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Up-and-coming enterprise startups in NYC

2018, April 22 - 1:00am

New York City has an incredible density of up-and-coming enterprise-focused startups. While the winners are publicized and well-known, we felt it was time to put a bit of a spotlight on younger companies, ones you may not have heard about yet, but are likely to in the coming years.

TechCrunch asked two dozen founders, venture capitalists, and other community members which companies — other than ones they are directly connected to — they thought were most likely to change the enterprise world in the coming years. From a list of 64 nominated startups, we chose twelve we thought best exemplified the potential for New York. All data on venture capital fundraised comes from Crunchbase. Also be sure to check out our in-depth profiles of NS1, Datadog, BigID, Packet, and Timescale as well as Security Scorecard, Uplevel, and HYPR, which were not included on this list.

Categories: Business News

Full-Metal Packet is hosting the future of cloud infrastructure

2018, April 22 - 1:00am

Cloud computing has been a revolution for the data center. Rather than investing in expensive hardware and managing a data center directly, companies are relying on public cloud providers like AWS, Google Cloud, and Microsoft Azure to provide general-purpose and high-availability compute, storage, and networking resources in a highly flexible way.

Yet as workflows have moved to the cloud, companies are increasingly realizing that those abstracted resources can be enormously expensive compared to the hardware they used to own. Few companies want to go back to managing hardware directly themselves, but they also yearn to have the price-to-performance level they used to enjoy. Plus, they want to take advantage of a whole new ecosystem of customized and specialized hardware to process unique workflows — think Tensor Processing Units for machine learning applications.

That’s where Packet comes in. The New York City-based startup’s platform offers a highly-customizable infrastructure for running bare metal in the cloud. Rather than sharing an instance with other users, Packet’s customers “own” the hardware they select, so they can use all the resources of that hardware.

Even more interesting is that Packet will also deploy custom hardware to its data centers, which currently number eighteen around the world. So, for instance, if you want to deploy a quantum computing box redundantly in half of those centers, Packet will handle the logistics of installing those boxes, setting them up, and managing that infrastructure for you.

The company was founded in 2014 by Zac Smith, Jacob Smith, and Aaron Welch, and it has raised a total of $12 million in venture capital financing according to Crunchbase, with its last round led by Softbank. “I took the usual path, I went to Juilliard,” Zac Smith, who is CEO, said to me at his office, which overlooks the World Trade Center in downtown Manhattan. Double bass was a first love, but he found his way eventually into internet hosting, working as COO of New York-based Voxel.

At Voxel, Smith said that he grew up in hosting just as the cloud started taking off. “We saw this change in the user from essentially a sysadmin who cared about Tom’s Hardware, to a developer who had never opened a computer but who was suddenly orchestrating infrastructure,” he said.

Innovation is the lifeblood of developers, yet, public clouds were increasingly abstracting away any details of the underlying infrastructure from developers. Smith explained that “infrastructure was becoming increasingly proprietary, the land of few companies.” While he once thought about leaving the hosting world post-Voxel, he and his co-founders saw an opportunity to rethink cloud infrastructure from the metal up.

“Our customer is a millennial developer, 32 years old, and they have never opened an ATX case, and how could you possibly give them IT in the same way,” Smith asked. The idea of Packet was to bring back choice in infrastructure to these developers, while abstracting away the actual data center logistics that none of them wanted to work on. “You can choose your own opinion — we are hardware independent,” he said.

Giving developers more bare metal options is an interesting proposition, but it is Packet’s long-term vision that I think is most striking. In short, the company wants to completely change the model of hardware development worldwide.

VCs are increasingly investing in specialized chips and memory to handle unique processing loads, from machine learning to quantum computing applications. In some cases, these chips can process their workloads exponentially faster compared to general purpose chips, which at scale can save companies millions of dollars.

Packet’s mission is to encourage that ecosystem by essentially becoming a marketplace, connecting original equipment manufacturers with end-user developers. “We use the WeWork model a lot,” Smith said. What he means is that Packet allows you to rent space in its global network of data centers and handle all the logistics of installing and monitoring hardware boxes, much as WeWork allows companies to rent real estate while it handles the minutia like resetting the coffee filter.

In this vision, Packet would create more discerning and diverse buyers, allowing manufacturers to start targeting more specialized niches. Gone are the generic x86 processors from Intel driving nearly all cloud purchases, and in their place could be dozens of new hardware vendors who can build up their brands among developers and own segments of the compute and storage workload.

In this way, developers can hack their infrastructure much as an earlier generation may have tricked out their personal computer. They can now test new hardware more easily, and when they find a particular piece of hardware they like, they can get it running in the cloud in short order. Packet becomes not just the infrastructure operator — but the channel connecting buyers and sellers.

That’s Packet’s big vision. Realizing it will require that hardware manufacturers increasingly build differentiated chips. More importantly, companies will have to have unique workflows, be at a scale where optimizing those workflows is imperative, and realize that they can match those workflows to specific hardware to maximize their cost performance.

That may sound like a tall order, but Packet’s dream is to create exactly that kind of marketplace. If successful, it could transform how hardware and cloud vendors work together and ultimately, the innovation of any 32-year-old millennial developer who doesn’t like plugging a box in, but wants to plug in to innovation.

Categories: Business News

BigID lands in the right place at the right time with GDPR

2018, April 22 - 1:00am

Every startup needs a little skill and a little luck. BigID, a NYC-based data governance solution has been blessed with both. The company, which helps customers identify sensitive data in big data stores, launched at just about the same time that the EU announced the GDPR data privacy regulations. Today, the company is having trouble keeping up with the business.

While you can’t discount that timing element, you have to have a product that actually solves a problem and BigID appears to meet that criteria. “This how the market is changing by having and demanding more technology-based controls over how data is being used,” company CEO and co-founder Dimitri Sirota told TechCrunch.

Sirota’s company enables customers to identify the most sensitive data from among vast stores of data. In fact, he says some customers have hundreds of millions of users, but their unique advantage is having built the solution more recently. That provides a modern architecture that can scale to meet these big data requirements, while identifying the data that requires your attention in a way that legacy systems just aren’t prepared to do.

“When we first started talking about this [in 2016] people didn’t grok it. They didn’t understand why you would need a privacy-centric approach. Even after 2016 when GDPR passed, most people didn’t see this. [Today] we are seeing a secular change. The assets they collect are valuable, but also incredibly toxic,” he said. It is the responsibility of the data owner to identify and protect the personal data under their purview under the GDPR rules, and that creates a data double-edged sword because you don’t want to be fined for failing to comply.

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GDPR is a set of data privacy regulations that are set to take effect in the European Union at the end of May. Companies have to comply with these rules or could face stiff fines. The thing is GDPR could be just the beginning. The company is seeing similar data privacy regulations in Canada, Australia, China and Japan. Something akin go this could also be coming to the United States after Facebook CEO, Mark Zuckerberg appeared before Congress earlier this month. At the very least we could see state-level privacy laws in the US, Sirota said.

Sirota says there are challenges getting funded as a NYC startup because there hadn’t been a strong big enterprise ecosystem in place until recently, but that’s changing. “Starting an enterprise company in New York is challenging. Ed Sim from Boldstart [A New York City early stage VC firm that invests in enterprise startups] has helped educate through investment and partnerships. More challenging, but it’s reaching a new level now,” he said.

The company launched in 2016 and has raised $16.1 million to date. It scored the bulk of that in a $14 million round at the end of January. Just this week at the RSAC Sandbox competition at the RSA Conference in San Francisco, BigID was named the Most Innovative Startup in a big recognition of the work they are doing around GDPR.

Categories: Business News

Timescale is leading the next wave of NYC database tech

2018, April 22 - 1:00am

Data is the lifeblood of the modern corporation, yet acquiring, storing, processing, and analyzing it remains a remarkably challenging and expensive project. Every time data infrastructure finally catches up with the streams of information pouring in, another source and more demanding decision-making makes the existing technology obsolete.

Few cities rely on data the same way as New York City, nor has any other city so shaped the technology that underpins our data infrastructure. Back in the 1960s, banks and accounting firms helped to drive much of the original computation industry with their massive finance applications. Today, that industry has been supplanted by finance and advertising, both of which need to make microsecond decisions based on petabyte datasets and complex statistical models.

Unsurprisingly, the city’s hunger for data has led to waves of database companies finding their home in the city.

As web applications became increasingly popular in the mid-aughts, SQL databases came under increasing strain to scale, while also proving to be inflexible in terms of their data schemas for the fast-moving startups they served. That problem spawned Manhattan-based MongoDB, whose flexible “NoSQL” schemas and horizontal scaling capabilities made it the default choice for a generation of startups. The company would go on to raise $311 million according to Crunchbase, and debuted late last year on NASDAQ, trading today with a market cap of $2 billion.

At the same time that the NoSQL movement was hitting its stride, academic researchers and entrepreneurs were exploring how to evolve SQL to scale like its NoSQL competitors, while retaining the kinds of features (joining tables, transactions) that make SQL so convenient for developers.

One leading company in this next generation of database tech is New York-based Cockroach Labs, which was founded in 2015 by a trio of former Square, Viewfinder, and Google engineers. The company has gone on to raise more than $50 million according to Crunchbase from a luminary list of investors including Peter Fenton at Benchmark, Mike Volpi at Index, and Satish Dharmaraj at Redpoint, along with GV and Sequoia.

While web applications have their own peculiar data needs, the rise of the internet of things (IoT) created a whole new set of data challenges. How can streams of data from potentially millions of devices be stored in an easily analyzable manner? How could companies build real-time systems to respond to that data?

Mike Freedman and Ajay Kulkarni saw that problem increasingly manifesting itself in 2015. The two had been roommates at MIT in the late 90s, and then went on separate paths into academia and industry respectively. Freedman went to Stanford for a PhD in computer science, and nearly joined the spinout of Nicira, which sold to VMware in 2012 for $1.26 billion. Kulkarni joked that “Mike made the financially wise decision of not joining them,” and Freedman eventually went to Princeton as an assistant professor, and was awarded tenure in 2013. Kulkarni founded and worked at a variety of startups including GroupMe, as well as receiving an MBA from MIT.

The two had startup dreams, and tried building an IoT platform. As they started building it though, they realized they would need a real-time database to process the data streams coming in from devices. “There are a lot of time series databases, [so] let’s grab one off the shelf, and then we evaluated a few,” Kulkarni explained. They realized what they needed was a hybrid of SQL and NoSQL, and nothing they could find offered the feature set they required to power their platform. That challenge became the problem to be solved, and Timescale was born.

In many ways, Timescale is how you build a database in 2018. Rather than starting de novo, the team decided to build on top of Postgres, a popular open-source SQL database. “By building on top of Postgres, we became the more reliable option,” Kulkarni said of their thinking. In addition, the company opted to make the database fully open source. “In this day and age, in order to get wide adoption, you have to be an open source database company,” he said.

Since the project’s first public git commit on October 18, 2016, the company’s database has received nearly 4,500 stars on Github, and it has raised $16.1 million from Benchmark and NEA .

Far more important though are their customers, who are definitely not the typical tech startup roster and include companies from oil and gas, mining, and telecommunications. “You don’t think of them as early adopters, but they have a need, and because we built it on top of Postgres, it integrates into an ecosystem that they know,” Freedman explained. Kulkarni continued, “And the problem they have is that they have all of this time series data, and it isn’t sitting in the corner, it is integrated with their core service.”

New York has been a strong home for the two founders. Freedman continues to be a professor at Princeton, where he has built a pipeline of potential grads for the company. More widely, Kulkarni said, “Some of the most experienced people in databases are in the financial industry, and that’s here.” That’s evident in one of their investors, hedge fund Two Sigma. “Two Sigma had been the only venture firm that we talked to that already had built out their own time series database,” Kulkarni noted.

The two also benefit from paying customers. “I think the Bay Area is great for open source adoption, but a lot of Bay Area companies, they develop their own database tech, or they use an open source project and never pay for it,” Kulkarni said. Being in New York has meant closer collaboration with customers, and ultimately more revenues.

Open source plus revenues. It’s the database way, and the next wave of innovation in the NYC enterprise infrastructure ecosystem.

Categories: Business News

Special Report: New York’s enterprise infrastructure ecosystem

2018, April 22 - 1:00am

New York City is a marvel of infrastructure planning and engineering. There are the visible landmarks — the Brooklyn Bridge, the Lincoln Tunnel, the Empire State Building — and also the invisible ones that run the city beneath its crowded streets, such as one of the world’s most complex water tunneling and reservoir systems. That infrastructure was built for the economy of the 20th century, a market that emphasized the manufacturing and trading of goods.

Infrastructure though has a very different meaning in the 21st century. The digital economy means we no longer measure the movement of products simply as tonnage on freight ships and trucks, but rather as bits and bytes flowing from data centers to devices. The shipping container once revolutionized 20th century global trade, and now containerization is revolutionizing the way we think about delivering applications to end users.

While New York has more Fortune 500 companies than any other state, to date it hasn’t been a global leader in startups compared to hotspots like the Bay Area, particularly in the sorts of enterprise and data infrastructure startups that undergird the internet revolution.

That situation is rapidly changing. Today, New York City has numerous unicorns targeting the enterprise, and a large number of up-and-coming winners like Datadog that are commanding substantial market share. But what is truly exciting — and different from past prognostications about the success of enterprise in New York — is that we are now seeing the rise of a generation of hundreds of startups that are deeply technical and deeply committed to building the future of enterprise infrastructure and applications.

Today, TechCrunch presents a special report on the state of enterprise startups in New York City. My colleague Ron Miller and I interviewed dozens of people, and we boiled down their thoughts and insights into this series of articles. We purposely brought out focus away from the pure SaaS application world, and instead tried to go deeper into the infrastructure and security startups that are increasingly powering and protecting our internet services.

This article provides an overview of the changing exit environment for startups in NYC, the rise of a set of mafias which are incubating startups, and the changing culture of customers and how that is assisting NYC startups with their competition out west.

We then have a series of profile pieces on early but burgeoning startups: DNS provider NS1, time series database Timescale, bare metal cloud Packet, data privacy BigID, cloud monitoring Datadog, and a trio of security startups: cybersecurity analytics Security Scorecard, graph-based security ops Uplevel Security, and decentralized authentication HYPR. Finally, we put together a gallery of enterprise startups we think are going to be making waves in the coming years.

No need to search for the exits anymore

One of the on-going criticisms of the New York City startup ecosystem has been its lack of exits. Despite being a technology epicenter and a hub for some of the world’s largest and richest companies, the actual track record of startups in the city has never measured up. That’s a massive problem, since exits aren’t just trophies to put on the wall. Rather, they’re the generators of wealth which can be transformed into the lifeblood for the next generation of startups.

The exit environment in New York has started to look much better in recent years though, particularly in the enterprise space over the past year. Yext, which manages online reputation for brands, debuted on the NYSE last year and now sits at a $1.28 billion market cap. MongoDB went public late last year, and is just shy of a $2 billion valuation. Flatiron Health, which applies data analytics to cancer research, was acquired by Roche for $1.9 billion two months ago. Moat, an ad measurement company, was purchased by Oracle for $850 million last year.

Those are some hefty exits over just a couple of months, but the real depth of the NYC ecosystem can be witnessed in the startups right behind them that are becoming market leaders. Those companies include AppNexus, Datadog, UiPath, Dataminr, Sprinklr, InVision, Digital Ocean, Percolate, Namely, Compass, Infor, Zeta Global, Greenhouse, WeWork and the list continues. Together, these companies have raised billion of dollars in venture capital funding according to Crunchbase.

What’s different for New York than in the past is that the city is no longer relying on one company as the leading light that will prove the worth of the rest of the ecosystem. As we interviewed investors and founders about what companies they thought were going to be the most notable in the years ahead, what was illuminating was just how little overlap there existed between their answers. There is truly a cohort of strong startups coming of age in the city, and that gives the ecosystem much more vitality than it has ever seen before.

These aren’t your Godfather’s mafias

New York is increasingly a mafia town, and that’s a good thing.

One of Silicon Valley’s biggest advantages has been the constant renewal of its startup talent. People join startups, learn the ropes from experienced founders, meet other talented employees, and eventually decide to spin out on their own and build their startup dreams. Some companies have become so well known for this pattern that the networks they have formed are known as mafias. The PayPal mafia is perhaps the most famous example, but there are many other companies in the Valley that have become boot camps for the next generation of founders.

New York may be more notorious for its occasionally violent, often Italian mafias, but today the city is also home to a growing network of startup mafias who are building companies and firms and powering the ecosystem.

Take Voxel. The company, which was formed in New York City in 1999, built enterprise hosting solutions for customers around the world. It was acquired by Internap in 2012, in an all-cash transaction valued at $30 million.

That’s a pretty small exit by startup standards, but despite its small size, it has created an entire generation of NYC enterprise startup founders. Voxel CEO and founder Raj Dutt ended up starting Grafana, an open source time series analytics platform. Voxel COO Zac Smith left to start Packet, and Voxel principal software architect Kris Beevers started NS1.

Another stylized example is Gilt Groupe. Security Scorecard founders Sam Kassoumeh and Aleksandr Yampolskiy met at Gilt when they became the first two hires for the security team there. Yampolskiy had never heard of the company before, but “my wife was apparently a customer, so maybe I would get some clothes discounts.” When Sam showed up at noon in a sweatshirt on his first day, “I was like, I am going to fire this guy,” he said.

In the end, the two got along, and they eventually left to found Security Scorecard, which has raised more than $62 million in venture capital according to Crunchbase from a long list of luminary Valley-based investors.

The examples are endless. Edward Chiu, the founder of Catalyst, learned customer success at Digital Ocean, and ended up realizing that the company’s internal tooling could be externalized as a startup. Liz Maida, the founder of Uplevel Security, learned her trade at internet traffic juggernaut Akamai, and has taken several of the product lessons she learned there to heart. Timber.io founders Zach Sherman and Ben Johnson met at SeatGeek, where they realized that logging could be made significantly better. The networks each of these bought along helped in building their startups.

Of course, all of these are anecdotes, and it is next to impossible to systematically analyze these movements. Yet, these patterns of entrepreneurs and investors have become much more visible in the ecosystem. Startup talent is increasingly begetting startup talent, spinning out and circulating their knowledge.

But beyond these clusters of individuals lie the glue that is holding the ecosystem together: Jonathan Lehr and his team at Work-Bench and Ed Sim and Eliot Durbin at Boldstart. All three of them made the bet years ago that New York City would become an epicenter of the enterprise infrastructure software industry. Now they are reaping the rewards of those bets.

Work-Bench is both a workspace and a fund, but its core value is the community that’s been built around it. Lehr founded the New York Enterprise Tech Meetup, which hosts at Work-Bench a monthly gathering of hundreds of participants in the enterprise space, from founders to customers.

He has also built up a wide network of potential customers across industries to accelerate the early sales of his startups. “We are not just sending intros, we can backchannel which can save a lot of time” for founders, Lehr said. For instance, if a customer can’t deploy an application for another year because of internal politics, Lehr can figure that out and tell his founders that information, saving them time on a sale that might not come to fruition.

For Sim at Boldstart, the message is much the same. When he first launched the seed fund with Durbin in 2010, people thought that “there aren’t going to be enough deals to be done,” he said. “We thought of it as an experiment,” and the two raised only $1 million to get started. Now the fund has raised its third vehicle of $47 million, and plays a convening in engaging West Coast VCs. “On the West Coast, what [founders] really want is access to customers,” Sim explained “and on the East Coast, they want access to West Coast VCs.” Those West Coast VCs are showing up in New York these days more and more. “Every week there are five different firms sitting in our office trying to figure out what is happening in New York.”

Startup ecosystems take off when there is a sufficient density of talent, a strong desire to help one another, and an open ambition to compete. New York City has never lacked the latter, but it has been missing out on a dense network of helpful and experienced startup hands. The rise of mafias centered on some of the city’s leading companies as well as the development of community hubs for support are adding the final ingredients for a world-class ecosystem.

How changing customer tastes rebuilt NYC’s startup ecosystem

In the classic text Regional Advantage, AnnaLee Saxenian analyzed the cultural differences between innovation on the East Coast, epitomized by Boston’s Route 128, and the culture of Silicon Valley. She found that the East Coast was stodgy, hierarchical, and centralized around large corporate behemoths like DEC and EMC. In contrast, the West Coast was nimble, networked, and decentralized, with little social hierarchy.

Silicon Valley was believed to be dead in the early 1990s, outcompeted by Asian tigers like Singapore, Taiwan, and Korea in manufacturing the chips that gave the region its name. The Valley was saved in just the nick of time by the opening of the internet to commercial activity, and the culture of the West Coast would prove perfectly attuned to the frenetic pace of innovation that followed. The Valley swept the internet economy, and many of the world’s most important tech companies are now located in the Bay Area.

That Silicon Valley innovation culture is now been exported around the world, and that is no less true walking around New York City startup neighborhoods like the Flatiron and Union Square. It’s not just the obvious sartorial changes that have made the city more relaxed and creative. It’s also the changing personality of the people who are successful here — the finance major is now the computer science graduate.

New York’s startup culture isn’t just a transplant of the Valley’s however, but rather an evolution of it. The pure excitement of tech that can be found at San Francisco meetups is much more muted here. Instead, there is a greater focus on investing in product design by listening to customers earlier and much more closely.

That’s only possible though because customers actually want to talk. The success of New York City’s enterprise startups rests in large part on the changing nature of purchasing at Fortune 500 companies.

Lehr of Work-Bench should know. Prior to starting the fund, he evaluated potential technology vendors at Morgan Stanley. “The adage that you don’t get fired for buying IBM had longed passed,” Lehr explained. Companies have vexing problems, and they are increasingly willing to experiment with startup technology if it has the potential to solve those issues.

The West Coast culture of flexible decision-making has entered the corporate world. CIOs used to have a vice grip on technology purchasing, but now leaders across the enterprise increasingly make their own independent decisions. Lehr said that “you now need to know, as a startup, nuanced different people in enterprise, and as a VC, to stay relevant, you don’t just want to know the CIO or CTO, but the 30 other people who have pain points” across a company.

Sim at Boldstart noted “The last thing heads of IT want is salespeople in front of them. You are not selling anything because they don’t want to buy anything.” Instead, “they are willing to work with startups if you have the right … service partnership mentality,” he said.

With customers increasingly engaged, proximity has become a major boon for startups in NYC. “In the early days before you are ready to scale, it is all about relationships in the enterprise,” Lehr explained. He described the thinking of customers today looking at buying from startups. “I can trust these people to get me promoted, and they are in New York, and they can give me feedback.”

I heard this point made from nearly every person I talked to. Roman Chwyl, a sales executive with experience at AWS, Google, and IBM, noted that when it comes to customers, “We can probably do six meetings a day up and down a subway line.” That thinking was mirrored by George Avetisov, the CEO of HYPR, who said that “All of our customers are in a 10 mile radius” because of the company’s focus on financial institutions.

That customer-centric view is what has made Datadog, which is now north of $100 million in annual recurring revenue, so competitive. Olivier Pomel, the CEO and founder, said that “Mostly what is interesting is that we’re not overwhelmed by the 5,000 startups around us” like in the Valley, and “what we hear is more clearly the message from the customers and the market.” He noted that “For most of the people at Datadog, their significant others are not in tech,” and that means reality doesn’t get distorted in the way it can on the West Coast.

While East Coast customers seem to have become more aggressive early-adopters, that view is not held universally. Kris Beevers, the founder and CEO of NS1, said that “the reality of our business through 2014 and 2015 is that I flew to California twice a month for sales meetings, and that is where the bulk of our customers come from.” As major West Coast companies signed on though, they ended up acting as lighthouse customers for more conservative companies on the East Coast.

Intense pain points can solve that hesitation. Ajay Kulkarni, the founder and CEO of time series database Timescale, noted that the company has customers in conservative industries because the database solves a critical production challenge for those businesses, namely the real-time processing of internet of things data. He also noted that selling to the West Coast is not necessarily easier. “I think the Bay Area is great for open source adoption, but a lot of Bay Area companies, they develop their own database tech, or they use an open source project and never pay for it,” he said.

Lehr also pointed to tech for tech’s sake as one of the increasing challenges for Silicon Valley-based enterprise companies. “In Silicon Valley, too many people start with the whiz bang tech, rather than the dirty word of use cases,” he said.

Some technology purists may complain that customers don’t know what they want until they see it. That may be true, and there is something to be said for disruptive innovation like Docker’s containers, which no one wanted for years and now everyone is excited about. But ultimately, customers buy software because it solves their problems, and they know those problems intimately. Mixing the nimble culture of Silicon Valley with a customer focus has allowed New York to start competing far more aggressively in enterprise infrastructure, and create a leading set of successful companies.

The future is still waiting to be built

New York has come a long way, but it does still have challenges. Unlike venture capitalists on the West Coast, VCs in NYC often face significantly less competition for deals, and that means they can take significantly longer to make a decision. Almost all founders I talked to griped that — with a handful of exceptions — local VCs just aren’t willing to write the first check into their companies. In fact, for Sim at Boldstart, that has become a rallying cry. He bought firstcheck.vc, which redirects to Boldstart’s domain.

Another challenge that is a bit more peculiar to the geography of the city is just how many sub-ecosystems exist. There are distinct Manhattan and Brooklyn startup communities that overlap far less than some might expect. While there are exceptions, the fintech, biotech, and adtech worlds also keep much to themselves. University ecosystems around Columbia, NYU, Cornell Tech, and Princeton also similarly stay in their own space. These fractures are not apparent at first glance, but few leaders in the community have been able to blur these demarcations.

Ironically, New York also has a lack of showmanship. To put it frankly, there is no Elon Musk or SpaceX that is a paragon of ambition and aspiration that drives the rest of the ecosystem to (literally) shoot for the stars. The city’s strength in enterprise tech is a strong bedrock for a durable startup ecosystem, but it is hard to turn the success of, say, an advertising analytics platform into a beacon for others to try their own fortunes in the startup world.

That’s a loss for the city today, but also the opening for the enterprising individual who wants to make it big. Sim at Boldstart said that “I feel like Rodney Dangerfield: we get no respect, and over the next few years, we will get the respect we deserve.” Ultimately, that’s the story of New York: scrappiness and hustle, and trying to build the future one piece of infrastructure at a time.

Categories: Business News

Startup ecosystem report: China is rising while the US is waning

2018, April 21 - 4:02am

Startups are a gamble, but it’s possible to better understand why some thrive and many more die by looking at the ecosystems in which they operate. Such is the mission of eight-year-old Startup Genome, composed of a group of researchers and entrepreneurs who, every year, interview thousands of founders and investors around the world to get a better handle on what’s changing in the regions where they operate, and what remains stubbornly the same.

The larger objective is to figure out how to help more startups succeed, and the outfit — which this year surveyed 10,000 founders with the help of partners like Crunchbase and Dealroom — produced some data that should perhaps concern those in the U.S. To wit, China looks positioned to overtake U.S. dominance when it comes to numerous tech sectors. Consider: In 2014, just 14 percent of so-called unicorns were based in China. Between the start of last year through today, that percentage has shot up to 35 percent, while in the U.S., the number of homegrown unicorns has fallen from 61 percent to 41 percent of the overall global number.

You could argue that investors are simply assigning China-based startups overly lofty valuations, as happened here in the U.S., and we partly believe that to be true. But China is also clearly “in it to win it,” based on a look at patents, with four times as many AI-related applications and three times as many crypto- and blockchain-related patents registered in China last year. With so much of the tech industry now focused on deep tech, it’s worth noting. In fact, as much as we loathed the January Financial Times column penned by famed VC Michael Moritz, who suggested that U.S. companies follow China’s lead, his underlying call to arms was probably, gulp, prescient in its own way.

What else should startups know? According to Startup Genome’s findings, in addition to the rise of AI, blockchain and robotics manufacturing, there are clearly declining sub sectors, too, including, least surprisingly, adtech, which has seen a roughly 35 percent drop in funding over the last five years. No doubt that ties directly to the growing dominance of Facebook and Google, which accounted for 73 percent of all U.S. digital advertising last year, according to the equity research firm Pivotal.

That doesn’t mean adtech startups are cooked, notes the study’s authors. Rather, declining sub-sectors are often “mature” but can be revived by new technologies. In this case, while funding for adtech has dropped, virtual reality and augmented reality could well inject some new growth into the industry at some point. Maybe.

Either way, to us, the most interesting facets of this report — and it really is worth poring over — are the connections it’s able to make by talking with so many people around the world. It addresses, for example, how Stockholm, a relatively small startup ecosystem, is able to produce sizable startups at a meaningful rate, versus Chicago, whose ecosystem is ostensibly three times bigger. (The answer: Stockholm’s startup founders are apparently better connected to the world’s top seven ecosystems.)

Also quite interesting is the report’s findings about women founders, who build more relationships with regional founders and are more locally connected than their male counterparts — except with investors. That’s bad news for both women founders and investors, as local connectedness is associated with better startup performance.

To read the report in full, click over here. You have to fork over your email address, but with 240 pages filled with fascinating nuggets and other useful information, you’ll likely find it well worth it.

Categories: Business News

This robot can build your Ikea furniture

2018, April 20 - 10:15pm

There are two kinds of people in the world: those who hate building Ikea furniture and madmen. Now, thanks to Ikeabot, the madmen can be replaced.

Ikeabot is a project built at Control Robotics Intelligence (CRI) group at NTU in Singapore. The team began by teaching robots to insert pins and manipulate Ikea parts and then, slowly, began to figure out how to pit the robots against the furniture. The results, if you’ve ever fought with someone trying to put together a Billy, are heartening.

From Spectrum:

The assembly process from CRI is not quite that autonomous; “although all the steps were automatically planned and controlled, their sequence was hard-coded through a considerable engineering effort.” The researchers mention that they can “envision such a sequence being automatically determined from the assembly manual, through natural-language interaction with a human supervisor or, ultimately, from an image of the chair,” although we feel like they should have a chat with Ross Knepper, whose IkeaBot seemed to do just fine without any of that stuff.

In other words the robots are semi-autonomous but never get frustrated and can use basic heuristics to figure out next steps. The robots can now essentially assemble chairs in about 20 minutes, a feat that I doubt many of us can emulate. You can watch the finished dance here, in all its robotic glory.

The best part? Even robots get frustrated and fling parts around:

I, for one, welcome our Ikea chair manufacturing robotic overlords.

Categories: Business News

Square acquires corporate catering startup Zesty

2018, April 20 - 5:30am

Square has acquired elements of corporate catering startup Zesty . Square, which already owns on-demand food delivery service Caviar, plans to use Zesty’s assets to strengthen Caviar’s corporate ordering business, Caviar for Teams.

Neither company disclosed financial terms of the deal, but the plan is for Caviar and Zesty to operate independently in the short term.

“Restaurants turn to Caviar to reach more diners and grow their businesses,” Square Caviar Lead Gokul Rajaram said in a press release. “Expanding our corporate catering product with Zesty enables us to offer our restaurant partners another way to boost sales through higher-margin, large-format catering orders,” said Rajaram, Caviar Lead at Square. “Caviar is thriving, and we’re excited to supercharge its success with Zesty and double down on an area with great opportunity to drive more growth for our business.”

Since its acquisition of Caviar in 2014, Square has acquired OrderAhead’s pickup business to launch Caviar Pickup and Entrees On-Trays to expand its footprint in the Dallas-Fort Worth, Texas area.

Zesty currently partners with about 150 restaurants in San Francisco, which is the only city in which it operates. Some of Zesty’s customers include Snap, Splunk and TechCrunch. Zesty, which first launched in 2013 under a different name, had previously raised $20.7 million in venture funding.

“Adding Zesty’s offerings, like sophisticated menu-planning tools and algorithms, white-glove catering services, and nutrition and allergen customization, will help us expand our catering offering and even better serve companies of all sizes,” the Caviar team wrote on Medium. “Plus, it provides our restaurant partners with more opportunities to reach new corporate customers.”

Categories: Business News

Crypto-collectibles and Kitties marketplace Rare Bits raises $6M

2018, April 20 - 1:00am

Rare Bits wants to be eBay for the blockchain, where you buy, sell and trade non-fungible crypto-goods. After CryptoKitties raised $12 million from Andreessen Horowitz last month for its digital collectibles game, there’s been an explosion of interest in the space. But without a popular marketplace, it’s hard to find the goods you want at the right price. Now a team of former Zynga staffers is building out the Rare Bits crypto-collectible auction and commerce site with a $6 million round led by Nabeel Hyatt at Spark Capital, and joined by First Round Capital, David Sacks’ Craft Ventures and SV Angel.

“Because of the Ethereum ledger, for the first time, users can truly own their digital items,” says co-founder Amitt Mahajan. “Previously in mobile or social games, virtual items earned through play or by spending money were actually owned by the company operating the game. If they shut down their servers, the items would go away and users would be out of luck. We believe this new asset class represents a paradigm shift in digital property whereby centralized assets will be moved onto decentralized systems.” For now, Rare Bits isn’t slapping any extra fees on its marketplace, compared to paying up to 1 percent on other marketplaces like Open Sea, or even more elsewhere. Instead, if a crypto-item developer charges a fee on secondary sales, say 5 percent, they’ll split that with Rare Bits for arranging the transaction.

Rare Bits lists more than 500,000 items from a dozen games, including CryptoPunks, Ether Tulips, CryptoBots, CryptoFighters, Mythereum and CryptoCelebrities. Users get the benefit of having all their crypto-collectibles in a single wallet. They can see historical pricing before they buy anything thanks to the transparency of the Ethereum ledger, whether they want to “Buy Now” or win an auction. The collectors can also see related items rather than transacting in a vacuum. One item sold for more than $10,000, and sales in the 5-10ETH range ($555 each today) aren’t uncommon.

Rare Bits founders from left: Danny Lee, Payom Dousti, Dave Pekar and Amitt Mahajan

Mahajan, Danny Lee and Dave Pekar all met after selling their gaming startups to Zynga . [Disclosure: I know Pekar from college.] Their fourth co-founder, Payom Dousti, worked at fintech VC fund 1/0 Capital and sold his sports analytics startup numberFire to FanDuel. With experience across the gaming, virtual goods and crypto space, Mahajan tells me, “We thought long and hard about potentially building blockchain-based games ourselves, but ultimately decided that there was a larger opportunity in focusing on crypto-based property as a whole.” The Rare Bits exchange launched in February and did more than $100,000 in transactions in its first month.

With some CryptoKitties selling elsewhere for as much as $200,000, investors liked the idea of taking a cut of everyone’s transactions rather than just launching another digital trading card. That led Rare Bits to raise a $1 million seed from Macro Ventures and angels like Steve Jang and Robin Chan. As scaling issues threaten to prevent the Bitcoin and Ethereum blockchains from supporting micropayments and mainstream commerce, new use cases like crypto-collectibles are taking the spotlight.

Now with the $6 million Series A, Rare Bits is bringing in some heavyweight angels from the world of gaming. That includes Emmet Shear and Justin Kan, the co-founders of Twitch. Former Dropbox execs and married couple Ruchi Sanghvi and Aditya Agrawal are also in the round, alongside Greenoaks Captial MD Neil Mehta and Channel Factory CEO Tony Chen.

The team hopes the runway will help it secure partnerships with developers and creatives to publish new collectibles for the blockchain that have a home on Rare Bits. Mahajan says, “People are viewing these items as assets that can be invested in instead of liabilities that are one way transfers of value towards the developer, it’s one of the major changes in this ecosystem versus traditional virtual items.”

Rare Bits will have to deal with the inherent scaling troubles of the Ethereum blockchain it operates on. For now, it’s refunding users the “gas” it costs to execute purchases and sales on its marketplace in a timely manner. Those range from a few cents to a few dollars, depending on network congestion. But Rare Bits could be looking at a steep bill or be forced to push those fees onto users if it gets popular enough.

There’s always the danger that CryptoKitties and the like are just the new Beanie Babies — valued today, but worthless when the fad dies. Rare Bits benefits from getting to follow the trend to whatever crypto-collectible is in vogue, and just has to hope the whole concept doesn’t fade.

But Rare Bits has a hedge against that. “While today most of these items are items from games and collectibles, we envision that we will see licenses, tickets, rights, even tokenized physical goods represented as digital assets,” Mahajan tells us. It’s now building a Fan Bits feature that will let YouTube creators, Twitch streamers and Instagram celebrities create crypto-based collectibles “to engage with their audience and let their fans support them,” he explains. You might one day be able to buy and resell a meet-and-greet pass for your favorite band.

“Our ultimate goal is to convince millions of new people to begin owning and transacting crypto-based property,” says Mahajan. But the founders will probably be okay regardless. “Like anyone crazy enough to start a crypto app company this early, we started buying and HODLing BTC and ETH years ago.”

Categories: Business News

3D-printing marketplace Shapeways raises a $30 million Series E

2018, April 20 - 12:34am

Investors, it seems, aren’t entirely soured on the world of 3D printing. The technology is still making progress in the enterprise sector, and Shapeways is certainly continuing to make a case for it in the world of online marketplaces. This morning, the New York-based company announced the closing of a $30 million Series E. 

The round, led by Lux Capital, puts its total funding north of $100 million. That’s no small chunk of change, particularly as 3D printing has lost much of its luster in the consumer world over the past several years. But the company has been a bit of a quiet success in 3D printing, selling the technology as a service along with an Etsy-like online marketplace, rather than attempting to convince early adopters to spend $500-$1,000 on a desktop machine.

After a long search, the company appointed Gregory Kress its new CEO, back in February. At the time, he explained his vision of playing a stronger role in the world of hardware prototyping/startup incubation. “We can help them to market it and develop and sustain a small business,” said Kress. “I see Shapeways shifting from delivering one niche of that customer experience to truly helping our creators from almost a platform perspective and allowing us to become a one-stop shop.”

Now flush with extra cash, Shapeways is going to take that expansion further. “The capital will be used to accelerate company growth and launch additional services to support Shapeways’ overall vision to become the complete end-to-end platform helping creators ‘design, make, and sell,’ regardless of 3D modeling experience,” the company writes in a press release tied to the funding announcement.

That starts with the introduction of the new Design With Shapeways tool, which is designed to walk creators through the 3D-printing process, starting with a 3D file, 2D drawing or even just an idea. The new Spring & Wonder line, meanwhile, offers a hands-on approach to creating personalized jewelry through the service.

Categories: Business News

mParticle hires Adobe’s John Sedlak as chief revenue officer

2018, April 19 - 11:00pm

mParticle, which helps companies like Airbnb and Spotify manage their customer data, has hired four new executives — including John Sedlak, most recently a vice president at Adobe, who’s joining the company as chief revenue officer.

In addition, Kiran Hebbar (formerly CFO of Social Tables) is joining as chief financial officer, Will Rogers (previously an engineer at Etsy) has been named chief information security officer and Aurélie Pols (who worked as data governance and privacy advocate at Krux Digital) is the new data protection officer.

Sedlak told me that in his roles at Adobe and Oracle (which he joined through the acquisition of BlueKai), he saw how the big marketing software players are trying to build comprehensive marketing clouds, often created through multiple startup acquisitions.

“They would constantly go to market and tout the benefits of the end-to-end stack, when I began to notice that there were many best-of-breed point solutions out there,” he said. “I got to see the power of standalone companies who are innovating ahead of what the big guys were doing. I’d put mParticle on that list.”

In the years since I first wrote about mParticle in 2014, a handy acronym has emerged to describe what the company does — CDP, short for customer data platform. Basically, CDPs like mParticle allow companies to unify all their first-party data, creating a single view of the customer.

Sedlak contrasted mParticle’s approach with older data management platforms, which he said weren’t built to connect customer data across all their interactions on different devices.

“They were originally built to ingest first-party cookie data coupled with third-party data,” he said. “They never fully contemplated the notion of a true cross-device world and I think [co-founders Michael Katz and Andrew Katz] knew that in 2013 and said, ‘You know we’re going to start solving for that now.'”

As for what hiring Sedlak will do for the company, he said one of his goals is to bring on even bigger customers: “I think mParticle can drive incremental or discrete value … to Fortune 50 marketers who I personally have done business with in the past, where I see an opportunity for us to significantly augment their current investments in the marketing cloud platforms.”

CEO Michael Katz, meanwhile, pointed out that two of these hires are focused on security. With the recent Facebook scandals discussions and Europe’s adoption of GDPR protections, there’s “a really healthy conversation around the importance of data control and governance,” and he said these hires will help mParticle build the tools that allow businesses to “put customer privacy and data security at the forefront of their business practice.”

Categories: Business News

PlayVS wants every high school to have an esports team

2018, April 19 - 11:00pm

Nearly 200 colleges and universities across the U.S. and Canada are actively recruiting for esports scholarships. But unlike other sports, there is currently no real infrastructure for high school esports.

PlayVS, a Science-backed startup out of Los Angeles, is looking to change that.

Founded by Delane Parnell, PlayVS has signed an exclusive contract with the National Federation of State High School Associations (NFHS) to provide support in building the infrastructure for high school esports, allowing students to play esports on behalf of their school all the way to the state championship level.

Most of us have participated in high school sports in some way, but many of us aren’t aware of all the moving parts going on behind the scenes. The NFHS, essentially the NCAA of high school sports and activities, handles those moving parts for more than 90 percent of schools in the U.S. across almost every sport.

From writing the rules to referees to building out the districts and conferences to organizing the state playoff tournaments, the NFHS has almost 100 years of experience across hundreds of sports and activities handling organization.

But esports represents a new challenge for the governing body, requiring more technical infrastructure than established sports.

That’s where PlayVS comes in. The company has built a website that handles league organization, scheduling, leaderboards and more. Plus, PlayVS has existing relationships with the game publishers, letting the platform pull stats in real-time from each high school match.

There will be two seasons each year, with students organizing their own teams at their school for a variety of games. High school teams go to the PlayVS website to see their schedule and log on for their game (which is played on the publisher client).

Eight season matches will be played online, with the top teams competing in a LAN tournament in front of a live spectator audience organized by PlayVS.

PlayVS is also partnering with NFHS Network, a live-streaming platform for high school sports, to broadcast some of the games to spectators.

As it stands now, colleges and esports organizations have to rely on relationships with publishers and tournament results to get a clear view of the top young talent. But there are surely many players slipping through the cracks.

With the new high school esports league powered by PlayVS, colleges and esports orgs will be able to use the PlayVS platform to see real-time stats and player profiles. Plus, the PlayVS site allows coaches and recruiters to request an introduction to the student’s parents and/or coach to start talking scholarships.

To start, the high school esports leagues will be PC-only games in three genres: Multiplayer Online Battle Arena, Fighting and Sports games.

The first season will start in the fall.

Categories: Business News

See you next week in New York

2018, April 19 - 10:00pm

I’ll be helping build a larger meetup focused on pre-ICO companies in New York on April 23 and I’d love to see you there. It will be held at Knotel on April 23 at 7pm and will feature a pitch-off with eight startups  and two panels with some yet-unnamed stars in the space. Let’s get together and talk about the hottest – and most controversial – topic in investing.

I’d love to see you there, so please sign up here. Early bird tickets are sold out and the regular tickets are going fast.

The event will be held at 551 Fifth Avenue on the 9th Floor and you can sign up to pitch here. This is still an experimental format and industry so let’s see how it works.

Categories: Business News

BenevolentAI, which uses AI to develop drugs and energy solutions, nabs $115M at $2B valuation

2018, April 19 - 8:01am

In the ongoing race to build the best and smartest applications that tap into the advances of artificial intelligence, a startup out of London has raised a large round of funding to double down on solving persistent problems in areas like healthcare and energy. BenevolventAI announced today that it has raised $115 million to continue developing its core “AI brain” as well as different arms of the company that are using it specifically to break new ground in drug development and more.

This venture round values the company at $2.1 billion post-money, its founder and executive chairman Ken Mulvaney confirmed to TechCrunch. Investors in this round include previous backer Woodford Investment Management, and while Mulvaney said the company was not disclosing the names of any other investors, he added it was a mix of family offices and some strategic backers, with a majority coming from the U.S., but would not specify any more. Notably, BenevolentAI does not have any backing from more traditional VCs, which more generally have been doubling down on investments in AI startups. Founded in 2013, the company has now raised more than $200 million to date.

The core of BenevolentAI’s business is focused around what Mulvaney describes as a “brain” built by a team of scientists — some of whom are disclosed, and some of whom are not, for competitive reasons; Mulvaney said: There are 155 people working at the startup in all, with 300 projected by the end of this year. The brain has been created to ingest and compute billions of data points in specific areas such as health and material science, to help scientists better determine combinations that might finally solve persistently difficult problems in fields like medicine.

The crux of the issue in a field like drug development, for example, is that even as scientists identify the many permutations and strains of, say, a particular kind of cancer, each of these strains can mutate, and that is before you consider that each mutation might behave completely differently depending on which person develops the mutation.

This is precisely the kind of issue that AI, which is massive computational power and “learning” from previous computations, can help address. (And BenevolventAI is not the only one taking this approach. Specifically in cancer, others include Grail and Paige.AI.)

But even with the speed that AI brings to the table, it’s a very long, long game for BenevolentAI. The division of BenevolentAI that is focused on drugs, called Benevolent Bio, currently has two drugs in more advanced stages of development, Mulvaney said, although neither of those happen to be in the area of cancer. A Parkinson’s drug is currently in Phase 2B clinical trials, after years of work.

And an ALS medication currently in development — which Mulvaney says will aim to significantly extend the prospects for those who have been diagnosed with ALS — is about five years away from trials. It’s worth the effort to try, though: The best ALS medications on the market today at best only add about three months to a patient’s life expectancy.

Some of the long period of development is because with drugs, there is a large regulatory framework a company must go through. “But we benefit from that,” Mulvaney said, “because it means you can actually then offer something in the market.” (Blood tests à la Theranos are very different in terms of regulatory requirements, he said.)

In part because of that long cycle, and also because BenevolentAI has spotted an adjacent opportunity, the company has more recently also been extending applications from its “brain” to other adjacent areas that also tap into chemistry and biology, such as material science.

One area Mulvaney said is of particular interest is to see if Benevolent can create materials that can both withstand extreme heat — to allow engines to work at higher rates without risks — as well as chemicals that could essentially create the next generation of efficient batteries that could provide more power in smaller formats for longer periods.

“There has been little development beyond a lithium-ion battery,” he noted, which may be fine for the Teslas of the world today. “But there is not enough lithium on this planet for us all to go electric, and there is not nearly enough energy density there unless you have thousands of batteries working together. We need other technology to provide more energy donation. That tech doesn’t exist yet because chemically it’s very difficult to do that.” And that spells opportunity for BenevolentAI.

Other areas where the startup hopes to move into over the coming months and years include agriculture, veterinary science, and other categories that sit alongside those BenevolentAI is already tapping.

 

Categories: Business News

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