500 Startups, still recovering from scandal, is giving some control to an Abu Dhabi investment firm

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500 Startups CEO Christine Tsai

It’s the VC firm’s most meaningful governance change since its CEO resigned from the role last year.

The accelerator program 500 Startups was roiled by drama last year after the ouster of its CEO, Dave McClure, under allegations of sexual harassment.

Now 500 Startups is making its most meaningful governance change since McClure resigned from the role last year. In an unusual deal, the firm said it would sell some equity in its parent company, called Mothership, to the Abu Dhabi Financial Group, which will now help manage 500 Startups operations alongside McClure’s successor, Christine Tsai.

Deal terms weren’t disclosed beyond the investment being “significant.” Another sign that it’s not small: ADFG is taking one of the two seats on the board — this is the first time 500 Startups is accepting outside capital into its parent company, it said.

500 Startups does, of course, have investors — or limited partners — in the individual funds that it runs. Those limited partners essentially “buy” an ownership stake in a fund. This is a rare instance in which a limited partner is “buying” a stake in the fund’s parent company, which in this case includes not just the individual funds but also non-deal programming like strategic partnerships and investor education courses.

500 is not a typical venture capital firm. It has a staff of about 100, far bigger than most VC firms, in part to oversee its expansive network of “micro-funds” that invest in specific regions.

ADFG is the latest big-money foreign investor to try and increase its footprint in Silicon Valley startups. Sovereign wealth funds like Abu Dhabi’s Mubadala and Singapore’s Temasek have recently opened offices in San Francisco to help their countries gain better access to young private companies. ADFG hasn’t done as many U.S. tech deals, but has more than $ 6 billion under management.

ADFG is now expected to serve as a large investor in future 500 Startups funds — which should make the eight-year-old accelerator more durable. The accelerator has long thought about taking on cash from an outside investor into its parent company, Tsai told Recode, in order to more aggressively scale its programming.

Tsai said the decision to take on ADFG’s investment was unrelated to the fallout from McClure’s ouster. She said she had been speaking with strategic investors like ADFG about a deal since before the sexual harassment scandal hit the headlines. And she claimed that limited partners remained excited about 500 Startups, and that the deal was not motivated by a need for replacement cash.

“It’s not something that’s a reaction to Dave per se or anything like that,” Tsai said. “We’ve had a lot of support from our LPs.”

Recode – All

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Honey — the under-the-radar coupon startup — has held talks to raise around $100 million in a new investment

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Honey co-founder Ryan Hudson

The Los Angeles-based startup operates an unsexy but lucrative business.

Online coupons may sound so 2008, but they are still big business in 2018.

Honey, a startup whose internet tool tells online shoppers whether there is an eligible coupon for their purchase, has held talks to raise somewhere around $ 100 million in new investment money, according to multiple sources.

Honey co-founder Ryan Hudson confirmed the talks to Recode in February, but at the time said his company had discontinued the discussions to focus on new product development. But after another inquiry last week, Hudson confirmed that the talks had restarted.

“Something came inbound that we’re seriously considering but not closed so nothing to announce yet,” he wrote in an email. He declined to provide more details.

Honey, based in Los Angeles, was founded in 2012 and makes technology that scours the web for available digital coupons and sales. Its website browser extension then displays those coupons or sale codes to shoppers right when they reach the checkout page on thousands of partnering retail sites. The tool is designed to help shoppers feel confident about going ahead with their purchase — coupon or no coupon — without leaving the page.

The funding discussions come at a time when investors have shown renewed interest in digital-native consumer brands that have the potential for mass appeal, and especially those that can grow fast without losing massive amounts of money.

Hudson said in February that Honey was basically running at “cash-flow neutral” and would only raise money if the terms were too good to pass up. The startup generates revenue by earning a commission on transactions at some partnering merchants since it says its tool increases purchase conversion rates. Honey also makes money from a cash-back program similar to that of Ebates, the unsexy online shopping site that is nonetheless a cash cow; Rakuten bought it for $ 1 billion in 2014.

Over the past year, Honey has beefed up its staff from 30-something people to north of 120 as it quietly builds the next version of the company. Honey has raised around $ 40 million in venture capital from Anthos Capital and others to date.

“If we plan to just do what we do today, we would do that with a much smaller team and be generating a lot of cash,” Hudson said.

He declined to provide details of what the company is working on other than saying it will be “a mobile version of the Honey shopping experience” that will likely launch before the holidays.

“If people think of us as a coupon extension a year or two from now,” he said, “we will have failed at execution.”

Recode – All

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Angela Ahrendts touts Apple’s investment in Japan, says ‘several’ new retail stores coming

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Earlier this week, Apple officially announced that it will open its new Japanese store in Tokyo’s retail district of Shinjuku on April 7th. Now, Angela Ahrendts is teasing that Apple has a lot more planned for Japan customers, with this store only being the beginning…

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The 22X Fund and Democratizing Startup Investment

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22X Fund

Tradition leads you to believe: start a company in a garage or basement, find a few people to tell you it’s a good idea, raise a small bit of money from your friends & family, move to Silicon Valley, raise more money from a well known VC and become a technology rockstar.  

Well those of us that are living and breathing this perceived narrative know that it is mostly untrue.  As the founder of Trueface.ai a face recognition startup, I am overwhelmed with how often people just assume ‘the valley’ is throwing money at any face recognition or artificial intelligence (A.I.) company.  It’s just not the case as the venture world has shifted their risk profile to focus more on growth investing.  

The history of raising money has always positioned the venture capitalist in the position of power, dictating to the market which companies have a higher chance of success.  But how investors make the decision to invest is unpredictable and not always backed by real expertise in building companies.  

Now that’s changing. New types of funding like ICOs and equity crowdfunding, accelerators and corporate venture arms are giving startups more options to raise funds. The newest and most exciting of these new investment vehicles are “security tokens.”

Security tokens are backed by real-world assets such as equity in a company. Like “utility tokens” they are tradable on exchanges. They allow many investors globally to buy into a promising project whether that’s investing a group of startups or a real estate project.

The game has now changed for investors thanks to tokens and how they can allow for someone to instantly diversify.  I can remember back to a finance class in college; we learned all about modern portfolio theory and diversification to reduce unsystematic risk.  We’ve been taught, broadly speaking, to invest in the minimum number of companies necessary to drive your exposure to unsystematic risk to near zero.  The number of which is accepted is 30 companies in multiple industries and different levels of risk associated.  

This theory is what has me incredibly excited about securitized tokens and specifically 22X Fund. The 22X Fund is the first security token of its kind – a founder-organized initiative of 30 companies from the most recent batch of 500 Startups (Batch 22), one of the best technology accelerators in the world. The startup founders of 22X joined forces to revolutionize the way we think about fundraising. The securitized token represents up to 10% equity interest in each company, providing investors with access to Silicon Valley’s best and brightest with one single investment. The batch of 30 companies was vetted by the 500 Startups organization and had previously raised over US$ 22,000,000 in capital to get to the stages they are at today.

Investors within the 22X Fund gain access to 30 high growth companies with one investment and can reduce their overall risk while having access to liquidity by trading the token as they see fit.

There are incredible benefits to both sides here – the founders of the companies have access to global capital ranging from smaller private investors overseas, to family offices to traditional institutional funds.  The 22X Fund empowers its founders to spend less time raising money and more time focusing on how to grow their business and be successful.  Although I still believe the venture capitalists play a critical role in the ecosystem, it reduces their power to be the final say about who has an opportunity to be successful. It democratizes startup investment.   

The long-term implications for the relationship between traditional venture capital and founders are still up in the air, but I think for the community this is an incredible step forward.  Silicon Valley is known for its forward-thinking, risk-taking and against the grain mentality. This new type of fundraising is precisely what should be expected from incredibly driven, determined and bright founders who are willing to take risks.

 

Editors Note & Disclaimer: TrueFace.ai & its parent company Chui are alumni of the ReadWrite Labs accelerator program. 

The post The 22X Fund and Democratizing Startup Investment appeared first on ReadWrite.

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Former Uber CEO Travis Kalanick forms investment fund

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Uber's controversial ex-chief has created an investment fund called 10100 to oversee both his for-profit and non-profit projects. Travis Kalanick has announced 101000 (pronounced "ten-one-hundred") on Twitter and talked about how he's made investment…
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Former Uber CEO Travis Kalanick announces new investment fund focused on job creation

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Former Uber CEO and co-founder Travis Kalanick today announced a new investment fund he’s calling 10100, pronounced “ten-one-hundred,” that will focus on his “passions, investments, ideas, and big bets.” The theme of the fund, he says, will be large-scale job creation with a focus on real estate, e-commerce, and innovations from countries like China and India. “Our non-profit efforts will initially focus on education and the future of cities,” Kalanick writes. The announcement was made on Twitter this afternoon with a prefaced note from Kalanick that read simply, “Some news…”

Since Kalanick stepped down from Uber in July of last year, he’s remained an outsized influence in the day-to-day operations at the ride-hailing giant thanks to…

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Cloud-native platform for IoT edge apps Zededa closes $3.06M in Seed investment

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Zededa, a startup providing a cloud-native approach to the deployment, management and security of real-time edge applications closed $ 3.06M in Seed funding. Wild West Capital, run by Angel investors Kevin DeNuccio and Rich Nottenburg led the round. Almaz Capital also participated in the round.

There’s an increased trend of analyzing data close to the ‘edge’ or devices/systems that generate it. For some IoT apps, such as in self-driving cars and industrial robots, it perfectly makes sense to minimize or even eliminate the time it takes to transfer data to the cloud and then running analytics. However, Zededa takes a different approach to its solution.

“True digital transformation requires a drastic shift from today’s embedded computing mindset to a more secure-by-design, cloud-native approach. This will unlock the power of millions of cloud app developers and allow them to digitize the physical world as billions of ‘things’ become smart and connected.” ZEDEDA CEO and Co-Founder Said Ouissal

However, the startup hasn’t explained how it achieves the so-called ‘cloud-native’ approach of deploying and managing edge-apps. It appears Zededa is still going through the R&D phase as it will use the funding proceeds for continued research and product development, investment in community open-source projects, and sales and marketing.

The startup has lined up resources having experience in operating systems, virtualization, networking, security, blockchain, cloud and application platforms. Its investors have previously funded IoT startups including Theatro and Sensity Systems (now Verizon).

As billions of devices and sensors get internet connected, there are a number of startups branching out in edge-domain. Losant, an edge-to-analytics platform for enterprise IoT customers raised a $ 5.2M Series A round. Interestingly, Losant was backed by Rise of the Rest, a seed-stage fund backing startups outside Silicon Valley, New York, and Boston area. The fund is backed by Eric Schmitt, Jeff Bezos, Meg Whiteman, Michael Bloomberg, and Reid Hoffman and other investors who believe innovation and next-gen technologies need not come from Silicon Valley and that’s why they’re betting on areas outside the Valley.


Postscapes: Tracking the Internet of Things

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Twitter’s $70 million SoundCloud investment is officially wiped out

Jack Dorsey invested in the music streaming service in 2016; last year he wrote off the deal.

One more reminder that digital music remains a very, very difficult place to make money: Twitter has written off a $ 70 million investment it made in SoundCloud, the music streaming service.

Twitter put the money into SoundCloud in in 2016, via its Twitter Ventures unit, in a deal that valued the company at $ 700 million. Now Twitter, via its 2017 annual report, says it has written off $ 66.4 million it invested in SoundCloud because that money is “not expected to be recoverable within a reasonable period of time.”

Variety first reported the news. For context: Twitter generated revenue of $ 2.4 billion in 2017, and ended the year with $ 4.4 billion in cash and short-term investments.

Twitter’s SoundCloud writedown isn’t a surprise, since almost all of SoundCloud’s existing investors were crammed down in a last-ditch funding deal last summer, which also brought in a new management team.

But it should be a formal coda to Twitter’s on-off infatuation with SoundCloud. Two years before the investment, Twitter had looked at buying SoundCloud for more than $ 1 billion, but didn’t.

And it’s a reminder that even though consumers have embraced free and paid music streaming services, the companies that run those services generally aren’t making a profit.

For giant tech guys like Apple and Google who run streaming music as a side business, that’s probably OK. For standalone companies like Pandora and Spotify, that’s not (reminder: Spotify is planning on going public in the next couple months).

Meanwhile SoundCloud, which had been pushing a $ 10-a-month subscription service like the one Apple and Spotify offer, is changing its strategy.

The new plan, as outlined by CEO Kerry Trainor at our Code Media conference this month: Focus on a more limited $ 5-a-month plan, as well as a renewed emphasis on a subscription service SoundCloud has always sold to music creators, producers and other prosumers.

Here’s my Code Media chat with Trainor:


Recode – All

028: HomePod stains, Berkshire Hathaway’s AAPL investment, KGI on 6.1-inch iPhone sales | 9to5Mac Daily

Today we’ve got everything you need to know about HomePod’s first controversy, Berkshire Hathaway’s latest massive AAPL investment, and KGI Securities prediction on upcoming iPhone sales.

9to5Mac Daily is available on iTunes and Apple’s Podcasts app, Stitcher, TuneIn, Google Play, or through our dedicated RSS feed for Overcast and other podcast players.

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New Media Confirms Investment in TapOnIt

New Media Investment Group Inc., one of the largest publishers of locally based print and online media in the United States as measured by number of publications, announced that it has acquired a 20% equity stake in TapOnIt, an opt-in text-based platform that delivers offers from local businesses direct to consumers’ phones.

TapOnIt was launched in April 2015 by digital advertising veteran Katie Wilson in Quad Cities, Iowa. In under three years, the company expanded to three additional Iowa markets – Des Moines, Iowa City and Cedar Rapids – and built a database of over 70,000 registered users.

The investment by New Media is expected to help TapOnIt to expand across the country by being added as an available product offered to advertisers at New Media’s publications across its 540 markets.

TapOnIt users register to receive up-to three image-based text messages per week featuring three local offers per message. With a 98% open-rate – including 90% who open within three minutes of receiving – the TapOnIt platform delivers immediate results at a fraction of the cost of traditional direct mail. And unlike other app-based discount offer platforms, TapOnIt business customers keep 100% of the revenue generated by users.

“Because our platform is text-based with no apps to download or update, we experience less than a 2% monthly churn rate compared to 70% churn for apps in their first 90 days,” said Wilson. “And our users redeem the offers they receive at rates of up to 11%.”

The post New Media Confirms Investment in TapOnIt appeared first on Mobile Marketing Watch.


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