Ashton Kutcher, Ann Miura-Ko and Mamoon Hamid are coming to Disrupt!

The Disrupt Battlefield is one of the best parts of the conference. Twenty+ startups step on to the Disrupt Main Stage with a product, a pitch, and a dream. They have six minutes to convey how they’re going to fundamentally disrupt their industry, and six minutes of Q&A with world-renowned judges from the VC world.

Pride. Anxiety. Despair. Glory. Anything could happen on that stage, particularly with judges that are at the top of their game and can smell bull shit from a mile away.

This year, at Disrupt SF 2019, we’ll be joined by Ashton Kutcher, Ann Miura-Ko and Mamoon Hamid in the finals round of the Battlefield. And we couldn’t be more excited!

This won’t be Kutcher’s first time at Disrupt. He’s hung out with us a couple times before to discuss his investment strategy for Sound Ventures, and previously, A-Grade investments. This will be his first time as a Finals Judge for the Battlefield, however, and it’ll be fascinating to see the superstar investor work in real-time on the Main Stage.

Ann Miura-Ko, co-founding partner at Floodgate, will be returning as a Battlefield judge. Miura-Ko is a repeat member of the Forbes Midas List, the New York Times Top 20 Venture Capitalists Worldwide, and has been called the most powerful woman in startups. Her portfolio includes Lyft, which went public this year, as well as Refinery29, Xamarin and Thinkful.

Kleiner Perkins partner Mamoon Hamid will also be judging the Battlefield Finals. Hamid was a cofounder at Social Capital and a partner at US Venture Partners before joining Kleiner Perkins, and has invested in companies like Slack, Yammer, Box, and Figma.

We’re amped to have such amazing VCs join us for the final round of the Startup Battlefield competition. Join us at Disrupt SF, which runs October 2 to 4 at the Moscone Center. Tickets are still available at an early-bird rate, but that ends this week.

See you there!

Startups Weekly: SoftBank’s second act

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 noted some challenges plaguing mental health tech startups. Before that, I wrote about Zoom and Superhuman’s PR disasters.

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.

Anyway, onto the subject on everyone’s mind this week: SoftBank’s second Vision Fund.

Well into the evening on Thursday, SoftBank announced a target of $108 billion for the Vision Fund 2. Yes, you read that correctly, $108 billion. SoftBank indeed plans to raise even more capital for its sophomore vehicle than it did for the record-breaking debut vision fund of $98 billion, which was majority-backed by the government funds of Saudi Arabia and Abu Dhabi, as well as Apple, Foxconn and several other limited partners.

Its upcoming fund, to which SoftBank itself has committed $38 billion, has attracted investment from the National Investment Corporation of National Bank of Kazakhstan, Apple, Foxconn, Goldman Sachs, Microsoft and more. Microsoft, a new LP for SoftBank, reportedly hopped on board with the Japanese telecom giant as part of a grand scheme to convince the massive fund’s portfolio companies to transition to Microsoft Azure, the company’s cloud platform that competes with Amazon Web Services . Here’s more on that and some analysis from TechCrunch editor Jonathan Shieber.

News of the second Vision Fund comes as somewhat of a surprise. We’d heard SoftBank was having some trouble landing commitments for the effort. Why? Well, because SoftBank’s investments have included a wide-range of upstarts, including some uncertain bets. Brandless, a company into which SoftBank injected a lot of money, has struggled in recent months, for example. Wag is said to be going downhill fast. And WeWork, backed with billions from SoftBank, still has a lot to prove.

Here’s everything else we know about The Vision Fund 2:

  • It’s focused on the “AI revolution through investment in market-leading, tech-enabled growth companies.”
  • The full list of investors also includes seven Japanese financial institutions: Mizuho Bank, Sumitomo Mitsui Banking Corporation, MUFG Bank, The Dai-ichi Life Insurance Company, Sumitomo Mitsui Trust Bank, SMBC Nikko Securities and Daiwa Securities Group. Also, international banking services provider Standard Chartered Bank, as well as “major participants from Taiwan.”
  • The $108 billion figure is based on memoranda of understandings (MOUs), or agreements for future investment from the aforementioned entities. That means SoftBank hasn’t yet collected all this capital, aside from the $38 billion it plans to invest itself in the new Vision Fund.
  • Saudi and Abu Dhabi sovereign wealth funds are not listed as investors in the new fund.
  • SoftBank is expected to begin deploying capital fund from Fund 2 immediately, and a first close is expected in two months, per The Financial Times.
  • We’ll keep you updated on the Vision Fund 2’s investments, fundraising efforts and more as we learn about them.

On to other news…

iHeartMedia And WeWork's "Work Radio" Launch Party

IPO Corner

WeWork is planning a September listing

The company made headlines again this week after word slipped it was accelerating its IPO plans and targeting a September listing. We don’t know much about its IPO plans yet as we are still waiting on the co-working business to unveil its S-1 filing. Whether WeWork can match or exceed its current private market valuation of $47 billion is unlikely. I expect it will pull an Uber and struggle, for quite some time, to earn a market cap larger than what VCs imagined it was worth months earlier.

Robinhood had a wild week

The consumer financial app made headlines twice this week. The first time because it raised a whopping $323 million at a $7.6 billion valuation. That is a whole lot of money for a business that just raised a similarly sized monster round one year ago. In fact, it left us wondering, why the hell is Robinhood worth $7.6 billion? Then, in a major security faux pas, the company revealed it has been storing user passwords in plaintext. So, go change your Robinhood password and don’t trust any business to value your security. Sigh.

Another day, another huge fintech round

While we’re on the subject on fintech, TechCrunch editor Danny Crichton noted this week the rise of mega-rounds in the fintech space. This week, it was personalized banking app MoneyLion, which raised $100 million at a near unicorn valuation. Last week, it was N26, which raised another $170 million on top of its $300 million round earlier this yearBrex raised another $100 million last month on top of its $125 million Series C from late last year. Meanwhile, companies like payments platform Stripesavings and investment platform Raisintraveler lender Uplift, mortgage backers Blend and Better and savings depositor Acorns have also raised massive new rounds this year. Naturally, VC investment in fintech is poised to reach record levels this year, according to PitchBook.

Uber’s changing board

Arianna Huffington, the CEO of Thrive Global, stepped down from Uber’s board of directors this week, a team she had been apart of since 2016. She addressed the news in a tweet, explaining that there were no disagreements between her and the company, rather, she was busy and had other things to focus on. Fair. Benchmark’s Matt Cohler also stepped down from the board this week, which leads us to believe the ride-hailing giant’s advisors are in a period of transition. If you remember, Uber’s first employee and longtime board member Ryan Graves stepped down from the board in May, just after the company’s IPO. 

Startup Capital

Unity, now valued at $6B, raising up to $525M
Bird is raising a Sequoia-led Series D at $2.5B valuation
SMB payroll startup Gusto raises $200M Series D
Elon Musk’s Boring Company snags $120M
a16z values camping business HipCamp at $127M
An inside look at the startup behind Ashton Kutcher’s weird tweets
Dataplor raises $2M to digitize small businesses in Latin America

Extra Crunch

While we’re on the subject of amazing TechCrunch #content, it’s probably time for a reminder for all of you to sign up for Extra Crunch. For a low price, you can learn more about the startups and venture capital ecosystem through exclusive deep dives, Q&As, newsletters, resources and recommendations and fundamental startup how-to guides. Here are some of my current favorite EC posts:

  1. What types of startups are the most profitable?
  2. The roles tools play in employee engagement
  3. What to watch for in a VC term sheet

#Equitypod

If you enjoy this newsletter, be sure to check out TechCrunch’s venture-focused podcast, Equity. In this week’s episode, available here, Equity co-host Alex Wilhelm, TechCrunch editor Danny Crichton and I unpack Robinhood’s valuation and argue about scooter startups. Equity drops every Friday at 6:00 am PT, so subscribe to us on Apple PodcastsOvercast and Spotify.

That’s all, folks.

Ne-Yo wants to make Silicon Valley more diverse, one investment at a time

Dressed in a Naruto t-shirt and a hat emblazoned with the phrase “lone wolf,” Ne-Yo slouches over in a chair inside a Holberton School classroom. The Grammy-winning recording artist is struggling to remember the name of “that actor,” the one who’s had a successful career in both the entertainment industry and tech investing.

“I learned about all the things he was doing and I thought it was great for him,” Ne-Yo told TechCrunch. “But I didn’t really know what my place in tech would be.”

It turns out “that actor” is Ashton Kutcher, widely known in Hollywood and beyond for his role in several blockbusters and the TV sitcom That ’70s Show, and respected in Silicon Valley for his investments via Sound Ventures and A-Grade in Uber, Airbnb, Spotify, Bird and several others.

Ne-Yo, for his part, is known for a string of R&B hits including So Sick, One in a Million and Because of You. His latest album, Good Man, came out in June.

Ne-Yo, like Kutcher, is interested in pursuing a side gig in investing but he doesn’t want to waste time chasing down the next big thing. His goal, he explained, is to use his wealth to encourage people like him to view software engineering and other technical careers as viable options.

“Little black kids growing up don’t say things like ‘I want to be a coder when I grow up,’ because it’s not real to them, they don’t see people that look like me doing it,” Ne-Yo said. “But tech is changing the world, like literally by the day, by the second, so I feel like it just makes the most sense to have it accessible to everyone.”

Last year, Ne-Yo finally made the leap into venture capital investing: his first deal, an investment in Holberton School, a two-year coding academy founded by Julien Barbier and Sylvain Kalache that trains full-stack engineers. The singer returned to San Francisco earlier this month for the grand opening of Holberton’s remodeled headquarters on Mission Street in the city’s SoMa neighborhood.

[gallery ids="1722954,1722952,1722953,1722955"]

Holberton, a proposed alternative to a computer science degree, is free to students until they graduate and land a job, at which point they are asked to pay 17 percent of their salaries during their first three years in the workforce.

It has a different teaching philosophy than your average coding academy or four-year university. It relies on project-based and peer learning, i.e. students helping and teaching each other; there are no formal teachers or lecturers. The concept appears to be working. Holberton says their former students are now employed at Apple, NASA, LinkedIn, Facebook, Dropbox and Tesla.

Ne-Yo participated in Holberton’s $2.3 million round in February 2017 alongside Reach Capital and Insight Venture Partners, as well as Trinity Ventures, the VC firm that introduced Ne-Yo to the edtech startup. Holberton has since raised an additional $8 million from existing and new investors like daphni, Omidyar Network, Yahoo! co-founder Jerry Yang and Slideshare co-founder Jonathan Boutelle.

Holberton has used that capital to expand beyond the Bay Area. A school in New Haven, Conn., where the company hopes to reach students who can’t afford to live in tech’s hubs, is in development.

The startup’s emphasis on diversity is what attracted Ne-Yo to the project and why he signed on as a member of the board of trustees. More than half of Holberton’s students are people of color and 35 percent are women. Since Ne-Yo got involved, the number of African American applicants has doubled from roughly 5 percent to 11.5 percent.

“I didn’t really know what my place in tech would be.”

Before Ne-Yo’s preliminary meetings with Holberton’s founders, he says he wasn’t aware of the racial and gender diversity problem in tech.

“When it was brought to my attention, I was like ‘ok, this is definitely a problem that needs to be addressed,'” he said. “It makes no sense that this thing that affects us all isn’t available to us all. If you don’t have the money or you don’t have the schooling, it’s not available to you, however, it’s affecting their lives the same way it’s affecting the rich guys’ lives.”

Holberton’s founders joked with TechCrunch that Ne-Yo has actually been more supportive and helpful in the last year than many of the venture capitalists who back Holberton. He’s very “hands-on,” they said. Despite the fact that he’s balancing a successful music career and doesn’t exactly have a lot of free time, he’s made sure to attend events at Holberton, like the recent grand opening, and will Skype with students occasionally.

“I wanted it to be grassroots and authentic.”

Ne-Yo was very careful to explain that he didn’t put money in Holberton for the good optics.

“This isn’t something I just wanted to put my name on,” he said. “I wanted to make sure [the founders] knew this was something I was going to be serious about and not just do the celebrity thing. I wanted it to be grassroots and authentic so we dropped whatever we were doing and came down, met these guys, hung out with the students and hung out at the school to see what it’s really about.”

What’s next for Ne-Yo? A career in venture capital, perhaps? He’s definitely interested and will be making more investments soon, but a full pivot into VC is unlikely.

At the end of the day, Silicon Valley doesn’t need more people with fat wallets and a hankering for the billionaire lifestyle. What it needs are people who have the money and resources necessary to bolster the right businesses and who care enough to prioritize diversity and inclusivity over yet another payday.

“Not to toot the horn or brag, but I’m not missing any meals,” Ne-Yo said. “So, if I’m going to do it, let it mean something.”

How [and why] I invest in startups

A lot of people ask me how I choose to invest in startups. Stage? Revenue metrics? Sector?

I’m not proactively funding at different stages. I’m proactively funding brilliant people trying to solve hard problems.

Focusing on this simple goal of identifying and enabling amazing entrepreneurs to create a better tomorrow is the crux of my investment strategy.

My startup investment “formula”

A lot of venture funds try to optimize for returns. They run complex ratio economic models to determine what their diluted value will be at the end of the life cycle of the optimal and non-optimal case of every given company.

I don’t do that. I just try to fund the best and brightest.

I love working with the smartest and brightest people in the world on some of the hardest challenges. And oftentimes I make a return as a result of that.

I weigh investments based on two vectors:

  • Return
  • Happiness

The primary litmus I put on any investment is on behalf of my LPs. Will the capital have a potential of 6-10x returns in five, eight, 10 years? If not, it’s not going to be worth our time and money.

But it’s not the only factor.

If we’re happy doing the work that we’re doing on behalf of this company and relatively confident that we can return for our LPs, it’s an investment worth making.

It seems counterintuitive, but it actually works — our first fund is showing 8-9x returns.

I’ve had the experience where I’ve lost all my money. But more often than not, I’ve had the other experience.

A lot of companies might not have 100x return, but they have 5-6x return and they’ve solved an important problem. By measuring both the financial return of the investment and the happiness of being a part of that journey, I can holistically gauge the net outcome.

Image: Bryce Durbin/TechCrunch

Know what you don’t know

It’s really easy to box yourself out of really great companies by having mathematical guard rails that don’t necessarily hold up over time.

At the time of investment, it can be difficult to anticipate the future products that end up being the largest revenue drivers.

If you had the insight to know that the value they were returning to customers was great enough that eventually they would find a way to monetize it, you would have invested in Facebook.

But if you’re operating on a purely mathematical model, you might not have been able to do that.

I remember sitting down with one of my mentors around eight years ago. He listed 10 companies on a white board and said “rank for me from top to bottom which company you think is the most valuable. Now rank for me from top to bottom which company has the most revenue.”

I had a mix of ones, fives and sevens; whether I thought they were going up or down the list on both sides.

It turns out that the company with the least amount of revenue was the most valuable. And the company with the most amount of revenue was the least valuable.

Image: Lee Woodgate/Getty Images

What I look for in founders

When I make an investment in a startup company, I plan on the likelihood that I’ll end up working with that person for five to 10 years.

I don’t have a magic formula, but there are four important factors that must all check out for me to invest in a founder.

1. Domain Expertise

The best founders have some unique insight in the domain where they’re building a company that gives them some edge. I often find that it’s one of three factors:

  1. Deeper understanding of consumer behavior
  2. Historical insight
  3. Data

There’s usually some initial edge that is really clear and that gives you confidence that they have absolute domain expertise for whatever problem they’re trying to solve.

2. Grit

Founders need some capacity of perseverance through really, really tough situations.

I’ve never heard a single story of someone building a company where everything went the way they thought it was going to go.

And when things don’t go the way you think they’re going to go, will you have the capacity and the willingness and the perseverance to sort of go through it?

This one is difficult to assess, and I generally go by gut instinct on meeting with the founder.

3. Purpose

Is whatever they’re building someway connected to a greater purpose in which they’re personally invested?

Whatever they’re building has some resonance relative to who they are, how they are and what they believe — because belief systems don’t go away when you get into trouble or come across a difficult challenge.

4. Charisma

There’s a level of charisma that many great founders have, especially if they want to be the CEO of their company.

When I meet with a founder with true charisma, I usually come away feeling like I want to quit my job and go work for them. Because if I don’t get that sense or that feeling that I want to quit everything that I’m doing to go work for them, the best person for the job that they are hiring for isn’t going to have that feeling either.

Recruiting is the hardest thing that any CEO has to do.

They have to be able to sell themselves, sell their vision, and sell their company. If they don’t have the charisma to sell it to me, I find it hard to believe that they’re going to be able to sell it to somebody else.

Image: Boris Austin / Getty Images

What makes me wary of founders

A founder can do many things to represent themselves poorly, but here are three:

1. Display questionable principles

I’m a very principle-driven person.

I have certain litmuses around gender equality, racial equality and working with good humans. I only want to work with founders and invest in companies that share my principles.

I want to be connected and associated with people who represent their brand in a way that I would represent mine.

It’s so easy to get distracted by the numbers and models and projections — and don’t get me wrong, these are important.

But also, I’m looking at human beings build businesses. I want to work with good people and people who respect other people and people who have good moral fiber.

2. Lack of domain expertise

If the person doesn’t know their numbers it’s an immediate killer.

I often drill down into the domain the founder is working in. There are often brand new, disruptive ideas that I’ve never seen before. It’s easy to get caught up in the excitement of that, but the economics still need to make sense.

If someone doesn’t understand the economics and the motivational drivers within a given sector, it becomes rapidly clear whether or not somebody has domain expertise.

And if they don’t understand the domain and have a unique insight, they’re probably not going to be able to build something special.

3. Lack of respect for time

The biggest key people often forget when they’re busy trying to sell what they’re doing is a basic, human understanding of other people.

Smart people know the right time and the right way to connect with someone.

I’ve answered cold emails from people who are really well-formulated, thought out, respectful of my time and respectful of me.

I’ve taken elevator pitches from people.

I’ve had meetings set up with strangers.

If you know somebody hasn’t even sort of taken the time to consider your time, they’re probably not going to consider the time of other people. And I think that’s going to negatively affect them and their company.

When a founder or company approaches me in a way that’s not considerate and respectful of my time and what I’m interested in, I have a hard time looking past that.
Image: Bryce Durbin/TechCrunch

My role as an investor in the growth of a startup

I believe the job of the investor goes way beyond fueling the company with cash. It’s about fueling the company with expertise, intelligence and connectivity.

On paper, growing a startup can roughly be summarized as follows:

  1.    Early-stage validation
  2.    Have an idea
  3.    Crank out an MVP
  4.    Get that MVP to customers
  5.    Establish feedback loop
  6.    Make sure customers appreciate the product
  7.    Establish a customer/product development feedback loop so the customer can improve the product
  8.    Build a company
  9.    Hire to fill initial capacities
  10.    Find product market fit
  11.    Market product to reach all target consumers
  12.    Build teams
  13.    Raise more money

Over the last 12 years of being an investor I’ve seen companies at every one of those life cycles. Each one of those transitions is a different discipline; a different challenge in and of itself.

As a founder, I think it’s really important to surround yourself with people who have seen it before, understand it, know what it’s like and know how to persevere through it.

That’s what an investor group does.

Image: Shutterstock

For example, going from a bootstrap company into a company that can scale is a tricky discipline.

A lot of founders make the really early mistake of hiring people just like them, instead of hiring people who bring unique diversity and expertise to their team.

And after the initial batch of hires is made, you transition from micromanaging into macromanaging; building startups within your startups, the variable divisions required to properly scale the company.

Investors who have helped companies through similar transitions can help you avoid pitfalls associated with these milestones. These are the very pitfalls that often derail early-stage companies.

Fast-forward to the growth stage and fundraising is a monster in and of itself. You have these checkpoints where you’ve got to go and raise additional funding — and the future of the company relies on executing.

And then eventually you get to the point where either you’re going public or there’s an acquisition. That’s incredibly tricky and not something that a lot of founders are ready for.

Every company’s situation is different.

If you’re a small team — two or three people — you might look to add 10 investors. I recommend building an investment team that has variable experience across different firms and individuals.

A lot of founders only target big firms. But you really want to get the person who understands your needs, your challenge and can help guide you through it — regardless of where they come from.

It all comes back to the purpose and principles

Make no mistake: I have a rigorous process around numbers.

Estimated TAM, IRR, NPV — we run them all.

But when weighed against potential impact for humanity and capability of individuals at the helm, I put slightly more value than most investors.

Maybe in the long run, I’ll fall into an even more disciplined manner of allocating capital.

But for now, I’m just going to keep working with great people on the problems that I want to work on.

Find good people solving tough problems and the financials often sort themselves out. 

This post was originally published on Atrium.

As eSports popularity explodes, betting needs to be regulated

Fans watch as screens show Yang Jin Hyeob, a professional video-game player, competing against Jeong Se Hyun, not pictured, during the final round of the Electronic Arts Inc. (EA) Sports FIFA Online Championship at the Nexon Co. e-Sports Stadium in Seoul, South Korea, on Saturday, Oct. 17, 2015. Video game competitions, known as eSports, have been expanding as gamers seek to shift perceptions around their craft from a basement hobby to a serious money making industry. Photographer: Jean Chung/Bloomberg via Getty Images Esports betting has boomed in the last five years, attracting investments from celebrities, investors and entrepreneurs like Mark Cuban and Ashton Kutcher — even the former NBA Commissioner, David Stern, has talked about it on many forums. Gambling in eSports has charmed stakeholders but it may have created a monster in the gaming industry. As with every growing industry, it’s… Read More

OpenGov raises $25M from Andreessen and others at $100M+ valuation, Marc joins board

OpenGov office in Redwood City, Ca. June 11, 2015. (Photo copyright Nader Khouri 2015)

OpenGov, aiming to transform how governments analyze and share financial data, has closed an “oversubscribed” $25 million round from top-tier VC firms. The raise values the company north of $100 million, a person familiar with the matter said.

Andreessen Horowitz, Thrive Capital, Ashton Kutcher’s Sound Ventures, and Intuit’s Scott Cook, among others, participated in the round. With the new funds, Marc Andreessen will join the company’s board.

Going forward, OpenGov plans to expand its staff and user-base. Prior to this round, the company had raised more than $19 million — $22 million according to crowdsourced data on CrunchBase.

In a call with VentureBeat, OpenGov cofounder and CEO Zac Bookman said the company “now serves 550 customers in 44 states” in the U.S. and Canada. He said the company “absolutely” plans to expand internationally, but for now “we’re not staffing up majorly overseas.”