Susan Su on how to approach growth as your startup raises each round

Your startup might rely on clever growth tactics to get off the ground, but you need more than spreadsheets if you want to turn viral spikes into a real business. You need a qualitative growth model to guide the strategy that you can use to tell your story to your team and investors.

Growth marketing expert Susan Su sat down with us at TechCrunch Early Stage: Marketing and Fundraising this month to share pointers for young companies that are trying to raise money after initial market traction. In the presentation below, she maps out a growth strategy from seed through Series A and B rounds and details how your milestones, budgets, investor updates and other measures change as you advance.

The not-so-secret secret here is that the key to great retention is really simple. It is building a product that solves a real and especially persistent problem for people.

Throughout the process, “a qualitative model tells the story of growth that you can use at early stages and really all throughout your company life cycle,” she explains.A quantitative model or quantitative growth accounting charts the numerical course for how you actually deliver against that narrative and becomes more relevant at later stages when you actually have real numbers.

Formerly a strategic growth adviser to companies at Sound Ventures, a growth marketing lead focused on startups at Stripe, and the first hire and head of growth at Reforge, Su just became a partner investing in climate tech for early-stage fund Toba Capital. She also writes a popular newsletter on climate investing and runs a six-week course for other investors on the topic.

Here’s more about growth, and how to talk about it with investors, from her presentation:

So here’s a sample qualitative growth model that I built for one of our portfolio companies with some modifications for anonymity. At the bottom, we have our linear inputs that form the foundation of awareness — in other words, traffic or leads that feed into our growth machine.

Once those leads come in, we have our acquisition loops, working to turn that non-repeatable spiky linear traffic (aka TechCrunch traffic, if you get so lucky as to be written up in TechCrunch) into scalable, repeatable acquisition. You cannot repeat the TechCrunch effect.

For this sample business, I happened to spec out five different acquisition loops — I was really ambitious. Many companies will struggle to identify this many. But the key to being able to scale is to have multiple viable acquisition loops, not just one single thing that works.

The pandemic showed why product and brand design need to sit together

Young startups need to be great at design, not just for their products, but for their brands. The pandemic made that all harder — but lessons are being learned. We caught up with Scott Tong, a startup design expert who advises early-stage companies, to learn more.

The office may still be the best place to hash out big multiteam decisions, he says, but new best practices and modern tools are making remote collaboration easier and easier.

Brand design seems to only be getting trickier, however. “To users,” he explains, “brand and product are lumped together and they each represent the other.”

Today, many users have spent lots of time at home online, often thinking harder about world events and how they are living their lives. They’re scrutinizing what they can observe about a startup to see if its values line up with theirs before they make a decision to sign up (or quit).

The solution, in Tong’s view, is to create a unifying plan where design decisions can address problems before they emerge.

More details are in the interview below. For a full conversation, check out Tong’s talk about design strategy coming up at our TC Early Stage 2021 – Marketing & Fundraising conference on July 8.

The pandemic affected us all. How has it affected user-focused brand design?

The pandemic drove people to consume even more media than before. News about science, politics, race and the economy were unavoidable. Brands have had to navigate a very complex landscape of topics that can be divisive. People increasingly identify with brands that are aligned with their values. But in order to understand a brand’s values, someone has to sift through competing signals — some from the brand itself, and others from vocal supporters and critics. Say the wrong thing and a brand can risk alienating large portions of their audience (including their own employees). If a brand says nothing, their silence can be interpreted as complicity. And if brand messaging comes across as unauthentic, it could spell disaster. It’s a difficult needle to thread. It’s not uncommon for companies to run surveys to gather signals about how their brand is perceived by customers and noncustomers alike.

What new things about users should startups consider when working on designing their identities? What are you advising startups now about designing their brands, versus what you said circa December 2020?

Identities are only one part of a much larger constellation of touch points that make up a user’s perception of a brand. User expectations are extremely high and will continue to rise. Even with their free products, users have gotten accustomed to highly polished experiences. While “high quality” is table stakes for users, the challenge for a company is to pinpoint the handful of dimensions that matter most. That’s why constantly seeking to understand users is so important. Deeply understanding what they care about will help isolate those critical dimensions so teams can focus on areas that will drive the most meaningful impact.

Founders, help TechCrunch find the best growth marketers for startups.

Provide a recommendation in this quick survey and we’ll share the results with everybody.

What do startups continue to get wrong?

One recurring observation is that brand teams and product teams often sit in different parts of a company’s org structure. While there are reasons for this, it’s important to remember that users don’t care about your org structure. To users, brand and product are lumped together and they each represent the other.

Internally, how are companies handling internal challenges like collaborative designing in a more remote world? In-person communication has been vital historically to get all parts of a company thinking in the same way. What is helping those who have gone remote-first succeed (tools, approaches to meeting and documentation, etc.)?

Collaboration tools have never been more abundant. But while tools are plenty, norms around their usage can vary significantly from group to group, even within the same company. Where can I find the project brief? How many back-to-back meetings is too many? How are brainstorms run in a virtual environment? When do I use Slack versus email? Establishing those norms requires conversation and experimentation.

Along with norms around tools, it’s helpful to establish a cadence/rhythm that allows team members to get and stay in sync. Depending on the team, that cadence may be daily, weekly, biweekly, monthly or quarterly, etc., but find the appropriate cadence for each audience.

Alternatively, do you think the demands of good design work will motivate more early-stage startups back into in-person office work?

There are varying opinions on whether being in-person spurs innovation or productivity. The pandemic has forced us all to adapt, and design is no exception. It’s been encouraging to see good design happen in remote work environments, and a lot of that has been enabled by tools and the norms around their usage. While I personally would prefer being in-person, especially at the early stages of company building, I think it’s entirely possible to establish a high-functioning team in a remote environment. Of course there are cases — like hardware or soft goods — where tactile feedback is important and hard to replicate remotely. But even then I’ve seen some successful workarounds (for example, sending the same material sample to every team member). Given that this is all still very new, there will inevitably be hiccups along the way. But a team of willing participants with the right mix of tools and norms can make it work.

Overall, with more teams remote and distributed, it may be even more natural than before to work with a third-party brand design expert. When do you advise startups to bring in an outside consultant today, and how should they work with them?

This depends largely on how design is valued within an organization — as a service or as a partner.

If design is viewed as a partner, then the relationship is ongoing and iterative. This means design is a function that builds, measures and learns alongside their product and engineering counterparts and the benefits of institutional knowledge compound over time.

If design is viewed as a service, third parties make sense, because in a service relationship there is usually a defined beginning and end to an engagement. Clear scope, timeline and deliverables will set this kind of service relationship up for success.

To win post-pandemic, startups need remote-first growth teams

Growth leaders used to build key relationships across a company while working together in a real-life office. Those relationships could carry over through the pandemic, but let’s say you’re a new company and you’re remote-first.

How do you build this complex collaboration from scratch?

Growth marketer and investor Susan Su tells us that the solution is not just more software tools. In the interview below, she says that after the pandemic, startup founders will need to develop a mentality that places growth at the center of company strategy.

Consultants and agencies can be great additions to this effort, especially if they have previously solved the types of problems you face. (In fact, TechCrunch is asking founders who have worked with growth marketers to share a recommendation in this survey. We’ll use your answers to find more experts to interview.)

Su is currently the head of portfolio strategy for Sound Ventures, previously a growth leader at Stripe and the first hire at Reforge. She also shared a few thoughts on market opportunities after the pandemic in the full interview below. E-commerce is mainstream for good, she says, even as we all try to step away from screens more often. However, many social and mobile sectors are mature, and it’s going to be even harder for startups to compete as real-world activities absorb more time.

Don’t forget: Susan Su will also appear at our Early Stage virtual event on July 8 (and answer questions directly).

How are you seeing startups manage changes in user engagement as more people exit pandemic lockdowns and adjust their daily lives?

As we exit the pandemic, I expect that we’ll see a natural and obvious spike in some consumer activity that will roll up to midsized businesses and enterprises. Just like with the onset of the pandemic, we’ll see uneven results across sectors:

E-commerce boomed during the pandemic but was really an augmentation of an already-accelerating trend towards digital commerce and streamlined logistics. I don’t think we backtrack from e-commerce because habit formation around online shopping has been building for years; we would be backtracking to an age long before 2020, and that’s not going to happen.

New social-mobile experiences also boomed during the pandemic, but there’s still a valid question around whether 15 months or so is enough time to become part of the ingrained infrastructure of daily life. We are living in an age of mature platforms, so every new service is stealing time away from an existing service. As with pre-pandemic growth, their success rests upon fast-accumulating network effects and great, sticky core product experience. Now that we have parks, friends and dinners out calling to us again, it’s a real test of how compelling some of these new value propositions really are, and whether they can continue to demonstrate their relevance in a more hybridized online-offline world.

That said, the pandemic was an enormous constraint on human society and [the] economy, and these kinds of constraints often breed innovation that doesn’t go away. We will evolve, but we can never go back. It sounds cheesy but it’s true.

Some aspects of the pandemic, like remote work, appear to have radically changed certain industries. How will these societal changes impact how the typical startup thinks about growth?

Growth will always be growth — that is, a process of iterative experimentation to identify and solve customer problems, and then scale those solutions in order to reach and convert bigger and bigger audiences. Platform changes like iOS 14 or Facebook’s periodic algorithm adjustments will have a bigger impact in the near term on the technical functioning of growth, and these aren’t specifically pandemic-related.

One area to watch is how growth teams are built and operated. Growth is a horizontal function that touches many different parts of the org, including product, engineering, marketing, comms and design. Many startup teams have already been working with collaboration tools even while they sat in the same office, but growth is about more than just using tools. The most effective growth leaders succeed by building relationships across the organization; it’s like the fable of Stone Soup — you’re creating this meal that will feed everyone, but you also need each person to bring a pinch of salt, or a dash of pepper, or one carrot, and that requires socialization and relationship-building. I’ll be very interested to see how new growth leaders onboard remote-only teams and what approaches they take to this “networking” need within the function.

From the days of growth hacking on social platforms, growth marketing is now an established part of the world. But it’s not necessarily the main expertise of a startup founder, even if it needs to be. So, how should they think about addressing growth marketing in 2021? What are the essentials they should do in their roles?

Every founder needs to have a growth mentality. They don’t need to memorize all the right buttons to push in an ads dashboard, but they need to be familiar and comfortable with the core work of gap-finding. That said, founders are by definition entrepreneurial — their company exists because they saw an opportunity that no one else did, and this is the fundamental work of growth as well.

Founders will fail if they adopt a mentality that someone else can or should do it for them. The founder’s job is to supply ambition and opinions, and then magnetize high-quality talent to come and pull the levers and bring their creative vision to life. There are many people who can do growth marketing — that is, they know how the platforms work, they understand the rules and the playbooks. But there are very few who can come up with truly visionary strategies that change the game altogether — those people become founders, and those companies become household names. So for a founder, I’d say the most important growth work is to continue to know your market and customer better than anyone else in the whole world, have an opinion about what’s missing, and work to bring the best talent to come in alongside you and be a thought partner, not just a button pusher.

With limited resources, how should early-stage companies think about what to focus on?

This is going to depend on the goals of your company. Are you planning to raise money and need to demonstrate certain KPIs? Are you bootstrapping and need to keep the lights on? Resources should always be allocated to the most strategic purposes, with the longest-term view you can afford. For some companies, this could mean forgoing revenue to focus on viral or word-of-mouth-driven user acquisition to demonstrate to future investors that there’s something special here. For other companies, perhaps in lower volume categories like enterprise, it’s about bringing a few strategic logos into the family as a signal to later customers and other stakeholders, including future employees and investors.

One thing that early-stage companies should always be focused on is building a top-shelf employer brand. You will only ever be as good as the talent you attract to your company, and interestingly growth can actually play a role in this. The best designers, engineers and product people are often flowing towards the companies that have the best growth. In that way, it’s a highly strategic role and function.

What do startups continue to get wrong?

You can’t truly outsource growth or any other core function; you can’t tack on customer acquisition after product development. At the end of the day, if you really think about it, all a company is, is a customer-acquisition engine. This needs to be core; wake up every day and think about growth, not just to hit revenue or user KPIs, but to build the company that the best people are clamoring to work at. It’s not about finding someone sufficient to solve your near-term problems; it’s about framing problems in a way that’s so compelling to the most creative, hardest working people so that they can’t get it out of their heads. Go for talent moonshots, and figure out how to close them. The rest will fall in line from there.

When should a founder feel comfortable getting help from an outside expert or agency?

Anytime. Agencies are great. They are an extension of your talent, and the best agencies aren’t selling you — they have to be sold on your problem because they have their pick of companies just like yours. That’s the agency or outside expert you want to work with, because they’ll have a priceless perspective from the other best-in-class founders and teams they’ve worked with that they can bring to your challenge. Any agency can run Facebook ads (it’s not rocket science), but you want to find the team that’s solved the gnarliest problems for your hero companies. Then you’ll get not just an ads manager, but a teacher.

 

The return of neighborhood retail and other surprising real estate trends

The pandemic made remote work and on-demand delivery normal far faster than anyone expected. Today, as the world beings to emerge from the pandemic, location doesn’t matter like it did a year ago.

As shocking as it sounds, we could be entering a much better era for small, local businesses.

Modern society produced superstar cities filled with skyscraper office and residential buildings. Now, the populations that once thrived in these urban centers are deciding how to repurpose them for a post-pandemic world.

I caught up with ten top investors who focus on real estate property technology to get a sense of how they’re betting on the future.

They are optimistic overall, because the typically glacial real estate industry now sees proptech as essential to its future. However, they are the most unsure about the office sector, at least as we knew the concept before the pandemic.

They expect remote work to be part of the future in a significant way and foresee ongoing high housing demand in the suburbs and smaller cities. They are especially positive about fintech and SaaS products focused on areas like single-family home sales and rentals. Many are continuing to invest in big cities, but around alternative housing (co-living, accessory dwelling units) and climate-related concepts.

Most surprisingly, some investors are actually excited about physical retail. I examined the latest evidence and found myself agreeing. As shocking as it sounds, we could be entering a much better era for small, local businesses. Details farther down.

(And before we dig in below, please note that Extra Crunch subscribers can separately read the following people responding fully in their own words, with lots of great information I wasn’t able to explore below.)

When the office is more of a luxury

The pandemic combined with existing trends has made office renters “more akin to a consumer of a luxury product,” explains Clelia Warburg Peters, a venture partner at Bain Capital Ventures and long-time proptech investor and real estate operator.

Landlords who have “largely been in a position of power since the 1950s” now have to put the customer first, she says. The “best landlords will recognize that they are going to be under pressure to shift from simply providing a physical space, to helping provide tenants with a multichannel work experience.”

This includes tangible additional services like software and hardware for managing employees as they travel between various office locations. But the market today also dictates a new attitude. “These assets will need to be provided in the context of a much more human relationship, focusing on serving the needs of tenants,” she says. “As lease terms inevitably shorten, tenants will need to be courted and supported in a much more active way than they have been in the past.”

The changes in office space may be more favorable to the supply side in suburban areas.

“Companies are going to have to offer employees space in an urban headquarters,” Zach Aarons of Metaprop tells me. But many will also want to offer ”some sort of office alternative in the suburbs so the worker can leave home sometimes but not have to take a one-hour train ride to get to the office when needed.”

“If we were still purchasing hard real estate assets like many of us on the MetaProp team used to do in previous careers,” he added, “we would be looking aggressively to purchase suburban office inventory.”

Most people thought that remote work was here for good and would impact the nature of office space in the future.

Adam Demuyakor, co-founder and managing director of Wilshire Lane Partners, is generally bullish on big cities, but he notes that startups themselves are already untethering from specific places. This is a key leading indicator, in TechCrunch’s opinion.

“Something that has been interesting to watch over the past year is how startups themselves have begun to evolve due to newfound geographic flexibility from the pandemic,” he observes. “Previously, startups (especially real-estate-related startups) felt pressure to be ‘headquartered’ near where their customers, prospective capital sources and pools of talent were located. However, we’ve seen this change over the past few months.”

In fact, a recent report by my former colleague Kim-Mai Cutler, now a partner at Initialized Capital, highlights these trends in a regular survey of its portfolio companies. When the pandemic began, the Bay Area was still the number one place that founders said they’d start a company. Today, remote-first is in first place. Meanwhile, the portfolio companies are either going toward remote-first or a hub-and-spoke model of a smaller headquarters and more far-flung offices. Those who maintain some sort of office say they will require significantly less than five days a week. Nearly two-thirds of respondents said they would also not adjust salaries based on location!

That’s a small sample but as Demuyakor says, “Startups (a) are frequently the most adept at utilizing the types of technology necessary for effective remote work and (b) simultaneously have to compete ferociously for talent. As such, I think we may be able to infer what the ‘future of work’ may look like as we observe what startups choose to do as the pandemic passes.”

Some landlords (with big loans) and large cities (with big budgets) are making a push to repopulate their offices quickly, and some large companies are loading up on office space or reaffirming their commitments to current locations.

Maybe efforts like these, plus the natural desire to network live, will bring back the industry clusters and pull everyone back to the old geographies? Maybe something close to 100% of what we saw before? What does that look like?

In such a scenario, some pandemic-era changes will persist, says Christopher Yip, a partner and managing director at RET Ventures. “A populace that has become sensitized to public health considerations may well gravitate toward solo forms of transportation (cars and bicycles) instead of mass transit, and parking-related and bike-sharing tech tools may likely thrive. From a real estate management perspective, technology that makes high-density living more comfortable and healthier will also increase, as consumers will become increasingly attracted to touchless technology and tools that facilitate self-leasing.”

Here’s the other scenario that he lays out “if a large number of jobs remain fully remote.”

“In theory, retail and office properties could structurally continue to suffer, and there has been some talk from government officials in certain regions about converting office properties into affordable housing,” he details. “If market-rate vacancies in cities remain high, there will be increasing demand for short-term rental platforms like Airbnb and Kasa, which enable landlords to gain revenue from hotel-type stays even in a market where residential demand is not strong.”

Vik Chawla, a partner at Fifth Wall, sketches out a middle-of-the-road scenario. “We believe that major cities will continue to attract knowledge workers and top talent post-pandemic,” he says, “though we expect remote work to become an increasingly critical component to the work economy, meaning that there will be increased flexibility in terms of time spent in the office versus elsewhere.”

This would still mean some sort of long-term price decline. “At a city level, this means that rents should taper relative to pre-pandemic levels due to lesser demand,” he believes. “That said, the real estate ecosystems in cities that have experienced growth throughout the pandemic will enter a period of innovation, and with it, see an increase in housing density, ADUs and modular building techniques.”

Andrew Ackerman, managing director of UrbanTech for DreamIt Ventures, also sees a gentle deflation of commercial office prices over time, followed by some complex space-management questions.

“[T]he return to work will likely result in more flexible work arrangements rather than the demise of the office which, as leases renew over the next 5-10 years, will lead to a gradual meaningful-but-not-catastrophic reduction in the demand for office space. The question is, what then happens to the excess office space?”

“Office to residential conversion is tricky,” he elaborates. “Layout is a major constraint. Many modern offices have deep, windowless interior space that is hard to repurpose. But even with narrow layouts, the structural elements are often in the wrong place. Drilling thousands of holes in structural concrete so you can move plumbing and gas to the right places is a heavy lift.”

This might just lead to new types of still-valuable uses? “One of the areas that I’m still investigating is whether co-living or microunits might be a more attractive conversion option. Turning an office break room and interior bullpens into a shared kitchen, dining area, and recreation or work flexspace may be a better way to repurpose deep interior space without a very costly retrofit. And if you don’t have to reroute too much plumbing, it may even be possible to convert (and convert back!) individual floors as market demand for office and residential space fluctuates over time.”

All respondents saw proptech being a core part of the next era of big cities (of course), however bullish or bearish they may be about the office itself.

A new equilibrium for residential

Housing availability has become even more limited in most places during the pandemic, with many more people looking to buy and fewer people wanting to sell. This is even though the previously hottest cities have seen major rental price drops.

Demuyakor of Wilshire Lane is staying focused on the housing problem, and solutions to it like co-living. “Despite the pandemic, it is still difficult for millennials and Gen Z to afford to live in the most expensive cities (New York, San Francisco, Los Angeles, etc.) at current wage levels,” he says. “As such, we believe that we will continue to see demand for products and solutions that can continue to help alleviate costs and burdens of living in major cities. For example, we think that at its core, co-living is an economic decision. Solutions that continue to help people live where they want to live more easily (ADUs are another example of this) will continue to thrive.”

Casey Berman, managing director and general partner of Camber Creek, thinks that “cities will continue to attract people to live, work and play because they offer density and opportunities for experiences that people crave even more now. To the extent all of this is true, there will be renewed demand for urban spaces and properties to take advantage of that demand.”

He says that the firm has been investing in products to make dense living safer and more convenient and “we expect those solutions will become increasingly popular. Flex allows tenants to pay rent online in easier-to-manage installments and in the process makes it more likely that landlords will receive payment on time. Latch’s access control devices are in one out of 10 new multifamily buildings. A lot of people purchased a pet over the past year. PetScreening makes it easy to manage pet records and confirm when a pet is a service or support animal.”

Robin Godenrath and Julian Roeoes, partners at Picus Capital, generally share this viewpoint and describe how new living arrangements in cities could allow for more radical changes to how people live.

“Flexible living solutions will allow remote workers to spend time across different cities with a fully managed, affordable and safe rental option for short-to-long-term urban living,” he says, “while commercial conversion to residential will play a key role in driving down per square foot prices enabling long-term returning residents to afford less densified space. Although co-living densifies multifamily buildings, we believe it will remain an interesting sector as the continued shift to remote work will make living communities increasingly important considering the reduced social interaction on the job.”

But modern proptech is also making the suburbs and beyond more appealing in the long run, according to many. Great new technologies for living can exist anywhere you are.

Proptech has also helped fuel the new suburban boom. “There is an ongoing trend of reverse urban migration causing an uptick in the demand for suburban-style living,” he says. “Proptech companies have played a significant role in enabling this shift, specifically via digitizing the home buying, selling and renting transaction processes (e.g., iBuyers, alternative financing models and tech-enabled brokerages). Additionally, proptech companies have played a key role in reducing physical interactions through remote appraisals, 3D/VR viewings and digital communications thus enabling homebuyers and sellers to efficiently and safely transact throughout the pandemic.”

Ultimately, the same technologies that could make cities more affordable will also help out in the suburbs. “We strongly believe that the acceleration of the digitalization of the home transaction process coupled with the significant increase in demand for suburban-style housing and evolving buyer profiles (e.g., tech-savvy millennials) opens up a multitude of opportunities for proptech to significantly impact suburban living across construction, access and lifestyle. This includes companies focusing on built-to-rent developments, modular homebuilding, affordable housing, community building and digital amenities.

Many investors who we talked to highlighted the single-family rental market trend. Here’s Christopher Yip again from RET.

“One of the unheralded trends of the past decade has been the rise of the single-family rental (SFR) market,” he says “with a significant number of major investors moving into this asset class. The SFR space is poised to benefit from the migration from cities, and the tech that supports SFR will likely have positive ripple effects across the industry.”

“SFR portfolios are particularly challenging to operate efficiently and at scale; compared with a multifamily property, they have more distinct unit layouts and are more spread out geographically,” he explains. “Technology has the ability to streamline operations and maintenance for SFR operators, with smart home tools like SmartRent facilitating self-touring and management of these distributed portfolios. We’re bullish on this space and are keeping a close eye on proptech tools that serve this market.”

Andrew Ackerman of DreamIt agrees. “Single-family has been neglected, slowly growing more interesting both from an asset and proptech perspective for some time. For example, we invested in startups like NestEgg and Abode who service this ecosystem … prior to the pandemic. COVID has been good to these startups and brought more attention to the opportunities in single-family in general.”

Stonly Baptiste and Shaun Abrahamson, co-founders of Urban.us, already see a world of options unfolding across geographies, with choices like co-living and short-term rentals letting people find new lifestyles. “Portfolio companies like Starcity are really thriving as co-living doesn’t just solve for cost, but also for a key overlooked issue — access to community. We also see room for more nomadic lifestyles. A lot of the discussion about Miami is about people moving there, but it seems like a more interesting question for a lot of places is maybe whether or not people will spend a few months of the year there. So for remote workers this might mean places near specific activities like mountain biking, surfing, snowboarding etc. Starcity makes it easy to move between city locations and Kibbo takes this far beyond the city by building communities around van life.”

Here’s how all these changes are adding up for the suburban market, as mapped out by Clelia Warburg Peters of BCV.

“The residential transaction disruption is now settling in three core categories: iBuyers (who buy homes directly from sellers and ultimately hope to own the sell-side marketplace), neobrokers (who generally employ their agents and use secondary services such as title mortgage and insurance to increase their revenue) and elite agent tools (platforms or tools focused on the top agents).”

This combination of innovations are changing residential real estate as we know it. “[C]onsumers are increasingly open to alternative financing tools, including home-equity-based financing models (where you sell a stake in your home, or you buy into full ownership in a home over time). The growth and proliferation of these new models are consolidating the whole residential market so that brokerage sales commissions and commission from the sale of mortgage, title and home insurance are now functionally one large and intertwined disruptable market.”

The surprising revival of neighborhood retail

Humans seem to love the concept of a traditional Main Street full of bustling, walkable local businesses. But the hits have kept coming to the people trying to successfully operate independent retail storefronts.

E-commerce began cutting into traditionally thin margins with the rise of Amazon and the 90s wave of “e-tailers.” More recently, art galleries, high-end restaurants and boutiques became a harbinger of gentrification in many cities. Many commercial retail landlords in these locations aggressively priced rents as more residents moved in who could afford higher prices, ultimately contributing to gluts of empty storefronts in prime locations.

The pandemic seemed to be the final blow, with even the most loyal shoppers turning to order online while local businesses stayed closed.

And yet, a range of investors are strangely optimistic. Even though the pandemic upended social and economic activity for more than a year, most agreed that IRL retail experiences are an essential aspect of modern life.

“Humans are fundamentally social animals and I think we will all be hungry for in-person experiences once it is safe to return to them. Additionally, I think the shift away from working five days a week in the office is going to create a greater desire for ‘third spaces’ — not home, not a formal office environment,” said Peters.

“I do think we will continue to see more ‘Apple store’-type retail experiences, where the focus is less on selling inventory and more on creating an environment for customers to physically interact with goods and experience the brand ethos beyond a website. Because I anticipate that retail rents are going to be meaningfully lower at the end of the pandemic, I actually think we will see even more experimentation than we did pre-COVID. It will be a very interesting period for retail.”

Many others held views in this direction, whether they are investing specifically in retail-related tech or more generally in third-space ideas.

“It’s true that retail has been in flux for more than a decade; the list of common e-commerce purchases has expanded from books and clothing to prepared meals and groceries. It’s also true that the pandemic has accelerated e-commerce’s growth, to the detriment of brick-and-mortar retail,” says RET’s Yip. “But people are still human and crave in-person experiences. Even if cities never bounce back fully, major metropolises will still have enough foot traffic to support a fair amount of retail, and innovative models like pop-up shops can be brought in to help address vacancies. It should also be noted that the public markets still have some confidence in the retail space. While the major REITs struggled in early to mid-2020, many have recovered substantially, and several have actually surpassed their pre-pandemic figures. It has been a bad decade for retail — and a very bad year — but it is just too soon to close the book on the sector.”

Godenrath and Roeoes of Picus say movie theaters are just one example of a retail sector poised for success when public life resumes at scale post-pandemic.

“Cinemas, many of which are key shopping center anchor tenants, were already reinventing the traditional theater experience by offering a more holistic experiential solution (e.g., reserved seating, 4DX visuals, in-theater restaurants, cafes and bars) and the pandemic has led to an expansion of these offerings (i.e., private theater rentals and events). We have the opinion that this trend will continue to expand across the entire retail real estate industry from restaurants (immersive culinary experiences) to traditional retail (integrated online and offline shopping experiences) and believe that proptech will play a defining role in helping retail real estate owners identify potential tenants and market properties as well as in helping retailers drive in-store customer engagement and gain key insights into the customer journey.”

The internet is also a friend these days, surprisingly! “We also see a lot of potential for hybrid models combining online and offline experiences without friction,” they say. “Taking the fitness sectors as an example we can imagine a new normal where in-studio courses are broadcasted to allow a broader participant group and apps tracking fitness and health progress throughout in-studio visits and at-home workouts.”

I have a few additional reasons to believe in the future of retail that I didn’t hear from any of the investors I interviewed.

You can also see how retail intersects with many other solutions investors are betting on, particularly to improve the appeal of cities and solve for macro problems like climate change.

“Cities have some massively underutilized assets, perhaps the biggest being public spaces that are allocated to cars,” Baptiste and Abrahamson say. “So one change we think will become permanent is reallocating parking spaces away from private vehicles to micromobility (bike/scooter/board lanes, parking, etc.). We’re seeing a lot of demand for portfolio companies like Coord (manages curb space starting with commercial vehicles and smart zones), Qucit (manages bike and scooter share operations in many large cities) and Oonee (secure bike/scooter/board parking).”

That’s just the start of the virtuous cycle they foresee.

“As [car removal] happens, the use cases like logistics can shift to electric micro-EVs. Similarly, parklets or seating areas increase social spaces. The EU is setting the pace for banning cars, but overall reduced access to streets for cars is going to be a big change. And likely will make cities attractive — yes, you give up private living space, but you’re going to get a lot more common/social space. This is also likely to drive more co-living so you can decrease the cost basis for being in a city, but get a lot more from shared spaces, which have no real comparison in lower density communities.”

Demuyakor of Wilshire Lane is betting in the same direction.

“One of the key tenets of our overall strategy has always been a focus on space utilization and identifying the best ways technology can monetize underutilized spaces. This can be seen clearly with many of our newest investments: Stuf and Neighbor (monetization of basements, parking garages and other vacant spaces), MealCo (monetization of vacant kitchens), WorkChew (monetization of restaurant seating areas, hotel lobbies and conference rooms), and Saltbox (monetization of empty warehouses). We believe that landlords can certainly use these types of strategies to help mitigate increased levels of vacancies that we’re seeing across the real estate industry today in the medium term.”

If this thesis pans out, retail may become more about shared spaces. “With WorkChew in particular, which just announced funding this week, we’re seeing a ton of demand for their product both on the demand side and the supply side. Hotels and restaurants are excited to partner with them to monetize their less-utilized spaces and infrastructure,” said Demuyakor. “And of course, employers and companies love [it] as an easy amenity that can be offered to their hybrid workforces that increasingly want to spend more time out of the HQ office.”

I have a few additional reasons to believe in the future of retail that I didn’t hear explicitly from the investors I interviewed.

  • First, millions of new businesses have been created during the pandemic, to the surprise of even economists and policymakers. A large portion appear to have a very local angle, whether food delivery (cupcakes) or services (on-site haircuts) or internet-first products with strong local followings (much of Etsy). These entrepreneurs went internet-first and now, as commercial rents plummet, they have sufficient revenue to support a physical presence.
  • Second, most local business that have sustained themselves during the COVID-19 era figured out how to succeed on the internet. To see which ones in your vicinity are weathering the storm, just open one of your preferred on-demand delivery and services apps and place an order.
  • Third, as noted by respondents and available data, landlords are already starting to drop prices, creating a renter’s market for the first time in decades.
  • Fourth, there are whole new types of financing opening up to more traditional businesses that could enable any company with a successful online side hustle, hobby (or perhaps larger project) to get funding for expansion. (This reason is perhaps the most speculative, but we are trying to figure out the future here at TechCrunch.) For example, Shopify has just invested in Pipe.com, a new “platform for trading recurring revenue.” Although the companies are not saying much now about the relationship, it’s possible to imagine a bunch of successful small(ish) businesses on Shopify suddenly getting a new kind of capital infusion right as the math is suddenly much better for a storefront location.

If you roll all of this up with other broader shifts in how we think about cities, like making them more climate-friendly through allowing density and bike lanes, you can start to see a world emerging that sounds a lot more like the fantasies of a New Urbanist than the world before the pandemic.

At the same time, these concepts are being deployed across smaller cities, suburbs and towns: All will compete to offer the highest quality of living — unless the old network effects of industry clusters return miraculously.

And let’s say the industry clusters don’t cluster like they used to. It’s possible that many landlords, lenders and city budgets will have to retrench soon, creating a drag on the economies of otherwise-attractive cities.

Even in this case, you can imagine a rebirth for places like New York and San Francisco focused around housing, retail and amenities. Maybe one day, we’ll look back at recent decades as the bad old days before we collectively bottomed out during the pandemic and had to decide on the right answers for the long-term.

And with that, I invite readers to go check out the full sets of responses from the investors I interviewed. Each person offered a lot more than I was able to fit into this already-too-long article and is worth reading in detail. Extra Crunch subscription required, so you can support our ongoing coverage of these changes.

I’ll be covering the future of proptech and cities more soon. Have other thoughts about all of this? Email me at [email protected].

10 proptech investors see better era for residential and retail after pandemic

The pandemic made the internet a lifeline for shopping, earning a living and maintaining personal relationships. Now, as lockdowns start to lift, the real estate industry has to figure out what that means.

Seeking answers, I surveyed the people who are betting on the biggest and most surprising changes in the sector — proptech investors. While landlords and their lenders may hope for a return to the past, proptech investors are focused on where the notion of place is going in the future. I have an in-depth writeup with many excerpts and my thoughts over on TechCrunch, including a look at the revival of neighborhood retail, the rebirth of cities and much more.

I couldn’t get into all of the great topics, though, including the rapid recent evolution of the residential sales and rental market, construction tech, related climate-tech topics and other issues.

So here are the thousands of words of answers in full, below. Extra Crunch subscription required. If you’re a startup founder, employee, investor, etc., you may also enjoy the previous editions of this survey, from the fall of 2020, spring of 2020 and fall of 2019.

The investors we talked to:


Clelia Warburg Peters, venture partner, Bain Capital Ventures

As the pandemic hopefully enters its final stages, how are the changes from this period affecting your real estate and proptech investment strategy? Are big trends of the present, like high nationwide housing demand and mass commercial vacancies, refocusing your investing strategy?

Above all, I think COVID will prove to be an accelerant to existing trends in both the residential and commercial space. I like to think of it as a decade of innovation acceleration in 24 months.

The pandemic has certainly refocused attention on life at home, and that combined with low interest rates has undeniably made this an incredible period for companies that touch the housing market. Given that I got into proptech through work at a family residential brokerage, this market has always been a big area of interest for me, and I would observe that we were in the midst of some major shifts in this market pre-COVID. The residential transaction disruption is now settling in three core categories: iBuyers (who buy homes directly from sellers and ultimately hope to own the sell-side marketplace), neobrokers (who generally employ their agents and use secondary services such as title mortgage and insurance to increase their revenue) and elite agent tools (platforms or tools focused on the top agents). Additionally, consumers are increasingly open to alternative financing tools, including home-equity-based financing models (where you sell a stake in your home, or you buy into full ownership in a home over time. The growth and proliferation of these new models are consolidating the whole residential market so that brokerage sales commissions and commission from the sale of mortgage, title and home insurance are now functionally one large and intertwined disruptable market. In this context, while some of the valuations we are seeing may be a little euphoric, I think there is no doubt that we are in a period of massive and sustainable innovation in how we buy and hold our homes and I think these trends are going to be enduring.

In the commercial arena, we were also in the midst of a meaningful shift in how companies were conceiving of office space, in many ways thanks to the innovations that WeWork brought to the market. But the pandemic has pushed this much further, fundamentally shifting the relationship between the landlord/manager (who has largely been in a position of power since the 1950s) and the tenant (who is now in a position of much greater power, more akin to a consumer of a luxury product). As a result of this, I think the best landlords will recognize that they are going to be under pressure to shift from simply providing a physical space, to helping provide tenants with a multichannel work experience. This might mean a physical/digital hybrid of systems that include access control, physical space management (both in the hub location and potentially in spoke locations), and a digital space for meetings and collaboration. These assets will need to be provided in the context of a much more human relationship, focusing on serving the needs of tenants. As lease terms inevitably shorten, tenants will need to be courted and supported in a much more active way than they have been in the past.

How do you see the big cities adapting to life after the pandemic — or will they? What solutions are you focusing on in particular for the future of urban living (co-living, ADUs, commercial conversion to residential, etc.)?

I think the experience of cities after the pandemic is going to be highly variable — for instance, the trajectories for Austin and New York will likely look radically different. I am personally uncertain about how co-living, or even commercial to residential conversion will be at play, but I do believe that there will be a few consistent areas of interest.

First, smaller-scale urban life will continue to be a significant trend. I think we will continue to see a proliferation of bike lanes, a focus on living in walkable neighborhoods, and a reliance on tools (such as the app Nextdoor) that reinforce our feeling of connection to our neighbors.

Second, I think we will continue to see a reliance on certain types of outsourced services — ghost kitchens for takeout or rapid provision of groceries and other essentials — and technologies and spaces that facilitate these will be a growth area.

Finally, I do believe that in some more sprawling urban environments ADUs will be an area of growth, particularly with seniors who are looking for an additional income stream so they can age at home. One caveat is that I think this will be something of a winner-takes-all space with a limited number of geographically dominant winners.

The demand for suburban-style living is back — for now. What are you focusing on across this category for the next year or two (new residential services and amenities, build-to-rent housing developments, etc.)?

The current transition out of urban environments and into suburban environments is playing out alongside some broader changes in the way the American public seems to be approaching homeownership. Over the past decade, there has been a net decline in homeownership and a net growth in renting. Some of this is by necessity, and some is by choice. I think one component of the tech-related opportunity in the migrations we see now will be around rental platforms and multifamily amenitization. There is still no data aggregator like the MLS on the rental side, and a number of portals (including Zillow Rentals, Apartment List, Zumper, RentalBeast and others) are competing to provide listing information to consumers. On the multifamily side, many multifamily operators are understanding that the integration of work/life/play is creating a new need for amenitization and greater services in their offerings. I think we will continue to see more and more emphasis on hospitality-style brand creation in the multifamily space, and much of this will be facilitated by different kinds of tech-facilitated amenities.

It’s also important to note the flood of both institutional and private investor money that is coming into the single-family rental space. (It may be that in the future a certain percent of the population is renting their primary home, but exposed to the property market through ownership of these kinds of real estate assets.) This growth is being facilitated by property management services like Mynd, marketplaces like Roofstock, and innovative products like Zibo or Knox Financial.

How top startup lawyer Dawn Belt thinks about company-building in the age of SPACs

Dawn Belt has been working with top tech companies for two decades, most recently helping commercial electric vehicle company Proterra go public as a SPAC in January.

Now she’ll be joining us at TC Early Stage in April to talk about building a company in 2021, from however you incorporate to however you decide to maybe go public one day.

As a partner at Fenwick & West, a top Silicon Valley law firm, Belt works with startups of all ages, sizes and industries (two of her past IPOs include Facebook and Bill.com). She has also written legal perspectives on a wide range of other topics that startups face, including implications of the CARES Act, board diversity legal requirements and how to manage acquired startups successfully. She also co-authored the firm’s Gender Diversity Survey, an in-depth report on women’s participation at senior levels of public tech companies.

She’ll be at Early Stage to share her experiences old and new, to help you make better decisions now for your company. The talk is part of the two days of events that explore seed and Series A fundraising, recruiting and more for early-stage startups at TC Early Stage – Operations and Fundraising on April 1 & 2. Grab your ticket now before prices increase tomorrow!

 

Letterhead wants to be the Shopify of email newsletters

You’re probably investing in an email newsletter these days, whether you’re an international brand, a nonprofit or a local news publisher.

Maybe email is even your focus now, because you got burned by Facebook, Google or other closed platforms during the past decade. The problem is that the tools you have available are probably too generic, or are built specifically for marketers. What if you want to make money from the newsletter content itself?

Letterhead is slicing through the vast market of existing email SaaS products, betting that a cross-section of revenue and collaboration needs are not being met properly for newsletter creators of all types. Instead, it puts all ad sales, paid subscriptions and newsletter content management into a single, streamlined product.

Its viewpoints on the future of newsletters — and its customer base so far — are intriguingly different from your typical SaaS startup in Silicon Valley. And there’s a reason for that. Letterhead is actually a product spinout of a community publisher in Miami called WhereBy.Us that began life in 2014 by launching a local media site, The New Tropic. The publication became a rare success in online local news, once it focused on the email newsletter format.

“Initially, our goal was to create a local media product that would help people learn about the city, get more involved and serve a new generation of local news users,” co-founder and CEO Chris Sopher tells me by video chat. “Our ideas had included opening a bar, events and all kinds of other stuff. We quickly pared that back to the things that were working, and email was at the top of the list.”

Advertising inventory in these emails was in high demand, so the company built out a self-service payment system for advertisers, which allowed its newsletter writers to easily publish the correct ads in the correct place.

With this business model and technology as a foundation, it launched or acquired newsletters in Seattle, Portland, Orlando and Pittsburgh. Through this process, it has continued to improve the tool itself.

It also discovered the broader demand.

“People would reach out to us and say ‘I love this newsletter, what tools do you use?’ because it was such a pain to produce emails with all of the different tools out there,” Sopher explains.

(Those tools, in this author’s experience, generally include a combination of Mailchimp, Constant Contact or Sailthru, together with your main web publishing CMS like WordPress, your separate subscription software like Piano and however you are managing ads.)

“We’d tell people that we used our own internal tools and they’d say ‘oh, can we use those, too? And we’d say ‘no, that’s not what we’re doing.’ Eventually, we said no enough that we looked at each other and said, ‘we should figure out how to get to yes on this.’ And that’s where Letterhead came from.”

Image Credits: Letterhead

Today, WhereBy.Us is one of the few success stories from a catastrophic decade in local news. Sopher says that its five city newsletters are comfortably profitable via ads overall — having recovered from a pandemic dip earlier this year — and are continuing to grow.

But the new focus is on Letterhead’s tools, including the ad system, a new paid subscription feature that lets you do things like add paywalled subsections of emails, easy-to-use text editing and template formatting, and soon, analytics.

“Sponsorships and ads were [needs] we heard about most, so that’s where we started,” co-founder and COO Rebekah Monson said by email. “The bigger vision is to create a set of tools and services that feed into each other in one easy place, and help all of those revenue streams grow, eventually branching out from email. We’re seeing demand for that not just from traditional media publishers, but also from marketers, nonprofits, universities, professional associations — all these folks who have engaged communities and want to deepen those relationships and bring in revenue through that engagement.”

On the spectrum of email newsletter products, Letterhead’s focus on revenues and team collaboration places it adjacent to Substack’s focus on the individual writer, and to other products like Lede designed specifically around subscription news organizations.

Letterhead is explicitly a hosted software solution that you pay for your organization to use, not an open-source project like Ghost. Like how Shopify provides a suite of white-label e-commerce features for anyone who wants to run an online business, it wants to be the engine humming away under the hood of your newsletter.

On the much broader spectrum of all email solutions in the SaaS world, Letterhead is betting that its understanding of the market and its product design can beat out the brutally competitive world of SaaS email products.

Since soft-launching earlier this year, Sopher says it has already been signing up a broad range of customers. Examples he cited include startups (Shoot My Travel), nonprofits (Vida y Salud and Refresh) and political groups (OD Action) as customers, as well as local news publishers, of course (VTDigger, Choose954 and Santa Cruz Local). Letterhead is also a partner in WordPress’ News Pack program, which is a collection of plug-ins for publishers on that CMS.

“We’re always going to have an affinity to media publishing… but there is a broader need than just that industry,” he explains. “And we’re also seeing this moment where a lot of other organizations are participating in [publishing]. You name a topic, there will be professional reporters out there doing great work. But it’s also pretty likely that there is a brand, an agency, a nonprofit or some other organization creating interesting and useful content, and building a community around it — that would not raise its hand and say that it is part of the news industry.”

Sopher also notes that the product is designed to be modular, so that companies can just use parts of it and integrate its features with other email service providers and most any tech stack.

“What we’re seeing is that smaller customers are coming on for the simplicity of having it all in one place without sacrificing monetization,” he adds, “but larger customers are choosing us as one part of their stack as they build a multifaceted business or grow out of tools geared more to individual or independent creators.”

With the revenue options in place, Sopher says analytics and additional ESP options are coming next.

Over the course of its history, WhereBy.Us has raised $5 million from across tech and media. Backers include the Knight Foundation, Jason Calacanis’ LAUNCH fund, Band of Angels, McClatchy, hundreds of smaller investors via Republic and SeedInvest and, most recently, a round led by Brick Capital.

Investors double down on tech stocks in massive DoorDash, Airbnb, C3.ai IPOs

Editor’s note: Get this free weekly recap of TechCrunch news that any startup can use by email every Saturday morning (7 a.m. PT). Subscribe here.

Maybe it is a stock market bubble, or a tech-stock bubble at least. And maybe DoorDash, Airbnb and C3.ai and their bankers should have priced higher regardless to take advantage of all of the enthusiasm. It’s hard to avoid reactions like that, after DoorDash, for example, doubled its final private share price to $102 for its public debut on Wednesday — only to see the price climb to $175 at the end of the week.

Or maybe none of this will matter, because the future is way bigger and the companies are going to get there regardless. That’s what Saar Gur tells Connie Loizos this week about DoorDash, which he had invested in many years ago:

I actually started my career at Lehman Brothers on the investment banking team, and so having seen the IPO process, while I can appreciate [frustration that a] company left some money on the table based on the pricing, the tactical challenge [is that] it’s very hard to predict. You know what the market will bear once it moves to retail investors.

What’s exciting to me is [that] DoorDash is raising money because they are just getting started. I do think this could be a $500 billion-plus company. There’s so much to be excited about. As for the capital-raising event, I think it’s hard for the bankers to know where it will land with the broader market, so I’m not as negative as maybe some others.

Here’s the blow-by-blow coverage of the craziest tech IPO week in the craziest (IPO) year in decades, resuming from where I left off last Friday:

DoorDash amps its IPO range ahead of blockbuster IPO (EC)

The IPO market looks hot as Airbnb and C3.ai raise price targets (EC)

Wish wants to be the Amazon for the rest of us; will retail investors buy it?

DoorDash said to price at $102 per share, doubling its final private price

Airbnb said to price IPO between $67 and $68

While several marketplace unicorns prepare IPOs, a VC digs into the data (EC)

DoorDash, C3.ai skyrocket in public market debuts

How DoorDash and C3.ai can defend their red-hot IPO valuations (EC)

Airbnb’s first-day pop caps off a stellar week for tech IPOs (EC)

In public and private markets, cloud earnings and valuations heat up (EC)

Photo via Natasha Mascarenhas

Meet Natasha Mascarenhas, your future Startups Weekly newsletter author

The year is coming to a close for my time writing this newsletter, too. I’m going to be returning full-time to my regular job editing Extra Crunch and stuff in the back offices here at TechCrunch virtual HQ. My colleague Natasha Mascarenhas will be taking over starting next week.

You’re in good hands. In fact you may have noticed many of her articles and her weekly contributions to Equity showing up here already. Since joining us from Crunchbase News earlier this year, she’s been covering early-stage startups and the San Francisco tech scene in general, with a big focus on edtech. We have a lot more planned across Equity, Extra Crunch and more, and she’ll be able to tie it all together around her daily coverage. Stay tuned for an action-packed 2021 (and follow her on Twitter in the meantime).

How to bootstrap to $200m+ in revenue

Alex Wilhelm hears from one startup founder who has taken a bit of an alternative approach to building a SaaS company. Here’s more:

Now north of $200 million in revenue, [Nextiva] is a quiet giant and, notably, has not taken venture capital funding along its path to scale. Chatting with CEO and co-founder Tomas Gorny, I got to dig a little under the skin of the company’s history. It goes a little something like this: After moving to California in 1996 at the age of 20, Gorny eventually founded a web hosting company in 2001 after working for tech companies during the dot-com boom. The web hosting company wound up selling to another company called Endurance International in 2007, which sold as a combined entity for around a billion dollars in 2011, later going public before being taken private last month for $3 billion — you can read this TechCrunch piece that mentions Endurance from 2010 for a bit of the historical record.

Gorny founded Nextiva in 2008, focused on what it describes today as “UcaaS,” or unified communications as a service. The startup grew to about $40 million in annual recurring revenue (ARR), at which point it ran into issues with a third-party system that would integrate hardware, and support and services software, which sparked a shift in its thinking. The company set out to build a platform.

Nextiva expanded horizontally, adding CRM software, analytics and other functionality to its broader suite as it scaled. And it grew efficiently; starting with money from its founding team, Gorny told TechCrunch that even if he had used someone else’s money, he would have built the company in the same manner.

digitally generated image of money tornado.

So why does TechCrunch cover so many early-stage funding rounds, anyway?

Here’s Natasha’s take, from a little explainer we did this week following some Twitter conversations:

The reason I love writing about tech and do the sometimes formulaic funding-round story is because I meet people who are crazy enough to bet their entire legacy on a napkin-stage idea. That’s the story, and the surprise and the tension. The dollar sign is just the first way in.

Having raised fundings that got covered in TechCrunch, and having written many many funding round articles over the year, I agree. The funding round is often the only way to prove that you have traction, if you are trying to get more attention.

Klarna CEO and co-founder Sebastian Siemiatkowski

Image Credits: Bryce Durbin / TechCrunch

The Klarna founding story

Swedish fintech decacorn Klarna pioneered new ways for users to buy online without credit cards over the decade, and is now battling rivals large and small across the world. How did it all happen? Steve O’Hear sits down with founder Sebastian Siemiatkowski for an exclusive in-depth interview that Extra Crunch subscribers have been eating up this week. Here’s his description:

In a wide-ranging interview, Siemiatkowski confronts criticisms head on, including that Klarna makes it too easy to get into debt, and that buy now, pay later needs to be regulated. We also discuss Klarna’s business model and the balancing act required to win over consumers and keep merchants onside.

We also learn how, under his watch and as the company began to scale, Klarna missed the next big opportunity in fintech, instead being usurped by Adyen and Stripe. Siemiatkowski also shares what’s next for the company as it ventures further into the world of retail banking after gaining a bank license in 2017.

Here’s a painfully fascinating excerpt from Siemiatkowski:

One of the drawbacks that we had at the company was that none of the three co-founders had any engineering background; we couldn’t code. We were connected to five engineers that by themselves were amazing engineers, but we had a slight misunderstanding. Their idea was that they were going to come in, build a prototype, ship it, and then leave for 37% of the equity. Our understanding was that they were going to come in, ship it, and if it started scaling they would stay with us and work for a longer period of time. This is the classic mistake that you do as a startup.

Facebook logo and FTC seal

Image Credits: TechCrunch

Those Facebook antitrust lawsuits

It seems that the US government has finally had enough of Facebook’s aggressive expansion and acquisition practices. After years of light regulation, the Federal Trade Commission and, separately, 49 state attorneys general are suing to break up social networking company. You can find lots of commentary about the details on TechCrunch and elsewhere.

But here’s my take for you to remember, as you watch headlines about this continue into next year: Facebook was always ready. I covered the company closely during its early years, and even back then it was talking about being the operating system for the internet, like Microsoft Windows was for desktop. The implied and whispered goal was to get as big as possible before regulations inevitably hit, like what Microsoft did. Here we are, with Facebook in a leading market position, with a massive army of lawyers who have been preparing for years. Without getting further into the lawsuits or political landscape where it’s all happening… I don’t expect a breakup. But maybe new restrictions on acquisitions or something could limit growth potential? Its big wins this decade have been from acquisitions.

One boring scenario I don’t see discussed much is simply that its products remain the phone book of the era for much of the world. Somewhat regulated this way or that way in various jurisdictions and banned outright in some — and very big and successful still.

Around TechCrunch

TC Sessions: Space 2020 launches next week

Announcing the final agenda for TC Sessions: Space 2020

Don’t miss the university research showcase at TC Sessions: Space 2020

Hear the latest from Kayhan Space and Firehawk Aerospace at TC Sessions: Space

Give the gift of Extra Crunch for 25% off

Extra Crunch Partner Perk: Find peace of mind with ‘Spotify for Mindfulness & Sleep’ app Aura

Across the week

TechCrunch

Survey: Americans think Big Tech isn’t so bad after all

Despite the pandemic, small business optimism persists

Mixtape podcast: Making technology accessible for everyone

Macron promotes European tech ecosystem in an interview with Zennström

Equity Monday: Airbnb pricing, Sequoia makes money and early-stage rounds

Extra Crunch

What to expect while fundraising in 2021

3 ways the pandemic is transforming tech spending

Why Sapphire’s Jai Das thinks the Salesforce-Slack deal could succeed

China watches and learns from the US in AR/VR competition

Is 2020 bringing more edtech rounds than ever, or does it simply feel that way?

#EquityPod

From Alex:

Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast (now on Twitter!), where we unpack the numbers behind the headlines.

What a week, yeah? Instead of the news cycle slowing as the year races to a close, things are still as hot as ever. We have funding rounds big and small, IPOs, first-day extravaganza and more.

Luckily we had the whole crew around — Chris and Danny and Natasha and me. Here’s the rundown:

And that’s that! If you aren’t tired, have you even been paying attention?

Equity drops every Monday at 7:00 a.m. PST and Thursday afternoon as fast as we can get it out, so subscribe to us on Apple PodcastsOvercastSpotify and all the casts.

It’s holiday season for tech unicorns

Editor’s note: Get this free weekly recap of TechCrunch news that any startup can use by email every Saturday morning (7 a.m. PT). Subscribe here.

Did you follow all of the unicorn news from the last couple of weeks? No? Here’s a list of headlines to catch you up, because this holiday season is already featuring mega acquisitions, even more IPO filings, and a steady drumbeat of fundraises.

Somehow, after one of the toughest years in recent memory, the tech industry is heading into December with more enthusiasm than ever. (Still remember the WeWork IPO fiasco from last year? No?)

Salesforce buys Slack in a $27.7B megadeal

Everyone has an opinion on the $27.7B Slack acquisition

What to make of Stripe’s possible $100B valuation

How the pandemic drove the IPO wave we see today

A roundup of recent unicorn news

C3.ai’s initial IPO pricing guidance spotlights the public market’s tech appetite (EC)

Working to understand C3.ai’s growth story (EC)

Insurtech’s big year gets bigger as Metromile looks to go public (EC)

Wall Street needs to relax, as startups show remote work is here to stay (EC)

In first IPO price range, Airbnb’s valuation recovers to pre-pandemic levels (EC)

3 new $100M ARR club members and a call for the next generation of growth-stage startups (EC)

Virtual fundraising is here to stay

Connie Loizos sat down with Jason Green of leading enterprise-focused firm Emergence Capital to get his view of SPACs, and how they are likely to be used next year and beyond. But early-stage startups, don’t miss his affirmation of Zoom meetings as part of the fundraising process going forward.

I would say that over the last five years, we’ve made almost a total transition. Now we’re very much a data-driven, thesis-driven outbound firm, where we’re reaching out to entrepreneurs soon after they’ve started their companies or gotten seed financing. The last three investments that we made were all relationships that [date back] a year to 18 months before we started engaging in the actual financing process with them. I think that’s what’s required to build a relationship and the conviction, because financings are happening so fast.

I think we’re going to actually do more investments this year than we maybe have ever done in the history of the firm, which is amazing to me [considering] COVID. I think we’ve really honed our ability to build this pipeline and have conviction, and then in this market environment, Zoom is actually helping expand the landscape that we’re willing to invest in. We’re probably seeing 50% to 100% more companies and trying to whittle them down over time and really focus on the 20 to 25 that we want to dig deep on as a team.

Thousands of startup founders will resume the trek around Silicon Valley VC offices, once the vaccines arrive. But we’ll remember 2020 as the year that venture truly joined the cloud.

Image Credits: Brighteye Ventures

Edtech looks to the future

Every level of education was forced online by the pandemic this year, at least temporarily. While the children might be back in the classroom already, higher education and corporate education are still booming remotely. Natasha Mascarenhas analyzed the latest market changes for Extra Crunch, and put together a panel of industry leaders for a special Thanksgiving edition of Equity. Here’s more about what you’ll find on the show:

For this Equity Dive, we zero onto one part of that conversation: Edtech’s impact on higher education. We brought together Udacity co-founder and Kitty Hawk CEO Sebastian Thrun, Eschaton founder and college dropout Ian Dilick, and Cowboy Ventures investor Jomayra Herrera to answer our biggest questions.

Here’s what we got into:

  • How the state of remote school is leading to gap years among students.
  • A framework for how to think of higher education’s main three products (including which is most defensible over time).
  • What learnings we can take from this COVID-19 experiment on remote schooling to apply to the future.
  • Why edtech is flocking to the notion of life-long learning.
  • The reality of who self-paced learning serves — and who it leaves out.

Blank Sale Tag on white background.

How to price your SaaS product for a bottoms-up growth strategy

SaaS is continuing to be reshaped by consumer internet techniques, with top companies of our era competing through word-of-mouth growth versus incumbent sales forces. The revenue model must be precise for this to scale, though. In a guest post for Extra Crunch, Caryn Marooney and David Cahn of Coatue lay out a strategic framework for how to price your bottoms-up SaaS product the right way for the market. Called “MAP,” for Metrics, Activity and People, it helps you sort your product against the actual ways that people are trying to use and pay for it. Here’s how they describe the A:

Activity: How do your customers really use your product and how do they describe themselves? Are they creators? Are they editors? Do different customers use your product differently? Instead of metrics, a key anchor for pricing may be the different roles users have within an organization and what they want and need in your product. If you choose to anchor on activity, you will need to align feature sets and capabilities with usage patterns (e.g., creators get access to deeper tooling than viewers, or admins get high privileges versus line-level users). For example:

  • Figma — Editors versus viewers: Free to view, starts changing after two edits.
  • Monday — Creators versus viewers: Free to view, creators are charged $10-$20/month.
  • Smartsheet — Creators versus viewers: Free to view, creators are charged $10+/month.

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#EquityPod

From Alex Wilhelm:

Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast (now on Twitter!), where we unpack the numbers behind the headlines.

We’re back with not an Equity Shot or Dive of Monday, this is just the regular show! So, we got back to our roots by looking at a huge number of early-stage rounds. And a few other things that we were just too excited about to not mention.

So from Chris and Danny and Natasha and I, here’s the rundown:

That was a lot, but how could we leave any of it out? We’re back Monday with more!

Equity drops every Monday at 7:00 a.m. PDT and Thursday afternoon as fast as we can get it out, so subscribe to us on Apple PodcastsOvercastSpotify and all the casts.

 

Affirm, Airbnb, C3.ai, Roblox, Wish file for tech IPO finale of 2020

Editor’s note: Get this free weekly recap of TechCrunch news that any startup can use by email every Saturday morning (7 a.m. PT). Subscribe here.

The wait was long but this week the time was right: Airbnb finally filed its S-1 and so did Affirm, C3.ai, Roblox, and Wish. We are likely to see these five price on public markets before the end of an already superlative year for tech IPOs. The ongoing pandemic and political turmoil were not scary enough, apparently.

This coming decade, you have to think that we’ll see a more even spread of tech companies going public. Many of the companies above have been bottled up for years behind privately funded growth strategies. Today, however, the industry has a better grasp of SPACs and direct listings, and various funding routes. Companies have more options from their founding for how they might grow and exit one day. Public investors in 2020 also seem to have a deeper appreciation for the current revenue numbers and future growth opportunities for tech companies. Why, I can still remember all the geniuses who bragged about shorting the Facebook IPO not so long ago.

Will we see a more even spread of where IPOs come from? While all of this week’s filers are headquartered in San Francisco or environs, that now feels almost like a coincidental reference to the years when these companies were founded. More states have been minting their own unicorns, with Ohio-based Root Insurance recently going public and Utah-based Qualtrics heading (back) that way. Tech startups are now global, meanwhile, and plenty of countries are working to keep their unicorns closer to home than New York.

On to the headlines from TechCrunch and Extra Crunch:

If you didn’t make $1B this week, you are not doing VC right (EC)

Affirm files to go public

Inside Affirm’s IPO filing: A look at its economics, profits and revenue concentration (EC)

Airbnb files to go public

5 questions from Airbnb’s IPO filing (EC)

The VC and founder winners in Airbnb’s IPO (EC)

Roblox files to go public

What is Roblox worth? (EC)

Wish files to go public with 100M monthly actives, $1.75B in 2020 revenue thus far

Unpacking the C3.ai IPO filing (EC)

With a 2021 IPO in the cards, what do we know about Robinhood’s Q3 performance? (EC)

(Photo by Win McNamee/Getty Images)

What does a Biden administration mean for tech?

What does Joe Biden intend as president around technology policy? On the one hand, tech companies might not be returning to the White House too fast. “All told, we’re seeing some familiar names in the mix, but 2020 isn’t 2008,” Taylor Hatmaker explains about potential presidential appointments from the industry. “Tech companies that emerged as golden children over the last 10 years are radioactive now. Regulation looms on the horizon in every direction. Whatever policy priorities emerge out of the Biden administration, Obama’s technocratic gilded age is over and we’re in for something new.”

However, tech industries and companies focused on shared goals might find support. In a review of Biden’s climate-change policies, Jon Shieber looks at major green infrastructure plans that could be on the way.

Any policies that a Biden administration enacts would have to focus on economic opportunity broadly, and much of the proposed plan from the campaign fulfills that need. One of its key propositions was that it would be “creating good, union, middle-class jobs in communities left behind, righting wrongs in communities that bear the brunt of pollution, and lifting up the best ideas from across our great nation — rural, urban and tribal,” according to the transition website. An early emphasis on grid and utility infrastructure could create significant opportunities for job creation across America — and be a boost for technology companies. “Our electric power infrastructure is old, aging and not secure,” said Abe Yokell, co-founder of the energy and climate-focused venture capital firm Congruent Ventures. “From an infrastructure standpoint, transmission distribution really should be upgraded and has been underinvested over the years. And it is in direct alignment with providing renewable energy deployment across the U.S. and the electrification of everything.”

Rebar is laid before poring a cement slab for an apartment in San Francisco CA.

Image Credits: Steve Proehl (opens in a new window) / Getty Images

The future of construction tech

A skilled labor shortage is piling on top of the construction industry’s traditional challenges this year. The result is that tech adoption is getting a big push into the real world, Allison Xu of Bain Capital Ventures writes in a guest column for Extra Crunch this week. She maps out six main construction categories where tech startups are emerging, including project conception, design and engineering, pre-construction, construction execution, post construction and construction management. Here’s an excerpt from the article about that last item:

  • How it works today: Construction management and operations teams manage the end-to-end project, with functions such as document management, data and insights, accounting, financing, HR/payroll, etc.
  • Key challenges: The complexity of the job site translates to highly complex and burdensome paperwork associated with each project. Managing the process requires communication and alignment across many stakeholders.
  • How technology can address challenges: The nuances of the multistakeholder construction process merit value in a verticalized approach to managing the project. Construction management tools like ProcoreHyphen Solutions and IngeniousIO have created ways for contractors to coordinate and track the end-to-end process more seamlessly. Other players like Levelset have taken a construction-specific approach to functions like invoice management and payments.

Virtual HQs after the pandemic?

Pandemic-era work solutions like online team meeting spaces are heading towards a less certain, vaccine-based reality. Have we all gone remote-first enough that they will have a real market, still? Natasha Mascarenhas checks in with some of the top companies to see how it’s looking, here’s more:

With the goal of making remote work more spontaneous, there are dozens of new startups working to create virtual HQs for distributed teams. The three that have risen to the top include Branch, built by Gen Z gamers; Gather, created by engineers building a gamified Zoom; and Huddle, which is still in stealth.

The platforms are all racing to prove that the world is ready to be a part of virtual workspaces. By drawing on multiplayer gaming culture, the startups are using spatial technology, animations and productivity tools to create a metaverse dedicated to work.

The biggest challenge ahead? The startups need to convince venture capitalists and users alike that they’re more than Sims for Enterprise or an always-on Zoom call. The potential success could signal how the future of work will blend gaming and socialization for distributed teams.

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#EquityPod

From Alex Wilhelm:

Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast (now on Twitter!), where we unpack the numbers behind the headlines.

This week wound up being incredibly busy. What else, with a week that included both the Airbnb and Affirm IPO filings, a host of mega-rounds for new unicorns, some fascinating smaller funding events and some new funds?

So we had a lot to get through, but with Chris and Danny and Natasha and your humble servant, we dove in headfirst:

What a week! Three episodes, some new records, and a very tired us after all the action. More on Monday!

Equity drops every Monday at 7:00 a.m. PDT and Thursday afternoon as fast as we can get it out, so subscribe to us on Apple PodcastsOvercastSpotify and all the casts.