s AI.) Seiilova-Olson says this self-generated, unfettered proprietary dataset is what sets Kintsugi apart in the AI health care space — where many technologies are reliant on outside data from electronic health records.

That collection of troves of data on individuals’ speech can be concerning — particularly in the mental health and wellness space, which is widely considered a regulatory Wild West. (These products and services are often not subject to the same laws and stringent standards that govern how licensed clinicians provide formal medical care to patients.)

But Kintsugi’s founders say that patient privacy is protected because what matters for its technology is not what people are saying, but how they are saying it. Patients are also asked for their consent to be recorded and care is not affected by their decision to opt in or opt out, according to the founders.

Kintsugi says it has served an estimated 34,000 patients. The company is currently working with a large health system with 90 hospitals and clinics across 22 states, and they are active in a care management call center that services roughly 20 million calls per year. It is also partnering with Pegasystems, which offers customer service tools for health care and other industries, to help payers and providers handle inbound calls.

Chang says other customers include Fortune 10 enterprise payers, pharmaceutical organizations and digital health applications focused on remote patient monitoring, but that she could not yet share their names. Kintsugi’s clinical partners include Children’s Hospital Colorado, Joe DiMaggio Children’s Hospital in Florida, Chelsea and Westminster Hospital in London and SJD Barcelona Children’s Hospital in Spain, Chang said.

Prentice Tom, Kintsugi’s chief medical officer, adds that it’s working with the University of Arkansas to explore how the tool can be used to possibly identify patients with suicidal ideation, or increased or severe suicide risk, as well as with Loma Linda University, to look at how the technology can be used to spot burnout amongst clinicians.

The team is also looking for ways to expand availability and uses for younger and elderly patients, as well as for maternal and postpartum populations. And beyond patients themselves, it’s perhaps nurses who are benefiting most from Kintsugi’s work, according to the founding team: having a triage tool that helps reduce administrative work or the time spent asking generic questions enables nurses to more seamlessly move patients in their journey.

But Tom, a Harvard-trained emergency medicine physician and former faculty member at Stanford University’s Department of Emergency Medicine, says Kintsugi is now doing far more than addressing infrastructure issues alone. It’s democratizing access to mental health care, Tom said, moving away from a physician-centric paradigm that caters more to people with significant enough depression that they require medical evaluation.

“This tool actually creates a view of mental health in terms of mental wellness,” Tom said, “where everyone has the opportunity to understand where they sit on the spectrum and that actually stratifies treatment options well beyond the current infrastructure.”

I’m a Senior Writer at Forbes covering the intersection of technology and society. Before joining Forbes, I spent three years as a tech reporter at Politico, where I covered

Source: Mental Health Startup Uses Voice ‘Biomarkers’ To Detect Signs Of Depression And Anxiety

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Who Do Young Entrepreneurs Look Up To? Elon Musk

Steve Jobs is dead, Mark Zuckerberg is tarnished. For the next generation of startup founders, the contributions of Bill Gates feel like ancient history.

In middle school, Kenan Saleh saw the movie The Social Network, the dramatized account of the early days of Facebook. He decided, right then and there, that he would one day start a company of his own. “It was the first movie I’d seen that showed that you could be young and still be the most successful person in the room,” he says. “I definitely emulated Mark Zuckerberg in some ways.”

In true Zuckerbergian fashion, Saleh did start a company out of his dorm room at the University of Pennsylvania. He raised $500,000 as he crammed for finals and then sold the company to Lyft in 2019, the year he graduated. Along the way, Saleh realized he needed a new role model. He no longer wanted to be like Zuckerberg, who by then had become ensnared in a series of scandals.

Plenty of people liked Steve Jobs, but Jobs was dead, and reading his biography was about as appealing as “reading a history book.” Larry Page, Sergey Brin, and Bill Gates were still alive, but their contributions to Silicon Valley already felt like ancient history. Saleh wanted a hero who was making history now.

Young people love to idolize their predecessors. Jobs was Silicon Valley’s idol of choice for decades, but to the next generation of startup founders, his legacy feels about as old as Web 1.0. Boy geniuses like Zuckerberg and Evan Spiegel, who became billionaires by the time they were 25, have fallen out of favor.

So have tech oligarchs like Jeff Bezos. “We don’t look up to these fools,” says Marc Baghadjian, the 22-year-old founder of a dating startup. “Just because you’re a billionaire doesn’t mean you’re positively effecting change.”

Instead, both Baghadjian and Saleh now worship Elon Musk, whom they see as a billionaire on an ethical mission. “He’s shown that you can do the best thing for the world and reap the benefits at the same time,” says Saleh, who started watching videos of Musk while he was in college.

WIRED asked more than a dozen young startup founders between the ages of 15 and 30 who inspires them. More than half brought up Musk. Others mentioned techno-optimists like Sam Altman and Patrick Collison, who seem to believe that technology can solve the world’s biggest problems, or entrepreneur-philanthropists with lesser-known startups.

None of them had read books about the history of Apple, Google, or Amazon; they said they were more inspired by forward-looking companies trying to solve the world’s biggest problems.

Olav Sorenson, who has taught entrepreneurship at UCLA and at Yale, says his students tend to admire people who have been “successful without selling out.” Some cite Seth Goldman—the founder of Honest Tea, who now chairs the board of Beyond Meat—as one source of inspiration because “he has focused his energy on investing in and supporting businesses with an ethical mission,” Sorenson says.

“This generation is looking at all of the issues and trying to say, ‘How can we start to be part of the solution to the problems that the older generation created for us?’” says Lori Rosenkopf, vice dean of entrepreneurship at the University of Pennsylvania’s Wharton School of Business.

Rosenkopf says that in the last few years, she’s noticed a shift in the way students talk about entrepreneurship—not just as a career alternative to banking or consulting, but as a way to start ventures with “a much greater social perspective.”

For many young entrepreneurs, Musk is the prime example of this mindset. “Elon Musk is literally picking up the tab for the mistakes that other generations have made,” says Baghadjian, who read Ashlee Vance’s biography of Musk in high school and has considered him a hero ever since.

Baghadjian says that while companies like Amazon and Apple have produced big innovations, Musk’s work with electric vehicles and solar energy was much more important.

Other young people were inspired by the trope of the startup founder who struggles on the way to success. One mentioned Musk sleeping on the floor in the Tesla headquarters, which they said showed grit. A few also mentioned the tale of Airbnb founder Brian Chesky, who maxed out his credit cards and subsisted on ramen noodles in the startup’s early days.

“There’s not a lot of glamour when you’re starting out,” says Pranjali Awasthi, who is 15 and is working on a stealth startup while she finishes high school online. Awasthi cited Musk and Altman as her heroes. But she also wished for more role models who look like her, a young woman of color. She says she was inspired to launch her startup in high school after she read about Laura Deming, who had started working on her own venture fund when she was 16.

A historic lack of diversity among high-profile entrepreneurs has left some young people without founder idols. “A lot of the founders people worshiped before have been straight, white men,” says Josh Yang, who is 27 and graduated from Stanford’s Graduate School of Business last year.

Women make up about 10 percent of tech CEOs, according to a 2021 report from the nonprofit AnitaB.org, and there are still startlingly few Black and Latinx CEOs in Fortune 500 companies. Yang, who identifies as a queer Asian man, doesn’t put much stock in the celebrities of the tech world. “I’m forging my own path,” he says.

So is Andrew Sun, an 18-year-old who recently launched a microfinance startup. He credits a high school teacher for getting him into entrepreneurship, rather than a celebrity CEO like Musk. “I don’t really have any desire to become a celebrity,” he says. “I want to be an entrepreneur who makes a substantial positive impact on our world.”

Arielle Pardes head shot - Wired

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Arielle Pardes is a senior writer at WIRED, where she works on stories about our relationship to our technology. Previously she was a senior editor for VICE. She is an alumna of the University of Pennsylvania and lives in San Francisco.

Source: Who Do Young Entrepreneurs Look Up To? Elon Musk | WIRED

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Crypto Incubators, Accelerators And Venture Capitalists Rise To The Challenge Of Web3.0 For All Investors

Many will recall the ICO craze of 2017 as crypto startup projects raising capital exploded onto the scene from May of that year with bitcoin hitting all time highs and surging above $15 thousand by December. Projects flooded the market seeking capital to mint new coins and promised groundbreaking changes.

The ICO landscape rapidly descended into chaotic scenes of indiscriminate buying and selling often for quick profit, disregarding long-term sustainable growth and investor interests. Hype and expensive marketing campaigns often misled investors, many of whom succumbed to greed instead of performing even cursory due diligence.

Though there were many excellent projects, some still with us today, many were fraudulent, ill-intentioned or at best, misguided. The SEC gave notice that it considered many tokens as securities and would apply the Howie Test to coin projects. This significantly dampened the market and in the end, some studies identified more than 80 percent of all ICOs as scams earning the badge of shitcoins for many from the lCO boom.

This was not crypto’s best day and the sector did little to engender legitimate and responsible inclusion within the financial system with policy makers and regulators, and this sentiment still lingers in the corridors of power today.

This is the principal reason many in my global community came to together to form Global Digital Finance, an industry not-for-profit organization focused on developing and sharing leading market practices and standards for the crypto and digital assets sector.

Many of us were called to action to demonstrate that the crypto and digital assets sector was founded, staffed, and run by responsible people who could abide by jurisdictional and global laws, and were keen to support policy makers and regulators with meaningful compliance, while asking for patience with the new technologies and business models as the developed.

The big message was, “there are adults on the room”, and there is some groundbreaking innovation going in here that is of benefit to society, lets not get lost in the technological jargon and please exercise a bit of patience.

Characteristic of bubbles that burst, a slump followed this high point, commonly known as the “Crypto Winter”. There was a silver lining to those dark days in that it proved to be a time for learning from mistakes for many and rethinking the future of crypto.

A wave of pioneering crypto-based incubators, accelerators and venture capitalists emerged aiming to restore normalcy and rekindle the flame of innovation. In addition to discovering and supporting genuinely promising early-stage startups, incubators significantly broadened the scope for capital formation and accumulation in the blockchain cryptocurrency sector.

The “2021 List of Blockchain Venture Builders, Incubators & Startup Accelerators,” is pretty comprehensive, and since their arrival on the scene, this collective has been a catalyst for increasing institutional investments in crypto-based projects, which has helped flood the market with record amounts of cash.

Kardia Ventures CEO Huy Nguyen believes incubators bring far more than expertise and experience to the table. They also provide startups with access to an essential and extensive network of investors, stakeholders, and service providers, and provide much-needed capital to help ensure early stage startups have a clear path to success. Kardia Ventures has made tens of millions of dollars in investments across 18 companies, including participating in an $8.5 million seed round for DeHorizon and a $2.1 million initial round for Thetan Arena.

A Record Year For Venture Investment 

Venture capitalists invested $26 billion in crypto-based projects in 2021, dwarfing figures from previous years. The surge includes a $10 billion investment in crypto exchange Bullish Global, and $350 million in funding for NFT gaming company Dapper Labs. Additionally, Paradigm and Andreessen Horowtiz have launched their own crypto investment funds worth $2.5 billion and $2.2 billion, respectively, the largest of their kind to date.

Venture capitalists aren’t getting into the crypto industry merely for the ROI. Shan Aggarwal of Coinbase Ventures highlights that short-term gain isn’t the primary metric for success given the blockchain-powered future that Web 3.0 promises. What’s really important is infusing liquidity into crypto markets. In other words, addressing volatility issues is key to long-term success, and the recent influx of venture dollars goes a long way to help ensure smoother sailing.

Institutional investors are increasingly interested in the crypto market but aren’t always aligned with the principles of decentralization and user-orientation and some have been at odds with the broader interests of the crypto and digital assets community. This prevalence has caught the attention of Cardano founder Charles Hoskinson who thinks institutional investment threatens the sector’s meritocratic and community-governed nature.

Hoskinson warns, “They (the institutional investors) are always going to get their pound of flesh before everybody else.”

The scenario is changing for the better with institutional investors rethinking their strategies to suit the needs and demands of the decentralized world of Web3.0. Deciding everything behind closed doors shrouded in secrecy has been the traditional way of doing things and these days, some seek to ratify investment decisions through community-oriented voting, as was witnessed during the funding rounds of SushiSwap.

Retail Investors Continue To Drive Adoption

Retail investors will always dominate the transaction volumes in crypto and have almost singlehandedly created to the $2 trillion crypto market without the governments and the legacy financial system, arguably Satoshi’s main goal with bitcoin. Many institutional investors access the market by participating in funds and listed equities focused on blockchain and cryptocurrency to get exposure to the asset class, especially in the West.

High volatility, a consistent feature in cryptocurrency, isn’t conducive to the demands of retail investors, who typically lack the capital buffer necessary for absorbing market fluctuations and do not have the hedging playbook or experience to rely on. Large capital losses pose a significant threat to many retailer investors who are limited to risk exposures far lower than institutional players. Volatility is also a big issue for regulators and is an important consideration in policies for investor protection as it relates to cryptoassets.

Recently retailer customers in Vietnam, India, Pakistan and the Ukraine have been buying cryptocurrencies and driving the adoption rate to more than 881 percent in 2021In India retail investment rose 600 percent from April 2020 to March 2021, leaping from $900 million to $6.6 billion,  however, traders went on a selling spree in anticipation of unfavorable regulations and a possible ban on cryptocurrencies, which led to tumbling prices.

Such erratic buying and selling hinders the sector’s progress, setting off a vicious circle of perpetual volatility. Policymakers are advised to offer a greater degree of consistency and clarity when it comes to the direction of travel and regulatory certainty of cryptoassets to help better align to and address retail investor’s interests for longer-term market stability.

A Crypto Market For All Investors

The crypto and digital assets sector is on the verge of a paradigm shift with Web3.0, and for that shift to happen, incubators, accelerators and venture capitalists are poised to rise to the occasion. In addition, onboarding new investors is vital, and many are already meeting these new challenges with relative efficiency.

Creating a safe space for retail and institutional investors is one of their primary functions of incubators and accelerators. If policymakers and regulators can match this with regulatory sandboxes such as Hester Peirce’s Safe Harbor Proposal in the U.S., and the Pan-European Regulatory Sandbox as part of MiCA, the sector will be better grounded to efficiently and effectively serve all investor markets.

The opportunity to start a new era of innovative industry and regulator collaboration is upon us and we are close to the tipping point of policy makers understanding the importance and impact that this new and innovative digital financial infrastructure will have on society.

Platforms like Morningstar Ventures are leveraging in-house and outsourced expertise to boost investor confidence through rigorous assessment and risk management. Using these principles, Morningstar Ventures has broadened its portfolio to span a multitude of investments across the Decentralized Finance (DeFi) space, including tokens like Elrond, Polkastarter, Humans.ai and Yield Guild, and equity investments including NGRAVE, Moralis.io, Unstoppabledomains.com, and Ethernity.io. Successful incubators like Morningstar Ventures consider all the markers necessary for well-informed investment decisions, from revenue models to growth potential.

With ongoing innovations in crypto-based venture capital funding, the scope for secure retail investments is broader than ever before. Diverse fundraising methods, such as Initial Exchange Offerings (IEOs) and Initial DEX Offerings (IDOs), are crucial to further lowering the barriers to entry. Furthermore, present-day launchpads prioritize sustainable growth, implementing robust checks and balances to filter bad actors. DAO Maker, for example, offers a lock-in functionality that secures investors while ensuring accountability on the part of the innovator.

Ultimately, delivering the Web3.0 vision will require adoption by both retail and institutional investors. Institutional investors have the resources to deploy to reduce volatility and improve mainstream adoption by infusing liquidity into cryptocurrency markets, while retailers uphold the sector’s community-governed structure. Both are key to success. To bridge the gap and entice both sides to the table, incubators, accelerators and venture capitalists play an important and vital role in helping ensure the crypto and digital assets sector’s sustainable future.

Follow me on Twitter or LinkedIn.

I cover fintech, crypto and digital assets, and sustainable finance and investments, and promote policies for a transparent, secure…

Source: Crypto Incubators, Accelerators And Venture Capitalists Rise To The Challenge Of Web3.0 For All Investors

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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.”

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. 

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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With Fraud Growing, Robinhood Becomes Latest Fintech To Block Customers From Transferring Money From Certain Banks

Fraud is a growing issue for fintech companies, as bad actors are doing everything from stealing identities to exploiting the slow U.S. bank-to-bank transfer network to siphon off money. The problem has gotten so bad that some fintechs, including investment service Betterment and digital banks HMBradley and One, have temporarily banned transfers from other digital banks for fear of being on the hook for a fraudulent transaction.

Forbes has learned that Robinhood, the dominant free stock trading app with 22 million active users, has become the latest fintech to ban transfers from a specific list of institutions as a blunt tool for fighting fraud. In a statement to Forbes, a spokesperson confirmed: “Robinhood prevents transfers from routing numbers that display a high pattern of return and fraud rates.” (Routing numbers are the bank identification numbers used by the bank-to-bank transfer system in America.)

“It is a standard practice to prevent transfers from institutions that are sources of sustained levels of fraudulent activity, whether digital banks or traditional banks,” the statement continues. “When Robinhood and other financial institutions take the step to prevent transfers from a particular routing number, it’s because the fraud problem originates at that institution.”

Robinhood declined to disclose the specific institutions on the list, but Forbes has learned that it contains a wide variety of banks, including a heavy concentration of neobanks and the moderate-sized banks they partner with, plus a small number of large, traditional brick-and-mortar institutions. Some of the names on the list include:

LendingClub; Ohio-based Sutton Bank (one of the partner banks that Square’s Cash App uses to store customer deposits); Tennessee-based First Century Bank (one of the partner banks for PayPal’s Cash Card); prepaid card issuer and digital bank Green Dot; New York-based Metropolitan Commercial Bank (the partner bank for digital bank Current); and Iowa-based Lincoln Savings Bank (one of the partner banks for fintech apps such as Cash App and Acorns). Pittsburgh-based PNC Bank–the nation’s seventh largest bank by assets–and its recent acquisition BBVA USA are also on Robinhood’s banned list, Forbes has been told.

LendingClub, First Century Bank, Green Dot and Metropolitan Commercial Bank didn’t respond to Forbes’ requests for comment. A Sutton Bank spokesperson says, “the fraud rates we experience across our programs are in line with or below industry averages” and that ACH returns (when a transaction fails because the customer doesn’t have enough funds in his or her account) are more likely the culprit. PayPal says it has never had an integration with Robinhood. Lincoln Savings Bank says it has no knowledge of such a ban, and that it hasn’t heard any complaints from customers. PNC also says it found no evidence of Robinhood’s ban.

The slow speed of America’s bank-to-bank transfer network makes certain types of fraud possible. Since transactions can take days to settle, people can move money from one account to another and then withdraw the same funds from both accounts while a transfer is in process–that’s why some fintechs are afraid to accept transfers.

Many financial institutions have lists of banks whose customer deposits they view as higher risk, and they apply extra scrutiny to transactions with those institutions. But outright bans on transfers are unusual and reflect the difficulty some fintechs have had controlling fraud.

Robinhood’s ban comes as it grapples with a variety of troubling security issues. In early November, the brokerage disclosed a breach that exposed personal data of roughly seven million users to hackers that demanded an extortion payment from the company. (Robinhood wrote in a blog post that it “contained” the hack, and said there was “no financial loss to any customers” as a result of the incident.)

And this summer, Robinhood reported that its provision for credit losses for the first half of the year surged 54%, largely due to increased fraudulent activity. Tommy Nicholas first encountered Robinhood’s ban last month when he tried to move money from his personal digital bank account (he declined to say where) to Robinhood.

The brokerage app abruptly rejected it, even though he had been moving funds between the two institutions without issue for three years. This naturally piqued Nicholas’ interest, since he’s the cofounder and CEO of Alloy, a startup whose software helps fintechs to prevent fraud and to comply with “know-your-customer” regulations (aimed at controlling money laundering, tax evasion and other illicit activity).

“Banks and fintech companies are banning deposits and transfers from fintech companies at a rate I’ve never seen before,” Nicholas tweeted after the experience. A wide range of factors have contributed to the problem fintechs are now having controlling fraud. One is that startups aim to have a “frictionless” signup process, where it’s quick and easy to join, making them a tempting target for scammers.

Another is that fraud is on the rise everywhere—fraud attempts on merchants rose 140% in 2021 compared with 2019, according to LexisNexis. Nicholas thinks one of the biggest causes of digital banks’ outsized fraud problem is simply their young age. Since they’re new and fast-growing, they have a larger concentration of new customers. And at any financial institution, new customers have a higher propensity to commit fraud than long-standing ones.

In early December, Forbes reported on merchants like Avis and Holiday Inn rejecting digital bank cards over fraud concerns, but fintechs blocking each other presents a different and potentially bigger challenge. So far, the total amount of transfers being blocked by fintechs isn’t large, Nicholas says. And a Robinhood spokesperson says that only a “single-digit percentage” of its users have been affected by its fraud-prevention bans—which means up to 2 million customers could encounter the block.

Yet if the practice continues to spread, digital banks’ brands could well suffer, as consumers won’t want to rely on a banking service that isn’t accepted by other apps for money transfers. In a blog post describing the challenges for fintechs, Nicholas writes: “The calculation used to be customer acquisition cost vs. lifetime value vs. fraud risk. Now, your institution’s reputation at the network level determines what your users can and can’t do. It’s no longer in each institution’s control.”

If bans between digital banks become common and long-lasting, all the startups could suffer, Nicholas says. That, he warns, could tilt the playing field further in incumbents’ favor and discourage entrepreneurs from starting new neobanks. “Fewer fintech companies means less innovation and less competition, which negatively affects the consumer, especially those underbanked or niche populations who may want something that traditional banking institutions aren’t providing,” Nicholas writes.

For example, Chime has attracted millions of customers partly because people can use it like a regular bank. It has helped lower-income Americans avoid monthly and overdraft fees and has pushed the entire banking industry to reduce or remove fees, with Capital One being the latest established bank to eliminate overdraft fees.

If blanket bans aren’t the right approach, what is? Nicholas believes companies can do more to identify each specific type of fraud they see–there are many ever-changing varieties–and deploy custom tactics to combat each one, such as requiring users to submit more documentation or a valid phone number to complete a transaction.

He also thinks fintechs need to collaborate more: “We all win by lowering the fraud risk of the entire ecosystem, but the growth mindset of the last five to ten years has lacked the incentives for deep collaboration at almost all levels. There are efforts underway to correct some of this, but I think more needs to be done.”

12/20/21: Updated to include comment from PNC.

I lead our fintech coverage at Forbes and also cover crypto. I edit our annual Fintech 50 list and 30 Under 30 list for fintech, and I’ve written frequently about leadership and corporate diversity. Before Forbes, I worked for ten years in marketing consulting, in roles ranging from client consulting to talent management. I’m a graduate of Middlebury College and Columbia Journalism School. Have a tip, question or comment? Email me jkauflin@forbes.com or send tips securely here: https://www.forbes.com/tips/. Follow me on Twitter @jeffkauflin. Disclosure: I own some bitcoin and ether.

I’m a reporter on Forbes’ wealth team covering the world’s richest people and tracking their fortunes. I was previously an assistant editor for Forbes’ Money & Markets section, and I worked for Bloomberg and Pitchbook News before that. I studied history and economics at the University of Virginia, where I also wrote for the student paper and a very secretive underground satire magazine.

Source: With Fraud Growing, Robinhood Becomes Latest Fintech To Block Customers From Transferring Money From Certain Banks

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