Michael Arrington’s next act

As longtime TechCrunch readers know well, Michael Arrington co-founded TechCrunch and Crunchbase, as well as the venture fund CrunchFund, which was later renamed Tuesday Capital. But In 2017, Arrington announced that he was shifting gears and becoming a full-time crypto investor, and despite a volatile ride since, he isn’t looking back, seemingly. As he said during an interview late last week from his new home in Miami, “I like reinventing myself and I think more people should do that.”

On the heels of a new fund announcement last month, we decided to catch up with Arrington to learn more about the hedge fund firm he has been building in recent years with longtime business partner Heather Harde; longtime investor-entrepreneur Ron Palmeri; and Ninor and Ninos Mansor, brothers whose crypto firm merged with Arrington’s Arrington XRP Capital in 2019.

Our chat has been edited for length and clarity below. You can hear that longer conversation here.

TC: You recently moved to Miami. Why?

MA: I visited Miami earlier this year for the first time in a couple decades and was here just for fun on a vacation. Part of it might have been that it was one of the first times I’ve been out and social since COVID. Part of it might just be it’s actually wonderful here in the winter. I think it was February when I came. But we just fell in love with the city and got to know the mayor, got to know some people here. A lot of my friends, particularly from New York and San Francisco, had already moved here, and it just felt very welcoming. The city’s government seems to care about its citizens and wants them to be happy, or at least not explicitly trying to make them unhappy. So we came back to look at houses a couple times [and] moved here pretty quickly.

A number of venture firms have recently relocated to Miami — is there a kind of Sand Hill Road forming anywhere?

What I’ve learned so far is that there are three areas of Miami that people live in. The first is downtown Miami, which is very centrally located and where business gets done. Another area south of that is where all the schools are, and it’s more suburban, and that’s where we live. The last area is Miami Beach where all the fun happens.

If you’re a young entrepreneur, just trying to figure out where you’re going to make your mark, they all seem to be located downtown. A lot of the really wealthy entrepreneurs are in Miami Beach, and then people who have kids are generally down south.

Is the process of meeting with founders any different in Miami than in California?

Since I’m doing crypto now, it’s still a lot of Zoom meetings with Asia and Europe and Russia and all over the world. But there are a lot of in-person meetings here. I’ve already been to a few events here. It’s very much like Silicon Valley was in 2005 when I was starting TechCrunch. It’s a small community, people are very [helpful to one another].

People who haven’t followed your career might wonder why you veered so directly into crypto when you did. 

I started it just because it was new and I like reinventing myself and I think more people should do that. I think a lot of people become very good at something, and then keep doing that, and stop exploring the world. Even though some VCs I know are multibillionaires, they just keep doing [the same thing]. And it’s like, well, you’ve made all the money, why not just explore something else?

My career has always been a series of reinventions. TechCrunch was one of those reinventions. So for me, this is just the next step. And I’m 50. Now, I plan on doing this right now for the rest of my career, but we’ll see in five or seven years if something else takes my fancy.

When you announced your first crypto fund, there were some twists. It was a hedge fund, not a venture fund, and it was denominated in the crypto currency XRP, created by Ripple Labs. Why hitch your wagon to XRP, and what is your relationship with Ripple exactly?

As I was getting into crypto, I was talking to Brad Garlinghouse, who was CEO at the time, and he told me that some people had approached him about maybe doing a venture fund or a hedge fund that was funded by Ripple. And I said, ‘Well, that’s interesting, because I’m thinking about raising a fund.’ And so we explored it. Ultimately, we realized it didn’t work for tax reasons. Ripple holds a lot of XRP, and they do different things with it to try to make the ecosystem for XRP more robust, but if they were to put a sizable amount of XRP into a new fund, that’s a tax-free exchange, but as soon as a fund invests it, then that underlying XRP would be taxed at capital-gains rates based on a zero basis and it would just be a huge tax bill.

At that point, I started talking to some non-tax foundations about doing the exact same thing. And it does work with the foundations because they don’t have to pay taxes and gains, and so a couple of foundations in Silicon Valley contributed a relatively large amount of XRP to us for our first close. And that provided the foundation of our fund. We went from there and took other LPs who put in money, or bitcoin or whatever, but that started with them. So we owe a lot to Ripple and to XRP. And we’ve been very loyal to them.

Why structure it as a hedge fund?

The reason why we wanted to create a hedge fund was we wanted to be able to recycle capital indefinitely. We make private investments very much like a venture fund. But we also have a pretty large active team based in Asia, and when you’re trading the venture fund, if you buy bitcoin and then you sell bitcoin, that’s it, you’re done. You return whatever you got from the sale to investors, and that’s it.

Now, there’s nuance to that. Venture funds usually can recycle 25% of their capital, for example, and over time, some of the newer venture funds and crypto funds have actually gotten to the point where they can recycle indefinitely for a period of time [and] look a lot more like hedge funds. But at the time we created our fund, that wasn’t state of the art.

Ripple has been battling with the SEC since the agency filed a lawsuit in December accusing the company of violating federal securities laws. What do you make of what’s happening?

I don’t understand it. The SEC basically let Ripple do its thing for half a decade before they said anything. And it’s odd to me that at some point, on [former SEC chief] Jay Clayton’s last day in office [as he was returning last year to private practice], they filed a lawsuit. So I don’t know if it’s political, I don’t know if it’s personal, I literally just don’t know. And I have no idea how this is going to come out. It hinges on whether or not XRP is a security. And that depends on securities laws that were created in the ‘40s. Frankly, I think it’s all bullshit. But who knows?

You’ve talked openly about having a terrible year in 2018. Your fund lost a lot of its value as the broader crypto market collapsed. You narrowly avoided entering into a death spiral. Where have you made the most money as a crypto investor?

Yeah, bitcoin and ETH fell 80%. I think XRP fell 90%, something like that. We fell 42% that first year, so it was bad — 42% first year out the door is not good. But we beat the market. And so one of our main LPs actually reupped in December of 2018 and gave us another $30 million in XRP that we ended up using mostly to buy bitcoin at $3,500 and that provided a foundation of bitcoin in our fund that we hold even until today.

When bitcoin is doing terribly, historically it’s been a wonderful time to buy it, and that will remain true until it isn’t true anymore. So we remain very bullish in down markets and very cautious in up markets. It’s not clear to me what market we’re in right now. We think we’re in the middle of an up market with a pause here for 60 or 90 days.

Why do you think we’re in the middle of an up market?

One of the things we look at are the derivatives markets — so people longing and shorting and there’s a bunch of interesting derivatives markets with bitcoin and ETH and others; there are these perpetual futures contracts where people are betting and you see the longs and the shorts stack up. And right now we’re seeing a lot of shorting in different ways of bitcoin. When that happens, you can have short squeezes, which tend to drive the price way up. So when the market gets super, super short, we get very, very bullish, because you can see squeezes happen and drive the price up as people are liquidated and have to buy to cover their positions. You see that all the time. It happens the other way, too. Sometimes the market gets very, very long, and you see long squeezes, and when that happens, we get nervous and we start to hedge our positions there.

You’re watching the derivatives markets. Are you also participating in them?

We don’t get too exotic. A lot of the really exotic stuff is on unregulated exchanges with fairly serious counter-party risk and it’s fine if you’re doing bets of $100,000. It’s definitely not fine if you’re doing bets of $30 million to $40 million at a time, which we sometimes do.

You’ve done well by stocking up on bitcoin; where have you seen the biggest losses?

So we’re doing some equity investments, and it’s indistinguishable from venture investing … but most of our deals are in tokens that we’re purchasing well before they’re released … these token deals tend to mature much more quickly than equity deals. Sometimes, it’s a year or two but usually it’s a much shorter time frame. We had a deal 50x this year like a month after we invested. They tend to fail faster and succeed faster. So we’ve had losses all over the place.

But our venture side, our losses are much smaller than they should be, so that worries me. It worries me that it’s not sustainable, because of course it isn’t, and so we were worried about that. We’re trying not to make long-term investment decisions based on short-term success. But the real losses just come in the wild swings of the market. I mean … last year, we had well over $1 billion in assets under management and that has taken a dramatic haircut in the last several weeks … it’s just part of crypto’s volatility.

You’ve got other funds cooking. You recently announced you were launching a $100 million fund for bets on projects building on the Algorand blockchain.

That fund is just getting its legs under it now.

Why index so heavily on Algorand?

Algorand is a layer-one coin, and that means it’s a network coin that has infrastructure to allow third parties to create new companies and protocols on the coin. And the founder Silvio [Micali] is literally, like, Einstein-level brilliant, and he has come up with what he thinks is a way to have your cake and eat it, too [in terms of developing a network that’s both decentralized and where transactions can happen quickly], and we believe he’s right.

Just before we hopped on this call, Dogecoin’s founder, Jackson Palmer, published a streak of tweets in which he accuses the crypto industry of all the things that already worry people about it. He says he believes that “cryptocurrency is an inherently right wing hypercapital capitalistic technology built primarily to amplify the wealth of its proponents through a combination of tax avoidance, diminished regulatory oversight and artificial enforced scarcity.” Have you seen these? Do you think there’s some truth to what he’s saying here?

I haven’t looked at these specific tweets yet, but based on what you just said, I don’t disagree entirely. Crypto — Bitcoin in particular — is fundamentally anti-statist. It’s trying to rip the idea of money away from the state in the name of economic freedom, and people either agree with that or disagree with that.

I’m a libertarian and it just happens to fit my world worldview perfectly. But there are tons of statists in crypto and tax avoidance is hard. As an American, it’s pretty darn hard to avoid crypto taxes at this point, and I certainly don’t even try. I just pay the taxes and smile and go on my way. But there are a lot of people who are in crypto for the money and not for the politics of it, and that’s fine. I’m not sure they see the ultimate outcome of Bitcoin being what I see it as.

There are a lot of multibillionaires who control large parts of crypto, but I think that’s why we need to see more and more people get into crypto, so that that [wealth] gets distributed among more people as well.

[Note: Arrington’s firm just today published a research report on Algorand. We also talked about his newest investment, we discussed a separate “yield fund” he is trying to put together right now, and much more. Again, you can listen to that interview with Arrington here. Worth mentioning: this editor has never worked for or alongside Arrington; I joined TechCrunch in 2015; he left in 2011 after a somewhat famous spat with AOL, which had acquired TechCrunch a year earlier.)

The head of Citi Ventures on how, and why, to leverage corporate venture arms like his

At our recent Early Stage event, we had the opportunity to talk at length with Arvind Purushotham, the managing director and global head of Citi Ventures, about how startups should think about corporate venture arms, including what a check from an enterprise like Citi can mean, and how to leverage that kind of Goliath once it’s already a financial partner.

For founders trying to understand the benefits and potential pitfalls of working with a corporate venture arm versus a more traditional venture team, it’s very much worth zipping through this discussion.

Among the many topics addressed, Purushotham gave us insight into how corporates have altered the way they work in some cases, driven by necessity. The bottom line at Citi Ventures, he said, is that they’ve had to move faster in order to remain competitive. Still, owing to its internal systems already in place, involving risk and compliance teams and senior management, moving faster mostly hasn’t been a problem.

Said Purushotham: “We have not had to wait for a second close or we’ve not had to request the company to do a second close. We’ve been able to close along with the rest of the the syndicate.”

Crypto investors like Terraform Labs so much, they’re committing $150 million to its ‘ecosystem’

There are many blockchain platforms competing for investors’ and developers’ attention right now, from the big daddy of them all, Ethereum, to so-called “Ethereum Killers” like Solana, which we wrote about in May.

Often, these technologies are seen as so promising that investors are willing to fund not only the blockchains but an ecosystem of products and projects that are built on their blockchain networks. On Wednesday, for example, Phantom, a digital wallet that resides on the Solana blockchain network, announced $9 million in  Series A funding led by Andreessen Horowitz (which in June also splashed out a lot of money for Solana’s digital tokens).

Similarly, a syndicate of investors today is casting their votes for Terraform Labs, a three-year-old platform that originally set out to mint different so-called stablecoins for e-commerce that mimic the value of various fiat currencies and has since expanded its offerings.

There is so much more to be built off the platform, in fact, that backers including Pantera Capital and Arrington XRP have just committed to investing $150 million on products tied to the Terra ecosystem, commitments that will be deployed over several years, says the company, and commitments that, should they prove fruitful, will boost Terraform’s underlying growth in a kind of virtuous circle.

Why are they so excited about Terraform? The Singapore-based company has apparently been gaining ground fast with merchants in users in South Korea by shortening settlement time from days to seconds, often without e-commerce customers knowing that their online (and sometimes offline) transaction involved a blockchain.

It’s been doing so well, says investor Mike Arrington, that it launched an e-commerce wallet called Chai that’s grown popular in Asia. It also launched Mirror Protocol, which creates fungible assets, or “synthetics,” that track the price of real world assets. (Arrington XRP led Mirror’s first round.)

Indeed, the market cap of Terraform’s tokens — they’re called LUNA — has skyrocketed from $300 million in January to $2.6 billion as excited buyers snap them up.

Whether these backers are getting ahead of themselves is an open question, but the company’s equity investors — which also include Coinbase Ventures and Mike Novogratz of Galaxy Digital — are plainly betting there is more to come.

Back in January, when Galaxy co-led a $25 million round in Terraform, Novogratz talked with Bloomberg about the investment. Among other praise heaped on the company, he said that: “What’s great about Terra is they are one of the first sandbox experiments that’s getting outside the sandbox. We are always looking at those projects because they are the canaries in the coal mines of what else is going to happen.”

Traditional VCs turn to emerging managers for deal flow and, in some cases, new partners

Nasir Qadree, a Washington-based investor who just raised $62.1 million for his debut venture fund, recently told us that as his fundraising gained momentum, he was approached by established firms that are looking to absorb new talent.

He opted to go it alone, but he’s hardly alone in attracting interest. Anecdotally, bringing emerging managers into the fold is among the newer ways that powerful venture firms stay powerful. Early last year, for example, crypto investor Arianna Simpson — who founded and was managing her own crypto-focused hedge fund — was lured into the heavyweight firm Andreessen Horowitz as a deal partner.

Andy Chen, a one-time CIA weapons analyst who spent more than seven years with Kleiner Perkins, was in the process of raising his own fund in 2018 when another prominent firm, the hedge fund Coatue, came knocking. Today he helps lead the firm’s early-stage investing practice.

It’s easy to understand the appeal of such firms, which manage enormous funds and wield tremendous power with founders. Still, as older firms look to recruit from a widening pool of new managers, they might have to wait on the most talented of the bunch; in some cases, as with Qadree, they might be out of luck entirely.

There is, of course, a long list of reasons that so many people are deciding to raise funds these days, from the glut of capital looking to make its way into startups, to tools like Angelist’s Rolling Funds and revised regulations around crowdfunding in the U.S.

Emerging managers also seem adept at capitalizing on the venture industry’s blind spots. One is the excessive wealth of more veteran VCs. An investor’s experience counts for a lot, but there’s a lot to be said for up-and-comers who are still establishing their reputation, who aren’t sitting on more than a dozen boards, and whose future will be closely aligned with their founders.

Yet there are other trends the establishment has long overlooked for too long. Many firms probably regret not taking crypto more seriously sooner. Many male-heavy teams have also ignored for too long the soaring economic power of women, which new managers are driving home to their own investors.

Not last, many have stubbornly resisted racially diversifying their ranks, creating an opening for investors of color who are acutely aware of changing demographics. According to census projections, white Americans will represent a minority of the U.S. population within 20 years, meaning today’s racial minorities are becoming the primary engine of the country’s growth.

That new managers have shaken up the industry is arguably a good thing. The question some are beginning to wonder is whether they can maintain their independence, and that answer isn’t yet clear.

Like the startups they fund, many of these new managers are right now operating in the shadows of the firms that came before them. It’s a seemingly copacetic arrangement, too. Venture is an industry where collaboration between business competitors is inescapable after all, and it’s easy to stay on the good side of giant firms when you’re investing a non-threatening amount into nascent companies you’ll later introduce to the bigger players.

Ensuring that things remain harmonious — and that deal flow keeps coming — a growing number of venture firms now plays the role of limited partner, committing capital to new managers. Foundry Group was among the first to do this in an institutionalized way five years ago, setting aside 25% of a new fund to pour into smaller venture funds. But it’s happening routinely across the industry. Jake Paul’s new influencer-focused fund? Backed by Marc Andreessen and Chris Dixon of Andreessen Horowitz. Katie Stanton’s Moxxie Ventures? Backed by Bain Capital Ventures.

The running joke is that big firms have raised so much money they don’t know where to plug all of it, but they’re also safeguarding what they’ve built. That was the apparent thinking in 2015, when a then-beleaguered Kleiner Perkins tried to engage in merger talks with Social Capital, a buzzed-about venture firm founded by Chamath Palihapitiya. (The deal reportedly fell apart over who would ultimately run the show. Kleiner subsequent underwent a nearly complete management change to regain its footing, while numerous members of Social Capital left to start Tribe Capital.)

It’s also why we might see more venture firms begin to gauge the interest of new fund managers who they think could add value to their brand.

Likely, some will say yes for the sheen and economics of a big firm and because teaming up can be far easier than going it alone. Early-stage investor Semil Shah — who has built up his own firm while also working as a venture partner with different, established outfits (including, currently, Lightspeed Venture Partners) — thinks it’s “natural to assume that lots of new rolling funds” in particular will either “burn out, stay small, or try to scale and realize how hard it is, and perhaps go to a bigger firm once they have established a track record.”

If true, it’s not a scenario that’s as widely embraced as some might imagine. Eric Bahn, who cofounded the Bay Area-based seed-stage firm Hustle Fund in 2017, predicted last week on Twitter< that “establishment VC funds will acquire emerging VC funds, who are building differentiated networks/brands.” While in a different era, that might be seen as a cushy landing, Bahn added: “Not sure how I feel about this. 🤔

He also later tweeted that “to be unequivocal, Hustle Fund is not for sale.”

For his part, Bahn says he’s “nervous about industry consolidation.” There have been “systemic issues with VCs being exclusionary in the past when it comes to women and other underrepresented groups.” He adds that even more recently he has “met LPs who — wink wink — really like men who come from Stanford and have computer science degrees,” leading him to fret that even a team with “good intentions can revert back to the mean.”

An industry friend of Bahn, Lolita Taub of The Community Fund —  a $5 million early-stage fund that is focused on community-themed startups and backed by the Boston-based seed-stage venture firm Flybridge — is more sanguine about emerging managers’ ability to remain independent. Rather than gobble up smaller funds, she foresees more established players begin to fund — and nurture — emerging funds that have overlapping areas of interest.

Taub suggests that it’s the next step beyond VCs who’ve worked with so-called scouts to find undiscovered gems. “I think older players are looking to expand their reach beyond what they know.”

Both may be right. Either way, the industry is changing shape and some form of consolidation, though not imminent, seems inevitable once the checks inevitably stop flying. Some firms will break out, while others team up. Some managers will find themselves at top firms, while others close up shop.

Almost the only certainty right now is that a larger fund “buying” a smaller fund is “not that complicated,” according to fund administration expert Bob Raynard of Standish Management in San Francisco.

Asked about the mechanics of such tie-ups, he shares that it “generally involves changing or adding members at the GP entity level [leading to a] change in control of the funds.”

Maybe, too, he says, there is a rebranding.

The real challenge, suggests Raynard, is just “getting two VCs to agree on a value.” And that depends entirely on their other options.

Nasir Qadree grew up in the projects; now he’s announcing one the largest debut funds for a solo VC

Nasir Qadree had been working in the world of venture capital for the last six years, starting with a role at Village Capital in Washington, then as an associate director of social investments at AT&T, and as a venture partner with Pier 70 Ventures in Seattle.

Qadree encountered even more opportunities to join established venture firms recently. In fact, he says that after deciding early last year to embark on launching his own firm — and garnering capital commitments for it — he became quite interesting to investors who tried bringing him aboard their own organizations.

He gets it, he says. “I think it’s great that organizations want to find new lines of business through their connections with fund managers who have differentiated sourcing and who will yield, I’d imagine, a more diversified portfolio.”

Still, he wasn’t going to hitch his wagon to another firm once he got going. “Venture capital is a wealth-creating business,” says Qadree. “I’m a first-generation college student. I grew up in the projects [and became] president” of numerous student-led organizations at his alma mater, Hampton University.

“I think it’s up to someone like myself and people who are constantly being asked these questions to have strong conviction around how to think about building your franchise. I’ve been through so much to get to this point that to give up my equity, give up my branding and ideas” was not going to happen, he says.

Qadree’s bet on himself appears to be paying off. His Washington-based venture firm, Zeal Capital Partners, today announced that it has closed its oversubscribed subscribed first fund with $62.1 million, making it one of the largest funds to be raised by a solo general partner to date. It was initially targeting $25 million.

That Qadree’s pitch resonated so widely isn’t surprising. Zeal is focused primarily on two sectors that are being reshaped fast: financial tech and the future of work. The themes play neatly into the firm’s overarching thesis around inclusive investing, meaning in this case that the startups which interest Zeal need in some way to address the yawning economic inequality in the U.S.

The firm’s current portfolio — it has announced five investments publicly — offers a flavor of what’s to come. For example, Kanarys, a three-year-old SaaS platform that provides metrics to help companies prioritize and optimize diversity, equity, and inclusion efforts in the workplace. Zeal led its $3 million seed round, led by Revolution’s Rise of the Rest seed fund and others.

Meanwhile, three-year-old Esusu automates credit building by reporting its customers’ monthly rent payments to credit bureaus in an effort to boost their credit score. The app also allows users to pool and withdraw money for big-ticket transactions, then reports the fulfillment of those obligations to credit bureaus to improve their credit profiles. Forbes wrote about the company — which has raised $4 million in seed funding — last August.

Kanary and Esusu’s founders are Black, as is Qadree. But Qadree isn’t exclusively funding Black founders or Latino founders or women-led teams (though women founders currently represent 40% of the portfolio). While he says he is leaning into empowering founders who have been underrepresented in the tech world for decades, “being Black doesn’t mean we will only fund Black and brown entrepreneurs.”

He says he is far more focused on ensuring that a team has a specific strategy to evolve (quickly) into a more diverse group if it doesn’t start that way. Says Qadree, “If you’re building out a fintech company that’s rethinking FICO scores and you’re an all-white team, you have to show us that diversifying your management team is top of mind, that you recognize your blind spot.”

Zeal is also focused on founders who are outside of major tech hubs like the Bay Area, New York, and Boston. These “secondary markets” as Qadree calls them (using air quotes during a Zoom call), are just as important to Zeal’s mission around inclusive investing. “We want to level the playing field geographically so that an entrepreneur in Nashville or Detroit receives their fair share of investment capital, just as the Harvard grad who lives in Silicon Valley and is an alum of Google.”

Zeal’s new fund is anchored by investors Truist and Paypal, with additional investments from Synchrony Financial, the Skoll Foundation, Foot Locker, DC’s RockCreek, Hampton University Endowment, Southern New Hampshire University, and Gary Community Investment.

It also counts as investors numerous individuals who are also advising the firm, including NEA cofounder Frank Bonsal and Wes Moore, the former CEO of the Robin Hood Foundation (and current gubernatorial candidate in Maryland).

Not last, Qadree has brought into the fold several operating partners, including Rachel Williams, who is the head of equity, inclusion and diversity at X, the “moonshot factory” that is part of Alphabet; and Kam Syed, a senior sales and business development exec at Amazon.

Pictured above, left to right: Andy Will, a senior associate with Zeal; Nicole ward, an analyst with the firm; Nasir Qadree; Nicole West, an executive in residence who was formerly a managing director with Legg Mason; and Jason Green, who cofounded SkillSmart and is also now an executive in residence with Zeal.

Beyond ‘Netflix Party’: startups and their VCs bet we’ll browse more of the web together

Last year, during the pandemic, a free browser extension called Netflix Party gained traction because it enabled people to play the same Netflix TV shows and movies as far-flung friends and family. It also enabled them to dish about the action in a side bar chat.

Yet that company — later renamed Teleparty — was just the beginning. So argue two companies that have raised seed funding, one of which just closed its round this week led by Craft Ventures, and the other a four-year-old startup that has raised $3 million in seed funding, including from 500 Startups, and having developed quite a bit of its tech already, is talking with investors anew.

Both suggest that while investors have been throwing money at virtual events and edtech companies, there is an even bigger opportunity in a kind of multiplayer browsing experience that enables people to do much more together online while apart, from watching sporting events and movie watching and to reviewing X-rays with one’s doctor. In fact, both say that for younger users who’ve largely grown up socializing online, more web surfing together is inevitable.

The companies are taking somewhat different approaches. The startup on which Craft just made a bet, leading its $2.2 million seed round, is Giggl, a year-old, London-based startup that invites users of its web app to tap into virtual Chrome sessions, which it calls “portals,” to which they can invite friends to browse content together, as well as text chat and call in. The portals can be private rooms or public so that anyone can join.

The company was founded by four teenagers who grew up together, led by 19-year-old CEO Tony Zog, and the startup is fairly nascent. Indeed, it only recently graduated from the LAUNCH accelerator program. Now it plans to use its new funding to build its own custom server infrastructure to minimize downtime and reduce its costs.

It’s somewhat of a field-of-dreams strategy, with just 60,000 people signed up currently on Giggle, one third of them monthly active users, Zog tells us. But the idea is to build a stickier product that works in all kinds of scenarios and is available in both free and paid versions. For example, people can right now chat while surfing social media with friends, or while watching events together like Apple Worldwide Developers Conference. Eventually, however, Giggl plans to charge consumers for more premium features, as well as sell enterprise subscriptions to outfits that are looking for more ways to collaborate. (You can check out a demo of Giggl’s current service below.)

The other “multiplayer” startup — the one backed by 500 Startups, along with numerous angel investors — is Hearo.live, which is the brainchild of Ned Lerner, who previously spent 13 years as a director of engineering with Sony Worldwide Studios and a short time before that as the CTO of an Electronic Arts division.

Hearo has a more narrow strategy in that the company is “all about watching,” says Lerner. “We’re kind of a special case in that you can’t browse absolutely anything” as with Giggle. Instead, Hearo enables users to access upwards of 35 broadcast services in the U.S. (from NBC Sports to YouTube to Disney+), and it relies on data synchronization to ensure that every user sees the same original video quality.

Hearo has also, unsurprisingly, focused a lot of its efforts on sound, aiming to ensure that when multiple streams of audio are being created at the same time — say users are watching the basketball playoffs together and also commenting — not everyone involved is confronted with a noisy feedback loop.

Instead, he says, through echo cancellation and other “special audio tricks” that Hearo’s small team has developed, users can enjoy the experience without “noise and other stuff messing up the experience.” (“Pretty much we can do everything Clubhouse can do,” says Lerner. “We’re just doing it as you’re watching something else because I honestly didn’t think people just sitting around talking would be a big thing.”)

Like Giggl, Hearo Lerner envisions a subscription model; it also anticipates an eventual revenue split with sports broadcasters and says it’s already working with one in Europe, the European Broadcasting Union, on that front.

While interesting in their respective ways, the startups aren’t the first to focus on watch-together type experiences. Rabbit, a company founded in 2013, enabled people to remotely browse and watch the same content simultaneously, as well as to text and video chat all the while.

Notably, Rabbit eventually ran aground. Lerner says that’s because the company was screen-sharing other people’s copyrighted material and so couldn’t charge for its service. (“Essentially,” observes Lerner, “you can get away with some amount of piracy if it’s not for your personal financial benefit.”)

Still, the the degree to which people are interested in “online watch parties” isn’t yet clear, even if, through their own tech offerings,  Hearo and Giggl have viable paths to generating revenue. Like Giggl, Hearo’s users numbers are conservative by most standards, with 300,000 downloads to date of its app for iOS, Android, Windows, and macOS, and 60,000 actively monthly users. While the company has been hard at work building its tech instead of marketing, it’s probably fair to wonder in what direction those numbers will move, particularly as people reintegrate into the physical world post-pandemic.

For his part, Lerner isn’t worried about at all about demand. He points to a generation that is far more comfortable watching video on a phone than elsewhere. He also notes that screen time has become “an isolating thing,” when it could easily become “an ideal time to hang out with your buddies.” He thinks it’s inevitable, in fact.

“Over the last 20 years, games went from single player to multiplayer to voice chats showing up in games so people can actually hang out,” he says. “We think the same is going to happen to the rest of the media business because mobile is everywhere and social is fun. And it’s nothing more complicated than that.”

Zog echoes the sentiment. “It’s obvious that people are going to meet up more often” as the pandemic winds down, he says. But all that real-world socializing “isn’t really going to be a substitute” for the kind of online socializing that’s already happening in so many corners of the internet.

Besides, he adds Giggl wants to “make it so that being together online is just as good as being together in real life. That’s the end goal here.”

Citi Ventures head honcho Arvind Purushotham is coming to TC Early Stage

Corporate venture capital used to get a bad rap. The money flowed from corporations into startups when times were good, and quickly disappeared when the market turned.

But startups and corporations discovered something over time: They’re a lot stronger together no matter the market conditions. Most big companies can’t gain enough insight into what’s bubbling up in the market without deep ties to founders; meanwhile, founders benefit greatly from having a renowned corporation on the balance sheet. Not only can a big brand give an upstart near-instant credibility, a corporate partner can also open doors and provide startups with a far better understanding about the needs of established companies.

It’s because the corporate venture relationship has become so key to founders that we’re thrilled to be welcoming Arvind Purushotham to TC Early Stage — Marketing & Fundraising happening tomorrow, July 8-9. Purushotham is a longtime VC who started his career as a circuit designer with Intel before spending nearly a decade with Menlo Ventures. Then, in 2011, he helped found Citi’s corporate venture capital group, where he remains the outfit’s global head of venture investing and sets the group’s overall strategy.

Indeed, having since partnered with all kinds of companies over this last decade with Citi  —  just some of its checks have gone to Square, DocuSign, Honey, Plaid, Betterment, Jet.com, DataRobot, Tanium, Pindrop and Digit — Purushotham knows what it takes to drive a business forward and how corporate VCs can help in the mission.

He’ll share what his own team looks for when meeting with a founding team and how Citi specifically identifies, then invests in startups as a way to bring cutting-edge tech to Citi’s businesses and functions.

He’ll also share what not to do and why, how much to reveal and when, and how to think about a corporate venture partner once that investment is made.

It’s going to be one of the highlights of our event, which is coming up quickly and is a must-see if your startup or a startup that you’re advising is looking for insights into how to better approach the key pillars of both marketing and fundraising. Get your ticket today before prices increase tonight.


Renegade Partners rolls out its much-anticipated debut fund with $100 million

Renegade Partners — a Bay Area-based venture firm cofounded by veteran VCs Renata Quintini and Roseanne Wincek — is taking the wraps off a $100 million debut venture fund that’s been capturing the imagination of the business press since almost its conception in late 2019.

The effort is interesting for a number of reasons, not least because of the backgrounds of both Quintini and Wincek, both of whom left powerhouse venture firms to join forces. Quintini, a trained attorney, was an investment manager with Stanford University’s endowment before being recruited into Felicis Ventures, after which she was poached by Lux Capital. Across those firms, she worked closely with a number of high-flying startups, including the autonomous driving company  Cruise, the satellite startup Planet, and the clothing company Bonobos.

Wincek was meanwhile once set on nabbing a PhD at UC Berkeley, instead leaving the school with a master’s degree in biophysics to head to Stanford for her MBA. From there, it was on to Canaan as a principal, and from there, she headed to IVP, where she rose through the senior ranks to partner, investing across enterprise and consumer companies that include Glossier, Compass, MasterClass, and TransferWise.

It’s not a new trend, successful VCs who happen to be women leaving established firms to create their own outfits. Think Mary Meeker of Bond, Dayna Grayson of Construct Capital, and Beth Seidenberg of Westlake Village BioPartners, just to name a few. But unlike some of its predecessors, Renegade is isn’t limiting itself to playing a certain role in the venture universe. It isn’t bound to any sector. It isn’t marketing itself as an early-stage venture firm. What it is looking for is a fairly specific mix of traction, team, and market — a combination that it is finding in companies that are anywhere from their Series A to Series C stage.

An in-house head data scientist from the insurance giant John Hancock is helping considerably, say the cofounders. So is a chief people officer with a powerful resume of her own (Uber, Zoom, Milo); principal Chloe Breider, a former IVP investor who worked closely with Wincek; and, as Renegade’s “decision scientist,” the former professional poker player and best-selling author Annie Duke.

We talked with Quintini and Wincek earlier today to learn more about what they have assembled — and how Renegade makes its mark in an industry that has never been more competitive. Excerpts from that chat, below, have been edited lightly for length.

TC: People would probably shiv someone to get a job at either firm where you worked. What drove you to leave, and who reached out to whom when it came time to partner?

RW: We first met when I was a Canaan and Renata was at Felicis, and back then, there weren’t many women in venture, so [women VCs were like] “Oh, there’s a new one, ‘Come meet everybody.'” Over the years, we looked at a lot of stuff together, and especially after I moved to IVP,  I was always bugging Renata about what was in her portfolio.

A few years ago, we were at one of those big, boozy dinners, with a bunch of people of our age at a bunch of firms. We were all having the conversation like, ‘Oh, if I had my own firm, I would do this, and I would do that,’ and Renata and I were finishing each other’s sentences. And I remember going up to her and saying, “We should have this conversation for real but maybe with less wine.” And that was Memorial Day of 2019.

TC: Institutional investors sometimes worry about how well an emerging manager team will get along when they’re coming from different places. How did you address this?

RQ: We were good friends, I thought Roseanne was a phenomenal investor, but frankly, we didn’t know if we would be good cofounders and that’s the biggest risk, right? We did ask: how do we de-risk this? And we actually hired a coach for what we jokingly refer to as marriage counseling. But we did a lot of work around how we handle stress and what success looks like and what our values are. We also spent a lot of time in hotel rooms, and I can tell you that Roseanne is more of a morning person than I am.

TC: You were raising this in the middle of the pandemic. How did that impact fundraising?

RQ: We had our first close on Friday, March 13, the weekend before COVID [started shutting everything down]. The Grand Princess Cruise was coming into the Bay, and we’re on the phone with the LPs, and we didn’t know if people were to going to come through. I think if we didn’t have our track records to draw from, [the fund] wouldn’t have happened. We were very lucky that we were backed by institutional LPs — an Ivy League school, endowments, foundations, family offices. But we did not factor in COVID.

TC: I see language about the “supercritical stage” on Renegade’s site. What does that mean?

RW: That phrase is purposely vague, because we don’t think the stage definitions mean that much anymore. I started my career as a chemist way back when, and supercritical fluid is the state of matter that is neither liquid nor gas but both at the same time, and we feel like companies can be the same. There’s a product to market, there is some data, there’s early customer love and generally a sizable team, but they’re not the big growth companies yet, right? They’re not ready to raise a big growth round and pour fuel on the fire, and that’s how we think about [our ideal targets].

Our sweet spot is [a startup with] early revenue — from a quarter million dollars a year up to a million dollars a month — [that have] from 20 to 100 employees [and which are] raising rounds that are between $10 million and $50 million. Our first deal was actually a Series C deal, but we have Series A and Series B companies in the portfolio, too, that all sit in that sandbox.

RQ: There’s so much capital today that capital is cheap. But execution is expensive, so our focus is on preparing startups to execute as big, giant companies. It’s: How do I think about the organization as it scales? How do I think about the exact team that I need? How do I think about my option pool? About my founder role design? How do you manage your capital and leverage your board? Things are working so well for some founders that the wheels are falling off the bus; meanwhile, many are thinking about these same questions [that they never had time to sort out].

TC: If you aren’t sector or stage focused, how do you whittle down what you’re looking to fund?

RQ: One good thing about [the types of startups we’re backing] is that they were funded by somebody else before, so it’s a known universe, if you’re thinking about it from a data science perspective.

Beyond that, it’s applying the heuristics that Roseanne, myself, Chloe, Susan [Alban, Renage’s chief people officer], have had from a decade plus of investing and working at outlier companies. It’s not just a number. It’s the quality of revenue. It’s a combination of other breadcrumbs that the companies put out there in terms of who have they hired and what are customers thinking of their product, and is this company building a system of record, and what is the velocity of adoption. Technology alone can’t do [the work].

TC: There’s so much money sloshing around right now. In terms of the advice you’re giving your portfolio companies, what do you tell them about how to react when someone knocks on the door and offers more funding right after they’ve closed a round?

RQ: There are so many dimensions here.  First, you should look at it from your company’s needs. You got to deploy this capital, and you got to provide a return on this capital, and nothing is free, so the more money you raise, the higher the valuation you receive, it catches up to you in the next round because you got to clear that watermark.

[We also tell them to ask themselves] do you have investments to make? Do you have team to hire? Some founders we’ve talked with have said, ‘I’m not going to raise any more because I cannot go faster or deploy more than my model is already supporting.  I’m actually going to execute more and then take more [capital] down the road when I’m going to get more credit for the stuff that I built, and the ROI is going to be better.’

The other piece, too, is when you’re in a very competitive environment, you have to look at what’s happening around you. Sometimes if your competitors are raising and pushing the market forward, it may be a reason to think [about raising more than you’d planned] because maybe they can out-hire you or they can outspend you in certain areas and can generate more traction. So you can’t look at things in absolute terms. At the same time, there is no free money and a lot of founders unwittingly create more problems for themselves [by not thinking through what that next check means].

TC: People see a women-led venture team and wonder how focused you will be on women-led startups.

RQ: I think we’re great investors who happen to be female. Our primary focus is on diversity of experience and thoughts. Gender is  just one of the lenses, and diversity is one of the core values of organization because we believe that provides better returns.

RW: One thing that’s been really fun and validating and inspiring about all this is the people who do come out of the woodwork who are so excited [about Renegade], because representation matters. At the end of the day, this is how this changes. We chip away at this and soon, you won’t ask this question anymore because it won’t be topical. That’s the goal.

TC: Do you feel that the diversity matters for LPs? Do you think that diversity is going to be codified in the way that LPs are looking at investing in funds?

RQ: Some lead with it. Others say, ‘Let me look at past returns. They look at lagging indicators.’ Today, founders are picking investors who reflect their values, who they’re proud to be associated with — people who have their same energy people and will go to bat for them and with them. These are the returns of the future, regardless of whatever Cambridge tells you today about investments that were made in the past. Leading LPs know this.

Hear top VCs Albert Wegner, Jenny Rooke, and Shilpi Kumar talk green bets at the Extreme Tech Challenge finals

This year, TechCrunch is proudly hosting the Extreme Tech Challenge Global Finals on July 22. The event is among the world’s largest purpose-driven startup competitions that are aiming to solve global challenges based on the United Nations’ 17 sustainability goals.

If you want to catch an array of innovative startups across a range of categories, all of them showcasing what they’re building, you won’t want to miss our must-see pitch-off competition.

You can also catch feature panels hosted by TechCrunch editors, including one of the most highly anticipated discussions of the event, a talk on “going green” with guest speakers Shilpi Kumar, Jenny Rooke, and Albert Wenger, all of whom are actively investing in climate startups that are targeting big opportunities

Shilpi Kumar is a partner with Urban Us, an investment platform focused on urban tech and climate solutions. She previously led go-to-market and early sales efforts at Filament, a startup focused on deploying secure wireless networks for connected physical assets. As an investor, Shilpi has also focused on hardware, mobility, energy, IoT, and robotics, having worked previously for VTF Capital, First Round Capital, and Village Global.

Jenny Rooke is the founder and managing director of Genoa Ventures, but Rooke has been deploying capital into innovative life sciences opportunities for years, including at Fidelity Biosciences and later the Gates Foundation, where she helped managed more than $250 million in funding, funneling some of that capital into genetic engineering, diagnostics, and synthetic biology startups. Rooke began independently investing under the brand 5 Prime Ventures, ultimately establishing among the largest life sciences syndicates on AngelList before launching Genoa.

Last but not least, Albert Wenger, has been a managing partner at Union Square Ventures for more than 13 years. Before joining USV, Albert was the president of del.icio.us through the company’s sale to Yahoo and an angel investor, including writing early checks to Etsy and Tumblr. He previously founded or co-founded several companies, including a management consulting firm and an early hosted data analytics company. Among his investments today is goTenna, a company trying to advance universal access to connectivity by building a scalable mobile mesh network.

Sustainability is the key to our planet’s future and our survival, but it’s also going to be incredibly lucrative and a major piece of our world economy. Hear from these seasoned investors about how VCs and startups alike are thinking about Greentech and how that will evolve in the coming years.

Join us on July 22 to find out how the most innovative startups are working to solve some of the world’s biggest problems. And best of all, tickets are free — book yours today!

Meet Mighty, an online platform where kid CEOs run their own storefronts; a “digital lemonade stand”

For kids of a certain age — think 9 to 15 — options for enrichment are somewhat limited to school, sports, and camps, while the ability to make money is largely non-existent.

A new startup called Mighty wants to provide them with a new alternative through a platform it’s building that, like a kind of Shopify for kids, enables younger kids to open their own store online and to learn a lot in the process. In fact, Mighty — led by founders Ben Goldhirsh, who previously founded GOOD magazine, and Dana Mauriello, who spent nearly five years with Etsy and was most recently an advisor to Sidewalk Labs — sees itself as smack dab in the center of fintech, ed tech, and entertainment.

As is often the case, the concept derived from the founders’ own experience. In this case, Goldhirsh, who has been living in Costa Rica, began worrying about his two daughters, who attend a small school and he feared might fall behind their stateside peers so began tutoring them after school. He says he was using Khan Academy and every other software platform that he thought might be helpful to the cause, but their reaction wasn’t exactly positive.

“They were like, “F*ck you, dad. We just finished school and now you’re going to make us do more school?'”

Unsure of what to do, he encouraged them to sell the bracelets they’d been making online, figuring it would teach them needed math skills, as well as teach them about startup capital, business plans (he made them write one), and marketing. It worked, he says, and as he told friends about this successful “project-based learning effort,” they began to ask if he could help their kids get up and running.

Fast forward and Goldhirsh and Mauriello — who ran a crowdfunding platform that Goldhirsh had helped fund before she joined Etsy — say they’re now steering a still-in-beta startup that has become home to 3,000 “CEOs” as Mighty calls them, with a smaller percentage of “super CEOs” logging into the platform 30 times each month to manage their business affairs.

The interest isn’t surprising. Kids are spending more of their time online than at any point in history. Many of the real-world type businesses that might have once employed young kids are shrinking in size. Aside from babysitting or selling cookies on the corner, it’s also challenging to find a job before high school, given the Department of Labor’s Fair Labor Standards Act<, which sets 14 years old as the minimum age for employment. (Even then, many employers worry that their young employees might be more work than is worth it.)

Investor think it’s a pretty solid idea. Mighty recently closed on $6.5 million in seed funding led by Animo Ventures, with participation from Maveron, Humbition, Sesame Workshop, Collaborative Fund and NaHCO3, a family office.

Still, building out a platform for kids is tricky. For starters, not a lot of 11-year-olds have the tenacity required to sustain their own business over time. While Goldhirsh likens the business to a “21st century lemonade stand,” running a business that doesn’t go away is a very different proposition.

Goldhirsh acknowledges that no kid wants to hear they have to “grind” on their business or to follow a certain trajectory, and he says that Mighty is certainly seeing kids who show up for a weekend to make some money. Still, he insists, many others have an undeniably entrepreneurial spirit and tend to stick around.  In fact, says Goldhirsh, the company — aided by its new seed funding — has much to do in order to keep its hungriest young CEOs happy.

Many are frustrated, for example, that they currently can’t sell their own homemade items through Mighty. Instead, they are invited to sell items like hats, totes, and stickers that they customize and which are made by Mighty’s current manufacturing partner, Printful, which then ships out the item to the end customer. (The Mighty CEO gets a percentage of the sale, as does Mighty.)

They can also sell items made by global artisans through a partnership that Mighty has struck with Novica, an impact marketplace that also sells through National Geographic.

The idea was to introduce as little friction into the process as possible at the outset; eentually, Mighty intends to enable its smaller entrepreneurs to sell their own items over time, as well as services, and not just products. Mighty also plans to eventually generate revenue through both a revenue split as well as via freemium services.

Of course, the startup, which launched last year, needs to overcome potential competition from established companies like Shopify to get there. Should Mighty begin to gain traction, these stalwarts might pay closer attention.

It’s also conceivable that parents might push back on what Mighty is trying to do. Entrepreneurship can be alternately exhilarating and demoralizing, after all.

Mauriello insists they haven’t. For one thing, she says, Mighty recently launched an online community where its young CEOs can encourage one another and trade sales tips, and she says they are actively engaging there.

She also argues that, like sports or learning a musical instrument, there are lessons to be learned by creating a store on Mighty, and not simply about storytelling and sales. As critically, she says, the company’s young customers are learning that “you can fail and pick yourself back up and try again.”

Adds Goldhirsch, “There are definitely kids who are like, ‘Oh, this is harder than I thought it was going to be. I can’t just launch the site and watch money roll in.’ But I think they like the fact that the success they are seeing they are earning, because we’re not doing it for them.”