Fresh out of Y Combinator, Tandem lands millions from Andreessen Horowitz

Tandem, one of the most sought after companies to graduate from Y Combinator’s summer batch, will emerge from the accelerator program with a supersized seed round and an uncharacteristically high valuation.

The months-old business, which is developing communication software for remote teams after pivoting from crypto, is raising a $7.5 million seed financing at a valuation north of $30 million, sources tell TechCrunch. Airbnb investor Andreessen Horowitz is leading the round.

Tandem and a16z declined to comment for this story. The round has yet to close, which means the deal size is subject to change. Y Combinator startups raise capital using SAFE agreements, or simple agreements for future equity, which allow investors to buy shares in a future priced round at a previously agreed-upon valuation.

We’re told several top venture capital firms were vying for a stake in Tandem. One firm even gifted the founders a tandem bike, sources tell TechCrunch, resorting to amusing measures to sway the Tandem team. But it was a16z — which has an established interest in the growing future of work sector, evidenced by its recent investment in the popular email app Superhuman — that ultimately won the coveted lead investor spot.

Tandem provides a virtual office for remote teams, complete with video-chatting and messaging capabilities, as well as integrations with top enterprise tools including Notion, GitHub and Trello. The service launched one month ago and has signed contracts with Airbnb, Dropbox and others. The company claims to be growing 50% week-over-week.

“Every company is a remote company,” Tandem chief executive officer Rajiv Ayyangar said during his pitch to investors on day two of Y Combinator Demo Days this week. “You have salespeople in the field, [companies with] multiple offices, people working from home. Tandem isn’t just building the future of remote work, it’s building the future of work.”

Ayyangar was previously a data scientist at Yahoo before joining Yakit, a startup seeking to simplify ecommerce delivery, as the director of product. Co-founders Bernat Fortet Unanue and Tim Su are also Yahoo alums.

We’re told Tandem’s fundraise was nearly complete before it pitched to investors Tuesday afternoon. Startups that participate in YC are often flooded with offers from VCs throughout the three-month program. Firms are hungry for the batch’s Airbnb, Dropbox or Stripe — graduates of the program — and will pay premiums on startup equity for their chance to invest in a future ‘unicorn.’

As a result, the median seed deal for U.S. startups in 2018 was roughly $2 million — a record high — with typical pre-money valuations hovering north of $10 million. Tandem’s seed financing represents both a trend of swelling seed deals and valuations, as well as a tendency for VCs to dole out more cash to fresh-from-YC companies amid heightened competition amongst their peers.

The previous YC batch, which wrapped up in March, included ZeroDown, Overview.AI and Catch, a trio of companies that pocketed venture capital ahead of demo day. ZeroDown, a financing solution for real estate purchases in the Bay Area, raised upwards of $10 million at a $75 million valuation before demo day, sources told TechCrunch at the time (months after demo day, Zero Down announced a whopping $30 million financing). ZeroDown was an outlier, of course, as the company’s founders had previously co-founded the billion-dollar HR software company Zenefits.

As for the summer batch, we’re told Actiondesk, Taskade and Tandem are amongst the startups to garner the most hype from investors. Some even forwent the demo day pitch altogether. BraveCare, which is creating urgent care clinics intended just for kids, raised $4.1 million ahead of demo day, we’re told. The company opted not to pitch to additional investors this week.

You can read about all the company’s that pitched during demo day one here and demo day two here.

Y Combinator’s Michael Seibel on building startups, early-stage deal-making and tech’s center of gravity

Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast, where we unpack the numbers behind the headlines.

We have a special episode ready for you today. As many of you know, it’s that time of year when hundreds of nascent startups make their big 2-minute pitch to the top venture capitalists of “Silicon Valley” (San Francisco) at Y Combinator’s Demo Day. We (Kate and Alex) thought we’d bring in a YC expert, YC chief executive officer Michael Seibel, to chat about the batch, changes in the last year, rising deal prices, SAFEs vs. convertible notes and the future of technology in SF.

“This place is where tech is happening and they want to be here,” Seibel told us. “Like I’m a struggling actor in Iowa and I want to get to Hollywood. This is kind of the promised land for a lot of people around the world.”

We had a lot of questions for Michael. For one, deal sizes and valuations at the seed stage are growing like crazy and YC is a big cause of that. To our surprise, Michael isn’t actually a big fan of these huge rounds.

“We don’t think this is necessarily a positive phenomenon; on the other hand, we like that our founders get less dilution,” he said.

If you’re interested in taking a look at each of the companies that made their pitch yesterday, at Day One of Y Combinator’s Demo Day, you can take a look at TechCrunch’s full list. Check back end of day Tuesday for a full list of companies that pitched on Day Two.

As a final note, Equity is still not an interview show. This was a fun exception!

Equity drops every Friday at 6:00 am PT, so subscribe to us on Apple PodcastsOvercast, Pocket Casts, Spotify, Downcast and all the casts.

Startups Weekly: The mad dash to the public markets

Hello and welcome back to Startups Weekly, a weekend newsletter that dives into the week’s noteworthy startups and venture capital news. Before I jump into today’s topic, let’s catch up a bit. Last week, I wrote about the differences between raising cash from angels and traditional venture capitalists. Before that, I summarized DoorDash’s acquisition of Caviar.

Remember, you can send me tips, suggestions and feedback to [email protected] or on Twitter @KateClarkTweets. If you don’t subscribe to Startups Weekly yet, you can do that here.


It’s Friday morning and I don’t want to dig into another IPO prospectus. The startups don’t care though, they’re in a mad dash to get to the public markets, reporters be damned.

This week, three billion-dollar venture-backed “unicorns” unveiled S-1 filings, the paperwork necessary to complete an IPO. First came WeWork, the $47 billion co-working giant beloved by SoftBank. Then came Cloudflare, a business that provides web security and denial-of-service protection for websites. Then this morning, after we all thought it was time for a breather, “teledentistry” company SmileDirectClub made its filing public.

There’s plenty to read on each of these high-profile IPOs; here’s a quick reading list:

WeWork

WeWork reveals IPO filing
WeWork’s S-1 misses these three key points
Making sense of WeWork’s S-1 (or trying to)

Cloudflare

Cloudflare files for initial public offering
Cloudflare says cutting off customers like 8chan is an IPO ‘risk factor’
In its IPO filing, Cloudflare thanks a third co-founder: Lee Holloway

SmileDirectClub
SmileDirectClub files to go public amid concerns from dental associations

On to other things…

Meet the startups in Y Combinator’s summer batch
As you may know, YC summer demo days are next week. A whopping 176 companies are expected to present and we’ll be there reporting live, as usual. In preparation, we’ve been cherry-picking companies in the latest batch that interest us. Here’s a look at our latest — more to come:

Equity Podcast
This was a very special week for Equity. We taped two great episodes, one in which we hung out with Axios’ Dan Primack in Boston, the other featuring me recording out of a New York City Blue Bottle Coffee shortly after WeWork dropped its S-1 filing. You can listen to our latest episodes here and here. Equity drops every Friday at 6:00 am PT, so subscribe to us on Apple Podcasts or Spotify.

Extra Crunch
In our latest installment of EC-1, in which go deep on an up-and-coming startup, TechCrunch’s Eric Peckham tells the founding story of Kobalt, the world’s next music tech unicorn. Here’s a passage from Peckham’s extensive piece: “You may not have heard of Kobalt before, but you probably engage with the music it oversees every day, if not almost every hour. Combining a technology platform to better track ownership rights and royalties of songs with a new approach to representing musicians in their careers, Kobalt has risen from the ashes of the 2000 dot-com bubble to become a major player in the streaming music era. It is the leading alternative to incumbent music publishers (who represent songwriters) and is building a new model record label for the growing ‘middle class’ of musicians around the world who are stars within niche audiences.”

Slack co-founder Cal Henderson and Spark Capital’s Megan Quinn are coming to Disrupt SF

If there was one company at the top of everyone’s mind this year, it was Slack.

The now-ubiquitous workplace messaging tool began trading on the New York Stock Exchange in June after taking an unusual route to the public markets known as a direct listing. Slack bypassed the typical IPO process in favor of putting its current stock on to the NYSE without doing an additional raise or bringing on underwriter banking partners.

Slack co-founder and chief technology officer Cal Henderson and Slack investor and Spark Capital general partner Megan Quinn will join us on stage at TechCrunch Disrupt SF to give a behind the scenes look at Slack’s banner year, the company’s origin story and what convinced Quinn to participate in the business’s funding round years ago.

Early in his career, Henderson was the technical director of Special Web Projects at Emap, a UK media company. Later, he became the head of engineering for Flickr, the photo-sharing tool co-founded by Slack chief Steward Butterfield. In April 2009, he was reported to be starting a new stealth social gaming company with Butterfield, a project that would ultimately become Slack.

Quinn, for her part, added Slack to the Spark Capital portfolio in 2015, participating in the company’s $160 million Series E at a valuation of $2.8 billion. No small startup at the time, Slack already had 750,000 daily users and backing from Accel, Andreessen Horowitz, Social Capital, GV and Kleiner Perkins.

Quinn is a seasoned investor, known for striking deals with Coinbase, Glossier, Rover and Wealthfront, among others. She first entered the venture capital scene in 2012 as an investment partner at Kleiner Perkins, where she invested in early to mid-stage consumer tech startups. Quinn joined Spark Capital in 2015 to make growth-stage investments in companies across the board.

Before trying her hand at VC, she spent seven years in product management and strategic partnership development at Google and one year as the head of product at payments company Square.

Disrupt SF runs October 2 to October 4 at the Moscone Center in San Francisco. Tickets are available here.

Y Combinator-backed Narrator wants to become the operating system for data science

Cedric Dussud, Michael Nason, Ahmed Elsamadisi and Matthew Star (pictured above, in order) spent the summer sharing a house in San Francisco, cooking meals together and building Narrator, a startup with ambitions of becoming a universal data model fit for any company.

Narrator is one of more than 100 startups graduating next week from Y Combinator, the San Francisco accelerator program. Put simply, the company provides data-science-as-a-service to its customers: fellow startups.

“We provide the equivalent of a data team for the price of an analyst,” explains Narrator co-founder and director of engineering Star. “Within the first month, our clients get an infinitely scalable data system.”

Led by chief executive officer Elsamadisi, a former senior data engineer at WeWork, the Narrator founding team is made up entirely of alums of the co-working giant. The building blocks of Narrator’s subscription-based data modeling tool were developed during Elsamadisi’s WeWork tenure, where he was tasked with making sense of the company’s disorganized trove of data.

As an early addition to WeWork’s data team, Elsamadisi spent two years bringing WeWork’s data to one place, scaling the team to 40 people and ultimately creating a functional data model the soon-to-be-public company could use to streamline operations. Then in 2017, Elsamadisi had an a-ha moment. The system he created at WeWork could be applied to any data stream, he thought.

“All companies are fundamentally the same when it comes to the kinds of data they want to understand about their business,” Narrator’s Dussud tells TechCrunch. “Every startup wants to know what’s my monthly recurring revenue, why are my customers churning or whatever the case may be. The only reason they have to go hire a data team and hire a business analyst is because the way that their data is structured is specific to that company.”

All Narrator clients use the same consistent format to absorb and manage their data, saving startups time and heaps of money.

Narrator follows a long line of Y Combinator graduates that built startups catering to other startups, as the accelerator becomes more of a SaaS incubator of sorts. PagerDuty and Docker proved that YC companies could build with a strong focus on other YC companies. Brex, a recent YC grad that issues credit cards to entrepreneurs, has leveraged the same startup-focused model for big-time success.

“Why not build a company to make something that other startups can have?” Asks Dussud. “It’s hugely valuable and only big companies have access to it. Let’s make it available to everybody.”

New York-based Narrator sees a massive opportunity ahead. Every company, after all, wants to increase revenue or decrease costs, a difficult task easier accomplished with a data-driven culture.

“If you start to imagine a world where, under the hood, the structure of the data at all companies is the same, you can now start reusing a lot of the things that in the past would actually be quite complicated,” said Star. “Right now, anytime you want to start from scratch with a new data system, you are literally starting from scratch and unfortunately reinventing the wheel. If you had a standardized system, you know, a standardized model, you could start reusing a lot of really wonderful things.”

Narrator is working with 14 clients today, each using an identical data model. Their goal is for Narrator’s structure to become the standard by which all startups do data science. In other words, Narrator hopes to become the operating system for data science.

“What’s kind of amazing is whether we’re working with a financial app … a clothing rental startup or a healthcare company, they’re all using the same data model,” said Star. “Any one of those teams, if they wanted to get the same level of analysis, they would have to hire a data analyst.”

Narrator raised $1.3 million in seed funding led by Flybridge Capital Partners prior to joining YC. Hot off the heels of the accelerator program, there’s no doubt the startup will close another round of financing soon.

Birth control delivery startup Nurx approaches $300M valuation

Nurx, citing 200,000 current patients and a monthly growth rate as high as 20%, has raised $32 million in Series C equity funding in a round co-led by existing investors Kleiner Perkins and Union Square Ventures. The company has also secured $20 million in debt, bringing total new capital to $52 million.

The San Francisco-based digital health startup, which seeks to make birth control more accessible and affordable by shipping it direct to consumer, has raised more than $90 million in debt and equity funding to date, with the latest infusion bringing its valuation to nearly $300 million, according to stock authorization filings uncovered by PitchBook. Nurx declined to comment on its valuation.

The goal, Nurx chief executive officer Varsha Rao explains, is to become a telehealth platform focused on all sensitive health needs.

“We see there is a need to help people that may have issues that often carry stigma and judgment by providing a streamlined platform,” Rao tells TechCrunch. “What the company is doing in terms of providing more accessibility form a physical and economic perspective to critical health services is very inspiring for me.”

The fresh bout of funding comes four months after a scathing New York Times report highlighted irresponsible practices at the company, including reshipping returned medications and attempting to revise medical policy on birth control for women over the age of 35.

Nurx’s Rao, who joined from Clover Health just one week before the article was published, says she feels good about how the company has scaled: “I want to make it clear, patient safety was never at risk even then; having said that, we are super committed to always investing in compliance and patient safety and all of the things that are important.”

The business plans to use the funding to double its engineering team and launch additional “sensitive” healthcare services of which Rao declined to further outline. In addition to shipping birth control D2C, including the pill, shot, ring and patch, Nurx provides emergency contraception, STI and HPV testing and screening kits, and PrEP medication, the once-daily pill that reduces the risk of getting HIV.

The company added STI testing kits to its line up last month and has since performed tests for 1,000 patients, Nurx says.

Nurx’s service is currently live in 26 states and Washington, D.C. The company plans to be accessible to 90% of the U.S. population by the end of the year, with additional launches, including the state of Nebraska, expected this month.

A graduate of Y Combinator, Nurx investors also include Reproductive Health Investors Alliance, Dreamers VC, Lowercase Capital and debt & equity provider Triple Point Capital.

Making sense of the WeWork S-1 (or trying to)

Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast, where we unpack the numbers behind the headlines.

Today is our promised Equity Shot (a short-form, single-topic episode) on the WeWork S-1. You can read Kate’s notes here, or Alex’s here as a place to start.

Given that we didn’t know when the WeWork S-1 filing was going to make itself known, we put together this episode from TechCrunch’s SF HQ, Alex’s home office, and Kate inside a New York Blue Bottle Coffee. We were not about to let the locational issues stop us from having fun!

Where to begin! WeWork is growing like mad, but it’s hard to tell what its gross margins are. This makes its revenue quality hard to parse. (Alex tried to figure that out here, TechCrunch has even more good questions and notes here). What wasn’t hard to figure out was that WeWork — also known as The We Company — is tectonically unprofitable on operating and net bases. And that the company’s operations consume cash, while its investing activities torch the stuff.

WeWork’s eclectic chief executive officer and co-founder Adam Neumann will maintain a majority of voting rights. It’s not uncommon for founder-led companies to adopt this sort of voting structure and considering how central Neumann is to WeWork’s identity, we weren’t the least bit surprised by this.

The company’s IPO will make a lot of groups a lot of money. Mainly Benchmark, a respected venture capital fund, JP Morgan, and, of course, SoftBank, which has invested billions in WeWork and now owns more than 100 million shares.

And that’s all for now. Don’t miss our episode with Dan Primack that came out yesterday. A busy week, but a good one. Chat again soon!

Equity drops every Friday at 6:00 am PT, so subscribe to us on Apple PodcastsOvercast, Pocket Casts, Spotify, Downcast and all the casts.

WeWork reveals IPO filing

WeWork, now known as The We Company, released its IPO prospectus Wednesday morning months after filing confidentially to go public.

Backed by billions by SoftBank and its mammoth Vision Fund, the exit is expected as soon as next month.

The New York-based company, valued at $47 billion earlier this year, has long been rumored to be plotting a massive IPO despite towering losses. The business recently disclosed steep 2018 net losses of $1.9 billion on revenue of $1.8 billion. To convince Wall Street it’s a business worthy of their investment will be a challenge, to say the least.

In its filing, WeWork disclosed revenue north of $1.5 billion in the six months ending June 30 on losses of $904.6 million.

WeWork has raised a total of $8.4 billion in a combination of debt and equity funding since it was founded in 2011. Its IPO is poised to become the second-largest offering of the year behind only Uber, which was valued at $82.4 billion following its May IPO on the New York Stock Exchange.

WeWork plans to sell shares of its stock under the ticker symbol “We” with the share price yet to be determined.

SoftBank, unsurprisingly, and Benchmark are to be the big winners of the upcoming exit. The investment funds own roughly 114 million and 33 million pre-IPO shares.  Benchmark, a venture capital fund, led a $17 million financing in the business in 2012.

Seven years later, WeWork operates 528 co-working spaces in 111 cities across 29 countries, with a total of 527,000 memberships.

Even with fast growth and a global presence, WeWork is often referenced as the perfect example of Silicon Valley’s tendency to inflate valuations. WeWork, a real estate business with tech-enabled services built on top, burns through cash rapidly and will has had a tough time plotting out a clear path to profitability.

WeWork is also backed by T. Rowe Price, Fidelity, Goldman Sachs and several others.

This story is updating

 

Axios’ Dan Primack on ‘the most polarizing startup that exists’

Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast, where we unpack the numbers behind the headlines.

This week was a bit special. Instead of meeting up at the TechCrunch HQ to record the episode, Kate and Alex met up in muggy Boston at Drift’s office, where we linked up with Axios’s Dan Primack. And since we were feeling chatty, we went a bit long.

After checking in with Primack (he has a newsletter and a podcast), we first dealt with the latest from Tumblr. In short, Verizon Media is selling Tumblr to Automattic for a few dollars. How did Verizon wind up owning Tumblr? Ah. Well, Yahoo bought it. Later, after Verizon bought AOL, it bought Yahoo. Then it smushed them together and called it Oath. Then Verizon decided that it didn’t like that much and renamed the group Verizon Media. But Verizon doesn’t want to own media (besides TechCrunch, of course), so it sold Tumblr to Automattic, a venture-backed company best known for operating WordPress.

That’s a lot, I know. What matters is that Yahoo bought Tumblr for more than $1 billion. Verizon sold it for around $3 million. Now, Automattic now has a few hundred new employees and a shot at juicing its userbase before it goes public.

After that, we lamented that the WeWork S-1 had yet to appear. This was a tragedy, frankly. We had expected to spend half the show riffing on WeWork’s financials, alas…

So we turned to some normal material, like Ramp’s recent $7 million raise to take on Brex, and, SmartNews’s recent round, which gave it an eye-popping $1.1 billion valuation.

We ran a bit long because we were having fun, fitting in some conversation surrounding the notes from the SEC regarding the now-dead and then-fraudulent Rothenberg Ventures. More on that here if you want to get angry.

And finally, Vision Fund 2. It’s been a big source of interest for everyone on the show, and we expect whatever the second-act Vision Fund winds up becoming to be a big damn deal. The fund will invest in more than just consumer marketplaces, in fact, it’s eyeing more AI businesses and even biotech. That should be interesting.

All that and we have a lot more good stuff coming. Thanks for listening to the show, and we’ll be right back.

Equity drops every Friday at 6:00 am PT, so subscribe to us on Apple PodcastsOvercast, Pocket Casts, Downcast and all the casts.

BuzzFeed CTO joins men’s health startup Ro

Ro, a two-year-old startup known for its online pharmacy of men’s health products, has named BuzzFeed’s Todd Levy its chief technology officer.

Levy first joined BuzzFeed in 2014 as the digital media company’s vice president of engineering; he was named CTO in 2016. Prior to BuzzFeed, Levy co-founded and led link management tool bit.ly. Levy begins his new role Wednesday, August 14.

We’ve reached out to BuzzFeed for comment.

Ro, valued at $500 million earlier this year, has raised $176 million in venture capital funding from Canaan Partners, FirstMark Capital, BoxGroup, Initialized Capital, General Catalyst, SignalFire and others. The fast-growing startup poised to enter the unicorn club in the next year represents an opportunity for Levy to get back in the business of early-stage startups.

The news comes months after BuzzFeed announced its largest layoffs to date. Despite having raised $500 million over the last decade, the site has struggled to find a path to profitability. BuzzFeed chairman Ken Lerer, a prolific media investor, stepped down this June.

profpic

Former BuzzFeed CTO Todd Levy.

In an email announcement to staffers, Ro co-founder Saman Rahmanian said the new hire will help usher the business into a new phase of growth: “First and foremost, we needed a great team builder – someone who cares about team spirit not just the code,” Rahmanian wrote:

Given the high growth state of our business, we also needed a leader who has seen or led the scaling of an engineering team like ours into the next stage (from 30 engineers to 200). We also needed someone with a strong technology background who has gone through the ranks and is fluent in modern software architecture. And equally as important, we needed someone that was the right fit for Ro – someone who will provide strong mentorship, who is excited about a distributed team, and who will evangelize the engineering team inside the business as well as outside of Ro to attract top talent.

New York-based Ro was founded in 2017 and has quickly become a leader in the direct-to-consumer health and wellness movement. The company competes with Hims, another online service for health products, as well as NumanManual and Thirty Madison, which have raised capital recently.

Ro was started by a trio of entrepreneurs: Rob Schutz, the former vice president of growth at Bark&Co; Rahmanian, a co-founder of the WeWork-acquired business Managed by Q; and chief executive officer Zachariah Reitano, who previously co-founded a Y Combinator -backed startup called Shout.

The startup initially launched under the name Roman, which became its flagship brand when the business adopted the umbrella name Ro last year.

In a 2017 interview with TechCrunch’s Josh Constine, Reitano said he began experiencing ED at 17 years old: “I think in a good way I’ve become numb to the embarrassment,” he said. “I remember the embarrassment of having the condition with no solution, and that’s much worse than sharing the fact that I had it and was able to fix it myself.”

Roman offers men a $15 online doctor’s consultation and access to an instant prescription for Viagra, Cialis or generic drugs that can be filled at Roman’s in-house cloud pharmacy. The company also sells hair loss, cold sore medication and more under the Roman brand.

Ro also operates Zero and Rory, purveyors of a quit smoking kit and a line of women’s health products, respectively.