Lessons from Top Hat’s acquisition spree

Top Hat, a startup that digitizes textbooks and turns them into an interactive experience for college students, announced on Wednesday that it has acquired yet another business: Fountainhead Press. The acquisition marks Top Hat’s third scoop of a publishing company in the past 12 months.

Consolidation is going to be huge in the next few years for edtech, as bigger players raise enough financing (and gain profits) to be able to afford other businesses.

Top Hat’s whole business proposition is a subtweet to Zoom University: It wants to make learning an active, online experience and completely digital. That focus has let them reach 3.5 million students and thousands of universities. With a new acquisition, Top Hat is bringing more content into its fold, and with it, more customers who need a better solution to a dusty textbook.

I caught up with Top Hat CEO and founder Mike Silagadze to understand what has triggered this string of content acquisitions. While the M&A isn’t tech-focused, we can learn about how a well-funded edtech startup is navigating the early innings of 2021.

We’ll talk about the shift from offline to online, edtech’s consolidation environment and why the “sell to Pearson or bust” mindset might officially be out the door for the sector.

Offline to online

Lessons from Top Hat’s acquisition spree

Top Hat, a startup that digitizes textbooks and turns them into an interactive experience for college students, announced on Wednesday that it has acquired yet another business: Fountainhead Press. The acquisition marks Top Hat’s third scoop of a publishing company in the past 12 months.

Consolidation is going to be huge in the next few years for edtech, as bigger players raise enough financing (and gain profits) to be able to afford other businesses.

Top Hat’s whole business proposition is a subtweet to Zoom University: It wants to make learning an active, online experience and completely digital. That focus has let them reach 3.5 million students and thousands of universities. With a new acquisition, Top Hat is bringing more content into its fold, and with it, more customers who need a better solution to a dusty textbook.

I caught up with Top Hat CEO and founder Mike Silagadze to understand what has triggered this string of content acquisitions. While the M&A isn’t tech-focused, we can learn about how a well-funded edtech startup is navigating the early innings of 2021.

We’ll talk about the shift from offline to online, edtech’s consolidation environment and why the “sell to Pearson or bust” mindset might officially be out the door for the sector.

Offline to online

The end of Plaid-Visa, and Palantir’s growing startup mafia

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

This week we — Natasha and Danny and Alex and Grace — had a lot to get through, as the news volume in early 2021 has been rapid and serious. Sadly this means that some early-stage rounds missed the cut, though we did make sure to have some Series A material in the show.

So, what did the assembled crew get to? Here’s your cheat sheet:

  • As is Talkspace, the tele-therapy startup that you’ve heard of.
  • Then there was SoftBank, of course, which has its own SPAC in the market now, confirming earlier reports. Which makes perfect sense.

There are so many SPACs and bits of IPO news and funding rounds to pick through and cover that we’re already straining the time limits of the show to even cover half of the material. This week that meant that we excised a chunk of the show to a forthcoming Saturday episode that is focused on e-commerce.

So, we will talk to you again soon!

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.

Pace launches out of private beta with a plan to scale virtual group therapy

One in five people have a mental health illness. Pace, a new startup founded by Pinterest and Affirm executives, wants to pay attention to the other four in that statistic.

“Nobody is perfectly mentally healthy all the time,” said Jack Chou, Pace co-founder. “It’s a non-existent idea, everyone is sort of swimming in between being clinically mentally unhealthy and perfectly mentally happy.”

While diagnosable mental health conditions might get an individual medication or therapy, those that live in a grey space might still need resources to stay afloat. After Chou experienced the detrimental effects of burnout while working for Pinterest and Affirm, and co-founder Cat Lee, formerly of Pinterest and Maveron, experienced a personal travesty, the former colleagues realized there needed to be a way to help people who didn’t fit squarely into one bucket.

So Pace, which launched out of private beta today, wants to address this fallacy by creating small-group training classes for people interested in taking care of their emotional and mental health. It is launching with $1.9 million in seed funding. Investors include Nellie and Max Levchin, Jeff Weiner, Emilie Choi, Ben Silbermann, Box Group, and SV Angel.

The core of the product is a 90-minute live video group session once a week, delivered through Pace’s platform. The video component integrates with Twilio and Agora (and interestingly, not Zoom, because its SDK lacks personalization options). Users can attend the sessions on Web, iOS or Android.

Image Credits: Pace

Pace forms cohorts of eight to 10 people around shared interest or identities, such as a founder group or parent group. Then, Pace interviews a new user for 15 to 30 minutes to learn about what they hope to get out of the experience.

Once a group is formed, they meet weekly with a facilitator at the helm. While it’s not trying to be a therapy replacement, the startup is looking for facilitators who are licensed in mental health practice. To help them do this, Pace secured two founding members who are psychologists: Dr. Kerry Makin-Byrd and Dr. Vivian Oberling.

When users sign on, they are prompted to pick three words that describe themselves from dozens of options. Those words show up under their video as they talk, and help skip some small talk in the beginning of the sessions.

The group talks about a variety of topics, from how to manage stress to how to adapt to a remote world. There is no formal curriculum, but each class has a takeaway for participants to leave with.

Pace doesn’t follow any specific curriculum during the meetings, but instead uses the time for people to talk through their feelings. Facilitators are licensed mental health clinicians, with the majority of the leaders being part-time or freelancers. It plans to introduce asynchronous ways for group members to chat and stay in touch beyond the weekly class, as well as spend time building out a product that feels beyond a Zoom call.

Mental health software startups are on a tear right now. Last month, Lyra Health raised $175 million at a $2.25 billion valuation to connect employees to therapists and mental health services. Another telehealth provider, Talkspace, announced today that it was going public through a SPAC. There’s also Calm, last valued at $2 billion, and Headspace, its biggest competitor in the mindfulness app space.

Pace’s focus is more similar to the latter than the former: It’s avoiding the telehealth label and positioning itself more as supplementary to formal health services.

“Our hope is that as [therapists] have individual patients who they’d like to incorporate some group work, or need a next thing, that we’re here for that too,” says Chou.

One of Pace’s closest competitors is Coa, which launched with $3 million in seed funding in October 2020. The startup is similarly using small-group fitness culture and applying it to mental health. It mixes lecture-style teaching with breakout sessions to breed conversation.

Pace wouldn’t expand on how it differentiates from Coa beyond alluding to upcoming product features and community investments. Coa charges $25 for drop-in classes (sticking to that fitness class theme) while Pace charges $45 per week for the same group to meet for months at a time. While Coa has licensed therapists, Pace has licensed mental health clinicians.

Coa co-founders Alexa Meyer and Dr. Emily Anhalt say their service is unique from Pace in a curriculum perspective.

“Although all of Coa’s classes are facilitated by licensed therapists, Coa’s classes are different from group therapy,” Meyer said. Coa uses Anhalt’s research around mental happiness to create programming. Both companies are still pre-launch, but Coa says it has 6,000 people on its waitlist.

For both startups, the hurdles ahead are common for any startup: customer acquisition, effectiveness in tracking outcomes and scaling an innately emotional and personalized experience. As Homebrew’s Hunter Walk pointed out in a recent blog post, vulnerable populations being exposed to venture-level risk is a difficult phenomenon. Startups fail often, and in this case, that could mean leaving without once-critical support people who are depending on group therapy.

Going forward, the real winner in the mental health fitness space will come down to a thoughtful curriculum and a user experience that brings out vulnerability in people even over a virtual setting. Regardless, innovation pouring into the sector couldn’t come at a better time.

Affirm doubles after starting to trade despite strong IPO pricing

Today shares of Affirm, a buy-now-pay-later unicorn, started trading above $90 per share, far above its $49 per-share IPO price, a figure that was already miles above the company’s early expectations.

The pop comes after Affirm raised its pricing range earlier this week, to $41 to $44 per share, up from an initial range of $33 to $38 per share. To see the company double from its raised price implies strong demand for its shares, a thin float, or both.

Affirm’s explosive debut comes on the heels of similarly-strong results from DoorDash, C3.ai, and Airbnb. Those companies’ debuts were so strong that Roblox delayed its IPO, later swapping a traditional IPO for a direct listing to get around the pricing issue.

Today’s IPO shows that the same dynamics that were at play in those IPOs have persisted into 2021. More public debuts are expected in Q1, including Coinbase, another well-known unicorn. Other names like Robinhood, Bumble, and others are in the wings.

Affirm’s first-day performance will certainly raise eyebrows from regular critics of the traditional IPO process. But the company did raise more money than it perhaps anticipated, and is having a raucous first-day’s trading, so it’s hard to fret too much for the company. If its share price is still as high in a month as it is today, perhaps it was as underpriced as some will claim.

Fintech

Affirm’s pricing brings a green splash to a busy week for fintech giants. Yesterday, Visa’s $5.3 billion acquisition of Plaid failed to go through due to regulatory concerns. While the fallen deal could have a chilling effect on fintech startups, Plaid told TechCrunch that it saw 60% customer growth in 2020, bringing it to more than 4,000 clients. Plaid’s next step, per many in the VC and tech community, will be even bigger than its once-planned $5.3 billion dollar exit.

Some tweets here to give you a sense of the momentum around fintech right now:

Affirm’s pop and Plaid’s forward-looking attitude show that the exit market for fintech feels both optimistic and energetic.

The next Zoom wants to be nothing like Zoom

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In the past few months, there hasn’t been one conversation I’ve had about remote work that doesn’t include a mention of Hopin, a virtual events platform last valued at $2.1 billion.

For a company only a little older than a year, Hopin has a wild growth story. It grew its ARR from $0 to $20 million in nine months. It scooped up two businesses to differentiate its business, including StreamYard for $250 million just this week. And its last financing round left the company’s valuation at $2.1 billion.

Hopin’s growth amid Zoom’s fatigue is giving validation to a whole crop of remote-work-focused startups. I see startups in the category sitting in two camps: Either you’re betting that users want a more passive way to interact with video or you’re betting that users want a more active way to interact with video.

This week, for example, I wrote about Rewatch, which creates internal private channels for startups to archive all their videoconferencing meetings. The company is essentially turning live meetings into transcribed documents that employees can sift through on their own time, shifting from synchronous to asynchronous.

In contrast, I also covered Teamflow, a platform that wants to give a virtual space to companies to recreate the serendipity and productivity of an office. Unlike Rewatch, Teamflow thinks that employees want there to be more live moments in a distributed world.

Both previously in-stealth companies cited Hopin as an example of the need for innovation around how we interact virtually. Rewatch and Teamflow, respectively, see Zoom as a plug-in or competitor – not inspiration.

As I mentioned in this week’s podcast, it’s a dynamic I expect to play out even more over the next few months, as we evolve from a Zoom world to a Zoom alternative world. I want to hear from you, even if you disagree, about what companies in the remote work space should be on my radar. E-mail me at [email protected] or tweet me @nmasc_ with companies you think should be on my remote-work radar.

The power of platform

This week, the U.S. Capitol building was stormed by pro-Trump insurrectionists in a fatal riot. Many in the tech community blamed Jack Dorsey and Mark Zuckerberg for not limiting hate speech on their respective platforms, thus stoking flames of domestic terrorism.

Here’s what to know:

Even as many see the response as too little too late, the events mark a crucial change in the way that regulation between government and tech works.

Etc: Reggie James, CEO and founder of Eternal, framed the issue in a tweet:

Image: Bryce Durbin/TechCrunch

FTC versus DTC

Sticking to our government and tech theme, P&G has officially terminated its plan to acquire razor startup, Billie, after the FTC sued over antitrust concerns.

Here’s what to know: Billie was founded in 2017 with the goal of fighting the “pink tax” on goods marketed to women, including razors and body wash. It was going to be acquired by P&G after raising just $35 million in venture capital.

Etc: Direct-to-consumer brands are not happy. The failed deal is not-so-subtly signaling to DTC brands that there is a cap to their scale, at least in the FTC’s eyes. Government regulation and limited scale also could hurt VC interest in the category.

The optimistic news is that VC funding might be falling out of favor with top D2C brands.

Many product-based brands, as it turns out, are no longer interested in chasing venture capital, playing the “grow-at-all-costs” game and relinquishing partial control to investors, despite the pandemic and the uncertain circumstances many founders find themselves facing.

Image Credits: Billie

IPOs, a direct listing, and sky-high valuations

My colleague Alex puts together a brilliant newsletter each week after his column, The Exchange. Subscribe to it for his in-depth analysis on the IPO market and late-stage startups. In the meantime, though…

Here’s what to know:

Etc: The Roblox Gambit

Green helium balloon carrying pink piggy bank with white strings on blue sky

Around TechCrunch

Remembering TechCrunch Japan’s Hirohide Yoshida (1971-2020)

Extra Crunch Live is back in 2021, connecting founders with tech giants and each other

A directory of the most active and engaged investors in VC: The TechCrunch List

The Mixtape Podcast: Behind the curtain of diversity theater

Across the week

Seen on TC

Elon Musk has a new title: world’s richest person

Waymo is dropping the term ‘self-driving,’ but not everyone in the industry is on board

VCs dispense political niceties during capitol riots: ‘Never talk to me again’

California vegan egg startup Eat Just yokes itself to China’s fast food chain

Detroit’s Ludlow Ventures goes for fund four

Seen on EC

Revenue-based financing: The next step for private equity and early-stage investment

5 questions about 2021’s startup market

What’s going on with fintech venture capital investment?

VCs discuss gaming’s biggest infrastructure investment opportunities in 2021

The tech-powered wave of smart, not slow, tutoring sessions

@EquityPod

If you’re new here, welcome! Equity is TechCrunch’s venture capital-focused podcast. I chat with Alex and Danny about the most important tech news each week, from early-stage startups to IPOs, and crack a few jokes in the meantime. Produced by Chris, Equity is a perfect appetizer to this newsletter.

Despite your wishes for a slower and perhaps more uneventful year, tech clearly isn’t slowing down in 2021. The Equity team had a mountain of news to get through, from Twitter’s very active checkbook to a $185 million Series A round.

Here’s what you’ll hear about if you tune into our debut full-team episode for the year:

  • Why Hopin might be the fastest growing story of this era
  • How, and why, a Utah-based expense management company founded in 2018 is already a unicorn
  • What does a slew of acquisitions from Twitter and Amazon mean for the exit environment?
  • And a tip just for you: a ton of VC firms squeezed in SEC filings on New Years Eve bringing hundreds of millions of capital to potential startups.

Convinced? Good. Listen here, and make sure to check out our bonus episode with Roblox and gaming news that comes out on Saturday.

 

 

Who is underpricing Roblox?

Hello and welcome back to Equity, TechCrunch’s venture-capital-focused podcast, where we unpack the numbers behind the headlines. We’re back on this lovely Saturday with a bonus episode!

The normal crew assembled, including Alex, Natasha, Danny, and Chris, to chatter about a chunk of creator and gamer news. And some big numbers, the sorts that we always find fun to chat about.

A sneak peek at what we discussed during this second-ever Equity Leftovers:

  • Roblox’s epic pre-IPO raise, and its decision to go public through direct listing instead of the IPO that it had previously planned.
  • Niantic buying a gaming platform with an esports-focus.
  • Nintendo buying a gaming studio, leading the crew to declare that the famous company is the Disney of video games.
  • Cameo, which allows fans to pay celebrities for personalized messages, is on a hiring spree after bringing in $100 million in transactions last year. The Information says that the company is seeking funding, which isn’t entirely surprising. Axios reports that it has brought in a couple high-profile hires, as well.

Back to our regular schedule Monday! Chat then!

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.

Hopin might be the fastest growth story of this era

Hello and welcome back to Equity, TechCrunch’s venture-capital-focused podcast, where we unpack the numbers behind the headlines. Happy 2021, or as our own Danny Crichton aptly names it, December 38, 2020.

Equity crew is back to start the new year in full force, with Alex, Natasha and Danny on the mics and Chris behind the scenes. The reunion led to extreme Dad joke energy from all of us, which helped get through the mountain of tech news that we had in front of us.

In fact, there was so much to talk about that we have a bonus episode coming out Saturday dealing with Roblox and the gaming environment. Stay tuned.

For now, here’s what’s in today’s episode:

As you can tell by our laughs and jokes this week, it is really good to be back. Enjoy the show, and don’t forget the Saturday extra!

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.

The tech-powered wave of smart, not slow, tutoring sessions

While starting a tutoring marketplace is easy, scaling is often where the troubles begin. Tutoring marketplaces require a base of tutors that have the bandwidth and empathy to work with students across different learning styles, goals and comprehension levels. The nuance means that fast scale isn’t foolproof and can lead edtech startups into a classic marketplace downfall: the inability to grow consistently while also providing definite outcomes.

But, as 2020 showed edtech, the demand for quick and convenient help is high. To win post-pandemic, the sector needs to think bigger about the way it can reach more students in an effective and savvy way.

In 2021, tutoring platforms can’t simply be middlemen that take a cut; they have to be extensive, smart and responsive.

Innovation from Quizlet, Chegg, Course Hero and Brainly shows that the future of tutoring might not look like a 30-minute video on Zoom or Google Hangouts. Instead, modern-day extra help might take the form of an AI-powered chatbot, a live calculator or tech more subtle than either.

Regardless, the rise of tutoring bots over marketplaces illustrates that some of the biggest decision-makers in edtech are taking a scalpel to the way that tutoring used to work and hope to scale faster by doing so.

The businesses driving the change

On January 31, Chegg will close its standalone tutoring service, which matched vetted tutors with students, relaunching it into a live chatbot that answers students’ questions. The move from a tutoring marketplace to chat interface, according to a spokesperson, will help Chegg “dramatically differentiate our offerings from our competitors and better service students.”

“Ever since Chegg Tutors was launched in 2014 we have seen what a powerful tool synchronous tutoring is for learners,” the company said in a statement. “What we have also learned is that the real need for learners is contextualized help directly in the experience of their actual learning environment.”

The closure of a marketplace isn’t necessarily a failure; the company says that live tutoring was never a big part of its business. Still, it’s clear that Chegg didn’t see enough opportunity to match students and tutors live and saw more promise in a chatbot approach. Plus, it goes well with Chegg’s theme of self-directed learning. CEO Dan Rosensweig was unavailable for comment.

Tech leaders speak out about platforms’ roles in US Capitol riots

After pro-Trump extremists violently stormed the U.S. Capitol, a number of tech executives and industry leaders are calling on Twitter CEO Jack Dorsey and Facebook CEO Mark Zuckerberg to more aggressively curb the president’s messages amplifying and endorsing violence.

After Trump released a video calling the extremists “very special” and telling them to go home, Facebook and Twitter have taken down the content. Twitter has locked Donald Trump’s Twitter account for at least 12 hours, warning that “any future violations” of Twitter rules will result in permanent suspension of the account.

The riot triggered the platforms, after long scrutiny, to finally react to Trump’s incendiary tweets and messaging. As the situation continues to play out, some prominent tech figures see the root of the riots as the platforms that ignored and amplified misinformation surrounding the election, allowing violent rhetoric to spin out of control in the final days of the Trump presidency.

Chris Sacca, one of the earliest investors in Twitter, wrote “you’ve got blood on your hands, [Jack] and Zuck. For four years you’ve rationalized this terror. Inciting violent treason is not a free speech exercise. If you work at those companies, it’s on you too. Shut it down.”

Alexis Ohanian, the co-founder of Reddit, added to Sacca’s remark, saying: “there are a lot of hard questions we’re going to have to answer for our children.” Ohanian left Reddit’s board in 2020 following Black Lives Matter protests.

Alex Stamos, Facebook’s former Chief Security Officer wrote that both companies needed to act arguing that the “labeling won’t do it” and that Twitter and Facebook “have to cut him off.”

Tech platforms have repeatedly come under fire for failing to address the rise of misinformation and groups coalescing around conspiracy theories. Twitter’s latest response has been the introduction of tags to flag potential misinformation.

Ellen Pao, tech investor and the former CEO of Reddit, argues today’s chaos is directly linked to Dorsey’s inaction. In November, Pao and Laura Gómez, a former tech founder and CEO, called on Dorsey to limit Trump’s influence on Twitter, explicitly accusing Trump of using Twitter to incite “a coup.”

“[We] told them to do the right thing. They didn’t. And here we are,” Pao wrote on Twitter today.

Timnit Gebru, a top researcher who recently was fired from Google’s AI team, slammed Facebook and Twitter, but further placed blame on YouTube, which she says has “completely managed to get out of the spotlight” for facilitating hate speech.

A recent video from Trump, where he calls the rioters “special people” and urges them to go home, has recently been taken down from Twitter, Facebook and YouTube.

Guy Rosen, VP of Integrity at Facebook, tweeted that the events are an “emergency situation and we are taking appropriate emergency measures, including removing President Trump’s video. We removed it because on balance we believe it contributes to rather than diminishes the risk of ongoing violence.” Facebook released an official statement as well.

With Inauguration Day just two weeks out, platforms will continue to play an intense role in safeguarding a peaceful transfer of power. Today’s events feel like a tipping point. The terrorism has pushed Silicon Valley tech figures to critize some of the industry’s most powerful leaders and implore them to act before further violence takes place.

“Let me say in no uncertain terms @jack @vijaya @kayvz: If you do not suspend Donald Trump’s Twitter account for the next day at least, this mob attack on Congress is also on you. Sorry, but he has incited violence for days, using your tools in large part and you need to act now,” Tech media figure Kara Swisher wrote in a post on Twitter.