Bottomless has a solution for lazy coffee addicts

If you’re like me, you let out a heavy sigh every month or so when you reach out and unexpectedly find an empty bag of coffee. Bottomless, one of the 200-plus startups in Y Combinator’s latest batch, has a solution for us caffeine addicts.

For a $36 annual membership fee, a cost which co-founder Michael Mayer says isn’t set in stone, plus $11.29 per order depending on the blend, Bottomless will automatically restock your coffee supply before you run out. How? The startup sends its members an internet-connected scale free of charge, which members place under their bag of coffee grounds. Tracking the weight of the bag, Bottomless’ scales determine when customers are low on grounds and ensure a new bag of previously selected freshly roasted coffee is on their doorstep before they run out.

Voilà, no more coffee-less mornings.

Founded by Seattle-based husband and wife duo Mayer and Liana Herrera in 2016, Bottomless began as a passion project for Mayer, a former developer at Nike.com. Herrera kept working as a systems implementations specialist until Bottomless secured enough customers to justify the pair working on the project full-time. That was in 2018; months later, after their second attempt at applying, they were admitted into the Y Combinator accelerator program.

Bottomless’ smart scale

Bottomless today counts around 400 customers and has inked distribution deals with Four Barrel and Philz Coffee, among other roasters. Including the $150,000 investment YC provides each of its startups, Bottomless previously raised a pre-seed round from San Francisco and Seattle-area angel investors.

Before relocating to San Francisco for YC, the Bottomless founders were working feverishly out of their Seattle home.

“This whole time we’ve been 3D-printing prototypes out of our apartment and soldering them together out of our apartment,” Mayer told TechCrunch. “We kind of turned our place into this new manufacturing facility. There’s dust everywhere and it’s crazy. But we made 150 units ourselves by hand-soldering and lots of burned fingers.”

The long-term goal is to automate the restocking process of several household items, like pet food, soap and shampoo. Their challenge will be getting customers to keep multiple smart scales in their homes as opposed to just asking their digital assistant to order them some coffee or soap on Amazon .

Amazon recently announced it was doing away with its stick-on Dash buttons, IoT devices capable of self-ordering on Amazon. The devices launched in 2015 before Google Homes and Amazon Alexas hit the mainstream.

So why keep a smart scale in your kitchen as opposed to just asking a digital assistant to replenish your supply? Mayer says it’s coffee quality that keeps it competitive.

“Some of our most enthusiastic customers live out in like deep suburbs far away from city centers, but they really love fresh coffee,” Mayer said.And there’s no way to get fresh coffee if you live 20 or 30 minutes from a city center, right?”

“Or you might think in a city like San Francisco or Seattle, you can get freshly roasted coffee pretty easily because there are restaurants all over the place, right?” He added. “That’s certainly true, but it does take a little bit of extra thought to remember to grab it on the right day when you’re running low.”

Mayer and Herrera don’t consider themselves coffee experts, despite now running what is essentially a direct-to-consumer coffee marketplace out of Seattle, the coffee capital.

“I’m originally from Portland and Portlanders know a lot about coffee,” Mayer said. “I never really considered myself to be a coffee aficionado or a coffee snob in my head, but I guess compared to like the average American from anywhere in the country, I would be just a regular coffee drinker in Portland. All I really knew about coffee going into this was that it’s better fresh. That’s it.”

Bottomless is currently accepting customers in beta. The team will pitch to investors at YC Demo Days next week.

Startups Weekly: What’s up with YC? Plus, mobility layoffs and Airbnb’s grand plans

Where to begin… Netflix darling Marie Kondo is hitting up Sand Hill Road in search of $40 million to fund an ecommerce platform, Y Combinator is giving $150,000 to a startup building a $380,000 flying motorcycle (because why not) and Jibo, the social robot, is calling it quits, speaking to owners directly of its imminent shutdown.

It was a hectic week in unicorn land so, I’m just going to get right to the good stuff.

Changes at Y Combinator

Where to begin! Not only did the prolific accelerator announce long-time president Sam Altman would be making an exit, but TechCrunch scooped the firm’s decision to move its headquarters to San Francisco. Y Combinator is going through a number of changes, outlined here. Interestingly, sources tell TechCrunch that YC has no succession plans. We’re guessing that’s because Altman had already mostly transitioned away from the firm, with CEO Michael Seibel assuming his responsibilities. The question is, is Altman planning to launch a startup? Hmmmmm.

Airbnb’s a hotelier

As it gears up for an IPO, Airbnb is showing its mature side. In a bid to accelerate growth, the home-sharing unicorn is buying HotelTonight in a deal said to be valued at around $465 million. Accel, the storied venture capital firm, was the business’s first-ever investors and is now its largest stakeholder. Oughta be a nice return. We’re still wondering whether it’s a cash deal, a cash and stock deal or an all-stock deal. Let me know if you’ve got the deets.

Mobility cuts

Lyft is preparing for its imminent IPO by getting lean. The ride-hailing company is trimming 50 staff members in its scooters and bikes unit, reports TechCrunch’s Ingrid Lunden. The cuts are mostly impacting those who joined the company when it acquired the electric bike-sharing startup Motivate, a deal that closed about three months ago. I’ll point out that Lyft employs 5,000 people; these layoffs are about one percent of their total workforce. And while we’re on the topic of mobility layoffs, Mobike, the former Chinese bike-share unicorn, is closing down all international operations and putting its sole focus on China.

Munchery goes bankrupt

Several weeks after a sudden shutdown left customers and vendors in the lurch, meal-kit service Munchery has filed for bankruptcy. In the Chapter 11 filing, Munchery chief executive officer James Beriker cites increased competition, over-funding, aggressive expansion efforts and Blue Apron’s failed IPO as reasons for its demise. Here’s the story, complete with Munchery’s bankruptcy filing.

Funders fundraise

This week Precursor Ventures closed its sophomore pre-seed fund on $32 million, NEA filed to raise its largest venture fund yet ($3.6 billion), SoftBank raised $2 billion on a $5 billion target for a Latin America Fund, aMoon raised $660 million for Israeli healthcare deals and Coral Capital brought in $45 million to make early-stage investments in Japan.

Here’s your weekly reminder to send me tips, suggestions and more to kate.[email protected] or @KateClarkTweets

Startup cash

Sea is raising up to $1.5B
Grab confirms $1.46B investment from SoftBank’s Vision Fund
Music services company Kobalt is raising roughly $100M
Eargo raises $52M for virtually invisible, rechargeable hearing aids
Matterport raises $48M to ramp up its 3D imaging platform
Netflix star and tidying expert Marie Kondo is looking to raise $40M
Blueground raises $20M for flexible apartment rentals

Netflix star and tidying expert Marie Kondo

A16z gets even bigger

Andreessen Horowitz tapped David George as its newest general partner and its first top dealmaker focused on late-stage deals. George joins from General Atlantic, where he’d backed consumer internet, enterprise software and fintech startups as a principal since 2012. The firm’s swelling team is amongst the largest of any VC firm. Most partnerships consist of one to three top dealmakers and a few partners or principals. A16z breaks the mold with its ever-expanding team of GPs. We talked to George and a16z managing director Scott Kupor.

Worth reading

The Khashoggi murder isn’t stopping SoftBank’s Vision Fund, by TechCrunch’s Jon Russell and Jonathan Shieber.

SXSW

Stopping by SXSW? Meet TechCrunch’s writers at our annual Crunch By Crunch Fest party in Austin, Texas. RSVP here to join us on Sunday, March 10th from 1pm to 4pm at the Swan Dive at 615 Red River St. @ E. 7th St., just 3 blocks from the convention center. Hang out with TechCrunchers and fellow readers, enjoy free drinks and check out a live performance by electro-RnB musician Elderbrook.  And check out the full line-up of TechCrunch panels here. I will be discussing the double standard in sex tech with Lora Haddock, the CEO of Lora DiCarlo, on Thursday, March 14th at 2pm at the Fairmont Congressional A, 101 Red River.

Listen to me talk

This week on Equity, TechCrunch’s venture capital-focused podcast, where we unpack the numbers behind the headlines, Crunchbase New’s editor-in-chief Alex Wilhelm and I discuss Y Combinator’s new HQ, Chime’s big funding round and SoftBank’s new Latin America fund. Listen here.

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UK military veteran launches crowd-funding for Pixie app to revive local stores

What if, instead of sitting on your phone on the sofa ordering stuff from Amazon, you could buy the same things locally from local stores that ultimately enliven and enrich your local neighborhood? What if by doing that, you wouldn’t be walking through deserted main streets, past boarded-up shops, dark alleys and graffiti? What if someone created a marketplace for independent businesses, local events and experiences that kept the money in the local economy rather than being siphoned off into global giants who don’t care about human-scale communities?

That’s the idea behind Pixie, a new take on the “shop-local app” startup model which, although it’s been tried before, has never quite managed to take off. Perhaps Pixie will have more luck?

Here’s how it works: The Pixie app connects people to independent businesses through a curated marketplace, incentivizing them to pay through the app and get rewarded for being loyal customers. Integrated into the app is Pixie Pay, a bespoke payment solution which keeps money in local hands.

The startup has a fascinating background. Whilst serving in the British Special Forces, Pixie’s founder Greg Barden understood that his mission was also to ‘win hearts and minds’ with the local population. Whether by buying bread from the local baker in a village in Afghanistan, or coffee from the market in Baghdad, he and his soldiers could tear down even the most hostile barriers.

He also realized that when more money stayed inside these the local economies rather than being sucked away by organized crime or large scale, globalized businesses, the local economy might flourish and the risk of the societies there becoming yet again destabilized could potentially diminish.

“Whether it was stalls in the bazaars of Baghdad or small boutiques on Bath high-street, I realized independent shop owners are linchpins in their community. They add variety to the mundane and nurture community spirit. Even local guardians need protecting sometimes, which is why we created Pixie.”

The threat to independent stores from globalization and digitization isn’t just happening in Afghanistan. Across the western world, ‘Main Street’ stores are closing at a prodigious rate. In the UK over 1,500 local stores closed in 2018. (And that was BEFORE Brexit…)

Pixie has stress-tested its idea in mid-sized town in the UK, including Bath, Frome and Sherbourne, completing transactions across 250 businesses, ranging from cafes to fashion boutiques, and spinning up 5,000 app users. It’s now going on the fund-raising trail, aiming to raise £500,000 in funding through its ‘Equity for Explorers’ campaign on Crowdcube a UK-based crowd-equity platform. The total addressable market for independent business in the UK is estimated to be £31.5bn in gross transactional value.

Barden — who last year spoke about his startup life at the launch of the military tech non-profit TechVets — says: “There might be thousands of independent businesses across the UK, but at the rate the high-street is disappearing they are severely under threat. Pixie isn’t here to turn people away from the bigger players on the high-street, but create opportunities for enriching discovery. Needless to say, in a world with increasing nationalism, Brexit, Trump and — dare I say it — Amazon, we feel Pixie has a huge part to play in countering the worst aspects of globalization.”

Pixie’s revenue comes from transaction fees taken when people use its ‘Pixie Pay’ payment mechanism. The payment system is designed to bypass Visa/Mastercard at the point of sale, whilst the loyalty scheme unites independent businesses under one umbrella, so the users can earn and spend their loyalty points (as money) across the entire Pixie community. If a store using Pixie is in Australia, a person from Bath could also use their points there. This keeps the money circulating inside local, independent stores, wherever they are on the planet.

Pixie distributes its own payment terminal that sits next to whatever the business has in place to take normal card payments (iZettle etc). The cards are contactless but don’t utilise visa MasterCard. It’s literally their own e-money system. Think PayPal where users can either add money to their balance by debit card or bank and/or link a debit card to Pixie if they don’t have a balance.

Obviously this also creates it an alternative to competitors like iZettle, Square, SumUp and WorldPay, but this time specifically aimed at local independent stores, not huge national and international chains.

The third element of Pixie is its discovery marketplace that gives its community of explorers (users) the ability to discover local businesses across the Pixie footprint of stores.

I’ve seen several startups try and tackle this problem, but it may well be that Pixie, under its charismatic leader, finally has a shot at cracking this idea around local markets.

Digital publisher Serial Box raises $4.5M

Serial Box, a startup bringing back the tradition of serialized fiction, has raised $4.5 million in seed funding.

The company actually disclosed the funding last week, when announcing a partnership to produce stories about Marvel characters, but it’s sharing more details about the round — namely, the fact that it was led by Boat Rocker Media, with participation from Forerunner Ventures, 2929 Entertainment co-founder Todd Wagner and Japanese business intelligence and media firm Uzabase.

“We carefully chose trusted partners for this round of investment,” said co-founder and CEO Molly Barton in a statement. “They see the big opportunity that we do to retool reading for the smartphone age, to take the best elements of traditional book publishing and innovate with influences from the audio, podcast, gaming and TV industries.”

Serial Box publishes stories in text and audio format, broken up into weekly episodes. The first episode of each story is free — then if you’re hooked, you can pay $1.99 for additional episodes or sign up for a season pass.

The idea of making readers and listeners wait for the next chapter of the story may seem strange. Hasn’t Netflix trained us to want to binge the full season, as soon as possible? Maybe, but anyone who’s watched “Game of Thrones” week-to-week knows that there’s still immense pleasure in waiting for smaller chunks of the larger story.

Behind the scenes, the company is borrowing from the TV production model, with a showrunner leading each writing time creating the stories. Serial Box writer include popular YA/science fiction/fantasy authors Gwenda Bond, Yoon Ha Lee, Max Gladstone and Becky Chambers. And as mentioned, the company will also be publishing stories based on Marvel characters, starting with Thor.

The company says it will launch its Android app next week, with plans for more product upgrades and content partnerships in the coming months.

VCs have growing appetite for “AgriFood”

Venture investors are pouring billions of dollars into feeding their hunger for food and agriculture startups. Whether that trend line is due to enthusiasm for the sector or just broader heavy investing in the VC space is much less clear.

According to a recent report published by AgFunder – a VC and investing marketplace focused on the agriculture and food sectors – the “AgriFood” space is booming. Using data from Crunchbase and several other data partners, the organization published its “2018 AgriFood Tech Investing Report” this morning, finding that investment in AgriFood companies increased 43% year-over-year, reaching $16.9 billion in 2018.

AgFunder classifies AgriFood tech as “the small but growing segment of the startup and venture capital universe that’s aiming to improve or disrupt the global food and agriculture industry.” Their definition is intentionally broad, encompassing everything from crop and livestock biotech, property management systems, and payments, to biomaterials and meat alternatives, all the way up to tech platforms for restaurants, grocers, deliveries and at-home cooks.

While some of the AgriFood tech categories – such as delivery or restaurant software – have long been popular destinations for venture capital, we’re now seeing a more diverse array of startups innovating across the entire food supply chain. According to the report, expansion in AgriFood is fairly consistent across upstream (agricultural and farming) subsectors to downstream (more consumer-facing) subsectors, with each group growing roughly 44% and 42% year-over-year respectively.

The data also shows growth occurring across almost all deal stages. AgriFood saw huge increases in the average deal size and total investment for late-stage companies in particular, as venture-backed startups have grown to global scale. And penetrating and attracting capital from international markets seems more feasible than ever. AgriFood investing, which traditionally has been largely US-centric, is rapidly becoming a global phenomenon, with more than half of total funding – and some of the largest rounds – now coming from companies and investors outside the US.

Hammerhead raises $4.2M to build a smarter operating system for bikes

Hammerhead founder and CEO Piet Morgan is a bicyclist, and he started the company to create something he wanted for his rides— a better navigation system.

So Hammerhead crowdfunded its first product, the H1, and subsequently built Karoo, a “cycling computer” with features for navigation and training. But Morgan told me his ambitions is bigger than that.

After all, he sees a future where electric bikes need smart range projections, where bikeshare fleets need to be managed, where social training programs like Strava can pull data from the bike itself and where any bicycle should come with theft and crash alerts.

“There needs to be a software layer on the bike,” Morgan said. “That’s really what we’re trying to build.”

That future isn’t here yet, however, so Hammerhead is starting out by building a consumer device. And while Morgan eventually plans to license the software to bike manufacturers and other partners, he said there will be a common goal across the business: To build products that cyclists want to use.

Karoo

Karoo

That includes the Karoo device itself — a mountable, shockproof computer with a high resolution, anti-glare touchscreen. But Morgan argued that the real differentiator is the software, because the dominant products from companies like Garmin are built with “software that’s pretty rudimentary.”

Karoo, on the other hand, runs on a regularly updated, Android-based operating system called Karoo OS. It includes a mapping and turn-by-turn navigation system that the company is designed specifically for cyclists. And the real potential may be unlocked when the launches an app store for that will allow third-party software to run on the device.

Hammer is announcing that it has raised $4.2 million in seed funding led by Primary Ventures and KB Partners, with Primary’s Steve Schlafman and KB’s Keith Bank joining the board. Courtside Ventures, Maveron, Drummond Road Capital, MapMyFitness co-founder Robin Thurston and Zipp CEO Andy Ording also participated.

“What really makes us a compelling venture-scale opportunity is what I believe is really going to be almost a winner-take-all situation,” Morgan said. “The company that [defines] this category is going to be able to own it.”

Remix picks up $15 million to help cities make better decisions around transit

A San Francisco-based startup just raised $15 million to solve the complicated problem of transit infrastructure in urban environments. Remix was founded by Tiffany Chu, Dan Getelman, Danny Whalen, and Sam Hashemi in 2014 following a project they built during their Code For America fellowships.

The $15 million Series B round was led by Energy Impact Partners, bringing total funding to $27 million.

Remix allows cities to plan public transit infrastructure, quickly computing how a change in a certain bus or train route or the addition of a bike lane might affect the city overall, all through a drag and drop menu. The platform also looks at how to manage private transportation options like ridesharing, dockless bikes and scooters, etc.

“This is an industry that has changed faster in the last five years than it did in the last 50,” said Chu, cofounder and COO. “One of our challenges is explaining to people, the community, what are the impacts of certain decisions around the way things have always been?”

One of the ways Remix measures its own success and allows its users to do the same is through a metric called Jane. Jane is an icon that you can drop anywhere on the map and see how far that fictional person can travel in 15, 30, 45, and 60 minutes, and how many jobs they might have access to based on changes in the public transit.

More than 300 cities are using the Remix platform, and the company says that 100 million+ people will be impacted by plans that are either completed or in progress.

Alongside helping cities make better decisions for the community, it also helps those governments better express their decision-making process. This is especially important as governments and citizens weigh the impacts of single-occupancy vehicles on the environment. The EPA says that transportation accounts for 28 percent of all greenhouse gas emissions.

“Parking is such a huge, huge point of contention for every city and being able to explain to somebody why a transit lane or a bike lane or a parklet might be more beneficial for the community at large as opposed to having people freak out over removal of two parking spots,” said Chu. “That’s a shifting conversation we, as an industry, need to have in order for everyone to start moving in the right direction, away from single occupancy vehicles.”

Remix is currently working with a wide variety of markets, including HonoLulu, Auckland, Dallas, Seattle and New York.

SoftBank launches the Innovation Fund, committing $2B to invest in Latin America

While SoftBank continues to make big bets on startups out of its $100-billion Vision Fund, it has also launched another investment vehicle to invest in tech opportunities specifically in Latin America.

Today the group announced the SoftBank Innovation Fund, which is starting out with a $2 billion commitment to invest in tech startups in Central and South America, specifically starting in the countries of Argentina, Brazil, Chile, Colombia and Mexico, covering areas like e-commerce, digital financial services, healthcare, mobility and insurance.

Alongside this, it’s establishing a group called the SoftBank Latin America Local Hub, which will partner with companies that are already in SoftBank’s investment portfolio to help them break into the region.

The effort in Latin America is a big win for Marcelo Claure, who has been named CEO of SoftBank Latin America. Claure is already COO of SoftBank Group Corp., as well as CEO of SoftBank Group International and executive chairman of Sprint Corporation — all roles he will continue to keep as he takes on this new challenge.

“Growing up in Latin America I witnessed firsthand the creativity and passion of the people,” said Claure in a statement. “There is so much innovation and disruption taking place in the region, and I believe the business opportunities have never been stronger. The SoftBank Innovation Fund will become a major investor in transformative Latin American companies that are poised to redefine their industries and create new economic opportunities for millions of people.”

This is the first time that SoftBank has created a fund of this kind focused on a single region — although it has spearheaded big bets into specific countries like India in the past — and it appears to the be first time that it has formally established a group to help other portfolio companies expand in a region, although this is likely something that SoftBank would have been doing on an informal basis before now.

News of the this fund had been trickling out for some time, although a report in Bloomberg from January that broke the news had underestimated the amount that SoftBank would invest in it (it predicted $1 billion, while the actual starting amount is $2 billion).

SoftBank says that it has yet to determine where it will establish its HQ for this new effort. I don’t imagine this question will take on the heated race that we saw unfold around Amazon’s HQ2 decision-making process. Likely candidates will probably be cities where SoftBank has already established operations in the region.

Indeed, SoftBank no stranger to investing in Latin America as part of its bigger “BRIC” strategy. As a developing market with a growing middle class (more than 50 million people in the region have entered the middle class generating increased disposable income, SoftBank said), it is one of the fastest-growing regions for tech products and services. SoftBank estimates that the region accounts for 10 percent of the world’s population and 8 percent of the world’s GDP. Notably (given SoftBank’s previous focus on Asia) it points out that this means it has “two times the GDP of India and half that of China.”

So far, SoftBank’s investments in the region have focused on e-commerce and related consumer services. It was one of the early investors in Uber rival 99 in Brazil (which eventually was taken over by Didi, the Chinese transportation giant that SoftBank also partly owns). It has also put at least $100 million into Loggi, another startup out of Brazil that focuses on delivery services. In Mexico, it is also embarking on a joint venture with Didi to establish transportation services there.

It’s likely the strong track record it has had in those investments so far that have led SoftBank to extend its activities there, particularly since it has already established a strong bulkhead in different regions across Asia, including China and India.

“Latin America is on the cusp of becoming one of the most important economic regions in the world, and we anticipate significant growth in the decades ahead,” said Masayoshi Son, Chairman & Chief Executive Officer of SBG, in a statement. “SBG plans to invest in entrepreneurs throughout Latin America and use technology to help address the challenges faced by many emerging economies with the goal of improving the lives of millions of Latin Americans. I am grateful to our Chief Operating Officer Marcelo Claure for leading this initiative, in addition to his other responsibilities at SBG.”

As with other SoftBank investments that do not come out of its Vision Fund, the latter will potentially use this as a springboard to get involved as well. “Latin America presents significant opportunities for SoftBank Group, and the Vision Fund will have the ability to co-invest alongside the innovation Fund,” said Rajeev Misra, CEO of SoftBank Investment Advisers, who runs the Vision Fund. “Marcelo and team will offer invaluable expertise to help Latin American companies scale their operations, benefit from the greater SoftBank ecosystem, and grow into global market leaders.” The Vision Fund has come under some scrutiny because of its ties to Saudi money and the controversy surrounding that government’s human rights policies.

For investors like SoftBank, putting a lot of attention on this region makes a lot of sense. Not only does it help diversify by focusing on another (rapidly growing) region, but it gives the group one more way to sweeten the deal to invest in any fast-growing startup, by offering a helping hand in their efforts to expand to other regions by way of their network of contacts and existing services.

In addition to people getting more well off in the region, it has shown other indication of it being a healthy market for tech investment. It has 375 million internet users and 250 smartphone users, putting it ahead of the US in terms of sheer numbers. And retail e-commerce has nearly doubled in the last three years, going to $54 billion in 2018 from $29.8 billion in 2015.

Similarly, there is a big opportunity ahead with some 400 million people still without bank accounts or credit histories; and 79 percent of population living in urban areas but without great access to public transport. Healthcare has also been an area of underinvestment up to now, opening the door to building and expanding medical, wellness and other related solutions.

To be clear, there are already a ton of companies in the region, and so this is as much about getting closer to them, and helping them grow with funding, as it is about bringing in startups from outside the region to tap these opportunities. SoftBank hopes that by setting out its stall in the heart of it, it will have a shot at profiting from both.

The Khashoggi murder isn’t stopping SoftBank’s Vision Fund

Money talks in the startup community, especially when SoftBank comes knocking with the megabucks of its Vision Fund.

Despite the public outcry around the firm’s dependence on money from Saudi Arabia in the wake of that country’s assassination of Washington Post journalist Jamal Khashoggi, deal flow for Softbank’s Vision Fund appears to be back to normal.

The $100 billion megafund has done 21 deals over the last two quarters, that’s as more than in the other quarters of the previous year combined, according to data from Crunchbase, thanks to an uptick from Asia. Since the October 2 murder, there have been 11 investments in U.S. companies, seven in Asia, two in Europe and one in Latin America. Just this week, the fund completed a near $1.5 billion investment in Southeast Asia-based ride-hailing company Grab.

While U.S. and European firms have more options, and therefore, perhaps deserve more scrutiny, Softbank’s cash is increasingly the only game in town for startups in Asia, where there are fewer alternatives for later stage capital outside of large Chinese private equity firms or tech giants — which come with their own risks.

The Vision Fund is seen by some critics as tainted money for its links to the Saudi Royal family. Saudi Arabia’s Public Investment Fund (PIF) is the fund’s anchor investor and it is controlled by Crown Prince Mohammed bin Salman, who has been strongly linked with the murder of Saudi journalist Jamal Khashoggi, an outspoken critic of the regime.

Khashoggi, a Washington Post columnist, was murdered on October 2 after he entered the Saudi consulate in Istanbul. His visit was part of an effort to obtain divorce documents in order to marry his fiancée, but it ended with his apparently gruesome death. Audio clips suggest he was beheaded, dismembered, and had his fingers severed before his body was dissolved in acid, although new reports suggest it may have been burned.

Jamal Khashoggi — pictured in 2014 — was murdered in the Saudi consulate in Istanbul last year [Photographer: Ohammed Al-Shaikh/AFP/Getty Images]

The Vision Fund is designed to finance ‘global winners’ which, like all investment funds, is set up to provide ‘unfair advantages’ to help its companies grow into hugely important businesses. On the financial end, as is the norm, it is built to provide handsome returns to the LPs, thus directly boosting the coffers of the PIF, the Saudi kingdom, and by extension the Saudi prince himself.

An investigation is going, but there’s already plenty of evidence to suggest that the murder happened at the request of the prince.

Sources within the U.S. State Department have reportedly said it is “blindingly obvious” that the Crown Prince ordered the killing — he reportedly threatened to shoot Khashoggi one year before. But, now that the apparent period of outrage is over, SoftBank has reverted back to writing checks and companies are taking them in spite of the links to Saudi Arabia.

For startups, the money flow means that a major source of capital for growth or subsidies for customers comes from the Saudi royal family’s pockets — a regime that would reportedly not hesitate to murder a critical voice.

SoftBank’s Vision Fund has ramped up its deals over the past six months, according to data from Crunchbase

What are the companies saying?

SoftBank itself said it has a commitment to “the people” of Saudi Arabia that will see it deploy its capital unchanged, although Chairman Masayoshi Son did concede that he will wait on the findings of the investigation into the murder before deciding on whether PIF will be involved in a second Vision Fund.

The founders taking the capital have been more cautious. When questioned, executives talk about the specifics of their deal and their growth plans, most defer issues on the management of LPs, like PIF, to SoftBank. While offering words in support of the ongoing murder investigation, they manage to say little about the ethics of taking money from the Saudi regime.

Bom Kim, CEO of Korean e-commerce company Coupang — which raised $2 billion from the Vision Fund — told TechCrunch in November that the allegations around the murder “don’t represent us and don’t represent [Vision Fund] companies.”

“We are deeply concerned by the reported events and alongside SoftBank are monitoring the situation closely until the full facts are known,” Tokopedia CEO William Tanuwijaya told TechCrunch in December after the Vision Fund co-led a $1.1 billion round.

William Tanuwijaya is the co-founder and CEO of Tokopedia [Photographer: Jason Alden/Bloomberg]

OYO, the budget hotel network based out of India, did not respond to a request comment sent the day before this story was published. The startup raised $1 billion led by the Vision Fund in September.

TechCrunch was also unable to get a response to questions sent to Chehaoduo, the Vision Fund’s first China-based startup which raised $1.5 billion in February. The company is notable for being the only one of this group that didn’t count SoftBank as an existing investor prior to its Vision Fund deal.

The latest addition to the collection is Grab, the ride-hailing company in Southeast Asia that’s led by CEO Anthony Tan, who is very publicly a devout Christian. In a statement sent to TechCrunch this week, Grab defended its relationship with SoftBank, which first invested in Grab back in 2014:

What happened to Jamal Khashoggi was obviously horrible. We hope whoever is responsible is held accountable. We are not in a position to comment on behalf of SoftBank but from our perspective Son-san and the entire SoftBank team have brought so much value to the table for Grab – beyond just financing. They have brought advice, mentorship and potential business opportunities. The Vision Fund is about investing for the next 100 or 200 years and investing in trends that will move the needle for humanity in positive ways. This is a lofty and ultimately positive goal.

Anthony Tan is the co-founder and chief executive officer of Grab [Photographer: Ore Huiying/Bloomberg/Getty Images]

The Vision Fund is just getting started in Asia, however, with rumors suggesting it is planning to open offices in China and India. Singapore is presumably on that list, too, while the fund has been busy hiring a general team that will operate globally out of the U.S.

To date, the fund’s focus in Asia has been on some of the region’s largest (highest-valued) companies, but as it develops a local presence it is likely to seek out less obvious deals to grow its portfolio. That’s going to mean this question of ethics and conscience around the Vision Fund’s capital will present itself to more founders in Asia. Going on what we’ve seen so far, most will have no problem taking the money and issuing platitudinous statements.

Privately, VCs in the region who I have canvassed have told me that founders have little choice but to take the Vision Fund’s money. They explain that nobody else can offer billion-dollar-sized checks, while SoftBank is an existing investor in many of them already which gives it additional leverage. The fund also takes the aggressive approach of threatening to back rival companies if it doesn’t get the deals it wants, as we saw when Son said he’d consider a deal with Lyft when its Uber investment was uncertain.

That reality may be true — finding an alternative to a hypothetical $1 billion Vision Fund check is a daunting challenge — but we’ve reached a very sad time and place when the sheer size of an investment overrides important concerns about where that money came from.

Kobalt, the music services company, is raising a big round that could exceed $100 million, says new report

Kobalt, a 19-year-old, London-based music services company that operates as both a music publisher and a service-based music company — among other things, it helps artists collect the royalties owed them — is reportedly raising a new round of funding that could surpass $100 million.

Music Business Worldwide (MBW) reported on the round yesterday, with Kobalt founder and CEO Willard Ahdritz confirming that the news is directionally correct without divulging precisely how much capital Kobalt is closing on currently.

The new funding comes about one year after Kobalt closed on its most recent funding, which valued the company at roughly $800 million, as TC had reported at the time.

A large part of Kobalt’s appeal to investors, as well as the artists, publishers and labels that are among its customers, is the content management system it has created and that makes it far easier and more transparent to capture the millions of incremental plays happening across streaming platforms like Apple Music, Spotify, and Soundcloud — then to collect money where it is due.

The company is made up of numerous parts, however, including Kobalt Music Publishing; Kobalt Neighbouring Rights; a recorded music division called AWAL (Artists Without a Label) into which Kobalt sunk $150 million last year to expand the business; and a collection agency that Kobalt acquired in 2015 AMRA. That’s short form for what was previously called the American Mechanical Rights Agency.

Kobalt also oversees Kobalt Capital, an acquisitive fund managed by KMG.

Kobalt’s investors to date have included GV;  Section 32, whose founder, Bill Maris, was previously the CEO of GV; Hearst Entertainment; Balderton Capital; and MSD Capital, a private investment firm that exclusively manages the capital of Michael Dell and his family.

According to MBW, Kobalt is currently talking with investment banks to pull together its mega round. Though Ahdritz would not state the express amount that Kobalt is targeting, he told the outlet that the fresh capital will be used to grow Kobalt’s presence in each of its verticals.

He added that its record vision, AWL, is particularly eager to challenge traditional and, as he sees it, outdated, record labels that tend to benefit a limited number of artists at the expense of so many others.

AWAL, as described last year by the Financial Times, offers musicians marketing and promotional services but lets them keep the copyright to their material, and has already drawn both new and established artists, including Nick Cave and De La Soul. Though they maintain ownership of their royalties, they share revenue with Kobalt in return for its services.