Apr
17
2019
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The Exit: an AI startup’s McPivot

Five years ago, Dynamic Yield was courting an investment from The New York Times as it looked to shift how publishers paywalled their content. Last month, Chicago-based fast food king McDonald’s bought the Israeli company for $300 million, a source told TechCrunch, with the purpose of rethinking how people order drive-thru chicken nuggets.

The pivot from courting the grey lady to the golden arches isn’t as drastic as it sounds. In a lot of ways, it’s the result of the company learning to say “no” to certain customers. At least, that’s what Bessemer’s Adam Fisher tells us.

The Exit is a new series at TechCrunch. It’s an exit interview of sorts with a VC who was in the right place at the right time but made the right call on an investment that paid off. 

Fisher

Fisher was Dynamic Yield founder Liad Agmon’s first call when he started looking for funds from institutional investors. Bessemer bankrolled the bulk of a $1.7 million funding round which valued the startup at $5 million pre-money back in 2013. The firm ended up putting about $15 million into Dynamic Yield, which raised ~$85 million in total from backers including Marker Capital, Union Tech Ventures, Baidu and The New York Times.

Fisher and I chatted at length about the company’s challenging rise and how Israel’s tech scene is still being underestimated. Fisher has 11 years at Bessemer under his belt and 14 exits including Wix, Intucell, Ravello and Leaba.

The interview has been edited for length and clarity. 


Saying “No”

Lucas Matney: So, right off the bat, how exactly did this tool initially built for publishers end up becoming something that McDonalds wanted?

Adam Fisher: I mean, the story of Dynamic Yield is unique. Liad, the founder and CEO, he was an entrepreneur in residence in our Herzliya office back in 2011. I’d identified him earlier from his previous company, and I just said, ‘Well, that’s the kind of guy I’d love to work with.’ I didn’t like his previous company, but there was something about his charisma, his technology background, his youth, which I just felt like “Wow, he’s going to do something interesting.” And so when he sold his previous company, coincidentally to another Chicago based company called Sears, I invited him and I think he found it very flattering, so he joined us as an EIR.

And really only at the very end of his residence did he come up with this idea that would become Dynamic Yield. He came about it very much focused on the problem he saw with publishers being outwitted by ad buyers. He felt like all the big publishers really didn’t understand their digital businesses, didn’t understand their users, didn’t understand how performance ad buying was working, and he began to build a product that could dynamically optimize a publisher’s website to maximize revenue, hence the yield … the dynamic yield.

But very quickly, we told him, ‘That’s interesting, but we’re not sure how big that market is. And, you know it’s not always great to sell to those kind of weak customers. Sometimes they’re weak for a reason.’

Apr
10
2019
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The right way to do AI in security

Artificial intelligence applied to information security can engender images of a benevolent Skynet, sagely analyzing more data than imaginable and making decisions at lightspeed, saving organizations from devastating attacks. In such a world, humans are barely needed to run security programs, their jobs largely automated out of existence, relegating them to a role as the button-pusher on particularly critical changes proposed by the otherwise omnipotent AI.

Such a vision is still in the realm of science fiction. AI in information security is more like an eager, callow puppy attempting to learn new tricks – minus the disappointment written on their faces when they consistently fail. No one’s job is in danger of being replaced by security AI; if anything, a larger staff is required to ensure security AI stays firmly leashed.

Arguably, AI’s highest use case currently is to add futuristic sheen to traditional security tools, rebranding timeworn approaches as trailblazing sorcery that will revolutionize enterprise cybersecurity as we know it. The current hype cycle for AI appears to be the roaring, ferocious crest at the end of a decade that began with bubbly excitement around the promise of “big data” in information security.

But what lies beneath the marketing gloss and quixotic lust for an AI revolution in security? How did AL ascend to supplant the lustrous zest around machine learning (“ML”) that dominated headlines in recent years? Where is there true potential to enrich information security strategy for the better – and where is it simply an entrancing distraction from more useful goals? And, naturally, how will attackers plot to circumvent security AI to continue their nefarious schemes?

How did AI grow out of this stony rubbish?

The year AI debuted as the “It Girl” in information security was 2017. The year prior, MIT completed their study showing “human-in-the-loop” AI out-performed AI and humans individually in attack detection. Likewise, DARPA conducted the Cyber Grand Challenge, a battle testing AI systems’ offensive and defensive capabilities. Until this point, security AI was imprisoned in the contrived halls of academia and government. Yet, the history of two vendors exhibits how enthusiasm surrounding security AI was driven more by growth marketing than user needs.

Apr
05
2019
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On balance, the cloud has been a huge boon to startups

Today’s startups have a distinct advantage when it comes to launching a company because of the public cloud. You don’t have to build infrastructure or worry about what happens when you scale too quickly. The cloud vendors take care of all that for you.

But last month when Pinterest announced its IPO, the company’s cloud spend raised eyebrows. You see, the company is spending $750 million a year on cloud services, more specifically to AWS. When your business is primarily focused on photos and video, and needs to scale at a regular basis, that bill is going to be high.

That price tag prompted Erica Joy, a Microsoft engineer to publish this Tweet and start a little internal debate here at TechCrunch. Startups, after all, have a dog in this fight, and it’s worth exploring if the cloud is helping feed the startup ecosystem, or sending your bills soaring as they have with Pinterest.

For starters, it’s worth pointing out that Ms. Joy works for Microsoft, which just happens to be a primary competitor of Amazon’s in the cloud business. Regardless of her personal feelings on the matter, I’m sure Microsoft would be more than happy to take over that $750 million bill from Amazon. It’s a nice chunk of business, but all that aside, do startups benefit from having access to cloud vendors?

Apr
03
2019
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Okta unveils $50M in-house venture capital fund

Identity management software provider Okta, which went public two years ago in what was one of the first pure-cloud subscription-based company IPOs, wants to fund the next generation of identity, security and privacy startups.

At its big customer conference Oktane, where the company has also announced a new level of identity protection at the server level, chief operating officer Frederic Kerrest (pictured above, right, with chief executive officer Todd McKinnon) will unveil a $50 million investment fund meant to back early-stage startups leveraging artificial intelligence, machine learning and blockchain technology.

“We view this as a natural extension of what we are doing today,” Okta senior vice president Monty Gray told TechCrunch. Gray was hired last year to oversee corporate development, i.e. beef up Okta’s M&A strategy.

Gray and Kerrest tell TechCrunch that Okta Ventures will invest capital in existing Okta partners, as well as other companies in the burgeoning identity management ecosystem. The team managing the fund will look to Okta’s former backers, Sequoia, Andreessen Horowitz and Greylock, for support in the deal sourcing process.

Okta Ventures will write checks sized between $250,000 and $2 million to eight to 10 early-stage businesses per year.

“It’s just a way of making sure we are aligning all our work and support with the right companies who have the right vision and values because there’s a lot of noise around identity, ML and AI,” Kerrest said. “It’s about formalizing the support strategy we’ve had for years and making sure people are clear of the fact we are helping these organizations build because it’s helpful to our customers.”

Okta Ventures’ first bet is Trusted Key, a blockchain-based digital identity platform that previously raised $3 million from Founders Co-Op. Okta’s investment in the startup, founded by former Microsoft, Oracle and Symantec executives, represents its expanding interest in the blockchain.

“Blockchain as a backdrop for identity is cutting edge if not bleeding edge,” Gray said.

Okta, founded in 2009, had raised precisely $231 million from Sequoia, Andreessen Horowitz, Greylock, Khosla Ventures, Floodgate and others prior to its exit. The company’s stock has fared well since its IPO, debuting at $17 per share in 2017 and climbing to more than $85 apiece with a market cap of $9.6 billion as of Tuesday closing.

Feb
04
2019
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Workplace messaging platform Slack has confidentially filed to go public

Slack, the provider of workplace communication and collaboration tools, has submitted paperwork with the Securities and Exchange Commission to go public later this year, the company announced on Monday.

This is its first concrete step toward becoming a publicly listed company, five years after it launched.

Headquartered in San Francisco, Slack has raised more than $1 billion in venture capital investment, including a $427 million funding round in August. The round valued the business at $7.1 billion, cementing its position as one of the most valuable privately held businesses in the U.S.

The company counted 10 million daily active users around the world and 85,000 paying users as of January 2019. According to data provided (via email) by SensorTower, Slack’s new users on mobile increased roughly 21 percent last quarter compared to Q4 2017, while total installs on mobile grew 24 million. The company recorded 8 million installs in 2018, up 21 percent year-over-year.

Slack’s investors include SoftBank’s Vision Fund, Dragoneer Investment Group, General Atlantic, T. Rowe Price Associates, Wellington Management, Baillie Gifford, Social Capital and IVP, as well as early investors Accel and Andreessen Horowitz.

Slack is one of several tech unicorns on deck to go public this year. Uber and Lyft have both similarly filed confidentially to go public in what are expected to be traditional initial public offerings. Slack, however, is expected to pursue a direct listing, following in Spotify’s footsteps. Instead of issuing new shares, Slack will sell directly to the market existing shares held by insiders, employees and investors, a move that will allow it to bypass a roadshow and some of Wall Street’s exorbitant IPO fees.

Jan
23
2019
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Anchorage emerges with $17M from a16z for ‘omnimetric’ crypto security

I’m not allowed to tell you exactly how Anchorage keeps rich institutions from being robbed of their cryptocurrency, but the off-the-record demo was damn impressive. Judging by the $17 million Series A this security startup raised last year led by Andreessen Horowitz and joined by Khosla Ventures, #Angels, Max Levchin, Elad Gil, Mark McCombe of Blackrock and AngelList’s Naval Ravikant, I’m not the only one who thinks so. In fact, crypto funds like Andreessen’s a16z crypto, Paradigm and Electric Capital are already using it.

They’re trusting in the guys who engineered Square’s first encrypted card reader and Docker’s security protocols. “It’s less about us choosing this space and more about this space choosing us. If you look at our backgrounds and you look at the problem, it’s like the universe handed us on a silver platter the Venn diagram of our skill set,” co-founder Diogo Monica tells me.

Today, Anchorage is coming out of stealth and launching its cryptocurrency custody service to the public. Anchorage holds and safeguards crypto assets for institutions like hedge funds and venture firms, and only allows transactions verified by an array of biometrics, behavioral analysis and human reviewers. And because it doesn’t use “buried in the backyard” cold storage, asset holders can actually earn rewards and advantages for participating in coin-holder votes without fear of getting their Bitcoin, Ethereum or other coins stolen.

The result is a crypto custody service that could finally lure big-time commercial banks, endowments, pensions, mutual funds and hedgies into the blockchain world. Whether they seek short-term gains off of crypto volatility or want to HODL long-term while participating in coin governance, Anchorage promises to protect them.

Evolving past “pirate security”

Anchorage’s story starts eight years ago when Monica and his co-founder Nathan McCauley met after joining Square the same week. Monica had been getting a PhD in distributed systems while McCauley designed anti-reverse engineering tech to keep U.S. military data from being extracted from abandoned tanks or jets. After four years of building systems that would eventually move more than $80 billion per year in credit card transactions, they packaged themselves as a “pre-product acqui-hire” Monica tells me, and they were snapped up by Docker.

As their reputation grew from work and conference keynotes, cryptocurrency funds started reaching out for help with custody of their private keys. One had lost a passphrase and the $1 million in currency it was protecting in a display of jaw-dropping ignorance. The pair realized there were no true standards in crypto custody, so they got to work on Anchorage.

“You look at the status quo and it was and still is cold storage. It’s the same technology used by pirates in the 1700s,” Monica explains. “You bury your crypto in a treasure chest and then you make a treasure map of where those gold coins are,” except with USB keys, security deposit boxes and checklists. “We started calling it Pirate Custody.” Anchorage set out to develop something better — a replacement for usernames and passwords or even phone numbers and two-factor authentication that could be misplaced or hijacked.

This led them to Andreessen Horowitz partner and a16z crypto leader Chris Dixon, who’s now on their board. “We’ve been buying crypto assets running back to Bitcoin for years now here at a16z crypto. [Once you’re holding crypto,] it’s hard to do it in a way that’s secure, regulatory compliant, and lets you access it. We felt this pain point directly.”

Andreessen Horowitz partner and Anchorage board member Chris Dixon

It’s at this point in the conversation when Monica and McCauley give me their off-the-record demo. While there are no screenshots to share, the enterprise security suite they’ve built has the polish of a consumer app like Robinhood. What I can say is that Anchorage works with clients to whitelist employees’ devices. It then uses multiple types of biometric signals and behavioral analytics about the person and device trying to log in to verify their identity.

But even once they have access, Anchorage is built around quorum-based approvals. Withdrawals, other transactions and even changing employee permissions requires approval from multiple users inside the client company. They could set up Anchorage so it requires five of seven executives’ approval to pull out assets. And finally, outlier detection algorithms and a human review the transaction to make sure it looks legit. A hacker or rogue employee can’t steal the funds even if they’re logged in because they need consensus of approval.

That kind of assurance means institutional investors can confidently start to invest in crypto assets. That swell of capital could help replace the retreating consumer investors who’ve fled the market this year, leading to massive price drops. The liquidity provided by these asset managers could keep the whole blockchain industry moving. “Institutional investing has had centuries to build up a set of market infrastructure. Custody was something that for other asset classes was solved hundreds of years ago, so it’s just now catching up [for crypto],” says McCauley. “We’re creating a bigger market in and of itself,” Monica adds.

With Anchorage steadfastly handling custody, the risk these co-founders admit worries them lies in the smart contracts that govern the cryptocurrencies themselves. “We need to be extremely wide in our level of support and extremely deep because each blockchain has details of implementation. This is inherently a very difficult problem,” McCauley explains. It doesn’t matter if the coins are safe in Anchorage’s custody if a janky smart contract can botch their transfer.

There are plenty of startups vying to offer crypto custody, ranging from Bitgo and Ledger to well-known names like Coinbase and Gemini. Yet Anchorage offers a rare combination of institutional-since-day-one security rigor with the ability to participate in votes and governance of crypto assets that’s impossible if they’re in cold storage. Down the line, Anchorage hints that it might serve clients recommendations for how to vote to maximize their yield and preserve the sanctity of their coin.

They’ll have crypto investment legend Chris Dixon on their board to guide them. “What you’ll see is in the same way that institutional investors want to buy stock in Facebook and Google and Netflix, they’ll want to buy the equivalent in the world 10 years from now and do that safely,” Dixon tells me. “Anchorage will be that layer for them.”

But why do the Anchorage founders care so much about the problem? McCauley concludes that, “When we look at what’s potentially possible with crypto, there a fundamentally more accessible economy. We view ourselves as a key component of bringing that future forward.”

Jan
22
2019
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Juniper Networks invests $2.5M in enterprise tech accelerator Alchemist

Alchemist, which began as an experiment to better promote enterprise entrepreneurs, has morphed into a well-established Silicon Valley accelerator.

To prove it, San Francisco-based Alchemist is announcing a fresh $2.5 million investment ahead of its 20th demo day on Wednesday. Juniper Networks, a networking and cybersecurity solutions business, has led the round, with participation from Siemens’ venture capital unit Next47.

Launched in 2012 by former Draper Fisher Jurvetson investor Ravi Belani, Alchemist provides participating teams with six months of mentorship and a $36,000 investment. Alchemist admits companies whose revenue stream comes from enterprises, not consumers, with a bent toward technical founders.

According to numbers provided by the accelerator, dubbed the “Y Combinator of Enterprise,” 115 Alchemist portfolio companies have gone on to raise $556 million across several VC deals. Another 25 have been acquired, including S4 Capital’s recent $150 million acquisition of media consultancy MightyHive, Alchemist’s largest exit to date.

Other notable alums include Rigetti Computing, LaunchDarkly, which helps startups soft-launch features and drone startup Matternet.

Alchemist has previously raised venture capital funding, including a $2 million financing in 2017 led by GE and an undisclosed investment from Salesforce.

Nineteen companies will demo products onstage tomorrow. You can live stream Alchemist’s 20th demo day here.

Jan
17
2019
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On-demand workspace platform Breather taps new CEO

Breather’s new CEO Bryan Murphy / Breather Press Kit

Breather, the platform that provides on-demand private workspace, announced today that it has appointed Bryan Murphy as its new CEO.

Before joining Breather, Murphy was the founder and president of direct-to-consumer mattress startup, Tomorrow Sleep. Prior to Tomorrow Sleep, Murphy held posts as an advisor to investment firms and as an executive at eBay after the company acquired his previous company, WHI Solutions — an e-commerce platform for aftermarket auto parts — where Murphy was the co-founder and CEO.

Breather believes Murphy’s extensive background scaling e-commerce and SaaS platforms, as well as his experience working with incumbents across a number of traditional industries, can help it execute through its next stage of global growth.

Murphy is filling the vacancy left by co-founder and former CEO Julien Smith, who stepped down as chief executive this past September, just three months after the company completed its $45 million Series C round, which was led by Menlo Ventures and saw participation from RRE Ventures, Temasek Holdings, Ascendas-Singbridge and Caisse de Depot et Placement du Quebec.

In a past statement on his transition, Smith said: “As I reflect on my strengths and consider what it will take for the company to reach its full potential, I realize bringing on an executive with experience scaling a company through the next level of growth is the best thing for the business.”

Smith, who remains with the company as chairman of the board, believes Murphy more than fits the bill. “Bryan’s record of scaling brands in competitive markets makes him an ideal leader to support this momentum, and I’m excited to see where he takes us next,” Smith said.

In a conversation with TechCrunch, Murphy explained that Breather’s next growth phase will ultimately come down to its ability to continue the global expansion of its network of locations and partner landlords while striking the optimal balance between rental economics and employee utility, productivity and performance. With new spaces and ramped marketing efforts, Murphy and the company expect 2019 to be a big year for Breather — “I think this year, you’re going to start hearing a lot about Breather and it really being in a leadership role for the industry.”

Breather’s workspace at 900 Broadway in New York City is one of 500+ network locations accessible to users.

On Breather’s platform, users are currently able to access a network of more than 500 private workspaces across 10 major cities around the world, which can be booked as meeting space or short-term private office space.

Meeting spaces can be reserved for as little as two hours, while office space can be booked on a month-to-month basis, providing businesses with financial flexibility, private and more spacious alternatives to co-working options, and the ability to easily change offices as they grow. For landlords, Breather allows property owners to generate value from underutilized space by providing a turnkey digital booking system, as well as expertise in the short-term rental space.

Murphy explained to TechCrunch that part of what excited him most about his new role was his belief in Breather’s significant product-market fit and the immense addressable market that he sees for flexible workspaces longer-term. With limited penetration to date, Murphy feels the commercial office space industry is in just the third inning of significant transformation. 

Murphy believes that long-term growth for Breather and other flexible space providers will be driven by a heightened focus on employee flexibility and wellness, a growing number of currently underserved companies whose needs fall between co-working and traditional direct leasing, and the need for landlords to support a wider variety of office space options as workforce demographics and behaviors shift. 

Murphy believes that the ease, flexibility and unlocked value Breather provides puts the platform in a great position to win market share.

“Breather has built a remarkable commercial real estate e-commerce and services platform that offers one-click access to over 500 workspaces around the world,” said Murphy in a press release. “To our customers, having access to workspace that is turnkey, affordable, beautiful, productive and that can flex up and down based on needs is a total game changer.”

To date, Breather has served more than 500,000 customers and has raised more than $120 million in investment.

Jan
10
2019
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Daily Crunch: How the government shutdown is damaging cybersecurity and future IPOs

The Daily Crunch is TechCrunch’s roundup of our biggest and most important stories. If you’d like to get this delivered to your inbox every day at around 9am Pacific, you can subscribe here:

1. How Trump’s government shutdown is harming cyber and national security
The government has been shut down for nearly three weeks, and there’s no end in sight. While most of the core government departments — State, Treasury, Justice and Defense — are still operational, others like Homeland Security, which takes the bulk of the government’s cybersecurity responsibilities, are suffering the most.

2. With SEC workers offline, the government shutdown could screw IPO-ready companies
The SEC has been shut down since December 27 and only has 285 of its 4,436 employees on the clock for emergency situations. While tech’s most buzz-worthy unicorns like Uber and Lyft won’t suffer too much from the shutdown, smaller businesses, particularly those in need of an infusion of capital to continue operating, will bear the brunt of any IPO delays.

3. The state of seed 

In 2018, seed activity as a percentage of all deals shrank from 31 percent to 25 percent — a decade low — while the share and size of late-stage deals swelled to record highs.

4. Banking startup N26 raises $300 million at $2.7 billion valuation

N26 is building a retail bank from scratch. The company prides itself on the speed and simplicity of setting up an account and managing assets. In the past year, N26’s valuation has exploded as its user base has tripled, with nearly a third of customers paying for a premium account.

5. E-scooter startup Bird is raising another $300M 

Bird is reportedly nearing a deal to extend its Series C round with a $300 million infusion led by Fidelity. The funding, however, comes at a time when scooter companies are losing steam and struggling to prove that its product is the clear solution to last-mile transportation.

6. AWS gives open source the middle finger 

It’s no secret that AWS has long been accused of taking the best open-source projects and re-using and re-branding them without always giving back to those communities.

7. The Galaxy S10 is coming on February 20 

Looks like Samsung is giving Mobile World Congress the cold shoulder and has decided to announce its latest flagship phone a week earlier in San Francisco.

Jan
07
2019
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Daily Crunch: Nvidia breaks with tradition at CES 2019

The Daily Crunch is TechCrunch’s roundup of our biggest and most important stories. If you’d like to get this delivered to your inbox every day at around 9am Pacific, you can subscribe here:

1. Nvidia launches the $349 GeForce RTX 2060

Nvidia broke with tradition and put a new focus on gaming at CES. Last night the company unveiled the RTX 2060, a $349 low-end version of its new Turing-based desktop graphics cards. The RTX 2060 will be available on Jan. 15.

2. Elon Musk’s vision of spaceflight is gorgeous 

This spring SapceX intends to launch the next phase in its space exploration plans. The newly named Starship rocket, previously known as the BFR, intends to to be rocket to rule them all. And it’s going to look good doing it.

3. Apple’s increasingly tricky international trade-offs

Far from its troubles in emerging markets like China, Apple is starting to face backlash from a European population that’s crying foul over the company’s perceived hypocrisy on data privacy. It’s become clear that Apple’s biggest success is now its biggest challenge in Europe.

Photo by Justin Sullivan/Getty Images

4. Marc Andreessen: audio will be “titanically important” and VR will be “1,000” times bigger than AR

In a recently recorded podcast Marc Andreesen gave some predictions on the future of the tech industry. Surprisingly, the all-start investor is continuing his support of the shaky VR industry saying that expanding the immersive world will require us to remove the head-mounted displays we’ve become accustomed to.

5. Fitness marketplace ClassPass acquires competitor GuavaPass

ClassPass, the five-year-old fitness marketplace, is in the midst of an expansion sprint. The company announced yesterday that it’s acquiring one it competitors, GuavaPass, for an undisclosed amount to expand into Asia. The move now puts ClassPass in more than 80 markets across the 11 countries, with plans to expand to 50 new cities in 2019.

6. Apple shows off new smart home products from HomeKit partners

Apple gave a snapshot of its future smart home ecosystem at CES. Looks like an array of smart light switches, door cameras, electrical outlets and more are on the way and will be configurable through the Home app and Siri.

7. Parcel Guard’s smart mailbox protects your packages from porch thieves

Danby is showing off its newly launched smart mailbox called Parcel Guard at CES, which allows deliveries to be left securely at customers’ doorsteps. Turns out you won’t need a farting glitter bomb to protect your packages after all. The Parcel Guard starts at $399 and pre-orders are will be available this week.

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