🗞 Venture Chronicles - March 2020

Overlooked #14

Hi, it’s Alexandre from Idinvest. Overlooked is a weekly newsletter about underrated trends in the European tech industry. Today, I’m sharing the most insightful news of March.

For 2020, I want to pick one piece of news per day and write a short comment about it. I want to talk about something that strikes me. Something that happened in the tech ecosystem.

This monthly issue for March is weird.

The first part of the month was business as usual in the tech ecosystem with new funding rounds (especially from our great portfolio companies), new funds raised by VCs, interesting in-person events to follow etc.

And then, covid-19 arrived in Europe. Taking a step back, I’m realizing that my focus totally shifted towards this healthcare crisis. I needed to understand this new paradigm to do the VC job properly i.e. to support our portfolio companies and to rebuild from scratch an adequate investment strategy. The second part of the month is therefore filled with tech news resulting from this covid-19 crisis.

Besides, I’ve built a 95+ slide deck digging more closely into this crisis covering the following topics: (i) concrete advice for founders, (ii) US and UE venture capitalists views on the crisis, (iii) non-VC investors views on the crisis, (iv) emerging and declining short term and long term tech trends, as well as (v) some thoughts on the looming economic crisis. The deck is an aggregation of the best content out there from tier-one investors (Sequoia, a16z, Benchmark, First Round, NfX, Angular, Entrepreneur First, Oaktree, Bridgewater, Pershing Square, Damodaran) operators (Brian Balfour, Guillaume Cabane) and institutions (BCG, McKinsey, HBR, FT, The Economist).

If you want to access it, send me an email at ade@idinvest.com

Now, let’s dig into what happened in the tech ecosystem in March!

Please note that the date picked for each event is not always the exact date of the event but the date I decided to write about the event.

  • Sunday, Mar. 1st: Activist investor Elliott eventually started coming after tech companies asking Twitter’s CEO Jack Dorsey to step down. Most of the tech companies have implemented a governance that is ill-suited for public markets (dual class of shares, original founder still leading the company, not focused on maximizing shareholder value etc.). In the future, I will not be surprised to see other activists funds going after other poorly governed tech companies. (FT, Axios, Matt Levine).

  • Monday, Mar. 2nd: Atrium is dead. It was an hybrid law firm combining software and lawyers with the vision to increase dramatically the efficiency of lawyers. The startup had raised $75m in funding including a series B led by a16z and was managed by Justin Kan who had before cofounded and sold Twitch to Amazon for $970m. Building a startup remains hard even if you’re an outstanding repeat entrepreneur tackling a huge and poorly digitized market and raising from the investors in the Valley. (Techcrunch)

  • Tuesday, Mar. 3rd: Le Wagon raised $19m to build a network of coding bootcamps with Cathay and Africinvest. Le Wagon has already 38 bootcamps across 12 countries. Numerous projects will be pushed forward with this round: part time course, a data science course, launch of an Executive program, open new geographies etc. (Techcrunch)

  • Wednesday, Mar. 4th: Lunchr (Idinvest portfolio) is rebranding into Swile and is planning to go beyond meal voucher to become the holistic companion for employees social life at work. (Medium 🇫🇷, BFM 🇫🇷, Swile Product)

    1. The following features will be released in the next two months for existing customers: free pots, reimbursements, messaging, event organizer, map to share your favorite spots. After this 1st period, the app will be open to all French companies even if they are not paying for the meal voucher offering.

    2. The team is impressive in both product and marketing. I love the universe they have built around the Lunchr brand and now they are ready to restart from scratch with a more developed product.

    3. I love the never ending ambition of this company: “25% employees have meal vouchers in France. We are happy to meet the other 75%.” And then the next sentence is something like “by the way, there are 33 countries using meal vouchers around the world and all the companies in the world need to foster social interactions between employees.” And I’m not even mentioning Loïc (CEO) on French TV channels wearing a unicorn dabbing on his t-shirt… I’m super excited!

Image result for uber vs. swile lunchr app
  • Thursday, Mar. 5th: Colonies (Idinvest portfolio) raised €30m with existing investors GFC, Idinvest and Benabou’s family office. Colonies offers coliving spaces for communities looking to live in beautiful apartments with private bedrooms and bathrooms but shared living room and kitchen for 8-12 people. Sometimes additional perks are added like a gym, a spa or a rooftop. LBO France is also committing to invest up to €150m to help Colonies building real estate projects. Colonies does not own the real estate but acts as managing partner for its buildings. (Techcrunch)

  • Friday, Mar. 6th: The French Cour de Cassation, the highest juridical instance in the country, recognized the right of a Uber driver to be considered as a full time employee. It applies for this specific employee but is a precedent that could be reused in the future by other drivers. It’s a serious topic for Uber because this sort of reclassification could increase its driver costs by 30% - not a good news when you promised to the markets that you are aiming to reach profitability by 2021. Numerous other French startups working with independents (ride hailing, temporary staffing, electric scooters blue-collars etc.) could also by impacted by this decision. (🇫🇷Cour de Cassation, 🇫🇷 Le Monde)

  • Saturday, Mar. 7th: Kleiner Perkins raised a “Returns of the Jedi” $700m 19th fund to invest in early-stage startups. KP 18 - the previous $600m fund - was deployed in 14 months (!) in 34 investments without taking into account the reserves for follow-on investments. The full investment cycle on KP 18 will last 2-3 years. (Techcrunh)

Screen Shot 2020-03-04 at 4.59.20 PM
  • Sunday, Mar. 8th: This week, I spent time at ETHcc listening to crypto startups willing to raise funds but also attending conferences by the most prominent stakeholders in the ETH ecosystem. All of them could be found on Youtube for those of you who love to watch Youtube videos with less than 50 viewers. I was impressed by the keynote from Kleros cofounder Clément Lesaege on how to manage identity in a decentralized and private way. (ETHcc)

  • Monday, Mar. 9th: Non custodian crypto wallet Argent is raising a $12m series A round led by Sequoia crypto fund Paradigm. It’s its 1st investment in Europe. Existing investors Index, Creandum and Firstminute are also participating. What a line up for a crypto project! (Argent)

    1. I understand this enthusiasm because Argent has an amazing product that you should definitely try. It simplifies the process of acquiring cryptos (reducing fees and steps) and investing in DeFi protocols like Compound or Maker. It has the potential to become the next crypto killer app after Cryptokitties and Coinbase.

    2. The next steps are: (i) organizing a public launch removing the waitlist (3k users as of today), (ii) add direct integrations with other DeFi protocols, (iii) grow the remote team all over Europe.

    3. Kudos to their amazing Belgian cofounder! Julien Niset is Chief Scientist Officer of Argent and has a badass curriculum, having founded and sold a quantum information startup and holds three patents in quantum information and cryptography.

  • Tuesday, Mar. 10th: Sequoia recruited its first European partner Luciana Lixandru. She was working for Accel where she had an outstanding track record of investments with UiPath, Deliveroo, Miro and Tessian. She will start working full time for Sequoia in Sep. 2020. It’s the first key European hire for the prestigious US VC fund which is planning to invest more in the old continent. Coming from a small town in Romania, Luciana worked at Morgan Stanley before breaking into the venture capital industry at Accel (Sequoia).

  • Wednesday, Mar. 11th: Alma (Idinvest portfolio) raised a $14.1m series A with Idivnest, ISAI and Picus. (Techcrunch, Press Release)

    1. Like Klarna, Alma provides an installment payment option to online merchants. Customers can chose to pay via Alma or as usual in one shot. When customers chose Alma, merchants are paid instantly and in this case merchants pay a fee between 3.8% and 4.2% to Alma. The startup manages the credit risk with algorithms which is challenging because there is no credit bureau in France. Merchant sales are increasing by 20% thanks to Alma. As a result, it’s a no brainer for merchants.

    2. Alma has 1,000+ merchants (inc. Asphalte, Cowboy, PandaTea, Sensee) and is integrated with the main e-commerce platforms like Magento, Shopify and Prestashop.

    3. With this round, the goal is to attract more merchants (not hard to guess) and increase the payment volume with an ambitious 4x growth on both KPIs for 2020. Alma aims also at reinforcing the product offering with a payment widget integrable in ecommerce websites (e.g. Shopify’s checkout page is sub-optimized according to numerous merchants) and more options offered to the customers (pay now, pay later). Louis (ex. CEO Stripe Italy) and Guillaume (ex. Actuarial Manager at Mazars) are amazing founders. Watch out Klarna!

  • Thursday, Mar. 12th: Sequoia messed up and gave $21m to a Stripe competitor.

  • Friday, Mar. 13th: Bill Gates is stepping down from Microsoft board to dedicate more time to his foundation. I’m impressed by how the handover with Satya Nadella went smoothly (their pivot towards open source and cloud is an amazing success story) and how brave Bill is to keep dedicating his brain on the biggest issues humanity is currently facing. (The Verge)

  • Saturday, Mar. 14th: Two great papers on D2C brands by Clipperton and Digital Native Group. (Digital Native Group, Clipperton)

  • Sunday, Mar. 15th: Angular’s partner Gil Dibner shared the mail he sent to his portfolio companies about surviving the covid-19 crisis with many great insights. You should follow this guy on Twitter. He is super smart and solid on B2B startups. (Angular)

    1. Keep forecasting your business. Cash is king in this troubled period. Set up a worse case scenario and a scenario to reach profitability with your runway. Know when you will run out of cash. Anticipate your next fundraising.

    2. Keep working with your customers: understand their shifting priorities and try to be part of the solution to solve the new challenges they are experiencing with their businesses.

  • Monday, Mar. 16th: Impossible Foods raised a $500m round led by Mirae Asset Global Investments with the participation from existing investors Khosla, Horizons Ventures and Temasek. (Techcrunch)

  • Tuesday, Mar. 17th: n8n raised a $1.5m seed round from Sequoia and firstminute. It’s a ‘fair code’ workflow automation platform helping developers to integrate easily any new app they use in their existing workflow. It’s the first seed investment in Germany for Sequoia and it’s not going to be the last one! (Techcrunch)

  • Wednesday, Mar. 18th: Revolut announced it is launching an offer for teenagers called Revolut Junior. It’s an new app and service dedicated to kids between 7 and 17 years old. The Junior account is connected to the Revolut app of the parents in which they can control the spendings of their children and wire them money instantaneously. If you are interested, I wrote a dedicated newsletter on neobanks for teenagers earlier this month. (Sifted, Techcrunch).

  • Thursday, Mar. 19th: Feed announced a large rebranding. It’s one of the most impressive D2C French brand selling meal replacement products similar to Soylent in North America. The brand is repositioning its products around natural ingredients and sustainability. Feed products are sold in 5k stores in 40 countries (20% sales abroad). The startup was planning to open the US but decided to remain focus on its current geographical scope during the crisis. (🇫🇷 Les Echos)

  • Friday, Mar. 20th: Formula 1 is shifting from offline to online as the beginning of the season was completely cancelled. A mini season will be streamed on Twitch and some F1 racing drivers will be involved. I’m convinced that eSport has the potential to replace Sport and I love to see existing sport professional accept to be part of this shift. (Techcrunch)

  • Saturday, Mar. 21st: In the first 3 weeks of March 2020, Patreon added a record of 30k new creators to its platform. Creators are loosing advertising revenues because marketing budgets are cut with the current covid-19 crisis. Tools like Patreon help them to move towards a subscription based revenue model in which fans are sponsoring their work. (Techcrunch)

  • Sunday, Mar. 22nd: I’m listening to and taking notes from this podcast in which Benchmark’s partners Bill Gurley and Chetan Puttagunta are talking about the covid-19 crisis. (Invest Like the Best)

    1. Later stage financing is strongly affected. Late stage investors are taking the temperature of public markets - which are down 30%. It’s impossible not to reflect this sharp decrease on late stage private valuations. Numerous companies will have to face the dilemma of accepting a discounted valuation or to keep operating with the remaining cash (w. the need to extend the runway by cutting strongly the expense). Late stage investors which also invest in public stocks will abandon the private market for several months and buy only discounted public companies.

    2. Benchmark is still opened for business because the fund invests at early stage and the partnership is confident that the companies built during these times will be great. Dealflow quantity will obviously go down but dealflow quality will go up because only the most resilient individuals will keep building businesses during these struggling days. Only the fittest will come to raise funds.

    3. Early stage companies should engage with customers more deeply during this crisis. They have less pressure to sell compared to large incumbents. They are more open to discussion about your value proposition. They should start a vast number of customer conversations to run circles around incumbents and then beat them at the end of the crisis.

    4. Cash is king again. Companies have to come back to this mindset. It’s crucial to keep the company is business. For this, you have to accept that your top line figures will be bad in 2020 and you should refocus on your core value proposition rather than trying to grow at all costs.

    5. Layoffs decisions will have to be made. In this case, a sharp single cut is required. Do it at a level that it will allow you to buy 6m+ runway and go through the crisis and don’t make a 5-10% lay-off plan. You don’t need to rush to fire people. It’s better to make these decisions calmly but once you are decided, you should do it in a single time.

    6. Topics entrepreneurs should work on during a crisis: culture (asynchronous communication becomes paramount, communication must be adapted), product, customer relationships. With this crisis, take time to be slow to grow faster later on. If you can afford it, be greedy when everyone is fearful: try to capture your market against competitors, experiment adjacent businesses.

  • Monday, Mar. 23rd: Coinbase is integrating DeFi services to let users earn interests on their crypto assets. It means that the DeFi ecosystem has reached a sufficient critical size to have a player like Coinbase willing to add its services. (Techcrunch)

  • Tuesday, Mar. 24th: Fast raised a $20m series A led by Stripe. Existing investors Index (Jan Hammer) and Susa are also taking part in the round. Fast is a one-click universal checkout solution. (Techcrunch)

  • Wednesday, Mar. 25th: In the US, three trends are booming in mobile apps installs with rising lockdowns all over the country: (i) remote work, (ii) online education, and (iii) grocery delivery. (Sensortower)

Weekly U.S. Downloads of COVID-19 Impacted Apps Over Time
  • Thursday, Mar. 26: Airbnb started to reduce its costs to face the current pandemic starting by freezing its hiring plans and cutting by half its marketing budget (i.e. $800m savings). The travel industry is shut down and Airbnb is no exception (cf. infra forecasted revenues based on bookings from AirDNA) . (The Information)

  • Friday, Mar. 27: Lime is in dire straits. It’s has been reported to be raising emergency cash at a $400m valuation - way below its previous $2.4bn valuation. Lime’s operations are almost down to zero in all the cities it operates in. Contrary to ride hailing companies, electric scooters startups have heavy fixed costs as they own their fleets and have to physically move, store and repair them. As a result, it’s impossible to scale down its cost structure with the demand evolution. (Techcrunch, The Information)

  • Saturday, Mar. 28: OneWeb filed for bankruptcy because it did not manage to raised a new $2bn funding round in the current economic and healthcare crisis. OneWeb was planning to give anyone in the world access to the internet aby building and operating the largest internet constellation. 40 satellites were already launched. OneWeb had already raised $3.3bn with investors like SoftBank, Airbus, Qualcomm or Virgin. It’s not surprising when you see the current difficulties faced by Softbank and how space deals could be perceived as non prioritary in its investment portfolio. (The Verge)

  • Sunday, Mar. 29: I watched Bill Gates interview with TED’s founder Chris Anderson about the current covid-19 pandemic. I’m always impressed by his insights when he goes deep into a topic like this one. (TED)

  • Monday, Mar. 30: Preply raised a $10m series A round led by Hoxton Ventures with the participation of existing investors Educapital, Point Nine and All Iron. Preply is a marketplace to let students find online tutors in Europe and in the United States. It’s an online education business but the round was closed in January pre-covid crisis. Preply has a network of 10k highly curated tutors. With this round, the goal is to keep growing in its existing geographies and to add product features (better mobile experience, gamification, more personalization for students etc.) (Techcrunch)

  • Tuesday, Mar. 31: Decathlon stopped selling Easybreath snorkeling masks on its online shop. This mask was launched in 2014 and is one of Decathlon’s best seller products (3m+ sold). This decision was taken after several healthcare players asked Decathlon to send them masks and related technical informations to potentially reuse them to fight covid-19. Decathlon communicated the news humbly after having worked for days to help the healthcare sector. “Chapeau bas”. (Decathlon)

Thanks to Julia for her valuable insights! 🦒

See you next week for another issue! 👋