by tyler | Apr 23, 2024 | Tech
Winding down a startup can be bittersweet for founders. In the case of Fundid , rising interest rates killed the business finance startup. But VCs and partners hurt it, too, founder Stefanie Sample says.
TechCrunch profiled the company in 2022 when Sample raised $3.25 million in seed funding backed by fintech investor Nevcaut Ventures, The Artemis Fund and Builders and Backers.
Prior to Fundid, Sample spent more than a decade as the owner of more than a dozen profitable franchise businesses in Montana. She owns 12 Taco Bell locations and was the previous owner of two Massage Envy franchises, as well as three other companies that are all profitable. It was through that experience she saw firsthand how difficult it was for companies like hers to have access to capital.
She started Fundid to offer lending via a business-building credit card as well as finance resources like a grant-matching tool, marketed mainly to women business owners.
Because Fundid was a fintech company and not a bank, it decided to have a debt facility partner to underwrite its operations, Sample explained. She found a partner and pre-negotiated the secured overnight financing rates, or SOFR. This is an interest rate banks use to price U.S. dollar-denominated derivatives and loans.
However, between spring of 2022 and the end of 2023, the Federal Reserve raised interest rates 11 times . Just before Fundid launched its first card product, the debt facility partner went to Sample with some bad news.
“The numbers worked originally because the interest rate was nothing,” Sample told TechCrunch. “When the rates went up, that really screwed us because the debt facility was based on SOFR plus, so the numbers didn’t work.”
The cost of the capital would cost Fundid so much compared to the fees Fundid could charge, that Fundid would essentially be paying its customers to use its product, and “then numbers would never shake out,” Sample said.
Fundid injects first funding into providing capital, credit for small businesses
To keep going, Fundid “needed to put up a lot more collateral because of the changing environment,” Sample said.
An investor was going to help with this, but that would mean giving up more equity in the company, Sample said. She recalls even telling the investor that it would have been a bad investment.
“The cost of capital and the warrants would have resulted in him taking our entire company — just for us to exist,” she added. “The interest rate market became this opportunity for everyone around us to take our company, and then the business model didn’t work in our case anyways. It was like, ‘Well, what are we doing?’”
So, over the summer of 2023 Sample decided to wind down Fundid. The decision was made more difficult when Fundid was able to raise $2 million the summer of 2023 just as she was pulling the credit card from the market.
Raising capital while thinking of going dark is something Sample said doesn’t get talked about enough. Despite her thoughts, Fundid’s board still encouraged her to keep going and to take the additional capital. Investors told her that they believed in Sample and her ability to figure it out or build a new product or build a brand new company.
They wanted her to pivot. However, all of the money was invested toward building the credit card that Fundid couldn’t afford to keep in the current market. In addition, the cap table would have been “too messed up to try anything new,” Sample said.
However, Sample had other ideas.
“I was so burnt out at that time that I was having panic attacks,” she said. “I took a step back. It was a moment where I told myself, ‘this is what happens to women in venture.’ They already took more of my cap table and now they want me to build a brand new company on the existing cap table. And they’re kind of talking to me like I’m an idiot.”
So Sample rescinded the raise and gave the money back. That was in August 2023. Then came the part she dreaded: She had to lay off her team of five, doing so in November.
This was her first time firing employees, and Sample recalls sitting in a coffee shop and crying with them. Not because Fundid was dead, but because they “all loved working together so much. It was a heartbreaking day,” Sample said.
So your startup’s runway is dwindling and fundraising is hard. What’s next?
She also said during this time she lost faith in the venture path. In 2023, the company was hitting all of its metrics in a timely manner. However, as the finance market changed, investors were actively collaborating with Sample to find a path forward. She described it like having “whiplash all the time.”
She also became disgruntled over how much of Fundid’s ownership she had lost, and could continue to lose if she stayed on the venture fund raising path. Sample spoke to other female founder friends who were raising at the seed stage and had already given up 30% of their company — similar to her.
As a general rule, seed investors typically want 10%-20%. Although 25% or even 30% is not unheard of, it is considered high for those early rounds.
But she felt that as a female founder, the odds were stacked against her, and she struggled to get competitive term sheets. The data backs up her perception. In 2022, female founders landed less than 19% of all venture fund dollars that year, PitchBook found. In 2023, it was 23%.
Far fewer female-founded companies are backed annually (less than 1,000 in 2023, compared to tens of thousands for males) and the deal amounts and valuations are lower, too, the PitchBook research shows.
“With the venture landscape, the goal posts are always moving or the rug being pulled out from under you,” Sample said. “When you are a female founder, you have to sacrifice a lot to be among the 2%. We end up paying ourselves less and accepting worse term sheets. The other part is that it is already so hard to get capital, yet the world is telling you to be grateful. I just wanted to build a real company, and it made me disgruntled how it all worked.”
How do you know when it’s time to shut down?
The whole experience inspired Sample to write a postmortem post about Fundid’s journey, which she shared with TechCrunch. In it, Sample wrote that “Fundid may have failed as a company, but more than that, we acknowledge that we failed the small businesses that need innovation in capital markets.” In it she wrote, “Would I do it again? Honestly, no.”
In hindsight, she said she would definitely build the next company with a technical co-founder, not take money from friends and family and should have “stuck to her guns” when it came to not launching a credit card. “As the founder/CEO, I’m the decision maker; this is my fault,” Sample wrote.
Fundid’s official close date was April 1. After taking some time off — and learning how to play ukulele — Sample said the Fundid experience has, however, made her eager to go back to what she affectionately calls “real businesses.”
She’s now launched a new investment company called Pailor Capital that stems from her work helping women finance their own businesses. A better way to do that is to buy existing profitable companies, she feels. She’s also purchasing an existing business.
“My existing investors are fantastic, this is a reflection of seeking new investment in a market that decided fintech, lending and cards were no longer desirable,” she wrote in her postmortem.
Pailor Capital has made seven investments so far this year, all for women to find, buy and grow existing businesses.
“If we really want to make a dent on gender equality and business we’re better off encouraging women to go out and buy existing profitable businesses,” Sample said. “Then their impact as CEO essentially skips the ladder.”
Countdown Capital winding down is not a bad omen for micro funds
by tyler | Apr 23, 2024 | Tech
Digital twin platform Matterport has agreed to be acquired by one of its customers, CoStar , in a cash-and-stock deal of $5.50 per share that gives it an enterprise valuation of about $1.6 billion. Matterport’s tech helps companies create digital replicas of physical spaces.
CoStar’s offer represents a premium of a whopping 212% over Matterport’s last closing share price before the deal was announced on April 22.
The deal looks like a fortunate turn of events for Matterport, whose shares had been trading below the $5 mark since August 2022 as the company struggled to meet investors’ expectations for subscriber growth amid a sluggish real estate market and a wider macroeconomic slowdown. Matterport’s stock was trading below $2 per share before the transaction was disclosed.
The company has been trying to improve its profitability over the past year, too, according to its 2023 financial statements. However, investors haven’t been happy with the company, whose shares have been struggling since it went public via a SPAC deal in 2021 , which Bloomberg reported valued Matterport at around $2.9 billion.
Matterport’s shares were trading at $4.76 before the bell on Tuesday — slightly below the $5.50 deal price, which indicates investors may be wary of the deal getting blocked by regulators, or they may be hedging their bets to account for a possible decline in CoStar’s stock, since the deal has a share-based component, too. CoStar’s shares, however, are up slightly since the announcement, indicating that its investors are happy with the potential benefits of the deal.
Matterport quickly rose to prominence from its start in 2011, making 3D imaging cameras , spawning out of the Microsoft Kinect hacker scene and going on to join Y Combinator’s Winter 2012 batch . Its services gained significant traction in the real estate space despite competition from alternatives such as Cupix , Giraffe360 and Zillow 3D Home .
Digital twin technology has applications in construction tech and insurtech, but demand from real estate players is particularly salient, as the pandemic accelerated the switch from in-person viewings to virtual tours, both for commercial and for residential properties.
Early-mover advantage aside, the company’s later decisions likely played an equally important role as the market evolved. It diversified into helping clients create virtual tours even with smartphones. And the addition of AI with its in-house solution, Cortex , added more differentiation to its offering, leveraging its data to generate 3D digital twins supporting additional labels such as property dimensions.
Matterport’s leadership changed over the years. Its current CEO, former eBay Chief Product Officer RJ Pittman, took the reins in 2018 — but its fundraising trajectory was fairly smooth. Over its first decade, it raised successive rounds of funding for a total of $409 million , followed by its public debut in 2021.
Matterport raises $48M to ramp up its 3D imaging platform
“CoStar Group and Matterport have nearly identical mission statements of digitizing the world’s real estate,” CoStar’s founder and CEO Andy Florance said in a statement.
CoStar, which has a market cap of $34.84 billion , is a real estate heavyweight that operates marketplaces such as Apartments.com, Homes.com and LoopNet (for commercial real estate). This gives it direct insights into the value that Matterport can add for its end users.
In March 2024, CoStar wrote in a press release, “there were over 7.4 million views of Matterport 3D Tours on Apartments.com, with consumers spending 20% more time viewing an apartment listing when Matterports were available.” The company now plans to incorporate Matterport’s virtual tours (“Matterports”) on Homes.com.
Taking to the stage at a real estate event shortly after the announcement, Florance reportedly said that allowing home buyers to view properties with their own furniture, for instance, will allow agents to provide more value and promote their brands.
It will be worth tracking what happens to Matterport’s activities beyond real estate, such as its partnership with Facebook to help researchers train robots in virtual environments.
The deal is subject to regulatory approvals, but this is more than an asterisk: In 2020, CoStar’s attempt to acquire RentPath was derailed by an FTC antitrust lawsuit , and RentPath was instead bought by Redfin in 2021 .
by tyler | Apr 23, 2024 | Tech
Framework Computer was ahead of the curve. The company was founded in 2019, as 20 U.S. states began exploring potential right to repair bills. It delivered its first product, the Framework 13, in 2021, a year before New York enacted its landmark (if flawed) Digital Fair Repair Act.
Today, the company sells its repairable laptops in 13 countries across North America and Europe, along with Taiwan. Even so, Framework has been deliberate — cautious even — when it comes to raising. Its last major round was an $18 million Series A, closed in early 2022.
“When we closed a Series A round two years ago, we shared our strategy around fundraising, which is to raise as little as possible and focus funds on efficiently expanding the reach of our mission,” the company notes. “You can now see the results of that investment with Framework Laptop 16 out in customers’ hands.”
On Tuesday, the company announced a follow-up — a $17 million Series A-1. “We are a consumer company that’s not doing AI that successfully raised funding in 2024,” founder and CEO Nirav Patel tells TechCrunch, with a bit of a laugh.
There is, indeed, something oddly refreshing in a company that hasn’t shoehorned some unrelated bit of ChatGPT functionality into their pitch. Instead, Framework remains focused on its core business: user-repairable and upgradable laptops.
Patel is, however, quick to note, “fundamentally, we are a consumer electronics company, not a laptop company.” That simple clarification highlights a key element of this fundraising round. While generative AI might not be in the cards, an expanded portfolio certainly is. In addition to “scaling the reach” of its current offerings, this new funding will go toward “extending to additional product categories.” Patel did not disclose specifics.
The European firm Fairphone , which operates on a similar philosophy of consumer access, recently expanded its own portfolio. In addition to smartphones, the company now offers repairable headphones and earbuds. “We love what they’re doing,” Patel says of the kindred company. “It’s obviously a brutally competitive category that they’re in, and they’ve been doing quite well in it.”
Part of the funding will go toward hiring. Framework is planning to fill a total of 10 roles in 2024, adding to a headcount that is currently just under 50. In spite of that figure, the company maintains a wide international reach, including the brand new territory of Poland.
“It’s all direct to consumer,” says Patel. “We managed our go-to-market directly. We don’t deal with distributors or channels or retail, and we have this very, very short pipeline from warehouse to the consumer’s doorstep. That makes it operationally incredibly efficient. For the most part, we have a positive cash cycle, in the sense that we’re collecting money from the customers buying our product before we need to pay suppliers, in many cases.”
Fairphone launches easy-to-repair earbuds
The round was led by Spark Capital and features Buckley Ventures, Anzu Partners, Cooler Master and Pathbreaker Ventures. In addition to the $17 million, the company is opening up $1 million to equity crowdfunding through $10,000 investments.
“It’s a little bit of an experiment,” says Patel. “We’re bringing in 100 investors, and probably for the most part, the vast majority of them are not going to be professional investors. This might even be the only private company investment any of them have ever made. We’ll see what that’s like, having that 100-person community board.”
by tyler | Apr 23, 2024 | Tech
Although many students in the United States enter community colleges intending to transfer to four-year universities, only 16% of those students receive bachelor’s degrees within six years . But Campus, an online alternative to traditional community colleges, has an approach that aims to change that.
Many adjunct professors at the nation’s top universities, including UCLA, Princeton and NYU, earn such low salaries that a quarter of them qualify for some form of government assistance . At the same time, the cost of education has been skyrocketing.
“I got obsessed with the idea of giving everybody access to these amazing professors” at a price that most students can afford, said Campus founder Tade Oyerinde.
Investors seem to be obsessed, too: The company announced Tuesday that it raised a $23 million Series A extension round, led by Founders Fund, with 8VC participating.
Campus has hired adjunct professors who are also currently teaching at colleges like Vanderbilt, Princeton and NYU, paying them $8,000 a course, which is much higher than the national average. The cost of attending Campus is $7,200 a year; it’s fully covered for students who qualify for federal Pell Grants, allowing about 40% of the college’s students to study for free.
All students are provided with a laptop, Wi-Fi and access to tutors. They’re paired with coaches who are tasked with making sure that everyone stays on track. Enrollment has been growing fast, according to Oyerinde. Students want to be a part of something modern and new, he said, and they think of Campus as a trampoline into a four-year program.
Last year, Campus raised a $29 million Series A, led by Sam Altman and Discord founder Jason Citron. Solo VC Lachy Groom, Bloomberg Beta, Founders Fund, Reach Capital and Precursor Venture also participated. Earlier this year, the company caught Shaquille O’Neal’s eye, and the basketball star topped up that round.
Most of the capital from Campus’ first Series A installment went toward purchasing a physical college in Sacramento . While most students study online and are based throughout the country, the community college now offers in-person courses in phlebotomy, medical assistance and cosmetology.
Shaquille O’Neal talks investing in edtech and startups that are going to ‘change people’s lives’
The capital from the Founders Fund-led Series A extension, which Campus is announcing on Tuesday, will be used to fuel growth.
The firm boosted its stake in Campus — Founders Fund’s first edtech bet — due to the company’s scalable tech platform, said partner Trae Stephens.
“I think the structure is kind of a hack,” he said. “You can get the cost low enough that there are no out-of-pocket costs. That’s very hard to do when there are overhead costs attached.”
Perhaps this is why VCs have historically avoided backing traditional academic institutions.
For now, each class has on average 75 students and three teacher assistants. While Oyerinde didn’t say whether professor to student ratios will increase as enrollment numbers grow, he emphasized that Campus’ margins look like those of a tech business.
The company is very mindful of for-profit colleges’ dark past. In 2019, University of Phoenix, a private university, agreed to pay a $50 million fine and forgive $140 million in student fees , following a five-year investigation by the Federal Trade Commission into the company’s misleading claims about job opportunities available to its students.
“Campus is not going to saddle students with tons of debt. I don’t think this is good for the U.S. economy,” Stephens said. “We’re going to do this in a way that aligns with the goals of the Federal Pell grants.”
Oyerinde says the company is squarely focused on making sure that the cost of education is low (or nothing) and that students graduate.
Campus faces a surprising challenge: finding the coaches. While attracting professors (with a long waitlist) and students is simple, the company needs coaches who encourage students to stick with their education.
“If we need engineers or marketing people, that’s easy,” Oyerinde said. “But there’s not a pool of people who’ve done this particular role of building deep relationships, motivating people consistently for multiple years on end.”
It’s a good time to invest in early-stage edtech, investors say
by tyler | Apr 23, 2024 | Tech
Apple just dropped an invite for its next event. Scheduled for May 7, the “Let Loose” presentation appears to be happening exclusively online — something that became standard fare for the company during the pandemic. Over the last couple of years, however, Apple has returned to in-person events, including WWDC, which kicks off in Cupertino on June 10 .
If this one is, indeed, online only, it’s likely to be on the smaller side, focusing on one or two select products. The company is no doubt saving some bigger news for its developer conference, happening almost exactly a month later.
The artwork features a prominent image of a hand holding an Apple Pencil, accompanied by the apparently handwritten tagline, “Let Loose.” We’re way overdue for a new iPad or four, as the company hasn’t updated the tablet line since 2022. M2 and M3 chips are strong possibilities, heading to the iPad Pro and iPad Air models, respectively.
As for the Pencil, this month’s early iOS 17.5 beta includes a reference to a “squeeze” feature for the upcoming fourth-generation version of Apple’s stylus. Other rumored upgrades include an updated version of the Pro’s Magic Keyboard case.
The event kicks off May 7 at 7 a.m. PT . Stay tuned to TechCrunch for more info.
by tyler | Apr 23, 2024 | Tech
Fisker says it’s planning more layoffs less than two months after cutting 15% of its workforce , as the EV startup scrambles to raise cash to stay alive. Fisker expects to seek bankruptcy protection within the next 30 days if it can’t come up with that money, according to a U.S. Securities and Exchange Commission regulatory filing.
The imperiled company said in the regulatory filing Tuesday it had just $54 million in cash and equivalents as of April 16, and another $11.2 million that can’t be immediately accessed. Fisker said in the filing that it’s currently trying to raise money to pay off a loan that it defaulted on in order to avoid bankruptcy. The outstanding balance as of mid-January was north of $300 million .
Fisker still employed 1,135 people globally as of April 19, according to the filing. That’s down from 1,560 at the end of 2022, and around 1,300 at the end of September 2023. The company also said Tuesday that it will be “reducing its physical footprint.”
This follows Fisker’s announcement Monday evening that a second member of its board of directors has left the company, with the first coming at the end of March. The company has also hired a chief restructuring officer who is now solely in charge of approving Fisker’s budget, as well as the decision-making process for any sale of Fisker’s business.
Fisker finds itself on the brink of bankruptcy following a troubled launch of its first electric vehicle, the Fisker Ocean SUV, that kicked off in June 2023.
The Ocean has been hampered by numerous problems, including buggy software, reports of sudden power loss and brake failure, and insufficient customer service, as TechCrunch reported in February . Fisker struggled to meet internal sales goals and lost track of millions of dollars of customer payments for some of the vehicles it did sell, triggering an internal audit that helped recover a majority of that money. It has spent the last few months attempting to pivot to a dealership model.
The Ocean is now subject to three separate federal investigations from the National Highway Traffic Safety Administration. The company has not issued any recalls, but has paused production of the SUV. In the meantime, it slashed prices on its existing inventory by as much as 39% in an attempt to generate short-term cash. The company has also been delisted from the New York Stock Exchange.
If Fisker ultimately seeks bankruptcy protection, it would be founder Henrik Fisker’s second automotive startup to do so. His previous effort, Fisker Automotive, filed for Chapter 11 bankruptcy protection in 2013.
