Chewy founder Ryan Cohen on its fast-approaching IPO: “It’s like seeing my baby graduate”

Ask any venture capitalist about the most important ingredient to success in startups, and they’ll tell you it centers on founders who can persuade not only investors to part with some of their capital but, more important, who can convince people to leave what are often more stable jobs in order to build a company from scratch.

Ryan Cohen certainly fits the description. It goes a long way in explaining why Chewy, the online retailer of pet food and supplies that he cofounded in 2011, sold to PetSmart for a reported $3.35 billion in 2017 — and why it’s also expected to stage a successful IPO this Friday, when PetSmart spins it off (though PetSmart will continue to hold a majority stake in the company).

Just today, the expected IPO price range, originally planned at between $17 and $19 per share, was raised to $19 to $21 per share, with the IPO advisory firm IPO Boutique saying the guidance it has received is that the deal is “multiple times oversubscribed.”

Cohen stepped away from Chewy last year, nearly a year after its all-cash sale. Naturally, he’s still excited to stand on the balcony of the NYSE as the company’s shares begin trading publicly on Friday. We talked with him earlier today about his path, beginning as a baby-faced founder without a college degree or any kind of network — and what, at age 33, he’s planning to do next.

TC: Your company sold in what was called at the time as the biggest e-commerce sale in history, yet most people still don’t know who you are. Who are you?

RC: [Laughs.] I’ve been an entrepreneur since as far back a I can remember. My father was a glassware importer — so a businessperson — and I saw what it was like to be accountable and responsible and to have your own employees and from an early age, I just knew that I wasn’t cut out for a traditional job, that entrepreneurship was the right path for me.

TC: Were you coding away in your bedroom like 90 percent of the founders we talk with?

RC: I was building websites at [age] 13, 14, then I moved on to affiliate marketing . . . My cofounder, Michael Day [who became Chewy’s CTO] and I met each other in an internet chat room, back when they were pure and bad things weren’t happening [online]. It was [centered around] website design computer programming, and we just hit it off.

TC: You get together, and then you settle on creating a retail pets business. Why? 

RC: We were doing affiliate marketing and we wanted to own the entire customer experience and were looking for big categories that were underpenetrated. In fact, we thought the jewelry space was ripe for disruption, so we started going to trade shows and building the site and the back end.

We even spent a few hundred thousand dollars on jewelry and we were a few weeks away from launching the company, but I have a poodle, Tylee, who’s now 12 years old, and I would go every couple of weeks to buy products from this store owner who knew me and who I really trusted and who was a pet lover like me. And I had this epiphany; I realized I’m so much more passionate about this category. So we sold the jewelry, luckily getting back most of our money, and started Chewy.

TC: Obviously, you’d heard of the terrible fate of high-flier Why didn’t that dissuade you?

RC: The world was full of business models back then didn’t make sense. People weren’t online. They were using dial-up. They weren’t comfortable putting their credit cards online. But over time, so much changed, including that the pets market had moved up into high-margin, higher-retail price points. You could also suddenly ship 30-pound boxes from most of the country overnight, thanks to shipping density.

TC: You were living in Dania Beach, Florida — not exactly a tech hub at the time. Did you think about moving?

RC: I had family here, growing up. I also knew it would be really expensive to build out customer service in a big city.  So it ended up working our really well. But you’re right, from a financing standpoint, south Florida is not a popular tech hub. We also had the fact that we were going head-to-head with Amazon, that I have no college eduction, and the demise of, and so when we talked with VCs, it was like, ‘We’ll pass.’

TC: Without outside help, how did you get started?

RC: We contacted a local distributor who worked with a [third-party logistics] company that was next to him, and we started buying product the same day.  Then we started marketing to cities and states near fulfillment centers, using all direct response marketing that we were able to optimize on the fly. We’d buy the inventory as we sold it and we were doing almost everything ourselves, so if an order came in and we didn’t have inventory, I’d go buy the product and ship it out from a local Kinkos.

For the first couple of years, it was three guys and a call center.

TC: When did that change?

RC: We hit an inflection point where three [third party logistics companies] we were working with [were getting overwhelmed]. We’d give them weekly or monthly projections so they could plan ahead and have warehouse space, but they didn’t fully believe our growth and by the end of 2013, we had these 3PLs that couldn’t scale any more, so we had to bring fulfillment in house.

We didn’t know anything about this, so we hired a bunch of people who were experts in fulfillment and we flew to Mechanicsburg, Pa. to lease a 4,000-square-foot space, and within nine months or so, we became expert at doing fulfillment. It was risky. It was totally outside of our areas of competence. But by August of 2014, after breaking everything first, that center was humming along, and then we launched another in Reno. At that point, we went national.

TC: How would you describe your hiring process?

RC: A lot of it was intuitive. I believe in the Warren Buffett model of treating people with respect and being honest and transparent with them. A lot of these people would come from Amazon and Wayfair.  I went home at night and reached out to them after finding them on LinkedIn. We’d jump on a call and we’d talk about this vision to build the largest pet retailer in the world, while focusing on delighting customers and being category experts. And all of my management team, they came from amazing companies and stable jobs, and they pulled their kids out of school to come to south Florida because they believed in me.

I was really grateful they took that leap of faith, but it was also a huge responsibility, so I was going to fight even harder; I wasn’t going to let them down.

TC: You say VCs weren’t interested. What happened exactly?

RC: Almost from the beginning we reached out to investors, but I knew nothing about raising capital. I have no network. I come from a middle-class family. I don’t have a rich uncle. We just started cold-calling VCs and I learned the hard way that’s not how it works. [Laughs.]. I got turned down basically every single time, until Larry [Cheng of Volition Capital] invested, and it was not a competitive process.

TC: What convinced Larry to write you that first check?

RC: We’d reached out to Volition six to nine months earlier and spoke to an associate who took down our information, and they followed up with us in late 2012. We’d given them our projections and we were crushing our numbers. Larry was doing to Disneyland anyway with his family, so he decided to make a pit stop to meet with us. I remember he was like, ‘Who is going to take this company to $100 million in sales?’ and I was like, ‘Me! Who do you think?’

I looked very young at the time so I think I was easy to underestimate. I’ve been slightly aged now from Chewy. But he gave us that needed credibility. Then Greenspring Associates — they’re investors in Volition — came in to lead our Series B.

TC: Did you want to take the company public or were you hugely relieved when PetSmart came knocking?

RC: We were building a big company that inevitably was going to go public. Especially in those later years, we’d become ‘public company ready.’ We built up our finance and accounting team; we had audited financials. We’d raised a lot of capital — $350 million — but we had a lot of discipline. We also had a lot of revenue. We went from $200 million in sales in 2014 to $3.5 billion in sales by 2018. We burned through $130 million, but that cash burn was going to new customer acquisition and future fulfillment centers.

TC: So when you got that call from PetSmart . . .

RC: It was very fast. From the time I had a conversation with Raymond [Svider, the executive chairman of PetSmart] to the time he gave us a term sheet — and I was looking for an all-cash deal — the entire thing happened in 30 days, on our terms. We weren’t going to go and open up the kimono unless we got comfortable, and we were comfortable with the entire transaction.

TC: You stayed on for bit, though I gather you weren’t locked up.

RC: I wasn’t locked up at all. I could have left the day after the deal. I stayed but I felt like the teams were built and the systems and strategy were in place, and it felt like a fine-oiled machine. The business was at a significant scale. I just felt like my job was done. I’d been at it for more than seven years, going 24/7. I gave my life to this thing. But I have a two-year-old today and just being with my family and being able to return to civilian life was [irresistible after a point].

TC: I’m a Chewy customer but I’m not even sure why, except that it’s easy for me to re-order. Why do you think I’m a Chewy customer?

RC: Because Chewy is the best in the business. It has the best selection, competitive pricing, fast shipping, excellent customer service and we know the product better than our competitors. If you need a weight loss product for your dog, we’ll tell you which to buy.  All Chewy does is sell pet products, and that’s a big differentiator. E-commerce can feel like a series of faceless transactions; we wanted to recreate that feeling I use to enjoy at the pet store, shopping with a pet parent who I trusted. And we did that at scale, which is hard but we stayed focused.

TC: How are you feeling about the IPO?

RC: It feels like my baby is graduating from the college that I never went to.

TC: There are concerns over the fact that Chewy remains unprofitable. Do you worry that, as a publicly traded company, Chewy might have to change — that it may need to charge for shipping, for example?

RC: It’s not profitable because it’s continuing to execute on scale and market leadership. If you reduce your marketing and decide you don’t want to grow as much, the company could have been profitable years ago. The underlying company is profitable.

TC: What about the fact that Amazon and Walmart are expanding their own pet product offerings?

RC: Amazon made us fight really hard. Obviously, they’re a fierce competitor. But I don’t think it was the category that made us successful. I think it was delighting our customers. You focus on that and you’re going to do just fine.

TC: You’re a young guy. Are you retiring?

RC: Retirement is overrated.

I’m lucky. I’m talking to a lot of different entrepreneurs and business and looking at corporate board opportunities. I’m going through that exploratory process.

TC: Would you partner again with Michael on a different e-commerce business or maybe a venture outfit?

RC: We’re really close. It needs to be the right opportunity obviously, and we need to be picky. But I have no plans to sit in retirement, that’s for sure. I’m 33 and I’m competitive and I like consumer businesses and I like to win.

London’s LocalGlobe just closed on two funds totaling $295 million

Seven months ago, TechCrunch’s Steve O’Hear reported that LocalGlobe had begun the fundraising process for two separate funds. The London-based seed-stage venture firm was raising yet another seed-stage venture fund, O’Hear said at the time; he also noted that LocalGlobe was also expect to raise its first opportunities fund.

Fast forward and today, the firm, founded by father and son duo Robin and Saul Klein, says it has closed both, having secured $115 million in capital commitments for its seed fund and $180 million in capital commitments for the second fund, dubbed “Latitude,” which it says it will use to support its “winners” at the Series B and later stages.

As we’d written earlier, it’s no surprise that LocalGlobe decided to institutionalize some of its later-stage investments. It’s become a trend in recent years for early-stage firms to raise separate funds to capture more of the upside when their portfolio companies begin to break away from the pack, rather than watch their stakes get hammered down in subsequent funding rounds.

And LocalGlobe already has a bit of a track record in supporting its growing portfolio companies, writing follow-on checks to companies like the property listings startup Zoopla and the money transfer service TransferWise, among others. (Others of the outfit’s best-known investments include the transportation app Citymapper and the SpatialOS software company Improbable.)

Still, LocalGlobe remains even more active on the seed-stage front. One of its newest bets is on Yapily, a two-year-old, London-based maker of an API for connecting enterprises to banks that just raised $5.4 million in seed funding co-led by LocalGlobe and HV Holtzbrinck Venturesand LocalGlobe.

Another new investment is Soda Says, a two-year-old, U.K.-based e-commerce marketplace for daily tech gadgets, from breast pumps to alarm clocks. It raised $2.5 million from investors, including LocalGlobe, late last month.

Modern Fertility raises $15 million to sell its hormone tests — and gather more fertility data from its users

Modern Fertility is a San Francisco-based company that sells fertility tests directly to consumers, but increasingly, those customers will be educating the company, too. Indeed, the two-year-old startup now plans to develop a database of anonymized data about its largely younger demographic.

A fresh $15 million in funding led by Forerunner Ventures should help. Forerunner founder Kirsten Green, who takes a board seat as part of the round, is known for countless savvy bets on a wide number of consumer brands that have taken off with users, from Dollar Shave Club to Bonobos to Glossier. With Forerunner’s help, Modern Fertility may well become a breakout hit, too, though potential customers should also understand its limitations before they click the “buy” button.

First, let’s back up. We’d originally written about Modern Fertility last year, when it began selling a kit from its website that’s sent to women’s doorsteps and allows them to gauge their levels of eight different reproductive hormones by using a finger prick. More specifically, the startup sends off its customers’ panels to CLIA-certified labs, where the tests are conducted, and most prominently, those tests are looking at the women’s level of AMH, or anti-mullerian hormone.

Why that’s relevant: every egg inside a woman’s ovaries sits within a fluid-filled sac full of cells that support egg maturation and produce hormones, including AMH. A woman’s AMH levels can provide one clue about how many of these sacs — or follicles — she has. That in turn provides a clue as to how many eggs she can release, or her ovarian reserve.

The point, says Modern Fertility’s cofounder and CEO, Afton Vechery, is to enable women to learn more about their bodies without having to shell out $1,500 to gain access to a similar picture by turning to a reproductive endocrinologist, of which there are relatively few.  According to the Centers for Disease Control and Prevention, there are roughly 500 infertility clinics in the U.S., and 2,000 reproductive endocrinologists.

Mixed feelings in medical community . . .

It’s a compelling pitch, especially given that women are putting off children longer for a variety of reasons, including to secure their financial future. In 2017, for the first time, U.S. women in their early 30s eclipsed younger moms to become the group with the highest birth rate, according to CDC data.

But there is room for pushback. The reality is that AMH and other tests can be conducted elsewhere, including by competing startups, for roughly the same cost that Modern Fertility is charging its customers. (Its kits originally sold from its website for $199; today, they sell for $159.)

Fertility testing is also generally is covered by health insurance plans because fertility problems can be linked to or caused by other health problems like endometriosis. (Not covered, typically: actual infertility treatments.)

A far bigger concern to some doctors is the unnecessary alarm that AMH screening may create for women who haven’t been diagnosed with infertility and who are less than 35 years old.

As Zev Rosenwaks, director of the Center for Reproductive Medicine at Weill Cornell Medicine and NewYork-Presbyterian, told the New York Times a couple of years ago, “All it takes is one egg each cycle . . . AMH is not a marker of whether you can or cannot become pregnant.”

Esther Eisenberg, the program director of the Reproductive Medicine and Infertility Program at the National Institutes of Health, has also said that AMH doesn’t dictate a woman’s reproductive potential. In fact, the NIH funded research in 2017 that found a “non-statistical difference” between low and normal AMH levels in a time-to-pregnancy study of women who were between the 30 to 44 years and who did not have a history of infertility.

Asked about such findings, Vechery, who was most recently a former product manager at the genetic testing company 23andMe, has clearly heard such criticisms. She readily acknowledges that AMH is “not an indicator of your ability to get pregnant right now in this moment,” adding that “it has so many other helpful benefits in thinking about your reproductive health in a much broader sense.”

Vechery also notes the company’s team of PhDs. She points to a clinical study that was published in The Green Journal (the official publication from The American College of Obstetricians and Gynecologists). She also speaks of Modern Fertility’s medical advisory board, which includes dedicated five medical doctors, including reproductive endocrinologists Nataki Douglas, a former associate professor at Columbia University Medical Center, and Scott Nelson, a professor at the University of Glasgow.

All are important pieces to building Modern Fertility, but it’s nevertheless worth mentioning that the company employs just two full-time PhDs currently.

Further, the company’s medical advisory members, including Nelson, are paid consultants.

As for the study, which Modern Fertility sponsored, it doesn’t actually prove anything about the power of AMH testing, though it does underscore that AMH, along with the seven other hormones the company measures on behalf of its customers, can be tested just as effectively with “fingerstick sampling” as a traditional blood draw.

The educator turns the tables . . .

Those curious about Modern Fertility — often younger women eager to get a jump on any later reproductive issues they may face — may well decide that information about their hormone levels is enough to part with the cost of a kit, which includes a one-on-one phone consultation with a nurse.

Interestingly, when they do, they’ll increasingly be asked to opt-in to questions about their health, lifestyles, and more. They may be asked repeatedly, too, as the company recommends that customers re-take the test yearly to track their hormones over time. Indeed, because so many of Modern Fertility’s customers do not have fertility issues, the company hopes to aggregate as much pertinent information from them as possible in order to complement the vast amounts of research that has been conducted on infertility.

“The fertility space needs to catch up, and a huge part of what we’re focused on is moving fertility science forward,” says Vechery. “So much research is primarily done on these women who are having issues; Modern Fertility is interested in flipping that around.”

It’s a strange state of affairs, but we’ve talked with several customers of the company in the past, and one can imagine them supporting it however they can, thanks in part to the sense of community that Modern Fertility has also been fostering. Among other things, for example, the company hosts get-togethers for customers in San Francisco so they can share their thoughts, their fears, and, presumably, their results.

As for whether Modern Fertility is also interested in selling that anonymized data as has happened at genetic testing outfits like Ancestry and Vechery’s former employer, 23andMe, Vechery insists that it will not, that the information will instead be used to inform the company’s product development.

Fertility startups have generally been on a fundraising tear, and little wonder. According to one estimate, the  global fertility services market is expected to exceed $21 billion by 2020. In fact, while venture capital has poured into everything from period-tracking apps to sperm storage startups, Modern Fertility has its own direct competitors, excluding obstetricians. Among these is KindBody, a New York-based startup that raised $15 million two months ago, and three-year-old, Austin-based Everlywell, which has garnered $55 million from VCs so far.

Notably, Modern Fertility represents Forerunner’s first foray into the so-called femtech space. Asked about Green’s involvement, Vechery notes she was particularly “excited about the community,” which Phil Barnes of First Round Capital, has also cited as the reason he wrote Modern Fertility an early check.

Ultimately, though, says Vechery, “Our business model is information, and I think for Kirsten, seeing what that trusted brand could do in women’s health and the conversations it could spark” was what she found most compelling about the company.

We understand why. We also can’t help but wonder if those conversations will drive some women to see — unnecessarily — the very specialists that Modern Fertility wants to free them of visiting.

Modern Fertility has now raised $22 million to date. Among its other backers are Maveron and Union Square Ventures as investors.

Pictured above: Modern Fertility cofounders Afton Vechery and Carly Leahy. Vechery is CEO; Leahy is the company’s CCO, or chief commercial officer.

A peek inside Sequoia Capital’s low-flying, wide-reaching scout program

Ten years ago, Sequoia Capital began quietly encouraging founders of its portfolio companies to consider which of their founder friends they might like to get behind financially. Sequoia would let them write checks to those companies, and it would share with them any later rewards.

It was a brilliant idea. It allowed Sequoia to keep tabs on entrepreneurs — and nascent technologies — not yet in its universe. It cemented the firm’s ties to the founders who were already in its family. Not last, it grew Sequoia’s already considerable influence in Silicon Valley.

Fast forward, and the ripple effects of the highly successful program have not only been wide-reaching, but they’ve quietly reshaped the industry in ways that only those closest to Sequoia have been able to fully appreciate — until now.

To learn more on the tenth anniversary of Sequoia’s “scouts” initiative — which has since been widely copied by other venture firms — we reached out to Sequoia’s Mike Vernal, the partner who today oversees the seed-stage program, as well as four scouts whose names you will recognize. What we learned in the process is that their experiences, while fairly different, have had an outsize impact on the way they lead as well, as on the founders whose paths have crossed with their own.

Ready, set. . .

It began working almost immediately, too. Among those first scouts — one of now hundreds to work with Sequoia — was Jason Calacanis, a serial entrepreneur whose then startup, a search engine called Mahalo, quickly raised $20 million from Sequoia and others after its 2007 founding.

Mahalo didn’t wind up putting Google or Yahoo out of business, but even back then, Calacanis, who’d earlier sold a blog network to AOL, had an established network that Sequoia realized was valuable. As Calacanis tells it, he’d told Sequoia about Zynga when its founder, Mark Pincus, was still figuring out the company in 2007. He’d also told Sequoia about a project that his friend Ev Williams was fiddling with. Both times, it passed.

Those decisions seemed to smart. At least, not long after, Sequoia’s Roelof Botha reached out to Calacanis and asked him, “‘What if we’d just given you some money to make those investments?'”

According to Calacanis, Botha explained that if he could turn up other interesting deals, Sequoia would give him money to invest, then split some of the profits with him and other Sequoia-backed founders who it was also inviting to scout deals on its behalf. (One of them was Sam Altman, then the founder of another Sequoia-backed startup called Loopt. Other early scouts included Airbnb CEO Brian Chesky, and Dropbox founders Arash Ferdowsi and Drew Houston.)

Calacanis loved the proposal, though he chafed at Botha’s insistence that he write an investment memo. As pushback, Calacanis says his first deal memo as a scout included two words, “Cabs suck.”

Calacanis laughs about it now. “I was protesting the fact that Roelof was making me do homework.” As it turns out, his short memo was spot on. The company Calacanis wanted to back was Uber. Sequoia approved it, and the small stake ultimately grew to be valued at “over nine figures,” according to Calacanis, who has collectively plugged $600,000 into 20 startups over the years as part of Sequoia’s scouts program.

From scout to VC . . .

As industry watchers may know, Calacanis has since gone on to raise his own funds, including two $10 million vehicles, and, more recently, a $30 million fund. Yet he’s far from the only person to learn the ropes with Sequoia’s help.

Altman, of course, went on to advise Y Combinator companies, then to become the organization’s president, before resigning earlier this year.  Other former scouts who have joined the world of venture capital full-time include Lee Linden of Quiet Capital, David Ulevitch of Andreessen Horowitz, Jana Messerschmidt of Lightspeed Venture Partners, Cat Lee of Maveron, and Deep Nishar of SoftBank Investment Advisors.

Three other former scouts have landed inside of Sequoia itself: Vernal, who before joining Sequoia spent more than eight years at Facebook, including as a vice president of engineering and product; Jess Lee, who previously cofounded the shopping site Polyvore and oversaw its sale to Yahoo; and Alfred Lin, the former COO and chairman of Zappos.

Not every scout has been plucked from Sequoia’s portfolio, as Mike Vernal himself makes plain. Though Vernal declines to delve into certain specifics about the program, including exactly how many scouts have worked with Sequoia, he says that while “early on, in that first batch, the program was biased toward Sequoia companies,” it’s no longer the case that Sequoia taps only the founders it has already backed.

We also know that Sequoia is now in the middle of its fifth batch of scouts, that it chooses two “classes” of scouts for each separate scout fund, and there have been three to date, including a $180 million fund it closed last year.

As for how much they have to spend, scouts are given up to $100,000. Some invest a little bit in a lot of companies; others invest more in a few. Their checks tend to lead to more checks, too, unsurprisingly. More than 230 companies that have received checks written by Sequoia scouts have gone on to raise more than $6 billion in follow-on financing, excluding Uber. Many of these have received further funding from Sequoia itself, including Faire, GenEdit, Guardant Health, Stripe, Thumbtack, and Vector.

It can also prove a lucrative side gig for those in Sequoia’s scouting program. According to Calacanis, for example, Altman wrote a check to Stripe as a scout, a position that’s now worth $25 million. As with Uber, Calacanis says, “It’s likely that everyone in that class will get a taste of that, too.”

No blank checks . . .

Still, being a scout does not mean having carte blanche to do whatever one chooses. When PlanGrid cofounder and CEO Tracy Young was asked by one of the partners to become a scout for Sequoia, “I had no idea what that meant, but they basically give us $100,000 to do whatever we want, assuming it passes a stringent approval process. [Sequoia] wants to know: how big can this get? What’s the market?”

It can take “hours of conversation” with a founder before Young — whose Sequoia-backed construction software company sold last year to Autodesk for a whopping $875 million — is able to “write up this whole thing, almost like a business plan” to pitch Sequoia, she says.

It may sound inconvenient, but she has learned much from this back-and-forth, she says. “Much of what we do as founders centers on our own problems within our own companies in our own industries. I’m in the construction software world every day, and [being a scout] has enabled me to see other companies’ problems in a deeper way.”

Clara Shih, a scout and the founder and CEO of Hearsay Systems, a Sequoia-backed digital marketing platform for financial services, echoes the sentiment, adding that the “series of diligence items that we go through” also helps to sharpen her thinking about her own company.

“When you’re the CEO of a company, that’s your baby and you’re biased in favor of your own startup,” says Shih. Scouting on behalf of Sequoia — along with her role as a director on the board of Starbucks —  “helps me think what would someone from the outside be [prioritize as part of] their strategy for Hearsay. It helps me to think more objectively and gets me out of the minutiae” that can occupy a founder’s thoughts and time otherwise.

Altogether, Young says she has made “six of seven” investments to date on behalf of Sequoia, and “probably talked with 50 companies” altogether, though not always with investing in mind. Shih has made a similar number of bets.

Both say their primary responsibilities are running their companies but that they are often contacted by founders who are looking to them for advice, and that it’s during these meetings that they sometimes wear the hat of investor, too.

“I’m not out there prospecting,” says Shih, “but a lot of women entrepreneurs reach out to me, because there are still too few of us and it’s my mission to change that.” Young meanwhile says she hears from founders in spaces “adjacent” to her own.

Both suggest that becoming a VC that it’s a path to which they’re open — though not yet. “I have a very busy full-time job,” says Shih. Young also says she’s “full time at Autodesk right now, integrating PlanGrid into the company.”

Still, she continues, “We’ll see. I’m pretty sure a lot of [people in the scout program] are going to become future VCs because a lot of them are really good at investing in and valuing companies.”

A lot of them are also women and minorities, she notes. “I’m biased,” says Young, “but having pitched to a lot of white men at different venture firms, including at Sequoia in 2014, when you walk into a room of scouts, it’s super diverse. It just feels different.”

Calacanis tells us the same. “They’ll never get enough credit for this, but one thing Sequoia did was use scouts to radically increase the amount of diversity in the industry,” he says. “Ten years ago, it was a bunch of Stanford people of a certain gender and [skin] color. But they opened the aperture to get more women and underrepresented investors” into their network, and he says it’s now among the most diverse groups in Silicon Valley — even if it’s also one of the lowest-flying.

Down the road . . .

One outstanding question is what happens when a scout sell his or her company, or takes it public, or otherwise becomes wealthy enough to invest on their own. After all, Sequoia tends to work with founders who have the contacts and the industry know-how, but who also need its financial support if they want to invest in their founder friends.

Calacanis falls into this category, yet says he still does the occasional scout deal and happily. “Sequoia is the greatest venture firm in the world. Whatever they ask me to do, it’s like ‘Yes.’ It’s a no-brainer.”

Another member of this particular club is Matt Macinnis, the founder of Sequoia-backed Inkling Systems, which sold for an undisclosed amount to the private equity firm Marlin Equity Partners last year. Macinnis is today the COO of Rippling, the online payroll and HR startup founded by Zenefits cofounder Parker Conrad, and he says that he has written 24 checks for Sequoia over the last five years, including to note-taking app Notion (founder Ivan Zhao spent a year working on product at Inkling) and the education applications company Clever, whose founder was a Harvard classmate of Macinnis.

Macinnis suggests that as he has begun investing more actively as an angel investor, deciding how much of his own money to pour into a company has become a more complicated affair. Yet like Calacanis, he only sings Sequoia’s praises.

He points to a new investment in Memfault, a startup that was among the most popular to graduate from the Y Combinator’s accelerator program this past winter. He says he was “super excited about the company because they’re doing firmware deployment to internet of things devices — doorknobs, cars, temperature sensors.” He also liked that the startup’s CTO came out of Fitbit.

In fact, he excitedly told Sequoia about the company.  The good news: Sequoia partner Bill Coughran — a former SVP of engineering at Google who well understands hardware — grew excited, too. The bad news, he made the company an offer before Macinnis had closed his own investment.  (Says Macinnis, the company was “surprise, surprise, oversubscribed right away.”)

Given different circumstances, Macinnis might have been out of luck. Instead, he says. “It was not problem at all. Bill adjusted the allocation so that both [I] and the scout program and the founder were able to get the desired outcome. He made room.”

There’s allegiance for good reason, suggests Macinnis, who implies that scouts get as much if not more than Sequoia from their relationship. To underscore his point, he points to DoorDash founder and former scout Tony Xu, whose company is currently valued at $7.1 billion,  and to Weebly cofounder David Rusenko, whose Sequoia-backed company sold last year to Square for $365 million. “I’m not Tony or David,” he says, “but those guys wouldn’t hesitate for a millisecond to pitch in and help a scouts company however they could.”

Says Calacanis separately, “I thought angel investing was stupid” before becoming a scout, which he credits with changing his career trajectory. “I thought I should invest in myself, that I was the smartest entrepreneur I know.” Sequoia, he says, knew better. “They know If you’re smart, your friends are probably pretty smart, too.”

Pictured above: Mike Vernal and Tracy Young. 

A Google Walkout organizer just left the company, saying ‘if they won’t lead, we will’

Claire Stapleton, a longtime Google employee who helped organize a 20,000-person walkout of Google employees last November over the company’s handling of sexual harassment allegations, announced today on Medium that she has left the outfit.

She cites her health, saying she is having another child this fall. But she also says the move ties to retaliation she has alleged she faced after helping stage the walkout, writing: “I made the choice after the heads of my department branded me with a kind of scarlet letter that makes it difficult to do my job or find another one. If I stayed, I didn’t just worry that there’d be more public flogging, shunning, and stress, I expected it.”

Stapleton — who joined Google in 2007 to work in global communications, later joining the Google Creative Writing Lab for just shy of two years before moving on to YouTube, where she has spent the last five years —  said in April that she and fellow organizer Meredith Whittaker had faced retaliation from Google management following the walkout.

For her part, Stapleton posted on numerous internal Google mailing lists that two months after the protest, she was told she’d be demoted from her marketing manager job at YouTube and lose half her reports. She said she then turned to human resources but that rather than find relief, the retaliation worsened.

“My manager started ignoring me, my work was given to other people, and I was told to go on medical leave, even though I’m not sick,” Stapleton wrote to her colleagues. A lawyer hired by Stapleton prompted the company to conduct an investigation and reverse her demotion, she said, but she added in writing that her work environment remained hostile and that “I consider quitting nearly every day.”

In leaving, Stapleton says she remains fond of Google, adding she still believes “this place is magic.” But she also traces how she arrived at such a public resignation”

I have such a simple, pure nostalgia around the years I spent at Google in Mountain View, 2007–2012, that it almost figures in my mind like a childhood — a blur of grass and sun. I used to go out of my way to check out a weekly dodgeball game (that was a thing then). I whizzed around campus on those primary-colored bikes. I dabbled in veganism. But the most potent sense-memory I have comes from five years’ worth of Fridays standing at the side of the stage in Charlie’s, half a beer deep, watching Larry and Sergey and TGIF in a kind of (half-a-beer-buzzed) state of rapture. Google’s lore, its leadership, its promise — the whole thing lit me up, filled me with a sense of purpose, of inspiration, of privilege to be here.

Fast forward a few years and I’d moved to New York, cycled through Creative Lab and landed at YouTube. As I neared the ten-year mark, my first boss, Sally Cole, who’d left Google many years before, joked that I was surely due for an existential crisis. But when I got back to work after having my son Malcolm in 2017, it wasn’t me who was having an existential crisis. It was Google itself. The world had changed, dramatically altering the context of our work and the magnitude of our decisions, especially at YouTube. Google’s always had controversies and internal debates, but the “hard things” had intensified, and the way leadership was addressing them suddenly felt different, cagier, less satisfying. It was the way that management answered the TGIF questions about the Andy Rubin payout–the sidestepping, the jokes, the total lack of accountability–that inspired me to call for the Walkout.

The walkout, which involved Google employees around the globe, was effective. One week later, Google said it would end its practice of forced arbitration for claims of sexual harassment or assault. CEO Sundar Pichai further told employees Google would overhaul its reporting processes for harassment and assault to provide more transparency about reported incidents, and that it would ratchet up the pressure on employees who do not complete mandatory sexual harassment training by dinging them in their performance reviews.

The protest followed an explosive New York Times investigation last year that reported Google had protected Android co-founder Andy Rubin after he had been “credibly accused of sexual harassment.” Instead of fire him, said the Times, the company handed him a $90 million exit package, paid in installments of about $2 million a month for four years.

Rubin has strongly denied the claims.

Google has more recently said it will no longer force employees to settle disputes with the company in private arbitration, expanding on that earlier pledge to do away with the practice in cases relating to sexual harassment or assault.

In closing her Medium post, Stapleton writes that it is her “greatest hope in leaving that people continue to speak up and talk to each other, stand up for one another and for what’s right, and keep building the collective voice. I hope that leadership listens. Because if they won’t lead, we will.”

Voatz has raised $7 million in Series A funding for its mobile voting technology

Voatz, the four-year-old, Boston, Mass.-based voting and citizen engagement platform that has been at the center of debate over the merits and dangers of mobile voting, has raised $7 million in Series A funding. The round was co-led by Medici Ventures and Techstars, with participation from Urban Innovation Fund and Oakhouse Partners.

Voatz, which currently employs 17 people, is modeled after other software-as-a-service companies but geared toward election jurisdictions, working with state and local governments to conduct elections and provide related election management and cybersecurity services.

As we reported back in March, the city of Denver agreed to implement a mobile voting pilot in its May municipal election using Voatz’s technology, an opportunity that was offered exclusively to active-duty military, their eligible dependents and overseas voters using their smartphones.

The company hasn’t yet shared how many people wound up using the platform. As Voatz co-founder and CEO Nimit Sawhney told us late yesterday, “Our most recent election in Denver finished last night on June 4th and the post-election audit will be beginning shortly.”

Denver was not the company’s first pilot program. Rather, Voatz had conducted more than 30 pilots previously, including two in West Virginia last year that attracted the financial backing of Tusk Philanthropies, the philanthropic operation of investor and strategist Bradley Tusk.

As for where Voatz will be used next, Sawhney says to “stay tuned. The next phase of our pilot programs will be announced by the relevant jurisdictions a bit later in the summer.”

Voatz has become the best-known mobile voting app, which has also made it the target of some unflattering attention, including last summer, when numerous security experts criticized it roundly in a Vanity Fair piece. One said it was “going to backfire.” Another warned that the “United States needs some form of vetting process for online voting in elections.” A software expert separately called Voatz a “horrifically bad idea.”

Apparently investors, along with a growing number of city and state governments, are still willing to bet that it’s better than what’s currently available.

Voatz had previously raised $2.2 million in funding, led by the venture arm of

VC and Warriors’ minority owner Mark Stevens banned from NBA Finals after shoving Kyle Lowry

Venture capitalist Mark Stevens has been banned from the rest of the NBA Finals after last night shoving Toronto Raptor’s player Kyle Lowry and hurling expletives at him after Lowry crashed into a row of seats. Notably, Stevens was not in the same row but rather can be seen on video rising from his chair behind the row to push the NBA star as he tried to regain his footing.

The episode is an embarrassment to the Warriors, as Stevens, a former Sequoia Capital partner who spent nearly 23 years with the firm and today manages his own money through a family office called S-Cubed Capital, is a minority owner of the team as well as an executive board member.

The Warriors issued a statement about the episode this morning, writing:

Mr. Stevens’ behavior last night did not reflect the high standards that we hope to exemplify as an organization. We’re extremely disappointed in his actions and, along with Mr. Stevens, offer our sincerest apology to Kyle Lowry and the Toronto Raptors organization for this unfortunate misconduct. There is no place for such interaction between fans — or anyone — and players at an NBA game.

Mr. Stevens will not be in attendance at any of the remaining games of the 2019 NBA Finals. Review of this matter is ongoing.

Meanwhile, a shaken Lowry said last night of Stevens, who had not yet been identified at the time: “The fans have a place; we love our fans. But fans like that shouldn’t be allowed to be in there, because it’s not right. I can’t do nothing to protect myself. But the league does a good job, and hopefully they ban him from all NBA games forever.”

Lowry hasn’t commented since the news broke that Stevens is the individual who shoved him.

Stevens was featured in March of this year on Forbes’s list of the world’s (then) 2,153 billionaires. Indeed, Stevens is believed by the outlet to have amassed a $2.3 billion fortune over the years. He bought a stake in the Warriors’ franchise in 2013.

David Krane, the CEO of GV, is coming to Disrupt

David Krane has a very big job. He’s the CEO and managing partner of GV, and he oversees the fund’s global activities, investing in tech companies including Uber, Nest and Blue Bottle Coffee among hundreds of others.

Yet the journalism major and former director of global communications and public affairs for Google maintains a surprisingly low profile. Indeed, you’d be hard-pressed to find news about Krane beyond the revelation several years ago that he was succeeding his far more public-facing predecessor, Bill Maris.

Then again, Krane seems to have a penchant for counterprogramming. He joined Google more than 19 years ago, when even its founders couldn’t imagine it would become one of the most dominant companies in the world. He also moved over to GV as a general partner in 2010, making what now looks like a smart bet that the company’s venture arm would not get lost in its other machinery.

Another bold bet Krane made was on Uber, convincing his colleagues to pump nearly $260 million into the company six years ago — its largest deal ever at the time — when Uber was breaking away from the ride-hailing pack but very far from becoming the Goliath that it is today.

In fact, when we sat down with Maris at a StrictlyVC event in 2016, he credited Krane almost entirely with the deal, telling us, “David Krane brought in Uber and we pushed all in [financially] when people thought [Uber’s then valuation of $4 billion] was crazy . . . There was no computer that told us that was as good decision.”

Of course, Krane and the 28 investors who work alongside him at GV, have funded a wide variety of consumer, enterprise, life sciences and frontier tech startups since — which is partly why we’re thrilled to announce that Krane is joining us at our upcoming Disrupt show, happening October 2-4 in sunny San Francisco.

We’ll talk for the first time with Krane about the inner workings of GV circa 2019. How does its decision-making process work under his leadership? How does the team think about new areas of investment? What are Krane’s views on SoftBank and other giant pools of capital to come into the venture world? How does GV work with Alphabet’s growth-equity investment fund, Capital G?

And that’s merely just the beginning. If you’re interested in understanding GV, its thinking, its processes and where it’s shopping on Krane’s watch, you won’t want to miss this rare stage appearance. We just hope he’ll put up with our many (many) questions.

Tickets are available here.

Possible Finance lands $10.5 million to provide consumers softer, kinder short-term loans

It’s easy to be skeptical of lending companies of every stripe. They uniformly rely on customers who don’t have enough money to cover their bills and are willing to pay interest on money borrowed in exchange for capital they can spend sooner — sometimes immediately.

Unfortunately, those consumers with the worst credit, or no credit at all, are sometimes left with few options other than to work with payday lenders that typically charge astonishingly high annual percentage rates. Until recently, for example, the state of Ohio had the dubious distinction of allowing payday lenders to charge higher rates than anywhere else in the country — with a typical ARR of 591%.

It’s one reason that venture capitalist Rebecca Lynn, a managing partner with Canvas Ventures and an early investor in the online lending company LendingClub, has largely steered clear of the numerous startups crowding into the industry in recent years. It’s also why she just led a $10.5 million investment in Possible Finance, a two-year-old, Seattle-based outfit that’s doing what she “thought was impossible,” she says. The startup is “helping people on the lower end of the credit spectrum improve their financial outlook without being predatory.”

At the very least, Possible is charging a whole lot less interest on loans than some of its rivals. Here’s how it works: a person pulls up the company’s mobile app, through which she shares the bank account that she has to have in order to get a loan from the startup. Based on her transaction history alone — Possible doesn’t check whether or not that person has a credit history —  the company makes a fast, machine-learning driven decision about whether a loan is a risk worth taking. Assuming the borrower is approved, it then transfers up to $500 to that individual instantly, money that can be paid over numerous installments over a two-month period.

Those repayments are reported to the credit agencies, helping that person either build, or rebuild, her credit rating.

If the money can’t be repaid right away, the borrower has up to 29 more days to pay it. ( By federal law, a late payment must be reported to credit reporting bureaus when it’s 30 days past due.)

Possible has immediate advantages over some of the many usurious lenders out there. First, it gives people more time to pay back their loans, where traditional payday lenders give borrowers just 30 days. It also charges APRs in the 150% to 200% range. That may still seem high, but as Possible’s cofounder and CEO Tony Huang explains it, the company has to “charge a minimum amount of fees to recoup our loss and service the loan. Smaller ticket items have more fixed costs, which is why banks don’t offer them.”

More important to Lynn, traditional payday loans are structured so those payments don’t impact credit scores, often trapping consumers in a cycle of borrowing at excessively high rates from shady issuers. Meanwhile, Possible, she believes, gives them a way off that path.

Yet Possible has another thing going for it: the apparent blessing of the Pew Charitable Trust’s Alex Horowitz, who guides research for Pew’s consumer finance project. As Horowitz tells us, his group has spent years looking at payday loans and other deep subprime credit lending, and one of their key findings about such loans “isn’t just that interest rates or APRs are high, but they’re unnecessarily high.”

In fact, though payday lenders once warned that they would exit certain states that set price limits on how much they can wring from their customers, a “kind of remarkable finding is that states are setting prices as much as four times lower — and these lenders are still coming in and providing credit.”

Horowitz gives Possible credit for not pricing its loans at the ceilings that those states are setting. “Usually,” he explains, “customers are price sensitive, so if a lender comes in two to three times lower than others, they’ll win a lot of customers.” That’s not true in the market in which Possible is playing, says Horowitz. Customers focus on how fast and how easily they can line up a loan, making it “unusual for a lender to offer loans that’s at a price point far below its rivals.”

Worth noting: Ohio, which once allowed payday lenders to get away with murder, is one of those states that more recently implemented interest rate ceilings, with a new payday lending law that went into effect in late April. It’s now one of six states where Possible operates (“with many more to come,” says Huang).

Possible, which currently employs 14 people, has processed 50,000 loans on behalf of users since launching the product in April of last year.

With its new round of funding, it has now raised $13.5 million altogether, including from Columbia Pacific Advisors; Union Bay Partners; Unlock Venture Partners, and angel investor Tom Williams.

Distru, a maker of supply chain software for the cannabis industry, has raised $3 million led by Felicis

Distru, a nearly three-year-old, Oakland-based startup whose platform aims to help track cannabis through its seed-to-sale process, has raised $3 million in seed funding led by Felicis Ventures, with participation from Village Global, Global Founders Capital, and numerous notable angel investors, including Elad Gil, Katie Stanton, and Avichal Garg.

The deal is an interesting one for numerous reasons, including that it marks Felicis’s first investment in the cannabis space after many months spent looking at a wide array of related startups, says Niki Pezeshki, a principal with the firm. Indeed, though interest in cannabis-related products and services is growing among traditional venture firms as a growing number of states move to legalize and regulate marijuana, there’s lingering concern about what will happen and when at the federal level.

Distru is also entering into a space that tech investors can grok: it’s a software as a service company, one that just happens to give cannabis operators insight into their inventory and order management, their customer relationship management, and their logistics. Most important, Distru’s software helps them automate compliance with complicated and growing state regulations by integrating with Metrc, which is itself inventory tracing software that’s being used by a growing number of states to record the inventory and movement of cannabis and cannabis products through the commercial supply chain. (We wrote about six-year-old Metrc last year when it raised $50 million in funding, including from Casa Verde Capital and Tiger Global Management.)

Not last, Distru’s team, headed by founder and CEO Blaine Hatab, comes from the tech world, even while most are in the formative stages of their careers. Hatab has spent much of his post-collegiate career as a software developer, as has his cofounder, Blake Gentry, who joined forced with Hatab after leaving a developer role with the startup Opendoor to create his own company, Actualyze, which merged with Distru last fall. A third cofounder, Johnny Li, who further serves as Distru’s chief technical officer, was most recently a JavaScript instructor. Altogether, says Hatab, the team is made up of just nine employees who work remotely, though with its new funding, Distru plans to fill five more roles imminently.

In the meantime, it seems to pick picking up momentum despite its scale. Among its customers are major cannabis producers and distributors Humboldt Farms and CannaCraft. More, though it has competitors, including nine-year-old, Denver-based, venture-backed MJ Freeway, Hatab says it’s growing steadily based solely on word of mouth. Perhaps most compelling to Felicis and its other backers, the company has been operating in the black for some time. Says Hatab, “I think [our investors] were surprised by profitable we were.”

And it has a lot of room to grow, no pun intended. Distru operates in California alone today, but Hatab says it plans to follow Metrc into the other markets where it operates today, including Colorado, Oregon, Alaska, Maryland, Michigan, Ohio, Massachusetts, Montana, Nevada and Louisiana.