Where VCs are looking for voice startup investments

Led by Amazon’s Alexa, smart speakers’ install base is expected to reach 200 million units worldwide by 2020. A quarter of Americans over the age of 12 own a smart speaker, and the majority of those users have more than one device in their home. Moreover, Apple could sell 50 million of its Airpods this year (generating $8 billion in sales) as Bluetooth earpieces explode in popularity.

For the market penetration of this hardware, the app ecosystem remains limited in terms of mainstream adoption. Podcast production and consumption has exploded, but they don’t take advantage of smart speakers and headphones as interactive devices. Even though there were 57,000 Alexa skills available at the end of last year, most people are using smart speakers mainly to check the weather, check the news, ask simple questions and play music.

If voice is a new operating system, where are the opportunities to build giant companies on top of it?

To get a better sense of how the smart money views this market, I asked five VCs who have spent the most time in this space to share which types of startups have captured their attention:

  • Matt Hartman, Partner at Betaworks Ventures
  • Nicole Quinn, Partner at Lightspeed Venture Partners
  • Paul Bernard, Director of the Alexa Fund at Amazon
  • Ann Miura-Ko, Partner at Floodgate
  • Jordan Cooper, Partner at Pace Capital

Here are their responses:

Matt Hartman, Partner at Betaworks Ventures

The most recent wave of audio was about constant connectivity and streaming, and we invested in Anchor, Gimlet, and other audio-first businesses that would thrive in the podcast renaissance. For the next wave of audio, we’re focused [on] three broad categories: personalization, new behaviors/new interfaces, and monetization. Personalization means both utilizing location, Apple Watch, and other data to create magical audio experiences and customized audio content, but also advances in generative content like Resemble.ai and Descript that can create custom audio. 

In terms of new behaviors/new interfaces, people are leaving their Airpods in longer, which means there may be an opportunity for “Airpod-first” product design. Finally, as audio becomes an industry, monetization will be improved and also re-thought: subscription products such as Shine and Headspace are interesting in the context that if they don’t really work as ad-supported podcasts, and they are packaged in such a way that people are willing to pay a monthly or annual subscription.

Nicole Quinn, Partner at Lightspeed Venture Partners

We are in between platforms and it’s not clear what the next platform will be. VR and AR are options, but I believe voice will be the next major platform with mass adoption. The biggest hurdle right now is discoverability which in turn leads to engagement and retention issues. This was the same for mobile before the App Store allowed us to discover new apps. We need the same for voice.

We will then see voice move from a music and list creation tool to one which quickly becomes part of popular culture around shopping, games, travel, meditation, etc. Leading audio apps such as Calm, the meditation and sleep app, are already set up to take advantage of the move to voice.

Paul Bernard, Director of the Alexa Fund at Amazon

Alexa got its start in the home, but we knew early on that bringing this experience to customers outside the home would become important. Our investments in companies like North (smart glasses), Vesper (power-efficient microphones) and Syntiant (power-efficient AI chip) were inspired by this vision, and reflect the idea that ambient computing is becoming part of daily life.

These companies are also helping create the surface area for interactive entertainment and information services, such as Drivetime’s trivia games (we are an investor there too), and social ones like TTYL, which enables friends wearing earbuds to maintain “audio-presence” with each other throughout their day while they multi-task. We also expect to see innovation in how voice can help seniors aging in place — our recent investment in Labrador Systems, which builds assistive robots, is a good example of this trend.

Betaworks’ next startup camp is focused on audio

Startup studio Betaworks is putting out a call for audio-focused startups.

Specifically, it’s announcing Audiocamp, the latest in its “camp” programs, where it backs a handful of early-stage startups, all working in a specific area. (The last one was focused on synthetic media.)

“When we make these calls for a camp around a theme, what we’re trying to do is see everything that’s out there in a short period of time,” said Danika Laszuk, the head of Betaworks Camp. “We use that to help us understand what are the more innovative things, and where are 57 companies trying to build essentially the same thing?”

The startups, meanwhile, get a “pre-seed” investment from Betaworks, as well as three months to work out of the firm’s office in New York City, where they can learn from and collaborate with each other.

Why focus on audio now? Laszuk said the firm has been interested in this area for a long time — it was an early investor in podcasting startups Gimlet and Anchor, which Spotify acquired earlier this year. The current interest in audio isn’t just driven by the podcast boom, but also the opportunities around smart speakers and what Lazsuk said will be “the next wave of innovation,” building “audio-first” services for people who are wearing AirPods and other wireless headphones all the time.

She acknowledged that this “always-in” behavior isn’t necessarily a good thing, since it can lead people to become increasingly oblivious to the world around them, but she said that’s been an ongoing worry since the first iPod (and maybe even before that).

“I’m not sure we will single-handedly break people of that addiction, but there’s so much more awareness around that, and maybe I could have this more thoughtful, context-aware, mobile-appropriate experience,” she said.

And that’s just one of the categories that Betaworks said it’s looking at for Audiocamp. The others are: Social audio experiences, synthetic/generative audio and music, audio utilities, natural language tools for audio, content discovery and monetization, augmented reality for audio and voice-first applications for smart speakers.

As a podcaster myself, I was particularly interested in Laszuk’s thoughts on discovery and monetization. On the discovery side, she predicted we’ll see AI-powered tools that “help us all find the gems in the long tail.”

As for monetization, she noted that some companies have already had success with subscriptions and listener-supported models. So while she isn’t sure what comes next, she’s “really interested in things that are not ad-based — or if they are ad-based, they’re more innovative and thoughtful than just new ad networks.”

The first application deadline is October 15. Interested startups can read more in Laszuk’s blog post and apply here.

Streem buys Selerio in effort to boost its AR teleconferencing tech

Streem, an AR startup that is meshing teleconferencing software with computer vision tech, has acquired a small UK startup called Selerio that’s also building out augmented reality technologies.

The startups were both members of betaworks’ VisionCamp accelerator program last year where they met and collaborated while tackling separate computer vision problems in the AR space.

Streem’s play is that they can create a kind of souped-up Skype call that enables home service providers to get more visual data in the course of chatting with home-owners. This can be something simple like character recognition that enables users to point their phone rather than reciting a 30-character serial number, the company can also take measurements or save localized notes.

The Portland startup has disclosed more than $10 million in funding, though they have also just closed a new bout of funding though they’re not sharing the amount yet.

Selerio’s focus is all about gaining a contextual understanding of a space. The startup was spun out of research from Cambridge University. The company has not disclosed its amount of seed funding, but betaworks, Greycroft Partners and GGV Capital are among its backers. All three of Selerio’s employees have joined Streem as part of the acquisition.

Media VC theses, SEO keywords, cosmology, and brand design

Where top VCs are investing in Media, Entertainment & Gaming

Our media columnist Eric Peckham (who is hard at work on the Unity EC-1, which we will start to publish here shortly) pinged his network of media investors to figure out what the media VC world is up to in mid-2019:

Here are the media investment theses of: Cyan Banister (Founders Fund), Alex Taussig (Lightspeed), Matt Hartman (betaworks), Stephanie Zhan (Sequoia), Jordan Fudge (Sinai), Christian Dorffer (Sweet Capital), Charles Hudson (Precursor), MG Siegler (GV), and Eric Hippeau (Lerer Hippeau).

Lots of interesting ideas in Eric’s piece, but one that I thought was particularly interesting was from Matt Hartman at Betaworks:

In 2019, I’m paying attention to Synthetic Media and the continued fluidity between what’s real and artificially generated inside of social media. Synthetic celebrities will be complemented by synthesized voice as these content types go mainstream. The technology tools to create these characters will improve and we’ll also see technology built to detect malicious use of these new tools.

Where top VCs are investing in media, entertainment & gaming

Most of the strategy discussions and news coverage in the media and entertainment industry is concerned with the unfolding corporate mega-mergers and the political implications of social media platforms.

These are important conversations, but they’re largely a story of twentieth-century media (and broader society) finally responding to the dominance Web 2.0 companies have achieved.

To entrepreneurs and VCs, the more pressing focus is on what the next generation of companies to transform entertainment will look like. Like other sectors, the underlying force is advances in artificial intelligence and computing power.

In this context, that results in a merging of gaming and linear storytelling into new interactive media. To highlight the opportunities here, I asked nine top VCs to share where they are putting their money.

Here are the media investment theses of: Cyan Banister (Founders Fund), Alex Taussig (Lightspeed), Matt Hartman (betaworks), Stephanie Zhan (Sequoia), Jordan Fudge (Sinai), Christian Dorffer (Sweet Capital), Charles Hudson (Precursor), MG Siegler (GV), and Eric Hippeau (Lerer Hippeau).

Cyan Banister, Partner at Founders Fund

In 2018 I was obsessed with the idea of how you can bring AI and entertainment together. Having made early investments in Brud, A.I. Foundation, Artie and Fable, it became clear that the missing piece behind most AR experiences was a lack of memory.

WeWork backs New York tech clubhouse Betaworks Studios

Betaworks Studios, the brainchild of New York City seed-stage venture capital fund Betaworks, has amassed the support of WeWork, or The We Company, as they now call themselves.

JLL Spark Ventures and the co-working giant have led co-led a $4.4 million investment in the membership-based co-working club described as a supportive community for builders. Launched in 2018, Betaworks Studios offers entrepreneurs, artists, engineers and creatives a place to work on projects and accumulate a network, similar to a WeWork hub.

Betaworks Ventures, which filed today to raise a $75 million sophomore fund, and BBG Ventures have also participated in the funding for Betaworks Studio, which previously raised a pre-seed round led by BBG.

Founded in 2008 by John Borthwick, Betaworks operates an investment fund, an accelerator and builds companies internally with spinouts including Giphy, Digg and Bit.ly. The idea for Betaworks Studios was to expand its resources and network to the greater entrepreneurial community.

Borthwick brought on Daphne Kwon, the former chief financial officer of Goop, to run the studio arm, which charges $2400 per year or $225 per month.

Betaworks says its studio has hosted some 9,000 people for meetings and speaking events. It currently has only one club location in New York City’s Meatpacking District but plans to open additional studios with the fresh cash.

Morphin instantly Deepfakes your face into GIFs

Want to star in your favorite memes and movie scenes? Upload a selfie to Morphin, choose your favorite GIF, and your face is grafted in to create a personalized copy you can share anywhere. Become Tony Stark as he suits up like Iron Man. Drop the mic like Obama, dance like Drake, or slap your mug on Fortnite characters.

Now after three years in a stealth developing image mapping technology, Morphin is ready to launch its put-you-in-a-GIF maker. While it might look like just a toy, investors see real business potential. Morphin raised $1 million last summer from Betaworks, the incubator that spawned Giphy, plus Founders Fund, Precursor, Shrug Capital, and Boost.vc’s accelerator.

Elon Musk as Iron Man

“We believe in the future you’ll be able to be the main character in your own film. Imagine a super hero movie where you’re a the main protagonist?” co-founder Loic Ledoux asks. “That sounded like science fiction a few years ago and now with AI and computer vision we definitely see our tech going there.”

Ledoux also wants to reclaim faceswaps as something fun rather than a weapon for misinformation. “Deepfakes brought something pretty negative to computer vision. But it’s not all bad. It’s about how you use the tech to give people a new tool for self expressions and storytelling.” And since Morphin re-generates the whole clip from scratch with CGI animation, they look right at a glance but clearly aren’t manipulated copies of the original video designed to fool anyone.

Kanye performs magic

Morphin started three years ago with the intention to build personalized avatars for games and VR so you could be a FIFA soccer player or Skyrim knight. Ledoux had started a 3D printing company to explore opportunities in scanning and modeling when he saw a chance to connect your real and virtual faces. He teamed up with his co-founder Nicholas Heriveaux who’d spent 13 years working on 3D tech while modding games like Grand Theft Auto to insert his avatar and assets.

What they quickly recognized was that “People were just reacting to themselves on the screen”, ignoring the gameplay, Ledoux recalls. “Being able to see yourself as a hero was the underlying sentiment, so we focused on video completely.” Recognizable GIFs became its preferred medium, as they combine familiarity and the ability to convey complex emotions with a template that’s easy to personalize so they stand out.

Morphin’s tech no longer requires 3D scanning hardware and it works with just a regular selfie. You just snap a headshot, select a GIF from its iOS or Android app’s library, and a few seconds later you have a CGI version of yourself in the scene with no watermark that you can export and post. “We wanted it to be super straight forward because we wanted people to relate to the content” Ledoux notes. Over 1 million scenes have been created by 50,000 beta users, and each time a celebrity shares one of the GIFs Morphin has been sending them for marketing, scores of their followers demand to know what app they were using.

Morphin’s 9-person French team will have to keep innovating to stay ahead of avatar-making competitors like the ubiquitous Snapchat Bitmoji, Genies, Moji Edit, and Mirror AI. Facebook, Microsoft, and Google all have launched or are building their own avatar creators. But these typically live as 2D stickers or 3D AR animations you overlay on the real world. By using GIFs as a canvas, Morphin takes the pressure off your visage looking perfect and instead emphasizes the message you’re trying to get across.

The challenge will be for Morphin to become a consistent part of people’s communication stack. It’s easy to imagine playing with it and posting a few GIFs. But iconic new GIFs don’t emerge each day and without a social network to stay for, Morphin is at risk of becoming a merely a forgotten tool. The app might need TikTok-style challenges like submitting the best personalized GIF to match a prompt or a GIF browsing feed to keep people coming back.

Turning Donald Glover into Jay Gatsby

Morphin isn’t racing to monetize yet, but sees a chance to sell longer premium video scenes a la carte or as an unlimited subscription. Ledoux eventually hopes to unlock new forms of storytelling beyond existing GIFs. There’s also a chance for Morphin to highlight sponsored clips from upcoming movies or TV shows. “In the long-term we’re more interested in the analogy of Lil Miquela and how people are interacting with digital characters” Ledoux explains, citing a virtual pop star who’s developer Brud recently raised at a $125 million valuation.

One of the most exciting things about Morphin is that it will allow people to take the spotlight no matter how they look. Often times certain races, genders, and looks are unfairly excluded from starring in today’s most popular media. But Morphin could let the underrepresented take their rightful place as stars of the screen.

Your faithful author Josh Constine dropping the mic like Obama

Spotify says it paid $340M to buy Gimlet and Anchor

Spotify doubled down on podcasts last week with a double deal to buy podcast networks Gimlet and Anchor. Those acquisitions were initially undisclosed, but Spotify has quietly confirmed that it spent €300 million, just shy of $340 million, to capture the companies.

That’s according to an SEC filing — hat tip Recode’s Peter Kafka — which deals the transactions which were “primarily in cash,” Spotify said. Kafka previously reported that Spotify paid around $200 million for Gimlet, which, if correct, would mean Anchor fetched the remaining $140 million.

Those numbers represent an impressive return for the investors involved, particularly those who backed the companies at seed stage.

Gimlet raised $28.5 million from investors that included Stripes Group, WPP, Betaworks and Lowercase Capital, according to Crunchbase.

Anchor, meanwhile, raised $14.4 million. Crunchbase data shows its backers included Accel, GV, Homebrew and (again) Betaworks.

Those deals represent a good chunk of change, but Spotify still has more fuel in the tanks.

As we reported last week, it plans to spend a total of up to $500 million this year “on multiple acquisitions” as it seeks to further its position on podcasting which, to date, has been an after-thought to its focus on music. Less these deals, Spotify has around $160 million left in its spending budget for 2019.

In a blog post announcing the deals published last week, Spotify CEO Daniel Ek admitted that he didn’t originally release that “audio — not just music — would be the future of Spotify” when he founded the business in 2006.

“This opportunity starts with the next phase of growth in audio — podcasting. There are endless ways to tell stories that serve to entertain, to educate, to challenge, to inspire, or to bring us together and break down cultural barriers. The format is really evolving and while podcasting is still a relatively small business today, I see incredible growth potential for the space and for Spotify in particular,” Ek explained.

Here are the six startups participating in Betaworks LiveCamp

Betaworks this morning revealed this list of six startups participating in its fourth Camp accelerator program. Launched in 2016, the program brings together a collection of young companies united under a single theme.

This time out, things are focused on live-streaming, for a program fittingly titled, LiveCamp. Betaworks settled on the topic based on the popularity of apps like Twitch and HQ Trivia. It’s admittedly a bit more nebulous than past topics like BotCamp, VoiceCamp and VisionCamp.

“When first settling on our next Camp program we knew that ‘live’ as a category would be a bit harder to define than our previous themes like voice-computing and augmented reality,” Betaworks’ Peter Rojas told TechCrunch, “but while these companies may each be building a wildly different product, they all share a common theme of bringing people together in real time for a shared experience.”

Betaworks has put together a nice little package for the half-dozen winners, including an 11-week in-house bootcamp and $200K per company. In addition, Betaworks will receive 8 percent common stock from each.

It’s a fittingly diverse array of companies, running the gamut from gaming to meditation to here’s the latest batch:

  • Bunch: An app that lets users play games over video chat, from HQ to Flappy Bird.
  • Cityrow Go: On-demand streaming of exercise — kind of a Peloton, but for rowing courses.
  • Content Flow: Live video streaming technology company, with a proprietary player.
  • Cultural Genesis: A digital gaming remix studio from Santa Monica, California.
  • Ghost Commander: A hybrid theater/gaming experience that lets users impact narrative structure.
  • Journey Meditation: On-demand and live-streamed meditation courses.

Betaworks’ Voicecamp is looking to give voice-powered startups $125K each

voicecamp Betaworks startup studio is today announcing the second in its line of accelerator camps in the form of voicecamp. And no, this won’t make you a better chorus member. Earlier this year, betaworks launched botcamp as a way to better understand and fuel growth of the chatbot space. With today’s announcement, betaworks wants to apply the same model to a new vertical with voicecamp.… Read More