Mailchimp and Shopify break up

Shopify today announced that the Mailchimp app, which let its users use their Shopify data to create targeted email campaigns, for example, is no longer available in its marketplace. The reason for this, Shopify says, is that it “had growing concerns about Mailchimp’s app because of the poor merchant experience and their refusal to respect our Partner Program Agreement.”

Clearly, this isn’t the most amicable divorce.

“It’s critical for our merchants to have accurate, complete insight into their businesses and customers, and this isn’t possible when Mailchimp locks in their data,” Shopify explains. “Specifically, Mailchimp refuses to synchronize customer information captured on merchants’ online stores and email opt-out preferences. As a result, our merchants, other apps, and partner ecosystem can’t reliably serve their customers or comply with privacy legislation.”

Unsurprisingly, Mailchimp’s side of the story is a bit different. “Yesterday, we asked Shopify to remove the Mailchimp for Shopify integration from their marketplace,” the company wrote. “We made this decision because Shopify released updated terms that would negatively impact our business and put our users at risk.”

Mailchimp says it refused to provide Shopify with all the customer data it asked for because Shopify’s terms simply weren’t fair or practical. “We have been negotiating for months with Shopify on trying to get terms that were very fair and equitable to both of our businesses — and there were several points that we just weren’t willing to compromise on,” Christina Scavone, director of corporate communications told me. “Anything that hurts our customers’ privacy was a non-starter for us.” She also told me that Shopify specifically asked for pretty much any data Mailchimp collects about its users, including data it collected in the past since the app was installed. “We had no data of getting that consent from our users retroactively,” Scavone noted.

There may be another wrinkle to this story, too. In recent months, Mailchimp partnered with Square to launch its shoppable landing pages. That puts Mailchimp deeper into the e-commerce business and into competition with Shopify.

In its statement, Mailchimp argues that it integrates with more than 150 different apps and platforms. “We won’t compromise on that just because Shopify sees it as a competitive threat,” the company wrote. “We want people to have choices,” Scavone added. “The marketplace is starting to collide and people are starting to compete with each other and many of our other partners are also in our space and we would never limit a competitor from what they were willing to do for their business.”

In the end, we’ve got two companies that both argue they are putting their customers’ privacy first. This doesn’t strike me as a conflict where there was no reasonable compromise to be had, though, so in the end, it’s now on both companies’ customers to figure out what to do next.

For users, there are still plenty of other options, including the use of third-party integrations that link the two services together, including Zapier, and ShopSync. Indeed, using those is Mailchimp’s recommendation for its current users.

Gig workers need health & benefits — Catch is their safety net

One of the hottest Y Combinator startups just raised a big seed round to clean up the mess created by Uber, Postmates and the gig economy. Catch sells health insurance, retirement savings plans and tax withholding directly to freelancers, contractors, or anyone uncovered. By building and curating simplified benefits services, Catch can offer a safety net for the future of work.

“In order to stay competitive as a society, we need to address inequality and volatility. We think Catch is the first step to offering alternatives to the mandate that benefits can only come from an employer or the government,” writes Catch co-founder and COO Kristen Tyrrell. Her co-founder and CEO Andrew Ambrosino, a former Kleiner Perkins design fellow, stumbled onto the problem as he struggled to juggle all the paperwork and programs companies typically hire an HR manager to handle. “Setting up a benefits plan was a pain. You had to become an expert in the space, and even once you were, executing and getting the stuff you needed was pretty difficult.” Catch does all this annoying but essential work for you.

Now Catch is getting its first press after piloting its product with tens of thousands of users. TechCrunch caught wind of its highly competitive seed round closing, and Catch confirms it has raised $5.1 million at a $20.5 million post-money valuation co-led by Khosla Ventures, Kindred Ventures, and NYCA Partners. This follow-up to its $1 million pre-seed will fuel its expansion into full heath insurance enrollment, life insurance and more.

“Benefits, as a system built and provided by employers, created the mid-century middle class. In the post-war economic boom, companies offering benefits in the form of health insurance and pensions enabled familial stability that led to expansive growth and prosperity,” recalls Tyrrell, who was formerly the director of product at student debt repayment benefits startup “Emboldened by private-sector growth (and apparent self-sufficiency), the 1970s and 80s saw a massive shift in financial risk management from the government to employers. The public safety net contracted in favor of privatized solutions. As technological advances progressed, employers and employees continued to redefine what work looked like. The bureaucratic and inflexible benefits system was unable to keep up. The private safety net crumbled.”

That problem has ballooned in recent years with the advent of the on-demand economy, where millions become Uber drivers, Instacart shoppers, DoorDash deliverers and TaskRabbits. Meanwhile, the destigmatization of remote work and digital nomadism has turned more people into permanent freelancers and contractors, or full-time employees without benefits. “A new class of worker emerged: one with volatile, complex income streams and limited access to second-order financial products like automated savings, individual retirement plans, and independent health insurance. We entered the new millennium with rot under the surface of new opportunity from the proliferation of the internet,” Tyrrell declares. “The last 15 years are borrowed time for the unconventional proletariat. It is time to come to terms and design a safety net that is personal, portable, modern and flexible. That’s why we built Catch.”

Catch co-founders Andrew Ambrosino and Kristen Tyrrell

Currently Catch offers the following services, each with their own way of earning the startup revenue:

  • Health Explorer lets users compare plans from insurers and calculate subsidies, while Catch serves as a broker collecting a fee from insurance providers
  • Retirement Savings gives users a Catch robo-advisor compatible with IRA and Roth IRA, while Catch earns the industry standard 1 basis point on saved assets
  • Tax Withholding provides an FDIC-insured Catch account that automatically saves what you’ll need to pay taxes later, while Catch earns interest on the funds
  • Time Off Savings similarly lets you automatically squirrel away money to finance “paid” time off, while Catch earns interest

These and the rest of Catch’s services are curated through its Guide. You answer a few questions about which benefits you have and need, connect your bank account, choose which programs you want and get push notifications whenever Catch needs your decisions or approvals. It’s designed to minimize busy work so if you have a child, you can add them to all your programs with a click instead of slogging through reconfiguring them all one at a time. That simplicity has ignited explosive growth for Catch, with the balances it holds for tax withholding, time off and retirement balances up 300 percent in each of the last three months.

In 2019 it plans to add Catch-branded student loan refinancing, vision and dental enrollment plus payments via existing providers, life insurance through a partner such as Ladder or Ethos and full health insurance enrollment plus subsidies and premium payments via existing insurance companies like Blue Shield and Oscar. And in 2020 it’s hoping to build out its own blended retirement savings solution and income-smoothing tools.

If any of this sounds boring, that’s kind of the point. Instead of sorting through this mind-numbing stuff unassisted, Catch holds your hand. Its benefits Guide is available on the web today and it’s beta testing iOS and Android apps that will launch soon. Catch is focused on direct-to-consumer sales because “We’ve seen too many startups waste time on channels/partnerships before they know people truly want their product and get lost along the way,” Tyrrell writes. Eventually it wants to set up integrations directly into where users get paid.

Catch’s biggest competition is people haphazardly managing benefits with Excel spreadsheets and a mishmash of and solutions for specific programs. Twenty-one percent of Americans have saved $0 for retirement, which you could see as either a challenge to scaling Catch or a massive greenfield opportunity., one of its direct competitors, charges a subscription price that has driven users to Catch. And automated advisors like Betterment and Wealthfront accounts don’t work so well for gig workers with lots of income volatility.

So do the founders think the gig economy, with its suppression of benefits, helps or hinders our species? “We believe the story is complex, but overall, the existing state of the gig economy is hurting society. Without better systems to provide support for freelance/contract workers, we are making people more precarious and less likely to succeed financially.”

When I ask what keeps the founders up at night, Tyrrell admits “The safety net is not built for individuals. It’s built to be distributed through HR departments and employers. We are very worried that the products we offer aren’t on equal footing with group/company products.” For example, there’s a $6,000/year IRA limit for individuals while the corporate equivalent 401k limit is $19,000, and health insurance is much cheaper for groups than individuals.

To surmount those humps, Catch assembled a huge list of angel investors who’ve built a range of financial services, including NerdWallet founder Jake Gibson, Earnest founders Louis Beryl and Ben Hutchinson, ANDCO (acquired by Fiverr) founder Leif Abraham, Totem founder Neal Khosla, Commuter Club founder Petko Plachkov, Playable (acquired by Stripe) founder Tad Milbourn and Synapse founder Bruno Faviero. It also brought on a wide range of venture funds to open doors for it. Those include Urban Innovation Fund, Kleiner Perkins, Y Combinator, Tempo Ventures, Prehype, Loup Ventures, Indicator Ventures, Ground Up Ventures and Graduate Fund.

Hopefully the fact that there are three lead investors and so many more in the round won’t mean that none feel truly accountable to oversee the company. With 80 million Americans lacking employer-sponsored benefits and 27 million without health insurance and median job tenure down to 2.8 years for people ages 25 to 34 leading to more gaps between jobs, our workforce is vulnerable. Catch can’t operate like a traditional software startup with leniency for screw-ups. If it can move cautiously and fix things, it could earn labor’s trust and become a fundamental piece of the welfare stack.

Slowdown or not, China’s luxury goods still seeing high-end growth

Despite well-documented concerns over an economic slowdown in China, the country’s luxury goods market is still seeing opulent growth according to a new study. Behind secular and demographic tailwinds, the luxury sector is set to continue its torrid expansion in the face of volatility as it’s quickly becoming a defensive economic crown jewel.

Using proprietary analysis, company data, primary source interviews, and third-party research, Bain & Company dug into the ongoing expansion of China’s high-end market in a report titled “What’s Powering China’s Market for Luxury Goods?

In recent years, China has become one of the largest markets for luxury good companies globally. And while many have raised concern around a drop-off in luxury demand, findings in the report point to the contrary, with Bain forecasting material growth throughout 2019 and beyond. The analysis provides a compelling breakdown of how the sector has seen and will see continued development, as well as a fascinating examination of what strategies separate winners and losers in the space.

The report is worth a quick read, as it manages to provide several insightful and differentiated data points with relative brevity, but here are the most interesting highlights in our view:

Amazon Pay inks Worldpay integration as it branches out in the wider world of e-commerce

Amazon rules the roost when it comes to e-commerce marketplaces in countries like the US, but today it’s announcing a deal that it hopes will be a start its plan to have that same kind of ubiquity outside of its walled garden. The company has inked a deal with Worldpay for the latter to become its first acquirer.

This means that Worldpay — one of the more ubiquitous providers of payment technologies, processing 40 billion transactions worth some $1.7 trillion annually through 300+ payment options and 120 currencies — will now be offering Amazon Pay as part of that mix, so that any merchant can offer this as a payment and shipping option to its customers.

Importantly, this would also allow Amazon, over time, to layer on further services into the mix for merchants, which could potentially include netting third party merchants into its popular Amazon Prime subscription scheme for free shipping and more.

“It’s a good question, but we’d prefer not to speak about our future plans,” Patrick Gauthier, VP of Amazon Pay, told TechCrunch when asked about Prime and whether it could become a part of the Worldpay offering. “Today the announcement is about the extension of our footprint. It will lead us into more opportunities to grow the value proposition for buyers and merchants, but I will reserve discussion about that for the future.”

The deal is being announced the same week that Worldpay had some other news of its own: it’s getting acquired by Fidelity National Information Services in a $43 billion deal. Asif Ramji, chief product and marketing officer at Worldpay, speaking to TechCrunch about the Amazon Pay news confirmed that the acquisition will have no impact on this Amazon deal.

Gauthier said that the initial focus of the deal will be to cover digital payments mainly for online merchants, although not just on websites per se. “The focus is on the connected experience, and we are leaning into other kinds of connected devices TVs,” he said.

The lure for merchants goes something like this: linking into Amazon Pay gives buyers an option to select from a list of active addresses and payment options that they will already be using to buy on Amazon. This, in turn, will make it less onerous to fill out details to complete the transaction — and therefore less likely for the sale to fall prey to the “shopping cart abandonment” that scuppers many an online transaction. That would be even more the case on screens where a user might not have a keyboard and so inputting information is even more of a pain, such as on a TV.

To be clear, in a nutshell, this quicker process, added convenience, and increased security (no need to re-enter card details), are the promised benefits of all digital wallets. Amazon’s unique selling point, however, is that its particular set of data is already widely used, and therefore more likely to be used again.

The other 95%

We once reported on some research that found that Amazon accounted for nearly half of all online commerce in the US, but only five percent of all retail spend. As a long-term plan to continue growing its business, Amazon has been working on ways to extend its reach outside of the world of Amazon for a while now.

While some efforts in areas like point-of-sale services, for example, have largely fallen flat, what’s interesting in this Worldpay deal is how Amazon is willing to concede a bit of control in its effort to change that track record and tap into that bigger market.

Ramji noted that Worldpay actually built Amazon a custom API to integrate Amazon Pay on to its platform and to create the ability to tap into the data around shipping and cards that Amazon can subsequently provide to merchants. That implies that this will, for now at least, be something that only Worldpay will be able to provide to customers.

What’s also very notable in this news is how Amazon Pay / Worldpay might help Amazon bring in more transactions under its Amazon Prime subscription umbrella.

While Gauthier would not comment on whether Prime might be offered as an option at checkout at any point in the Worldpay integration, he did note that the company has quietly been testing using Prime outside of Amazon for a while now.

“As a matter of fact we have had instances of doing that already,” he said, noting that the fashion retailer All Saints currently provides the same Prime shipping benefits to its customers if they happen also to be Prime subscribers. “It has been very successful in terms of customer conversion and lift, and to capture new customers.” He also noted that the company ran tests during Prime Day in 2018, testing using Prime with third-party merchants to understand the potential opportunity it might have here. “Yes, we have had interest from merchants if and when we decide to go further with Prime.”

Opendoor raises $300M on a $3.8B valuation for its home marketplace

Last month, we reported that Opendoor — the startup that is taking on the real estate industry with its own platform for buying up homes and selling them on to interested buyers — filed to raise $200 million on a $3.7 billion valuation. Now, we can confirm that the round has closed, and it has turned out to be higher on both counts. The company has raised an addition $300 million, and sources close to it tell TechCrunch that the valuation is now at $3.8 billion.

This latest round was led by previous investor General Atlantic, with participation also from Hawk Equity, the SoftBank Vision Fund, Access Technology Ventures, Lennar Corporation, Fifth Wall Ventures, SV Angel, Norwest Venture Partners, NEA, GGV Capital, Khosla Ventures, and GV. Opendoor has now raised $1.3 billion in equity, with some $3.0 billion in debt financing for buying in properties.

Opendoor’s funding underscores a couple of big themes. The first is the “safe as houses” maxim. That is to say, the housing market — despite some huge dips resulting either from wider economic tides, or simply scandalous mismanagement around, for example, sub-prime lending — continues to be a major draw not just for investors but also consumers.

“Our business is designed to operate in up markets, down markets and flat markets,” co-founder and CEO Eric Wu said in an email to TechCrunch. “During a slowdown, it becomes increasingly more painful to sell a home, which impacts mobility for homeowners and increases the need for reliable home sales through products like Opendoor. It is our responsibility to manage that risk and charge the proper fees to account for the volatility.” The company says that in 2018, more than 800,000 people toured Opendoor homes.

And that leads to the second theme this funding touches on: the disruption of the business model for buying and selling homes.

That process has largely remained unchanged for decades, but Opendoor is part of (and arguably leading) a new guard of startups that is trying to shake that up. In Opendoor’s case, it’s doing so by creating data modelling that lets it spot opportunities and gaps in the market for homes, as well as optimal pricing for properties, which helps the company mitigate some of the risk associated with taking assets on to its own books with the understanding that it will be able to offload them in a predictable way.

There are signs that over time, those algorithms have been getting more efficient. Eric Wu, who co-founded the company with Ian Wong, Justin Ross and Keith Rabois, told TechCrunch that the average time a home is now held on its books is now 90 days, versus 140 days when the company first launched in 2015.

Wu said that this latest round of funding will be used both for product development as well as to continue expanding to more markets in North America.

On the product side, the company wants to continue making pricing more accurate (not just for selling but for buying in homes at competitive rates). Another focus will be continuing to bring down the time it takes to convert interested sellers into actual sellers, and likewise with buyers. This will include integrating more services like mortgage tools — including title and escrow — as well as other service providers and contractors, who might be needed by buyers to help consider the work that would need to be done once the home is purchased.

(If you’ve ever bought a home, you will know that access to estimates and work commitments from contractors and others can be essential to comprehending the ‘true cost’ of home purchase, since post-purchase work can sometimes be a massive and costly effort.)

Wu said that for now, the plan will be to focus all of this around the private home buying experience, rather than move into using the Opendoor platform to tackle the selling and buying of other large assets such as commercial real estate, cars or loans. “These capabilities lend themselves well to rental/residential income,” he noted, “but that is currently not on our roadmap.”

These ad execs have a venture fund they’d like to sell you

Mike Duda comes from the world of advertising. In fact, he spent 13 years at the renowned ad agency Deutsch, becoming the youngest partner in the company’s history until another creative, Brent Vartan, came along and stole the title. Little wonder that in 2010, when Duda struck out on his own to create Bullish (formerly known as Consigliere Brand Capital), he stole Vartan, later making him the firm’s second managing partner.

It isn’t that the two wanted to outgun their former employer exactly. Instead, the idea from the outset was to create an ad agency that also happens to be an investment firm. In a way, they stole a page from many Silicon Valley service firms that, beginning in the go-go dot com era of twenty years ago, worked for pay and, when the right opportunities arose, for equity.

It’s turned out to be a pretty good approach. Bullish, which is based in New York and works on a pay-for-performance compensation model, has managed to sneak checks into some of the biggest consumer new brands out there, including Warby Parker and Peloton and Harry’s and Casper, companies that have happily agreed to include Bullish as a syndicate partner including because of its advertising know-how.

In the meantime, to keep the lights on as those privately held companies have continued to operate privately, Bullish has also managed to land more traditional big-league clients, including Anheuser-Busch, Pepsi, Nike and Walmart. It also counted GNC as a client and reportedly turned heads when it dropped it in order to invest $250,000 in the three-and-a-half-year-old vitamin supplement startup Care/of.

With Bullish now contemplating fund two, we decided to sit down with Duda last week to learn more about how the whole things operates, and where he and Vartan are shopping now.

TC: You’d spent your career in advertising. What circles were you traveling in that you were also seeing seed-stage startups — good ones —  in need of funding?

MD: It was through outlier circles. Like, Peloton struggled to raise money, so it got104 angels to invest, including high-net worths, and us, who looked institutional, though I laugh at that now. [Founder and CEO John Foley] didn’t know how to play the VC game. He’d been the president of Barnes & Noble and he had this idea that people thought was crazy. He had a PPM for his fundraise — he didn’t have the [traditional] ten-page PowerPoint. So a lot of people in New York passed, and those same people now funding the Mirrors of the world and Tonals of the world.

It was a similar situation with Birchbox. It trouble raising money because its founders are women, and most of the guys they were talking to were like, ‘Well, my wife would get bored of this after a couple of months.’ But the target audience doesn’t have a seven-car garage in Palo Alto. It’s a mom of two in Cleveland who subscribes to the New Yorker.

On the agency side, we worked on Revlon for two years, so we get that a consumer doesn’t have to be like just someone we know. It isn’t, ‘Oh, it’s a product for women; let me ask my wife.’ We actually do focus groups to [find] consumer insights.

TC: So the pitch is that it isn’t just money you’re bringing but a full marketing group, too.

MD: A marketing group with people from places like Deloitte and A.T. Kearney and Goldman Sachs and RBC who try to understand what’s really going on among the says 330 million Americans out there – – not just in New York, San Francisco, L.A. or Boston, which are the hotbeds for consumer investment in VC. We look at stuff that could be disruptive for the normals, which is sometimes unsexy stuff like a stationary bike with a TV.

TC: A $3,000 stationary bike is for normal people?

MD: There were 1.6 million stationary bikes being sold in the U.S. every year [when Foley first began pitching investors]. Harry’s taking on Gillette before Dollar Shave Club came along [is another example]. The jeans I’m wearing are from a company called Revtown in Pittsburgh, Pennsylvania, founded by Henry Stafford, who was the North American president of Under Amour and [previously worked for both] American Eagle and Gap. So this was a first-time entrepreneur who had corporate experience was paranoid about raising too much money and promising investors too much too soon. And we’re attracted to entrepreneurs who don’t want to raise tons of capital before they build a profitable business.

That’s not the case with all of our investments, obviously. Casper and Peloton have both raised a fair amount of money, but their growth kind of followed suit.

TC: Why jeans?

MD: I think [Stafford[ was kind of ticked off and wondering why do people have to choose from either the Gap or a $200 pair of jeans. He wanted to build a great pair of jeans that sell for under $100 and that he can sell through great advertising. The pair I’m wearing right now is $75 and it’s a great pair of jeans. Not that I have the ability to stretch, but if I could put my foot over my head without them on, I could do it with them on, too, because they’re stretchy and durable and well-made. Also, from an operations from business standpoint, this is an adult who has built up businesses before and brings that sensibility so that we can get the scale right. Though a direct-to-consumer brand, it’s not too precious to go into physical retail earlier, either.

TC: Most direct-to-consumer brands are showing up in the offline world faster. 

MD: DTC 2.0 is definitely going to be more about going where your customers are. When Harry’s went into Target, it was a genius move, because there are people in Overland Park, Kansas who may not see its digital banners, but they’re in a Target, and they’re like, ‘That’s new, that’s interesting.’ So it’s another form of marketing.

TC: What about social media? All the platforms are already saturated. Who’s doing really novel things out there, in your view?

MD: I’ll maybe start with the stuff that just annoys us. First, I think a lot of VCs and other people involved with early-stage companies think marketing is a customer acquisition cost and it’s not. If you have to rely on Facebook and Google, you’ll never grow because your [costs] never go down.

When we think of DTC companies, we’re looking for is,  what can you do that gets talk value, not just at your initial PR launch but that [produces] advocates in a kind of flywheel talking about you. People do talk about this stuff. People like to be the one to discover something before anyone else and like to talk about it.

TC: What about TV spend? I’m always astonished to see fairly new brands spending what I’d guess is a lot of money on television ads.

MD: With digital marketing, the accountability is not there as much as people thought. And that’s why about a year ago, you started see the [men’s wellness company] Hims start spending $6 million or $7 million a month on TV advertising during March Madness. Was that a flawed strategy? No. TV works. That’s why you see companies that reach a certain size go to TV; it’s like some sort of validation that this a real company. TV is a storefront for companies that may not have one.

TC: I do wonder how these brands, many of which are great, deal with fickle customers. There are some old brands that I will always love — Patagonia, Hermes – – but a lot of newer brands that I love but I will throw over in two seconds for a newer, shinier brand when it also has a compelling product.

MD: It’s more like someone is probably not serving you well enough. They’re letting you forget about them. Is it Amazon’s fault that RadioShack and JC Penny are going out business? Probably not. They weren’t serving the customer. If you build a relationship with your consumer rather than advertising to her, you have a much better chance of keeping that person as a customer longer term. Patagonia makes great stuff, but so do other people. It’s that the company’s values are bigger than the product itself [that keeps people coming back].

TC: You’re going to start raising a fund later this year. How it will it be different than what you put together the first time around?

MD: We undershot our proposition the first time around. Being an executive at an ad agency, I wanted to be more conservative rather than sell the dream and not achieve it. It was actually harder to raise $10 million than what I was told it would have been if I’d been raising $25 million or $30 million. But we wanted to show proof of concept. Now, a lot of people have left the seed and pre-seed area as investors have raised bigger funds and we see a great opportunity, in a world where there is literally trillions of dollars in play, to get in as early as possible, then play pro rata defense [to maintain our stake]. And in our case, we’ll probably offer up later rounds to the [limited partners] who support us.

TC: A lot of seed and pre-seed deal flow comes to investors from Series A investors. Which are those firms in your universe?

MD: By and far, the most helpful firm to us was First Round Capital. Without their time, we wouldn’t be where we are.

I’m dating myself, but back in 2009, they did office hours. They were commercializing this angel VC investing thing. And I went to one of their office hours and [firm founder] Josh [Koppelman] spent 10 minutes with me and gave me his card and it was like a ‘Dumb and Dumber’ moment. I called my wife, and I was like, ‘He’s saying I have a chance!’ Then I flew to San Francisco to do another office hours . . .

TC: You flew cross country expressly for another of these office hours?

MD: Yes. And 78 people showed up. And it was like the land of broken toys. There were older gentlemen in three-piece suits, and a 19-year-old guy who showed up with a Rock’em Sock’em Robot and people who flew in from San Diego and Portland. And they just gave every one 10 minutes and I was like, ‘Here’s our proposition. It’s a marketing agency with a fund.’

And 75 of of the 78 people got 10 minutes, and two got 30 minutes, and one of them — me — got an hour and a half with Chris Fralic and Kent Goldman, who were kind enough to spend time with someone who kind of wanted to do what they do in a different way. Really, they’re the ones who gave me the confidence that this could work.

Photo above, left to right: Mike Duda, Brent Vartan. Courtesy of Mike Duda.

Zeus raises $24M to make you a living-as-a-service landlord

Cookie-cutter corporate housing turns people into worker drones. When an employee needs to move to a new city for a few months, they’re either stuck in bland, giant apartment complexes or Airbnbs meant for shorter stays. But Zeus lets any homeowner get paid to host white-collar transient labor. Through its managed ownership model, Zeus takes on all the furnishing, upkeep, and risk of filling the home while its landlords sit back earning cash.

Zeus has quietly risen to a $45 million revenue run rate from renting out 900 homes in 23 cities. That’s up 5X in a year thanks to Zeus’ 150 employees. With a 90 percent occupancy rate, it’s proven employers and their talent want more unique, trustworthy, well-equipped multi-month residences that actually make them feel at home.

Now while Airbnb is distracted with its upcoming IPO, Zeus has raised $24 million to steal the corporate housing market. That includes a previous $2.5 million seed round from Bowery, the new $11.5 million Series A led by Initialized Capital whose partner Garry Tan has joined Zeus’ board, and $10 million in debt to pay fixed costs like furniture. The plan is to roll up more homes, build better landlord portal software, and hammer out partnerships or in-house divisions for cleaning and furnishing.

“In the first decade out of school people used to have two jobs. Now it’s four jobs and it’s trending to five” says Zeus co-founder and CEO Kulveer Taggar. “We think in 10 years, these people won’t be buying furniture.” He imagines they’ll pay a premium for hand-holding in housing, which judging by the explosion in popularity of zero-friction on-demand services, seems like an accurate assessment of our lazy future. Meanwhile, Zeus aims to be “the quantum leap improvement in the experience of trying to rent out your home” where you just punch in your address plus some details and you’re cashing checks 10 days later.

Buying Mom A House Was Step 1

“When I sold my first startup, I bought a home for my mom in Vancouver” Taggar recalls. It was payback for when she let him remortgage her old house while he was in college to buy a condo in Mumbai he’d rent out to earn money. “Despite not having much growing up, my mom was a travel agent and we got to travel a lot” which Taggar says inspired his goal to live nomadically in homes around the world. Zeus could let other live that dream.

Zeus co-founder and CEO Kulveer Taggar

After Oxford and working as an analyst at Deutsche Bank, Taggar built student marketplace Boso before moving to the United States. There, he co-founded auction tool Auctomatic with his cousin Harjeet Taggar and future Stripe co-founder Patrick Collison, went through Y Combinator, and sold it to Live Current Media for $5 million just 10 months later. That gave him the runway to gift a home to his mom and start tinkering on new ideas.

With Y Combinator’s backing again, Taggar started NFC-triggered task launcher Tagstand, which pivoted into app settings configurer Agent, which pivoted into automatic location sharing app Status. But when his co-founder Joe Wong had to move an hour south from San Francisco to Palo Alto, Taggar was dumbfounded by how distracting the process was. Listing and securing a new tenant was difficult, as was finding a medium-term rental without having to deal with exhorbitant prices or sketchy Cragislist. Having seen his former co-founder go on to great success with Stripe’s dead-simple payments integration, Taggar wanted to combine that vision with OpenDoor’s easy home sales to making renting or renting out a place instantaneous. That spawned Zeus.

Stripe Meets OpenDoor To Beat Airbnb

To become a Zeus landlord, you just type in your address, how many bedrooms and bathrooms, and some aesthetic specs, and you get a monthly price quote for what you’ll be paid. Zeus comes in and does a 250-point quality assessment, collects floor plans, furnishes the property, and handles cleaning and maintenance. It works with partners like Helix mattresses, Parachute sheets, and Simple Human trash cans to get bulk rates. “We raised debt because we had these fixed investments into furniture. It’s not as dilutive as selling pure equity” Taggar explains.

Zeus quickly finds a tenant thanks to listings in Airbnb and relationships with employers like Darktrace and ZS Associates with lots of employees moving around. After passing background checks, tenants get digital lock codes and access to 24/7 support in case something doesn’t look right. The goal is to get someone sleeping there in just 10 days. “Traditional corporate housing is $10,000 a month in SF in the summer or at extended stay hotels. Airbnb isn’t well suited [for multi-month stays]. ” Taggar claims. “We’re about half the price of traditional corporate housing for a better product and a better experience.”

Zeus signs minimum two-year leases with landlords and tries to extend them to five years when possible. It gets one free month of rent as is standard for property managers, but doesn’t charge an additional rate. For example, Zeus might lease your home for $4,000 per month but gets the first month free, and rent it out for $5,000 so it earns $60,000 but pays you $44,000. That’s a tidy margin if Zeus can get homes filled fast and hold down its upkeep costs.

“Zeus has been instrumental for my company to start the process of re-location to the Bay Area and to host our visiting employees from abroad now that we are settled” writes Zeus client Meitre’s Luis Caviglia. “I particularly like the ‘hard truths’ featured in every property, and the support we have received when issues arose during our stays.”

At Home, Anywhere

There’s no shortage of competitors chasing this $18 billion market in the US alone. There are the old-school corporations and chains like Oakwood and Barbary Coast that typically rent out apartments from vast, generic complexes at steep rates. Stays over 30 days made up 15 percent of Airbnb’s business last year, but the platform wasn’t designed for peace-of-mind around long-term stays. There are pure marketplaces like UrbanDoor that don’t always take care of everything for the landlord or provide consistent tenant experiences. And then there are direct competitors like $130 million-funded Sonder, $66 million-funded Domio, recently GV-backed 2nd Address, and European entants like MagicStay, AtHomeHotel, and Homelike.

Zeus’ property unit growth

There’s plenty of pie, though. With 330,000 housing units in SF alone, Zeus has plenty of room to grow. The rise of remote work means companies whose employee typically didn’t relocate may now need to bring in distant workers for a multi-month sprint. A recession could make companies more expense-cautious, leading them to rethink putting up staffers in hotels for months on end. Regulatory red tape and taxes could scare landlords away from short-term rentals and towards coprorate housing. And the need to expand into new businesses could tempt the big vacation rental platforms like Airbnb to make acquisitions in the space — or try to crush Zeus.

Winners will be determined in part by who has the widest and cheapest selection of properties, but also by which makes people most comfortable in a new city. That’s why Taggar is taking a cue from WeWork by trying to arrange more community events for its tenants. Often in need of friends, Zeus could become a favorite by helping people feel part of a neighborhood rather than a faceless inmate in a massive apartment block or hotel. That gives Zeus network effect if it can develop density in top markets.

Taggar says the biggest challenge is that “I feels like I’m running five startups at once. Pricing, supply chain, customer service, B2B. We’ve decided to make everything custom — our own property manager software, our own internal CRM. We think these advantages compound, but I could be wrong and they could be wasted effort.”

The benefits of Zeus‘ success would go beyond the founder’s bank account. “I’ve had friends in New York get great opportuntiies in San Francisco but not take them because of the friction of moving” Taggar says. Routing talent where it belongs could get more things built. And easy housing might make people more apt to live abroad temporarily. Taggar concludes, “I think it’s a great way to build empathy.”

Korean e-commerce unicorn Coupang hires Walmart’s former global chief compliance officer

Coupang, the unicorn that is defining e-commerce in Korea, announced today that it has hired Jay Jorgensen, Walmart’s former global chief ethics and compliance officer, to serve as its general counsel and chief compliance officer. Jorgensen will relocate to Seoul for the position.

Founded in 2010, with a total of $3.4 billion raised from investors including SoftBank and a valuation of $9 billion, Coupang currently operates only in Korea, where it is the largest e-commerce player, but has offices in Seoul, Beijing, Los Angeles, Mountain View, Seattle and Shanghai.

Known for building a tech infrastructure that gives it almost complete control over delivery fulfillment, including last-mile logistics, Coupang more than doubled its revenue over the past two years to about $5 billion in 2018. The company says more than 120 million products are available on its platform and half of Koreans have downloaded its mobile app, with millions of customers ordering from Coupang more than 70 times each year.

Prior to Walmart, Jorgensen was a partner in law firm Sidley Austin LLP. Earlier, he served as a judicial law clerk for the late Supreme Court Chief Justice William Rehnquist and a law clerk for Samuel Alito Jr. while he sat on the United States Court of Appeals for the Third Circuit.

Jorgensen told TechCrunch in a phone call that he wanted to join Coupang because of “the extent to which it is changing life in Korea. It is not just an e-commerce player, it is the e-commerce player.” The company also reminded Jorgensen of learning about Amazon and later on Alibaba in their early days, then watching them develop into the world’s biggest e-commerce players.

When a quickly growing startup unicorn hires a chief compliance officer, the obvious question is if that means a public offering is in the works. Coupang’s vice president of marketplace and customer experience, Dan Rawson, who was also on the call with TechCrunch, said the timing of company’s future IPO is “contingent on a number of factors, including everything from market conditions to company performance” and that it still sees many growth opportunities both in Korea and eventually other countries.

Rawson adds that Korea, already one of the five biggest e-commerce markets in the world, is set to become the third biggest, after only China and the United States, and there is still room for growth in the country. One of Coupang’s most important advantages is its control of the last-mile delivery and customer service experience (most packages are brought to customers by “Coupang men,” or the company’s delivery workers, while a some are performed by Coupang Flex, a peer-to-peer delivery program similar to Uber Eats).

More than four million products are available through its premium Rocket Delivery service, which, like Amazon Prime, offers faster shipment. Rocket Delivery’s options, however, are even faster than Amazon Prime’s. For example, one guarantees delivery by dawn if customers order by midnight. Rawson says Rocket Delivery has fulfilled more than one billion items since September 2018.

Surging costs send shares of ecommerce challenger Pinduoduo down 17 percent

China’s new tech force Pinduoduo is continuing its race to upend the ecommerce space, even at the expense of its finances. The three-year-old startup earmarked some big wins from the 2018 fiscal year, but losses were even greater, dragging its shares down 17 percent on Wednesday after the firm released its latest earnings results.

The Shanghai-based company is famous for offering cheap group deals and it’s able to keep prices down by sourcing directly from manufacturers and farmers, cutting out middleman costs. In 2018, the company saw its gross merchandise value, referring to total sales regardless of whether the items were actually sold, delivered or returned, jump 234 percent to 471.6 billion yuan ($68.6 billion). Fourth-quarter annual active buyers increased 71 percent to 418.5 million, during which monthly active users nearly doubled to 272.6 million.

These figures should have industry pioneers Alibaba and JD sweating. In the twelve months ended December 31, JD fell behind Pinduoduo with a smaller AAU base of 305 million. Alibaba still held a lead over its peers with 636 million AAUs, though its year-over-year growth was a milder 23 percent.

But Pinduoduo also saw heavy financial strain in the past year as it drifted away from becoming profitable. Operating loss soared to 10.8 billion ($1.57 billion), compared to just under 600 million yuan in the year-earlier period. Fourth-quarter operating loss widened a staggering 116 times to 2.64 billion yuan ($384 million), up from 22 million yuan a year ago.

Pinduoduo is presenting a stark contrast to consistently profitable Alibaba, which generates the bulk of its income from charging advertising fees on its marketplaces. This light-asset approach grants Alibaba wider profit margins than its arch-foe JD, which controls most of the supply chain like Amazon and makes money from direct sales. Pinduoduo seeks out a path similar to Alibaba’s and monetizes through marketing services, but its latest financial results showed that mounting costs have tempered a supposedly lucrative model.

Where did the ecommerce challenger spend its money? Pinduoduo’s total operating expenses from 2018 stood at 21 billion yuan ($3 billion), of which 13.4 billion yuan went to sales and marketing expenses such as TV commercials and discounts for users. Administration alongside research and development made up the remaining costs.

Pinduoduo’s spending spree recalls the path of another up-and-coming Chinese tech startup, Qutoutiao . Like Pinduoduo, Qutoutiao has embarked on a cash-intensive journey by burning billions of dollars to acquire users. The scheme worked, and Qutoutiao, which runs a popular news app and a growing e-book service, is effectively challenging ByteDance (TikTok’s parent company) in smaller Chinese cities where many veteran tech giants lack dominance.

Offering ultra-cheap items is a smart bet for Pinduoduo to lock in price-intensive consumers in unpenetrated, smaller cities, but it’s way too soon to know whether this kind of expensive growth will hold out long-term.

Drivezy, India’s vehicle sharing startup, is raising $100M+ at a $400M valuation, eyes US expansion

Drivezy — the startup out of India that wants to turn private car usage on its head through a car-sharing network where people lend their cars and two-wheeled vehicles but also have options to use vehicles from a fleet managed by Drivezy — said it is raising more money as it gears up for the next stage of its expansion, including a launch in the US in coming weeks.

The company is in the process of raising $100 million in equity funding, plus another $400 million in asset financing, with the latter to help continue building out the inventory that sits alongside the vehicles provided by its users. This would technically be a Series C and is being raised at a $400 million valuation, the company confirmed to me.

“Currently” is the key word: Ankur Sengupta, who heads up business development for Drivezy, said in an interview that the startup will leave the round open for about a year and continue raising it on a rolling basis, with the valuation varying accordingly. “The valuation we are working at now is $400 million, but we will keep accepting investments, at different valuations,” he said.

(Note: This is not an entirely new way of raising rounds, but in the last few years, it has become a lot more common to see it rather clear “Series” blocks. Fast-growing companies like Snap and more recently Grab in Southeast Asia have chosen this route to tap into readily available funding faster and closer to when it’s actually needed.)

The company is not disclosing any names right now except to note that it is likely to include a new, large investor from Japan, and that it also has commitments from investors in the US, Singapore and China. Previous backers have included the Yamaha Motor Company, Axan Partners and IT-Farm, as well as Y-Combinator — where Drivezy was a part of a 2016 cohort as JustRide, led by its five founders Amit Sahu, Ashwarya Pratap Singh, Vasant Verma, Abhishek Mahajan and Hemant Sah. It has also been through Google’s Launchpad accelerator, although it doesn’t look like Google is investing (yet).

Drivezy last raised money as recently as three months ago, a $20 million Series B, when it also raised $100 million in asset financing. Alongside users’ own cars and the fleet it manages, Drivezy also works with in partnership with dealerships and others to provide vehicles for its inventory.

Between then and now, the company has seen a lot of growth.

The company gets more than 53,000 bookings for cars each month, versus 37,000/month just three months ago. Two-wheeled vehicles — primarily motorcycles — add nearly 30,000 more. While cars are typically booked for two-three days, two-wheeler bookings are weekly or monthly bookings.

The inventory has also gone up. Currently, there are 7,500 two-wheelers on the platform, with another 7,500 coming by the end this month; and 3,500 cars. (This is up from 5,000 motorbikes and scooters and 3,000 cars three months ago.) Currently there are 30 dealerships and more than 25 banks and other financial companies in Drivezy’s network.

Drivezy’s growth is coming at what seems to be a key inflection point for the transportation industry.

Some believe the the days of vehicle ownership in mature markets like the US are numbered, with several developments helping that trend along: the rise of over-expensive self-driving cars that many will not be able to afford; the proliferation of affordable Uber-style services; and the emergence of startups like Getaround (which will be a direct competitor to Drivezy when it comes to the US) and Fair to make it easy and cheap to procure a car ride without buying a car or using old-school car rental services.

But in developing markets like India, vehicle ownership is already a relative rarity, even if the desire to use a car is not: currently only seven percent of Indians own a car and sixteen percent own two-wheelers.

“That’s meant that the auto industry has been slow to grow here,” Sengupta said. (That, plus patchy public transport in many urban areas, has also meant a lot of growth, incidentally, for the likes of Ola.)

Drivezy’s response has been to create a completely new supply chain for private car and two-wheeled vehicle usage. Customers include people who are not able to purchase a car, those who do have cars but would appreciate some income to help pay off the loans they took to get them, plus car companies and dealerships who are looking for new avenues and business models to shift more vehicles.

Currently, the P2P side of the business is most popular on the car side of the business, where 70 percent of the inventory has been listed by private owners, while only 35 percent of the two-wheelers come from private owners (all the P2P vehicles get a “fitness check”. Most of the rest are listed by asset financing companies through SPVs on a revenue sharing basis, with less than two percent on Drivezy’s own books. These, the Sengupta said, have been purchased to meet licensing obligations in India.

While Drivezy has definitely benefitted from useful market conditions — low vehicle ownership and a rapidly growing, tech-savvy middle class with disposable income and more reasons for travelling — now the plan will be to take its model to other markets, including both those that have similar conditions to India’s, as well as those that are more developed (and hence, more competitive).

That will include the US, where the company is planning on setting up its first pilots in April to test demand in different markets and market segments, Sengupta said. While it’s a very different market — and certainly more competitive when you consider the likes of Getaround, Turo, Fair and others — Drivezy (its founders having spent time there going through Y Combinator and Google’s accelerator) thinks that there is a gap in the area of microlending and the fact that even with a lot of options already, there can be more.

“People have an aspirational needs, they want better cars, BMWs and Audis for example, and there are no companies tackling the issue of bringing the cost of renting these models down,” Sengupta said. Considering that there is also a burgeoning market for scooters in the country, that could also be an area where Drivezy will get involved.

The pilot/expansion in the US will come alongside building and hiring for an innovations lab in the country, a pattern that Drivezy will also be following when it expands in Asia as well. Other countries where it plans to go this year, he said, include Indonesia, Thailand and Singapore.

It’s not often that you hear about startups out of India expanding to the US, so that in itself (in my opinion) is a great story about how the gravitational pull of the tech world has indeed shifted away from Silicon Valley. Ultimately, the international expansion to North America and other markets will serve a dual purpose for Drivezy. Not only will it help the company grow business, but it’s putting the company on the map, and that too will help attract more funding attention.