The inside story of the venture capital and startup world by Biz Carson.
May 1, 2021
Hello and welcome to Pipeline. I'm back from maternity leave, so a big thank you to Tomio for his help filling in on Pipeline the last few months. Don't worry though: You can still hear from him twice a week on the Protocol Fintech newsletter, so subscribe here.
It's also the one-year anniversary since I launched Pipeline! Who knew we would still be in a pandemic or that I would have completed the pandemic trifecta (baby, vaccine and moving out of San Francisco), but thank you readers for sticking with me through it all. If you have ideas and suggestions on things I should refresh or change up, feel free to email me at email@example.com.
Otherwise, on to the news. This week: Basecamp's politics, accelerated equity payouts and why famtech is an under-invested area.
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- "It's hypocritical how Basecamp is now a 'leave politics at home' company. For months, their cofounder was in the news criticizing everyone. It's only a problem when their employees want the same privileges/freedoms on matters directly affecting them," wrote AWS engineer Jaana Dogan on Twitter. Now over a third of the company has quit.
- "We're all calling it SXSE." Somehow Miami Tech Week meme'd its way into existence, and founders like Farhaj Mayan are flying to Miami to meet investors.
- "A growing phenomenon I'm seeing is GPs at venture firms making angel investments a round or two before their firm's typical stage. It's a great way for the partner to get on the cap table, build a relationship, and track the co. Cos happy to have them (vs firm) on the cap table," tweeted DoorDash exec (and angel investor) Gokul Rajaram.
- "It's time lower taxes not be key criteria for ethical folks. Sharing the benefits of capitalism is not terrible. Capitalism is by permission of democracy. Let's preserve these benefits by sharing a little more broadly. Inequality may be the largest problem in our society today," Vinod Khosla tweeted about the capital gains tax.
- Beast mode: Logan Bartlett distilled Tiger Global's investing strategy into one perfect meme.
Biz on Biz
Babies are a big business
I promise you: The next trillion-dollar company will be whatever company cracks the code to infant sleep and can best target ads to new parents at 3 a.m.
One of the things that struck me when I became a new parent is just how hard it is — and all the opportunities there are to make it easier and introduce technology.
- It starts just with downloading pregnancy-tracking apps, of which I ended up with five different ones, and each would tell me my growing (still in-utero) baby was the size of everything from a carrot to a cabbage to a Mr. Potato Head doll, all in one week.
- It didn't get any easier choosing a baby-tracking app, either, once our daughter was born, and I know several parents who use multiple to try take advantage of different features.
- Now that we're looking for child care, I once again signed up for multiple apps and websites, only to find a daycare through a nearly 28-year-old nonprofit messaging board.
But the many struggles of parenting are turning into opportunities for VCs to invest in "famtech" or the sector of family technology startups designed to make everything — including finding child care and managing a household — easier. These companies have only become more important in 2021 after millions of mothers left the workforce during the pandemic, and investors are starting to see value in the opportunities.
- The number of famtech investment deals in the U.S. nearly doubled from 22 deals in 2015 to 43 deals in 2020, according to data from PitchBook.
- Already in 2021, Brightwheel, an early-education software company, raised $55 million at a $600 million valuation. And just this week, debit card for kids startup Greenlight raised $260 million in a monster round led by Andreessen Horowitz.
- The one complaint I've heard is the lack of sizable exits. Care.com was a VC-backed company before it became publicly traded in 2014. It was acquired in 2019 by IAC for $500 million — a big exit, but not in the billions like VCs prefer.
- What's changed now is that the pandemic has made clear that the needs of families are not being met, and there's political tailwinds from the Biden administration with the $1.8 trillion "families plan" that could help bolster famtech companies.
Investors are collaborating on deals and formalizing famtech as an investing thesis, not unlike fintech or enterprise specialists.
- Melinda Gates's Pivotal Ventures teamed up with Ideo on The Holding Co., an incubator and investment company looking to work with founders focused on making families' lives easier.
- All Raise has a special learning circle, led by Maven Ventures's Sara Deshpande, on the future of families.
- Over 130 founders also joined the Fam Tech Founders Collaborative, started by TendLab's Amy Henderson, and worked on helping families during the COVID-19 crisis.
Solving baby sleep may be a stretch for a startup (although VC-backed Huckleberry is trying), but there's still a large market for startups to address other gaps in parenting. So far, solutions have ranged from child care startups like Winnie and UrbanSitter to smart family assistants like Modern Village's Milo to new consumer products like Lovevery's play kits, but with trillions in family spending on the line, there will be a new wave of startups proving that babies are a big business.
A MESSAGE FROM LENOVO
The pandemic upended life as we knew it. Most of us experienced the abrupt shift in the way we work, learn and connect, with blurring lines between office and home. While the future of work continues to evolve, the focus on a more engaged and fulfilled workforce will outlast the pandemic.
- Investing into your team's health and well being isn't "paternalistic" as Basecamp argued, it's just good business, says Union Square Ventures's Fred Wilson.
- If you want to advance in venture capital, NextView's David Beisel recommends not to wait until you lose your job, but to start by forming co-investor relationships at the would-be destination firms.
- The Stanford Tech History Project released its final report this week on what a decade of entrepreneurship looked like. Hint: more institutionalization of startup culture and a greater focus on the ethical and societal implications of tech.
Need to Know
- $200 million in, billions in return. Sutter Hill Ventures made a $12 billion profit on less than $200 million invested. And there are several other firms sitting on similar billions in profits as 2020 IPOs yield blockbuster VC profits, according to the WSJ.
- Stripe and Lyft are speeding up equity payouts. Instead of four years, Lyft and Stripe are switching to a one-year vesting schedules for two very different reasons.
- Startup investing is at record levels. Investing in women and POC is not. All Raise released its annual report this week, only to find that 2020 was a tough year for female and nonbinary founders and investors.
- A SPAC crackdown is coming? The SEC is reportedly mulling measures to stop every SPAC company of projecting wildly optimistic growth metrics.
- Not what the gig economy wanted to hear. U.S. Labor Secretary Marty Walsh weighed in for the first time on gig workers and suggested he supports classifying gig workers as employees. Uber, Lyft and DoorDash all took a hit, which could mean trouble for startups, too.
- From Protocol: A MoviePass founder has a wild new gaming startup.
- This week in VC history: Microsoft abandoned its takeover of Yahoo in 2008, leaving us to always wonder what would've happened if the two had combined to challenge Google.
- Your weekend reading: Pfizer = luxury, or at least that's what the internet has decided.
Five questions with...
Maven Ventures's Sara Deshpande
Focused on seed-stage investing, Maven Ventures partner Sara Deshpande has invested in consumer companies like Carrot, May Mobility and Neighborly.
What's the biggest thing you're talking about at your Monday morning partner meeting right now?
We spend part of all of our partner meetings talking about emerging consumer trends. What are new consumer behaviors we're seeing in our lives, in startup pitches and in the macro environment? COVID has caused one of the most massive shifts in consumer behavior we'll see in our lifetimes, and as we move into a post-COVID world, we're talking about what behaviors will stick and which new ones will emerge. Some of the trends we're watching are silver tech (the adoption of technology by seniors), the side hustle economy, companies built on top of the Zoom platform, hybrid events and new tech for parents and families.
What's one way you changed working in 2020 that you plan to keep?
I'll stick with 30-minute intro meetings with founders on Zoom. The default pre-COVID was typically hourlong meetings in person. We can meet so many more companies this way, and really open up our pipeline to companies we might have had a harder time meeting before when logistics made meetings more difficult. It's definitely a new dynamic and skill for founders, delivering their pitch in a tighter 30-minute window, and worth getting really good at because I think it's here to stay.
What problem do you want to see a startup solve?
There is so much opportunity for startups to solve problems for parents and families. Parenthood in today's world is relentless. With more dual-working couples and more moms in the workforce than ever before, families need support to keep things running happily at home. I'm excited about creative care models that help families access and afford child care — one of the top spend categories for families — as well as new tech products and tech-enabled services that help families manage their homes and the mental load of running them.
What's one article/book/podcast you can't stop thinking about and why?
The book "Maid" by Stephanie Land was a tough but great read. It's about the struggle of a single mom working incredibly hard to raise her young daughter by cleaning houses. It offers a real-world view into the daily life of many Americans and was a powerful story. I'm also reading "White Fragility" right now, which is at the same time educational, difficult and incredibly important.
What's the craziest thing you've seen in a pitch? And did it work?
Once I saw a founder bring a stack of coffee gift cards and dole them out as a question-and-answer game about her business. It did not work. Honestly my best advice for pitching is to really nail your vision and get the investor leaning in, and emphasize the things that are particularly special about your business. Give me exactly what I expect to see with the rest of the pitch. You don't need to break the mold on the basics. Follow the slide flow investors are expecting. Put yourself in the upper-right-hand corner of the competitive matrix, ya know?