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This morning Carta, a startup that helps private companies manage equity, announced it has created an investing vehicle called Carta Ventures. The well-funded unicorn wants to invest in young startups that it sees building off of its data-driven perspective into the world of private companies, helping to foster an ecosystem around its core products and services.

As TechCrunch has reported, the world of corporate venture capital has seen an enormous rise in the number of players active in the category, as cash-rich incumbents of all sizes deploy cash as a way to both keep an ear to the ground in their market and surrounding areas, and perhaps drive some cash-on-cash returns to boot. Companies like Slack have also compiled investing entities while private to put capital to work in companies that plug into their platform.

With all the activity in corporate venture capital, why do we care about Carta Ventures? Mostly because Carta itself is of growing importance in the expanding and increasingly crucial world of private companies, and the company has some pretty specific things it’s looking to invest in.

Why private companies matter

Carta works with private companies to help with certain valuation varietals, cap tables and reporting. It also offers tools and services for the venture class. This puts it squarely in the middle of the private market, which is in the midst of a long crescendo.

Investment into private companies is growing. The number of public companies is falling, and it’s taking longer for private companies to go public. The companies staying private are worth hundreds of billions of dollars. Hell, even The Economist dug into the private company boom, noting that “[i]nstitutional investors are rushing headlong into private markets, especially into venture capital, private equity and private debt.”

And Carta provides behind-the-scenes sinew and tissue to both the players (startups and other private companies) and their fuel (investors of all stripes). Efforts that sum to the startup working to expand the world of companies supporting those same firms through its new venture fund.

Carta wants to accelerate (and even instigate, as we’ll see) companies that add to its own platform, making investing and participating in the private markets a bit more limpid and simple — two things that the world of private capital and its constituent bets have never had in abundance.

Capital for whom?

To get a grip on who Carta wants to fund and why, TechCrunch caught up with James McGillicuddy, who heads up strategy for the company. Starting with the basics, the capital that Carta Ventures plans to invest will come out of Carta’s own accounts. McGillicuddy said that the entity will invest “balance sheet capital, with no outside structure,” meaning that the setup is “very much from the corporate ventures playbook.”

Standard so far, then. Next we wanted to know about how many general partners Carta Ventures would muster to go into the market. Instead of answering that directly, McGillicuddy discussed a number of existing internal staffers, and a collection of folks that he considers a “pretty good group of folks in the classical sense on the investment committee that will be able to help these entrepreneurs and guide them towards a business that we think should exist now that we [are] programmatically opening up access to the markets.”

Carta Ventures intends to write seed checks, according to a pre-release copy of a blog post shared with TechCrunch. McGillicuddy added that Carta Ventures’ “first priority is helping folks think through how to leverage our platform to build things that we think should exist, that we don’t have the expertise [in].”

As you can tell from McGillicuddy’s last two answers, there is intentionality afoot at Carta Ventures in terms of what it wants to see built.

In a blog post written by Carta CEO Henry Ward, three companies are mentioned: A startup focused on helping other companies come up with fair and market-fitting “total compensation” for employees including both cash and stock; a startup focused on “build[ing] analytic investment tools for venture as an asset class;” and one final startup focused on executing and publishing research on private companies.

I was curious why Carta wouldn’t just build this out itself, given how precise its anticipation of what it wants to be built. McGillicuddy said that the best people for all things that Carta wants to see aren’t inside its offices (true), and that even if some of those folks were already working for Carta, his company has “many other priorities and so many things to build.” 

Fair enough. But it indicates that Carta isn’t just building a corporate venture arm to go out and put money to work in companies that could later eat its lunch. Instead, it wants to put to use capital as a lever to power particular firms that could extend its reach.

What else?

Carta’s venture fund is willing to put money to work in idea-stage companies, provided that you’re doing stuff that it finds enticing (see above). And Carta is willing to put you up in its office and so forth. It’s there to help if you want it.

Why is all this happening? Carta isn’t public and probably isn’t profitable. How can it afford to have its own venture arm? This is how:

 

That was back in mid-2019 when it raised $ 300 million at a $ 1.7 billion valuation.

When the private capital markets are wiling to throw that much money at you, why not put it to work funding smaller companies who may profit off of your private company platform?1

  1. If you say “private companies” four times fast, you have to accept a check from Carta Ventures. It’s the rule.


TechCrunch

As the insuretech space fills up, a new entrant is joining the fight.

Y Combinator -backed Goodcover is launching today to take on the likes of big insurance, as well as insurance startups like Lemonade, Jetty, Hippo, and Zebra.

The company offers renters insurance in California. The twist? Goodcover returns unclaimed premiums to policy holders at the end of the year.

Here’s how it works. Goodcover operates as a managing general agent, which means they write the policy, set the pricing, and build their own risk assessment model, but partner with insurance carriers to hold the backend capital and write on their book. This differs from Lemonade, who is its own insurance carrier, but is similar to Hippo and many other new insurtech startups.

The first priority of the company, according to cofounder Chris Lotz, is to use technology to bring down the cost of insurance in the first place. That means eliminating paperwork, sales agents, and expensive acquisition tactics used by big insurance. Statista reports that GEICO, Progressive and StateFarm alone spent upwards of $ 3 billion on advertising in 2018.

But tech is also used to rethink the insurance model. Here’s what the company said in its launch blog post:

Old models say the number one indicator you’ll make a claim is having a prior claim, and charge you accordingly, even when you were not at fault. Models designed with the Member in mind determine whether a claim is likely to reoccur, or whether mitigation has actually reduced risk and warrants a lower price. Good technology empowers us to build this new data into our models, keeping prices as low as possible for as many people as possible.

Cofounder and CEO Chris Lotz says that USAA was actually a part of the inspiration for Goodcover. Lotz worked at AIG for eight years before starting the company, inspired by the USAA’s member-first mentality. Lotz looked to model Goodcover after USAA, the insurance co-operative for military service members and their families, which has no outside agents, pays a dividend, and uses technology to both keep costs down and offer quality policy coverage.

Goodcover takes a 20 percent cut up front. The other 80 percent goes to Goodcover’s partners: KnightBrook Insurance (primary carrier), Transatlantic Reinsurance (reinsurance), North American Risk Services (Claims Services), and Milliman (Actuarial Services).

The majority of that 80 percent goes toward indemnity, or paying out claims, with some going toward loss adjustment expenses (paying the human that goes and checks out or works on the claim), carrier fees and reinsurance premiums. These portions of the revenue are where partners like Knightbrook and Transatlantic Reinsurance make their money.

Whatever is left over is passed on to the policy holders. Lotz says that that number is expected to range from 5 percent to 10 percent. However, in a case where reinsurance premiums are applied (if, for example, a major earthquake were to destroy multiple Goodcover-insured apartment buildings), there may not be extra cash leftover. In that case, Goodcover will take on the extra cost, eliminating the dividend to policy holders but also not costing them any extra.

“This isn’t about charging everyone and then giving 50 percent back,” said Lotz. “It’s a guarantee that we’re not overcharging you in the first place.” The company claims that it saves renters 45 percent on their renters insurance.

Goodcover has raised a total of $ 2 million in funding from Fuel Capital, YC, Liquid 2, Box Group, several angels, and Transatlantic Reinsurance, one of their insurance partners.

The company has plans to continue expanding, though insurance is regulated at the state level, which could make that a more tedious process. Lotz explained that starting in California was very purposeful, as regulatory approval is relatively difficult to secure in such a consumer protection-heavy state. The company is also interested in introducing home owners insurance.

Insurance is a crowded market, with startups racing to rethink the model, employ tech to advance the product, and update the value proposition for a millennial audience that may be new to insurance. But in an industry that hasn’t changed much in over a century, and who has lost the trust of the consumer, it makes sense that startups are scrambling to stake their claim.


TechCrunch

I love music. Seriously, it’s one of the few things that brings solace in this cold, lonely world. Want to go deep on Joni Mitchell, William Onyeabor or Pablo Casals? I’m game. Yes, I worked at multiple record stores years before TechCrunch. Yes, I will always be that guy. What I will never be, however, is a musician, professional or otherwise.

I’m resolved to this fact at this point in my life. I’ll never be a rock star like I’ll never be a professional baseball player — both facts I’ve mostly made peace with. We don’t need to go into the two years of junior high when I played the trombone, or the decade and a half I attempted to master the guitar. All you need to know is I had absolutely zero aptitude for either.

It’s not for lack of desire to make music. It’s just a straight-up, good-old-fashioned lack of talent. For precisely this reason, I view any new piece of musical equipment with great interest. There’s a ton of money to be made for the startup that can truly unlock the potential of music making for those lacking the basic skills to do so.

Roli has long been of interest to me for this reason. I was one of the first people to cover the Seaboard when it debuted at SXSW a number of years ago. It’s a fascinating instrument, letting users bend notes courtesy of a soft material makeup, but mastering it — or, really, making any music at all — requires some ability to play piano.The company’s modular block system, announced a few years ago, was even more compelling, but similarly failed to scratch that itch.

Last week at CES, the fine folks at Kickstarter introduced me to the founders of a trio of crowdfunding companies that fit the bill to some degree. French startup Joué actually went on to win top prize at our CES pitch-off this year, with its modular MIDI controller of the same name.

The device operates on a similar principle as the Sensel Morph we’ve covered before, with silicone skins that overlay atop a touch surface to offer a variety of different controllers. Joué’s take is more music-focused than Sensel’s ever was. And besides, based on a conversation with Sensel at the show, I think it’s pretty fair to say that the company is turning most of its focus away from that device, in favor of compelling touch components it’s working to build into third-party handsets.

The Kickstarter project is an impressive one, as evidenced by the brief demo. It’s extremely versatile, requiring just a new skin and sound pack for the system to take on completely different aural qualities. The company also discussed the potential for customized sound packs. Joué brought NWA founder Arabian Prince in to perform at its both all week. An odd fit for CES, to be sure, but an interesting example of the kinds of artists such a product might be able to draw. It’s easy to see musicians expressing interest in a customized pad.

That said, while the company seems to be positioning the product as perfect for beginners, I do expect there’s a reasonably large learning curve here. That seems removed somewhat from Rhythmo. The Austin-based startup’s project combines music making with a guided dip into the maker world.

It’s a MIDI controller drum kit that you make out of a cardboard box. It ships with all of the pieces, and putting it together offers a nice connection into the process of creating a musical instrument. Founder Ethan Jin let me take a constructed model for a spin on the CES floor. The demo was a little glitchy for various reasons, but it was fun. The kit features large arcade buttons that can be mapped to a variety of sounds. You can use the Rhythmo app or interface with your music software of choice in iPad, desktop, etc. It’s a fun entry into that world.

Artiphon, however, is probably closest to fulfilling my very specific desires. The company is best known for its massively successful Kickstarter project, Instrument 1. That racked in a mind-boggling $ 1.3 million with the promise of delivering a guitar, violin, piano and drum machine all in a single device.

The newer Orba ($ 1.4 million this time), however, really caught my eye. The puck-shaped device is a pocket synthesizer/looper/MIDI controller that requires little if any musical knowledge to get up and running. After a conversation with founder Mike Butera, I’ve come to regard it at a very base-level as a sort of musical fidget spinner.

That is to say, it’s simple enough that you can use it absentmindedly to make music while you pace around your apartment, trying to come up with a half-decent headline for the story of crowdfunded music projects at CES you’ve been writing (a purely hypothetical example that in no way reflects my life).

Of the three, that’s the one I’m most key to review, in hopes of finally scratching that musical itch.

CES 2020 coverage - TechCrunch


TechCrunch

“Keep your head high and give them hell.”

My grandma, Opal Thompson, once wrote that to me in a letter, like the dyed-in-the-wool, strong Texan woman she was. It is now tattooed on my forearm for all to see. Memories of her powerful presence and great advice have been a North Star on my path to entrepreneurship, as well as the kick in the pants I have needed along the way to confidently go toe-to-toe with nonbelievers in my industry. “Honey, you need to work harder and smarter than men and get ‘er done,” she once told me. It may sound folksy, but it’s gotten me to where I am today.

Last October, my fearless cofounder Carolyn Rodz and I “gave them hell” with an announcement of which I couldn’t be prouder: our small business growth platform Alice just closed a Series A round of funding. That’s a major accomplishment that I think is newsworthy in its own right. But, the headline is even better. We required a morality clause in the funding agreement, legally demanding repercussions in the event of racial, gender, or sexual orientation discrimination.

As we were pitching Alice for funding, Carolyn and I went back to the fundamentals of why we started Alice for small business owners in the first place. Our platform exists to break down barriers to growth for our community of more than 100,000 business owners — especially entrepreneurs who are women, veterans, people of color, or members of the LGBTQ+ community.

Whether that means access to tips and best practices or funding opportunities of which they otherwise wouldn’t be aware, our job is to help small business owners “get ‘er done” — whatever that means to them. For us, there is an immense responsibility in being a comprehensive resource that small business owners trust to help them grow their ventures. We’re always encouraging our owners to try new approaches and go big in every aspect of their development, and that includes pushing owners to challenge institutions that stand in the way of their successes.

One institution that has long stood in our way is the silent perpetuation of discriminatory and predatory behavior by influential investors. While we’ve seen a rise of so-called “Weinstein” clauses drafted in the wake of the watershed #MeToo movement two years ago, most of those cases refer to protections for investors against investee executives who have outstanding allegations.

This is an important step in the right direction of instilling accountability at all levels of business. But we were left asking ourselves, “what happens when an investor is the one #MeToo’d?”

We at Alice were troubled by the lack of legal consequences for key decision makers, from board members to venture capitalists, given the reputational harm their actions could inflict on the businesses they touch. So to protect the reputation we have worked so hard to build for Alice and to protect the business owners who seek us for help every day from across the globe, Carolyn and I decided to lead by example and take a stand with our own investors. We took the “Weinstein” clause and flipped it, giving our board members the agency to use corporate governance mechanisms to vote for removal of any board member in the event of a #MeToo event, racial discrimination, or sexual orientation discrimination incident. Simply put, Alice and its investors are not afraid to show you the door if your behavior doesn’t serve the best interests of our community of entrepreneurs.

Including this provision was crucial to our vision for the company as we continue to grow. It echoes our core values of inclusivity within our online business community. And, as our users seek venture capital, we want them to know that they have the right to stipulate what should be common sense legal protections while still securing the funding they need. We have provided the clause openly here so everyone can take advantage — and not have to pay the legal bills we did.

Making sure that this information is available to anyone who wants it is part of our commitment to ensuring that everyone in business gets a fair shake. To have other founders include morality clauses like ours in their funding agreements is as important to me as the fact that we did it ourselves. We must make this a trend.

Our morality clause is also important to us as we strive to improve the broader business community and the way we all seek funding. Small businesses represent nearly 95 percent of all U.S. employers and support the careers of more than 50 percent of Americans.

But, while the small business landscape is changing into a New Majority, with more women, people of color, and LGBTQ+ folks starting businesses every day, the demographic of venture capitalists is much slower to change. To date, 89 percent of venture capital deciders are still men, and of all the investments they make, only 2 percent of them are in female-owned businesses. Less than half of a percent of women who receive venture capital are Latina, and the representation is even worse for other minority communities of entrepreneurs.

By now, Carolyn (who is Latina herself) and I have learned that we have to make our presence known in a business world that has often excluded us. And as more #MeToo behaviors come to light across industries, we’ll be able to protect our businesses and entrepreneurs making lasting impacts on our communities.

As we look to the next chapter of Alice and its expansion into new markets in 2020, we will continue to share our unique funding story with hopes that other small businesses will be inspired and empowered to do the same.

Venture capitalists be warned: the New Majority of entrepreneurs is here to stay, and our morality clause is just the beginning of a new path to small business success.

I think Grandma Opal would be proud.


TechCrunch

The Guild, a nearly four-year-old, Austin, Texas-based startup that turns apartments into comfortable short-term accommodations for business and other travelers, has landed $ 25 million in Series B funding from some of its earlier investors, including Maveron and Convivialite, along with real estate companies like the Nicol Investment Company, which owns some of the buildings in which The Guild has units.

The 171-person company — started by two University of Texas grads who met in 2015 through their overlapping interests (one worked in boutique hotel development and the other is a cofounder of the apartment marketplace Apartment List) —  has plenty of competition. Lyric, Domio, and Sonic are but three of the many other companies now in the business of gussying up apartments and renting them out like hotel rooms is Lyric, Domio, and Sonic

The competition is so stiff, in fact, that all are fast adding other services to their offerings. All promise around-the-clock support, for example, so if the WiFi goes down, there’s someone to scream at, no matter the hour. Lyric also offers its customers “curated in-suite art, music and coffee programs.” The Guild touts its personal approach, like adding a Christmas tree to a room for a family that is temporarily displaced during the holidays. Meanwhile, among its offerings, Sonder offers “pre-stay cleaning.”

The last seems less like a perk than a necessity, but in the race to capture mindshare, no detail is too small to promote, apparently.

As for its part, The Guild is now operating 565 units with another 235 units in the “final stages of development,” the company tells us. It’s also operating in six cities currently — Austin, Cincinnati, Dallas, Denver, Miami and Nashville — but it plans to land in six more in the next 12 to 24 months. (If you’re curious about how long it takes for a unit to become profitable, the company says the investment payback is traditionally within 12 months.)

As for how its breaking through the noise of its competitors, the company has a corporate sales team that works with companies like McKinsey, Google and Whole Foods, as well as partners with travel companies, including Concur, Airbnb, and Expedia.

Certainly, investors see promise in its strategy — and its momentum.

The Guild, which says it generated $ 10 million in revenue in 2018, tells us it generated more than $ 20 million in 2019 and that it expects to maintain 100% growth in 2020, thanks in part to its new round of funding.


TechCrunch

The Pallone-Thrune TRACED Act, a bipartisan bit of legislation that should make life harder for the villains behind robocalls, was signed into law today by the president. It’s still possible to get things done in D.C. after all!

We’ve covered the TRACED Act several times previously, as robocalls are, in addition to being horribly annoying, a uniquely annoying high-tech threat. Using clever targeting and spoofing technology, scammers are placing millions of calls that at best irritate and at worst take advantage of the vulnerable.

The new law won’t end that practice overnight, but it does add some useful tools to regulators’ toolboxes. Here’s how I summarized the bill’s provisions earlier this month:

  • Extends FCC’s statute of limitations on robocall offenses and increases potential fines
  • Requires an FCC rulemaking helping protect consumers from spam calls and texts (this is already underway)
  • Requires annual FCC report on robocall enforcement and allows for it to formally recommend legislation
  • Requires adoption on a reasonable timeline of the STIR/SHAKEN framework for preventing call spoofing
  • Prevents carriers from charging for the above service, and shields them from liability for reasonable mistakes
  • Requires the attorney general to convene an interagency task force to look at prosecution of offenders
  • Opens the door to Justice Department prosecution of offenders
  • Establishes a handful of specific cutouts and studies to make sure the rules work and interested parties are giving feedback

Senate Minority Leader Chuck Schumer (D-NY) took a break from other business to laud the enactment of the law:

And FCC Chairman Ajit Pai’s praise was effusive in a statement his office sent along:

I applaud Congress for working in a bipartisan manner to combat illegal robocalls and malicious caller ID spoofing.  And I thank the President and Congress for the additional tools and flexibility that this law affords us.  Specifically, I am glad that the agency now has a longer statute of limitations during which we can pursue scammers and I welcome the removal of a previously-required warning we had to give to unlawful robocallers before imposing tough penalties.

And I thank the American people for never letting us forget how fed up they are with scam, spoofed robocalls.  It’s their voices that power our never-ceasing push to fight back against the scourge of robocalls and malicious spoofing.

Of course the new law isn’t a magic wand; The FCC is still limited in what it can do and how quickly it can act. Even major fines like this $ 120 million one have had a negligible effect on the nefarious industry. “Like emptying the ocean with a teaspoon,” said Commissioner Jessica Rosenworcel at the time.

Here’s hoping the TRACED Act amounts to more than a bigger spoon. We’ll find out as regulators and the mobile industry grow into their new capabilities and begin the long process of actually applying them to the problem. It may take months or more to see any real abatement, but at least we’re taking concrete steps.


TechCrunch

Security researchers at Google say they’ve found a number of malicious websites which, when visited, could quietly hack into a victim’s iPhone by exploiting a set of previously undisclosed software flaws.

Google’s Project Zero said in a deep-dive blog post published late on Thursday that the websites were visited thousands of times per week by unsuspecting victims, in what they described as an “indiscriminate” attack.

“Simply visiting the hacked site was enough for the exploit server to attack your device, and if it was successful, install a monitoring implant,” said Ian Beer, a security researcher at Project Zero.

He said the websites had been hacking iPhones over a “period of at least two years.”

The researchers found five distinct exploit chains involving 12 separate security flaws, including seven involving Safari, the in-built web browser on iPhones. The five separate attack chains allowed an attacker to gain “root” access to the device — the highest level of access and privilege on an iPhone. In doing so, an attacker could gain access to the device’s full range of features normally off-limits to the user. That means an attacker could quietly install malicious apps to spy on an iPhone owner without their knowledge or consent.

Google said based off their analysis, the vulnerabilities were used to steal a user’s photos and messages as well as track their location in near-realtime. The “implant” could also access the user’s on-device bank of saved passwords.

The vulnerabilities affect iOS 10 through to the current iOS 12 software version.

Google privately disclosed the vulnerabilities in February, giving Apple only a week to fix the flaws and roll out updates to its users. That’s a fraction of the 90 days typically given to software developers, giving an indication of the severity of the vulnerabilities.

Apple issued a fix six days later with iOS 12.1.4 for iPhone 5s and iPad Air and later.

Beer said it’s possible other hacking campaigns are currently in action.

The iPhone and iPad maker in general has a good rap on security and privacy matters. Recently the company increased its maximum bug bounty payout to $ 1 million for security researchers who find flaws that can silently target an iPhone and gain root-level privileges without any user interaction. Under Apple’s new bounty rules — set to go into effect later this year — Google would’ve been eligible for several million dollars in bounties.

When reached, a spokesperson for Apple declined to comment.


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