• A Slick New 401(k) Platform, From TaskRabbit Cofounder Kevin Busque

    1485040In recent years, Kevin Busque began to notice something at TaskRabbit, the outsourced jobs marketplace that he co-founded seven years ago with his wife, and TaskRabbit’s CEO, Leah.

    The company employs a lot of younger employees, and according to Busque (who was long the company’s VP of Technology but also tackled HR for some time), they weren’t taking advantage of TaskRabbit’s 401(k) program.

    In fact, the participation rate was somewhere in the range of 30 to 40 percent — on par with other U.S. businesses, where 401(k) participation is around just 36 percent, Busque says.

    According to Government Accountability Office testimony from 2013, numerous reasons explain such low figures. Sometimes, the employer plans of small businesses are too expensive. Sometimes, employees worry they aren’t making enough money to contribute to retirement savings. Often, too, retirement plans are so confusing that employees – younger staffers especially — decide they’re not worth the hassle.

    Enter Guideline Technologies, Busque’s four-month-old, San Francisco-based company, which has just raised $2 million in seed funding from New Enterprise Associates, Lerer Hippeau Ventures, SV Angel, Red Swan Ventures, BoxGroup, Xfund and 500 Startups.

    Its big idea: To work with small and mid-size employers in making 401(k) plans affordable for employees — as well as dead simple to set up.

    More here.

  • Having Won Over VCs, Y Combinator Turns to LPs

    y_combinator_logo_400-400x220Last week, Y Combinator ran investors through 105 presentations by early-stage startups in a two-day show it calls Demo Day. The pace of deal-making for such events, staged every summer and winter, has grown so feverish that the incubator introduced a new wrinkle: backers could commit to plowing millions into a company by simply clicking the equivalent of an “easy button” via an online dashboard that Y Combinator created.

    Many local VCs seemed too busy to notice. Brian O’Malley of Accel Partner was walking around on his phone. Jon Sakoda of New Enteprise Associates made the rounds. Hunter Walk of Homebrew looked to be taking a couple of meetings, too.

    Yet there were other, more surprising guests. There, in the front row, was “Stevie” Cohen, the famed hedge fund manager. Elsewhere in the audience, a money manager for Major League Baseball sat rapt, listening to the procession of startup presentations.

    Perhaps the most interesting category of attendee, though, were more traditional limited partners, who typically invest in venture and private equity funds.

    Indeed, while it used to be that VCs treated their LPs a bit like mushrooms, keeping them mostly in the dark, today’s LPs want to be closer to the action, and for them, Y Combinator is Ground Zero.

    More here.

  • EShares, Now Valued at $77 Million, Looks Far Beyond Silicon Valley

    eSharesThree-year-old eShares digitizes paper stock certificates along with stock options, warrants, and derivatives to create a real-time picture of who owns what at a startup. It also makes it far simpler to transfer ownership of all of the above — which goes a long way in explaining the company’s traction. The Mountain View, Ca.-based outfit right now maintains the cap tables of 1,500 companies, including Slack and Blue Bottle Coffee, and says it’s adding 200 more companies each month. Perhaps more important, eShares has won the trust of roughly 35 law firms, the gatekeepers for most startups and their paper certificates.

    But eShares — which has just raised $17 million in Series B funding at a post-money valuation of $77 million from insiders like Spark Capital and Union Square Ventures — isn’t just racing to win over tech startups. Now, the 42-person company wants the rest of the world’s still-private small and mid-size businesses on its platform, too.

    We talked with cofounder and CEO Henry Ward about his big plans yesterday.

    As of last year, eShares charged companies $159 a month or roughly $1,900 a year to maintain an ongoing valuation. It also charged a $20 fee every time a company issued a new grant and another $20 every time someone exercised the sale of one of their holdings.

    That hasn’t changed, and the model works well at the early stage, though a lot of our larger customers go to an all-you-can-eat annual subscription model. We don’t publish the pricing (publicly) but that typically happens when companies hit 50 employees.

    Worth noting: Employees on eShares can hook up their bank account to their eShares account and self-exercise their options and we wire the money straight to the company, as well as issue the employee new stock certificates. It’s much easier than the normal paper exercise, where employees have to get the company to process [the transaction every time they want to exercise their options].

    You must have pretty good insight into what’s happening in terms of secondary sales, too. Are you noticing more shares selling to insiders versus third parties or vice versa? 

    I can’t talk specifics, but secondaries are getting a lot of attention. We joined forces with [the secondary investment firm] Industry Ventures [which participated in eShare’s new round] to work on streamlining the process and bringing more transparency to it.

    As an investor, does Industry Ventures get “first dibs” on secondary sales where you’re helping companies facilitate their movement?

    For more of our conversation with Ward, click here.

  • The High Cost of Small Checks

    moneyBy Semil Shah

    Naively, one of the most profound lessons I had to learn in attempting to raise funds from limited partners is that most institutions prefer to write large checks. By “large,” I mean commitments to VC funds that are equal to at least or oftentimes two to three times more than what a typical decent startup may raise in its lifetime. It is all rational. The time, attention, diligence, legal burdens, and administrative headaches of doling out smaller checks to more funds reduces a larger institutions’ ability to concentrate and, frankly, creates a roster of more egos to manage over a long period of time.

    An LP friend and mentor of mine summed it up perfectly to me: “Semil, I like you, but you gotta understand, my friends don’t get out of bed unless they’re writing a $25 million check.”

    To those who haven’t raised funds or been around fund formation, it can all seem inefficient. For the rash of micro VC funds that have formed (mine included), we collectively confuse, vex, and overwhelm traditional institutions, including because of our higher pace of investing, heavily reduced levels of ownership, lack of toothy pro-rata rights, and a host of other issues.

    Luckily for micro VCs, it doesn’t really take that much money to get going. My first fund was $1 million. It was really hard to raise. Some people have access to wealthy folks, family offices, or corporations, but it isn’t a slam dunk to raise a small fund. The second fund was considerably bigger (relative to the first), yet was still too small for institutions. The third fund will be even bigger — perhaps just at the size where the larger institutions like to build a relationship and track, much like a large VC firm who drops a $100,000 check into a company with the hopes of monitoring its progress.

    As other non-traditional LPs (companies, high net-worths, and even funds) have stepped in, it’s created a boon for entrepreneurs. People with the right networks and halfway decent concepts can raise as little as $1 million in a month, even in a category where every early-stage investor knows there are four or five nearly identical competitors working on the same thing. Many of these attempts won’t go on to raise traditional venture capital, and the institutional LPs know that.

    So, while there’s a high cost of writing so many small checks, we will have to wait a few years still to see just how costly it is. On the other hand, the cost of starting up may, in fact, decrease during any kind of correction as talent becomes less fragmented and major cost drivers (rent, salaries, benefits) decrease. Founders who are in demand and who are dilution-sensitive may want only specific people on their cap table, and they may want $100,000 to start, not $10 million or even $1 million.

    We are a few years away from that, but this is where I see the trend headed — that being nimble enough to be invited to the cap table is what will define individual investors and firms. Those definitions can’t really be bought with money, and that’s what will make the next wave of micro VC investing so interesting — that is the high cost of small checks.

    Semil Shah is the founder of Haystack, a seed-stage fund that has backed Instacart, DoorDash, and Hired, among other startups.

  • Quick Chat with Scalus Founder and CEO Kristen Koh Goldstein

    uploads-23183691-ad7c-48c2-a2a6-a02ac1de0b85-_MG_6508-retouched-3By Semil Shah

    Scalus, a five-year-old, San Francisco-based maker of workflow and collaboration software, was born out of necessity, says founder and CEO, Kristen Koh Goldstein, a former investment analyst turned entrepreneur. We recently caught up with her to learn more.

    With Scalus and a company you founded previously, BackOps, you seem to have developed a passion and expertise around building software and networks for remote workers — how did that all come to be?

    It’s fueled from a place of personal experience. After 9/11, I left Wall Street to learn operational finance and accounting at startups. Then life happened. I became a mom.  And I learned firsthand the challenges of being a mom and a professional. So I started BackOps, a back office service employing skilled moms who work from home between school dropoff and pickup.  The business grew quickly, doubling revenue every year for four years, so we ended up needing to develop software to clear the hurdles to scaling our business and Scalus was born.

    Our corporate mission is to prove that the future of work includes workplace flexibility for all.  Our social mission is to get a million parents back to work by empowering them to be productive at work and engaged at home.

    Speaking of remote workers, some of them are likely to be on contract. Have you been following the contractor versus full-employee debate as it relates to the on-demand sector? Any reactions?  

    The labor laws haven’t caught up with the changing face of the workforce. The Millennial generation approaches employment differently than its predecessors. Companies look more like Hollywood productions or real estate development projects. The line between “internal” and “external” becomes much more blurred in this environment, where contractors can often have the same longevity and close working relationships as internal employees, especially across departments.

    Philosophically, I believe it’s important to make a commitment to people who commit to you.  At BackOps, where I’m the chairwoman, my perspective has always been that unless you have an active income source elsewhere (you’re working for others), you are an employee of the company, even if just part-time on a temporary basis.

    What’s your point of view on the increased attention paid to having more women in VC and investing roles in the Valley? Are there more women quietly doing this than we know about, or is it still pretty dismal? If so, what can change it quickly?

    In angel investing, there have always been a lot of women funding and supporting early-stage companies. Shawn Byers, a prolific investor in female-led companies, is probably the only member of her family [which includes her husband, Brook Byers of Kleiner Perkins and their sons Blake Byers of Google Ventures and Chad Byers of Susa Ventures] who you haven’t heard about.  I think it’s quite possible that Shawn may end up backing just as many startups as Brook, Blake, and Chad. Full disclosure: Blake Byers is our biggest champion at Google Ventures, so we’re a big fan of the whole Byers clan.

    I am thrilled that trailblazers, including Helena Morrissey and Sukhinder Singh Cassidy, are pushing forward the discussion about getting more women in the boardroom, which is a positive change toward getting more women in VC. I am also so grateful to the countless women quietly working behind the scenes, including Aileen Lee. Hopefully, more companies, especially startups where like-think reigns, will start diversifying their boards, which will increase the demand for female VCs, who will in turn invest in a broader range of founders who will seek diverse boards.

    You’re an active angel and seed investor but keep a relatively low profile. Is that on purpose or all part of the plan?

    It’s on purpose. I have been listening, learning, and waiting for the remote worker movement to come center stage. When the time is right to talk about what it means to empower everyone across an organization to determine the way that they work, you’ll hear a lot more from me.

  • Quick Chat with Ryan Hoover of Product Hunt

    ryan-hoover-product-hunt-4-of-6By Semil Shah

    Though not quite two years old, Product Hunt has become a highly popular platform for an expanding community of users who vote on and discuss tech tools. VCs clearly like it, too. The company has already raised $7.5 million from some notable investors, including Andreessen Horowitz, Slow Ventures, and investor-entrepeneur Alexis Ohanian. Recently, we caught up with the company’s founder, Ryan Hoover, to ask how things are going.

    Almost overnight, you became “Internet famous” in tech circles. What’s that like?

    My life has changed a lot in the past 12 months, professionally and personally. Since the beginning, I’ve been a very public and approachable “face” of the company. As a result, my following has grown and inbox has become unmanageable with people asking for feedback on their product, advice on how to market their product, and other requests. The flood of outreach can make me anxious because I genuinely want to help but I simply can’t without deprioritizing what’s most important — my family, friends, team, and health.

    I’ve also become more self-aware in public as it’s not uncommon for someone to recognize me and introduce themselves as I’m walking down Market Street [in San Francisco] or grabbing food with friends at a restaurant. It’s flattering and I sincerely enjoy meeting Product Hunt fans, but we all want to escape work sometimes.

    What’s the most-cited critique of Product Hunt?

    When I invited the first few dozen people to contribute to the Product Hunt “MPV” — an email list highlighting new products — I reached out to startup folks I knew and respected. We quickly expanded beyond these initial curators by referral from others in the community and since then it’s grown far beyond my relatively tiny network to a global audience, with half the community outside the U.S. Still, not everyone can post and comment on Product Hunt — you have to receive an invite from someone else in the community – and understandably, this frustrates some people. Eventually, Product Hunt will be open to all, but right now we’re focusing on slowly building the community.

    Product Hunt recently launched Games.

    Last year, after Product Hunt gained early traction within the startup community, I thought hard about what it could become and what I wanted to build. Our longer-term vision is build a platform and communities around all types of products. Games was toward the top of that list.

    How do you balance your taste and instincts versus pleasing the crowd?

    The truth is, all of the products on Product Hunt are submitted by those in the community, with the exception of those that I and my teammates personally hunt. Once posted, products rise or fall based on the number of legitimate upvotes they receives, discounting voting rings or fraudulent votes from those trying to game the system.

    As the community has grown, we’ve already begun to see bifurcation in the types of products people gravitate toward. For example, people have been posting and upvoting games on Product Hunt since the beginning. While appealing to the general Product Hunt community, an enthusiastic subset was particularly attracted to this category and asked for their own place to share and discuss games. That was part of the inspiration to expand into gaming; as we expand to other categories, we’ll create new, autonomous communities that adopt and grow their own taste and culture. [Editor’s note: the newest of these channels focuses on books. You can learn more here.]

  • Survata Raises $6 Million to Take on Entrenched Survey Players

    survata-logo-160pxSurvata is a three-year-old, 10-person, San Francisco-based startup that creates consumer surveys for ad agencies, hedge funds, consumer packaged goods companies, and many others that are looking for feedback about their offerings. If Chipotle is thinking of introducing a new salsa concept, for example, Survata — which works with a network of publishers, from blogs to online magazines to video sites — will create a survey that targets the demographic from which Chipotle wants to learn.

    It’s easy to appreciate the company’s appeal. It’s a channel for consumers to access content for free. (Publishers ask readers to complete surveys to readers in lieu of paying.) It’s a cheaper, faster alternative to traditional research. To wit, Survata charges a flat rate of $1 dollar per survey response, in contrast with a company like Nielsen, whose starting costs can be around $30,000. Survata’s surveys also represent a new revenue stream for its publishing partners. Say Chipotle – a real customer – wants 500 responses about that new salsa. Survata shares the $500 it’s paid by Chipotle with its publishers.

    Despite heavyweight competition from the likes of SurveyMonkey and Qualtrics, among others, investors apparently like the traction it’s gaining. This morning, the company is announcing $6 million in Series A funding led by IDG Ventures, with participation from Bloomberg Beta and numerous angel investors, including Alexis Ohanian and Garry Tan. The company — a Y Combinator alum – has now raised $8.1 million altogether, including from earlier backers SoftTech VC and PivotNorth.

    To learn more about Survata and how it helps it clients (including VCs), we talked Friday with CEO Chris Kelly. Our chat, right here, has been edited for length.

  • Employees Wise Up

    timthumbThis week, a Bay Area founder was taken aback when an engineer being recruited by his startup asked for both its cap table and information regarding the liquidation preferences of its venture backers. The candidate presumably “worked somewhere where he discovered that these things matter,” says the founder, who asked not to be named in this story.

    Though the startup is still debating how much information to give to the candidate, it will likely need to come up with a policy around such requests soon. The amount of information that privately-held companies share with employees is becoming a bigger issue, largely owing to the rise of so many billion-dollar valuations.

    Just yesterday, CB Insights, the research firm, published an attention-grabbing report about “unicorn” valuations, reporting that 2015 has already seen growth of $143 billion in combined unicorn valuations year-to-date, a 47 percent increase over their aggregate valuation at the end of 2013. It also reported that the number of still-private companies now valued at $1 billion or more has grow by around 50 percent in 2015. (That jump represents a stunning 39 companies that have been assigned billion-dollar valuations by their investors this year.)

    More here.

  • Y Combinator’s Big Future

    y_combinator_logo_400-400x220There’s been a lot of talk in venture circles lately about “signaling risk” and seed-stage investments. The gist: When earlier backers are high-profile venture firms, and these firms decide not to participate in a startup’s next round, it hurts the company’s ability to raise a Series A round.

    Although this concern isn’t exactly new, recent numbers published by the firm CB Insights suggest that the issue is worth revisiting. According CB Insights’s findings, while 35 percent of all venture-backed, seed-funded companies go on to raise a Series A, a company that counts a respected venture firm among its seed backers has a 51 percent chance of raising a Series A if that firm participates in the round.

    That’s the good news. The bad: If the venture firm decides not participate in the startup’s Series A, the company’s chances of closing its Series A round drop to 27 percent.

    The study made us think about Y Combinator, the popular accelerator program, and its plan for the future. Right now, Y Combinator has the best of both worlds. It can make seed-stage investments at scale, for sizable stakes in startups, and not worry in the least about signaling risk: no one expects it to pour more of its capital into follow-on rounds. Its very model is premised on finding and funneling smart companies to other Series A, B, and C investors.

    Recently, however, some have speculated that Y Combinator is heading into a future where it is both seed and growth-stage investor.

    More here.

  • U.S. Companies Backing Out of U.S. Indices? Maybe Not

    ChinaIt’s been a big story of late. As of mid-June, 14 U.S.-traded China-based companies had received buyout offers valued at a collective $22.4 billion, according to Dealogic. The highest profile of the bunch is Internet services provider Qihoo 360, which, several weeks ago, announced it had received a buyout offer led by its chairman and CEO — one that would make it the “largest take-private deal of a U.S.-listed company,” said the WSJ.

    The reason for all the take-private talk? China’s stock market, which has roared along for much of this year, thanks to a series of moves by the Chinese government, including cutting benchmark interest rates, reducing stock market transaction fees — even reconsidering its stance on what are called variable interest entity structures, which are used by China-based companies to list in the U.S. and are hard to unwind.

    China, in short, wants its companies to come home.

    “The government wants to build its own capital markets,” says Glenn Solomon, a managing partner of the cross-border venture firm GGV Capital who we talked with last week. “It wants to see capital stay in China and continue to be invested in China.”

    The question is whether companies are smart to listen.

    (More on what’s changing fast in China here.)

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