pipelinepipelineauthorBiz CarsonBraintrust Post No HeaderDo you know what's going on in the venture capital and startup world? Get the Pipeline newsletter every Saturday.021fce003e
Get access to Protocol
I’m already a subscriber
Want to better understand the $150 billion gaming industry? Get our newsletter every Tuesday.
Are you keeping up with the latest cloud developments? Get Tom Krazit and Joe Williams' newsletter every Monday and Thursday.
David Wertime and our data-obsessed China team analyze China tech for you. Every Wednesday, with alerts on key stories and research.
Want your finger on the pulse of everything that's happening in tech? Sign up to get David Pierce's daily newsletter.
Do you know what's going on in the venture capital and startup world? Get the Pipeline newsletter every Saturday.
Do you know what's coming next up in the world of tech and entertainment? Get Janko Roettgers' newsletter every Thursday.
Hear from Protocol's experts on the biggest questions in tech. Get Braintrust in your inbox every Thursday.
Get access to the Protocol | Fintech newsletter, research, news alerts and events.
June 27, 2020
It's a great time to build a company, but the coronavirus pandemic, economic downturn and Black Lives Matter movement will shape startups in new ways, according to top venture capitalists.
Co-founder of LinkedIn and general partner at Greylock
The class of 2020 startups will be unique in two ways: 1) the massive shift in market readiness, and 2) nearly every founding team will be distributed.
The pandemic has set certain markets back (e.g. coworking spaces), but it has also created the conditions for other markets to take a giant leap forward. A specific example: telehealth startups. While the majority of health visits have now moved to video calls, the implications go well beyond a simple shift in delivery mechanism.
Moreover, older adults represent a large proportion of patients, and an even larger proportion of market power. Not previously early adopters of telemedicine, older adults are now developing what is likely to be a lasting habit, accelerating the industry adoption cycle by several decades. This will speed up the deployment of new technologies such as AI and machine learning to make diagnoses via smartphone imaging, or to extract information from doctor-patient interactions and improve follow-up and follow-through. And while the pandemic will eventually recede, we will see a permanent change in how we access health care.
Another impact for the class of 2020: All founding teams will be distributed. Previously, most founding teams coalesced in a specific place, but there isn't much social distancing in a garage! Teams that want to build world-changing products together will need better ways to communicate. It will be more difficult — and more important than ever — that co-founders find ways to quickly connect and align. And when people are sheltering-in-place, the geographic density of talent in Silicon Valley is much less relevant. The techniques that Silicon Valley uses to scale companies, such as Blitzscaling, can be learned and practiced by anyone. The next generation's big winner could be based anywhere with sufficient access to financial capital and virtual access to technological expertise.
Co-founding partner at Floodgate
- Areas where I think there are interesting new opportunities for startups:
- They will leverage new knowledge management tools: Knowledge management hasn't been rethought in some time, but with the move to remote work — whether they are fully remote teams or hybrid teams — documentation will become a central focus of organizations. Some interesting tools have popped up (Supernote.io and Almanac.io are two we have invested in, but Notion and Roam Research are two other examples) and we're still investing in this space. In particular, I'd be interested in companies that are creating deeper knowledge management and search as well as a social network for knowledge, which is more consumer-facing.
- They will empower the solopreneur: With the uncertainty of the go-forward economy, many individuals are taking matters into their own hands and becoming their own businesses. Digital tools like Dumpling.us and Mighty Networks (our investments) enable the solopreneur to build their own clientele, set their own schedule, and create their pricing on their terms. We also think that companies like Substack and Cameo and Patreon power a new content path for solopreneurs
- They will rediscover the Future of Joy: With money saved on gyms, travel, events and eating out, consumers will start to look for new ways to experience joy. There are opportunities for creating new categories of spend. One example we are seeing is Learn Monthly, where we believe consumers are mastering creative pursuits like oil painting or music production in a similar manner to how they might pursue running a half marathon (social, bragging rights). What other ways of experiencing joy are new and unexpected?
- How startups will be run differently than in the past:
- Essentialism: Companies started this year will know what is essential and what is not. Employees will not be bogged down by face time but will be evaluated on the quality of their work and measured by the contributions they make to their company. Many of us have applied the Marie Kondo principles of decluttering our homes to decluttering our work lives and businesses. It enables us to rethink fundamental assumptions about the world — what we need and what we simply do because it's the way that it has been done. My feeling is that this means management moves from storytelling to execution with a renewed emphasis on wisdom rather than hope.
- Minimum viable companies: Companies started this year will not try to buy the perception of product market fit with growth of vanity metrics. Instead, they seek to build first a minimum viable company that balances product innovation and value with a business model that is not dependent on scale for margins. Such companies have the ability to outlast competitors and are not required to outspend them. While this may mean less reliance on venture capital, most companies don't need venture capital anyway.
- Renewed focus on access and inclusion: Founders are focused on creating diverse teams from the get-go. This means diversity of viewpoints. Diversity in lifestyle. Diversity in background. Much of this is enabled by geographical diversification through remote work. Continued work needs to happen to make sure that this representation happens at the executive level, board room and cap table.
Managing partner at Forerunner Ventures
This year has exposed so many important issues, including the crisis of COVID and the deeply important and impactful work of Black Lives Matter. Because these long overdue issues have surfaced and cracked the outdated veneer of status quo, this breakthrough class of startups will be reevaluating long-held business values and instead lead with compassion to make a real social impact.
These new startups are likely to be more purpose-driven with regards to their missions, business impact and cultures. The ones that capture our attention will be built around solving customer needs versus desires; they will prioritize sustainability practices and be hyper aware of their overall footprint on the planet; and importantly, they will be building diverse teams with inclusive practices. These startups won't be afraid of having important and often difficult or uncomfortable conversations and will understand their ability to influence for good.
In terms of operating, because of the pandemic, millions of workers experimented with working from home for the first time in their careers. And given that many tech companies have already mandated work-from-home until 2021 (Twitter, Google, Microsoft), many others will likely follow suit. As we continue to adapt to remote work, employees are operating within different frameworks, and companies will need to reimagine new ways to foster bonds and build strong team dynamics, especially from the top down.
In the face of unknowns and unimaginable hurdles to growing a business, flexibility and the fortitude to make swift changes will be more essential than ever for founders. Founders set expectations on growth, and it's their responsibility to build teams that can deliver on those visions, but now more than ever they have to have the adaptability to react to and ensure solid foundations for achieving considered growth and recalibrating their businesses for ever-changing environments. Resilience is the key word here.
Venture Partner at NextGen VP
We've left the pre-COVID world, where companies can easily raise millions amid major money losses and ignore human and social dynamics. New startups will be molded by the implications of COVID and the social and racial justice movement.
Startups will be remote-first to preempt health issues and avoid unnecessary real estate costs. Startups will focus on problems that affect the many and not just the elite few because of the work-life challenges that COVID has brought about (e.g., job loss, WFH). Startups will bootstrap, prioritize revenue, profit and performance more than ever. Because of the tightening of purse strings, startups will prompt side-hustling entrepreneurs looking for extra cash. This new breed of entrepreneur will create products and services (a la passion economy) and generate additional revenue streams.
From a social and racial justice movement perspective, startups with underestimated founding teams will get their moment to shine with capital coming their way from the VC and tech ecosystem that is putting their money where their mouth is (e.g. a16z's Talent x Opportunity Fund, SoftBank's Opportunity Growth Fund, Google investing $100 million in underestimated founders and funds).
Funding will come from a more diverse set of vehicles, from alternative VC funds to equity crowdfunding, to debt to newly activated diverse angels. Underestimated founders will build the companies of the future — ones that represent the diversity of our population and produce the products and services that the mass market sorely needs.
Partner at First Round Capital
The national conversation around race and equality is creating a renewed emphasis on the importance of diversity in the startup and venture ecosystem. I'm hopeful that this much-needed and long overdue pressure — on both the startups being built and the investors tasked with backing them — will result in a more diverse class of founders than ever before.
Founders are taking a hard look at the composition of their founding teams, their cap tables, their board rooms, and their early hires — and will be less willing to let "diversity debt" accrue as the costs are impossible to ignore. As investors, we have a tremendous amount of work to do here. That work consists of 1) acknowledging and dismantling the bias within narrow "traditional" founder archetypes, 2) putting in the legwork and process changes it will take to back more founders of different backgrounds, and 3) pushing ourselves and the companies we back to build more inclusive organizations that are more representative of the country that we live in.
Whether it's fully remote or some kind of hybrid model, we're also seeing a broader shift toward both distributed workforces and distributed systems. We're noticing that companies in our community are increasingly opting to buy rather than build, and we expect to see developer focused API services proliferate. We're excited about this trend because it empowers new companies to focus as much as possible on their core product and creates a new category of developer focused companies for us to partner with as investors.
Finally, the growth-at-all-costs mentality is becoming more muted in the 2020 startups. We are seeing a shift from a "tell me the story" fundraising environment to a "show me the proof" fundraising environment. Conversations around contribution margins and unit economics are starting much earlier on in a company's life. We think businesses without a very strong economic engine will face challenges when they go to raise money this year, and the class of 2020 founders will take this into account when balancing growth vs. profitability.
Biz Carson ( @bizcarson) is a San Francisco-based reporter at Protocol, covering Silicon Valley with a focus on startups and venture capital. Previously, she reported for Forbes and was co-editor of Forbes Next Billion-Dollar Startups list. Before that, she worked for Business Insider, Gigaom, and Wired and started her career as a newspaper designer for Gannett.
More from Braintrust
A prolonged, widespread outage affected customers of several different Salesforce products Tuesday afternoon, and also took down its status page.
"Salesforce is currently experiencing a service disruption across multiple instances," the company confirmed on Twitter with a link to its status page, which was not working. The sales and marketing software company uses a combination of cloud providers and its own data centers to provide its services, and it was not immediately clear what was causing the outage.
Salesforce co-founder Parker Harris acknowledged the outage on Twitter, blaming the disruption on a "DNS issue," which is a very common reason for prolonged cloud service outages.
This story was updated at 4:14 p.m. PT to include Harris's explanation of the outage.
EXPAND Show less
Twitter just poached Bumble's head of product design, a woman widely respected in her field for building with inclusion and accessibility. Lara Mendonça will lead Twitter's work using design to encourage meaningful conversation.
Mendonça, whose title will be senior manager of product design, is just the latest in a string of widely-respected, increasingly diverse, and ethics- and inclusion-minded hires over the last two years at Twitter: We broke down a quick list of some of the notable names (though this is by no means exhaustive).
- Mendonça made a name for herself at Bumble with her vulnerability theory of design, which she told the Wall Street Journal was born out of her own experiences as a bisexual woman with ADHD from Brazil.
- Rumman Chowdhury: Twitter's new head of its ML Ethics, Transparency and Accountability team (called META internally), Chowdhury was hired in February, just months after launching her own AI-ethics focused group called Parity AI. Chowdhury is one of the most widely-respected leaders in the AI ethics field, and news of her hire at Twitter drew widespread industry praise.
- Jutta Williams: Hired nine months ago as the product lead for the META team, Williams left her job as senior technical lead for central privacy at Facebook after only a year. She helped lead Google's AI health research before her time at Facebook.
- Rinki Sethi: The new CISO at Twitter filled the long-open role in September 2020; she was previously the CISO and VP at Rubrik and VP for information security at IBM.
- Nikkia Reveillac: Twitter's head of research was promoted from interim to full-time director in June 2020, after less than a year on the company research team; she previously worked at Colgate for more than 13 years, spending her last few leading its research insights team.
- Maya Gold Patterson: The young woman in charge of designing Twitter's audio-chat Spaces product made a name for herself writing about the challenges and frustrations of being a Black woman in tech.
- Christine Su: The former "activist-entrepreneur" working on farming and climate change tech became the head of product for conversational safety in early 2020. In that role, she's focused on increasing user choice and control over the Twitter experience.
Kayvon Beykpour, Twitter's head of consumer product, and Dantley Davis, Twitter's chief design officer, both joined the company earlier (2018 and 2019, respectively), but they often profess the same philosophies as many of these newer hires. Twitter has spent the last two years emphasizing conversational health and user safety in its product announcements, and it appears the company is building out its team to reflect those commitments internally.
EXPAND Show less
Better.com said Tuesday that it is going public via a special acquisition acquisition company in a deal that values the digital mortgage lender at $6.9 billion.
Better.com has signed a merger agreement with Aurora Acquisition Corp., which completed its own initial public offering in March. The merger, once effective, would turn Better.com into a publicly listed company. The companies said they expected to complete the deal by December.
SB Management Limited, a SoftBank subsidiary, will be part of the deal through a $1.5 billion private investment in public equity. Better.com announced last month that SoftBank had invested $500 million in the company, boosting its valuation to $6 billion.
EXPAND Show less
Facebook research has found that users who had the company's COVID-19 information center promoted in their News Feeds experienced a 3% increase in their belief in facts about vaccines, compared to users who did not. "It's an example of how even a single campaign can have an impact here," Facebook's head of health, KX Jin, said in a call with reporters Tuesday.
Facebook released those stats along with results of a survey the company has been conducting in partnership with Carnegie Mellon University, which CMU statistician Alex Reinhart called "the largest public health survey ever conducted." That survey found that vaccine acceptance is on the rise nationally, particularly among Black and Hispanic adults.
As part of this research, Facebook has been assessing its own ability to influence vaccine acceptance, promoting the COVID-19 information center in a subset of users' News Feeds across five countries and comparing their survey results to a control group. That experiment yielded positive results, said Heidi Larson, founding director of the Vaccine Confidence Project at the London School of Hygiene & Tropical Medicine. "Any incremental... positive increase is a good thing," Larson said.
Still, Larson said that research in both the U.S. and in Africa has shown that people who spend more time on social media are more likely to be hesitant about the vaccine. "For those that spend a larger proportion of time on social media," she said, "there is a correlation with more tendency to believe conspiracy and misinformation."
Facebook said it's using the results of this and other research to design new interventions, including the vaccination stickers and profile frames the company recently rolled out. "Researchers at MIT actually did a separate Facebook COVID-19 survey and found that vaccine acceptance can increase simply by showing the number of people in your area that plan to be vaccinated," Jin said.
EXPAND Show less
Coinbase banned all salary and equity negotiations for its future hiring and instead plans to offer identical pay to every employee in the same position and location in an effort to eliminate the lingering effects of early-career pay disparities.
The company announced the new policy as part of a series of steps to make its compensation more competitive and fair, according to a blog post written Monday by L. J. Brock, Coinbase's chief people officer. "Traditionally people expect they need to negotiate for the best package after being hired in a new job. Those that do this well tend to be rewarded, and those that don't lose out. These negotiations can disproportionately leave women and underrepresented minorities behind, and a disparity created early in someone's career can follow them for decades," Brock wrote.
Coinbase will also increase its compensation targets to the 75th percentile of its peers and adopt annual equity grants that vest yearly over the course of the workers' career, instead of the standard four-year vesting grants offered at most tech companies. Stripe and Lyft have also recently shifted their equity offers to one year from four.
While the four-year vesting rules typically create longer retention periods for tech companies, the new one-year offers will allow companies with fast-growing valuations to avoid enormous equity payouts, costing less over the long-term for small and medium-sized startups. The new offers may also prove more attractive to top talent interested in increased workplace flexibility as the COVID-19 pandemic comes to an end.
"Some may say eliminating 4-year new hire grants could hurt retention; we disagree. We don't want employees to feel locked in at Coinbase based on grants awarded 3 or 4 years prior. We want to earn our employees' commitment every year and, likewise, expect them to earn their seat at Coinbase," Brock wrote.
EXPAND Show less