This former Tesla CIO just raised $150 million more to pull car dealers into the 21st century

“I have to choose my words carefully,” says Joe Castelino of Stevens Creek Volkswagen in San Jose, California, when asked about the management software on which most car dealerships rely for inventory information, marketing, customer relationships and more.

Castelino, the dealership’s service director, laughs as he says this. But the joke has apparently been on car dealers, most of whom have largely relied on a few frustratingly antiquated vendors for their dealer management systems over the years — along with many more sophisticated point solutions.

It’s the precise opportunity that former Tesla CIO, Jay Vijayan, concluded he was well-positioned to address while still in the employ of the electric vehicle giant.

As Vijayan tells it, he knew nothing about cars until joining Tesla in 2011, following a dozen years of working in product development at Oracle, then VMware. Yet he learned plenty over the subsequent four years. Specifically, he says he helped to build with Elon Musk a central analysis system inside Tesla, a kind of brain that could see all of the company’s internal systems, from what was happening in the supply chain to its factory systems to its retail platform.

Tesla had to build it itself, says Vijayan; after evaluating the existing software of third-company providers, the team “realized that none of them had anything close to what we needed to provide a frictionless modern consumer experience.”

It was around that time that a lightbulb turned on. If Tesla could transform the experience for its own customers, maybe Vijayan could transform the buying and selling experience for the much bigger, broader automotive industry. Enter Tekion, a now four-year-old, San Carlos, California company that already employs 470 people locally and in Bangalore and has come far enough along that just attracted $150 million in fresh funding led by the private equity investor Advent International.

With the Series C round — which also included checks from Index Ventures, Airbus Ventures, FM Capital and Exor, the holding company of Fiat-Chrysler and Ferrari — the company has now raised $185 million altogether. It’s also valued at north of $1 billion. (The automakers General Motors, BMW and the Nissan-Renault-Mitsubishi Alliance are also investors.)

Eric Wei, a managing director at Advent, says that over the last decade, his team had been eager to seize on what’s approaching a $10 billion market annually. Instead, they found themselves tracking incumbents Reynolds & Reynolds, CDKGlobal and Cox Automotive’s Dealertrack — and waiting for a better player to emerge.

Then Wei was connected to Tekion through Jon McNeill, a former Tesla president and an advisory partner to Advent.

Says Wei of seeing how Tekion’s tech compared with its more established rivals: “It was like comparing a flip phone to an iPhone.”

Unsurprisingly, McNeill, who worked at Tesla with Vijayan, also sings the company’s praises, noting that Tekion even bought a dealership in Gilroy, Calif., to use as a kind of lab while it was building its technology from scratch.

It’s nice, such praise, but more important is that Tekion is also attracting the attention of dealers. Though citing competitive reasons, Vijayan declines to share how many customers have bought its cloud software — which connects dealers with both manufacturers and car buyers and is powered by machine learning algorithms — he says it’s already being used across 28 states.

One of these dealerships is the national chain Serra Automotive, whose founder, Joseph Serra, is now an investor in Tekion.

Another is that Volkswagen dealership in San Jose, where Castelino — who doesn’t have a financial interest in Tekion — speaks enthusiastically about the time and expenses his team is saving because of Tekion’s platform.

For example, he says customers need only log-in now to flag a particular issue. After that, with the help of an RFID tag, Stevens Creek knows exactly when that customer pulls into the dealership and what kind of help they need, making their arrival far more seamless.

Tekion can also make recommendations based on a car’s history. It might, for instance, suggest a brake fluid flush to a customer without an advisor having to look through that customer’s history, Castelino says.

As crucially, he says, the dealership has been able to cut ties with a lot of other software vendors, while also making more productive use of its time. Says Castelino, “As soon as a [repair order] is live, it’s in a dispatcher’s hand and a technician can grab the car.” It’s like that with every step, he insists. “You’re saving 15 minutes again and again, and suddenly, you have three hours where your intake can be higher.”

With converts like Castelino, it’s easy to image Tekion making serious strides in market share. And yet it does have rivals, some of which have long contracts in place with their customers.

Even steeper competition, should it come, might eventually be from Tesla itself.

In a Tesla earnings call earlier today, Musk told analysts that there are essentially a dozen startups housed inside of Tesla, including one centered on vehicle service. It’s the very business that Vijayan helped to create.

As for whether Musk might spin out any of these, he said Tesla currently has no plans to do so. He suggested it has enough on its plate for the time being. If Tekion takes off, however, that could well change.

Tesla is a chain of startups, Elon Musk explains

Today during a call with investors and journalists, Tesla CEO Elon Musk was asked to expand a tweet from yesterday. In it, he stated: “Tesla should really be thought of as roughly a dozen technology startups, many of which have little to no correlation with traditional automotive companies.”

In short, he explained there are over a dozen startups in Tesla, and he views every product line and plant as a startup. It’s an interesting point of view from the top of Tesla, a car manufacturing company that also builds batteries, home solar panels and, among other things, is looking to offer car insurance, too.

Outside of vehicle manufacturing, Musk points to insurance when asked about the growth potential. He says the insurance business could grow into 30-40% of Tesla’s car business.

This strategy seemingly works well for Tesla, which constantly rolls out updates to existing products at an unusual pace. New features arrive without much warning, and it makes sense when Tesla is treating different vehicle component divisions as a collection of companies instead of a collection of divisions.

According to Musk, some of the so-called startups include autonomy, chip design, vehicle service, sales, designing a drive unit, motors, supercharger network and, soon, insurance.

“The thing people don’t understand about Tesla is [the company] is a whole chain of startups,” Musk said. “And then people say, ‘well, you didn’t do that before.’ Yeah, well, we’re doing it now. I think we may have been a bit slower than other startups, but I don’t think we’ve really had anything fail.”

He concluded there are no plans to spin out any business, noting there’s no need to add complexity.

Daily Crunch: Quibi is shutting down

The end is in sight for Quibi, PayPal adds cryptocurrency support and Netflix tests a new promotional strategy. This is your Daily Crunch for October 21, 2020.

The big story: Quibi is shutting down

The much-hyped streaming video app led by Jeffrey Katzenberg and Meg Whitman, which raised nearly $2 billion in funding, is shutting down, according to reports in The Information and The Wall Street Journal.

Katzenberg, a longtime Hollywood executive, had blamed the coronavirus pandemic for a lackluster launch in May — an app designed for on-the-go viewing didn’t have much appeal when people were largely stuck at home. And whatever the reason, none of Quibi’s shows ever became a breakout hit.

Quibi executives confirmed the news in a post on Medium.

The tech giants

PayPal to let you buy and sell cryptocurrencies in the US — In partnership with Paxos, PayPal plans to support Bitcoin, Ethereum, Bitcoin Cash and Litecoin at first.

Facebook is working on Neighborhoods, a Nextdoor clone based on local groups — Facebook said that Neighborhoods currently is live only in Calgary, Canada.

Netflix to test free weekend-long access in India — The streaming service recently stopped offering a month of complimentary access to new users in the United States.

Startups, funding and venture capital

Syte, an e-commerce visual search platform, gets $30M Series C to expand in the US and Asia — Launched in 2015 to focus on visual search for clothing, Syte’s technology now covers other verticals, like jewelry and home decor.

June’s third-gen smart oven goes up for pre-order, starting at $599 — It’s been two years since the smart oven’s last major update.

Mine raises $9.5M to help people take control of their personal data — Mine scans users’ inboxes to help them understand who has access to their personal data.

Advice and analysis from Extra Crunch

Founders don’t need to be full-time to start raising venture capital — John Vrionis and Sarah Leary of Unusual Ventures told us that lightweight investing matters in the early days of a company.

Dear Sophie: What visa options exist for a grad co-founding a startup? — The latest edition of immigration lawyer Sophie Alcorn’s column answering immigration-related questions about working at tech companies.

Lessons from Datto’s IPO pricing and revenue multiple — How do you value slower, more profitable software growth?

(Reminder: Extra Crunch is our membership program, which aims to democratize information about startups. You can sign up here.)

Everything else

Sam’s Club will deploy autonomous floor-scrubbing robots in all of its US locations — Sam’s Club parent company Walmart is already using robotics to perform inventory in its own stores.

AOC’s Among Us stream topped 435,000 concurrent viewers — The purpose of the stream, which drew a massive crowd, was to get out the vote as we head into the general election.

Coalition for App Fairness, a group fighting for app store reforms, adds 20 new partners — The coalition claims that both Apple and Google engage in anti-competitive behavior.

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 3pm Pacific, you can subscribe here.

4 quick bites and obituaries on Quibi (RIP 2020-2020)

In memory of the death of Quibi, here’s a quick sendoff from four of our writers who came together to discuss what we can learn from Quibi’s amazing, instantaneous, billions-of-dollars failure.

Lucas Matney looks at what the potential was for Quibi and how it missed the mark in media. Danny Crichton discusses why billions of dollars in VC funding isn’t enough in competitive markets like video. Anthony Ha discusses the crazy context of Quibi and our interview with the company earlier this year. And Brian Heater looks at why constraints are not benefits in new products.

Lucas Matney: A deadpool company before it was even launched

There will be dozens of post-mortems on Quibi, but the fact is there were dozens of post-mortems written about Quibi before it even launched. The whole idea was, to be kind, audacious, though it was also clear to most people that weren’t personal friends with founder Jeffrey Katzenberg that it was doomed from the start.

Quibi’s death is an important moment for streaming, largely because it’s a pretty strong rebuke of services trying to one-up the Netflix model by solely focusing on high-dollar original content. I think Quibi made several mistakes, but its most pertinent ones can be tied to a lack of flexibility in vision.

The startup insisted that all of its titles were mobile-only, high-production value and relying on Hollywood star power when they probably could have succeeded by keeping a closer eye on what kind of quick-bite content was succeeding elsewhere. Snap has seen success with Discover after years of attempts, and there is space for a dedicated player here, but Katzenberg tried to level-up by throwing checks at his friends and not doing the hard work of scouting out rising trendsetters in the creator world.

There are other lessons here that apply to other streaming new-comers like Apple. Namely that creating a hit TV show is hard and buying a hit TV series is easier if you already have the money. Quibi and Apple TV+ both launched with plenty of new series and no back libraries of beloved legacy content for users to spend time digging into. There’s just so much good stuff out there already. Apple has shifted strategy here, but Quibi boxed itself in and probably couldn’t afford to play here once its error was made clear.

Quibi showcases how the streaming wars’ upending of Hollywood has probably eclipsed reason at this point. Players like Apple don’t belong here, and there’s just too much money pouring into original content that loosely fits the Hollywood mold.

Netflix stock is down 7% today after earnings yesterday showcased slowing growth. With HBO Max, Disney+, Peacock and Apple TV+ all launching in the last 12 months, the streaming market’s cup runneth over. And while I don’t think a Quibi death spells the end for innovation here, I think that the market is ready for some 2021 consolidation.

Gillmor Gang: Something Goes Right

Here we sit in the valley of predespair, 2 weeks ahead of the election and God knows where we are in the pandemic. As my partner Tina says to me on this once glorious sunny day (the view formerly known as the Pacific Ocean has been replaced by the fog like a Zoom background) we seem to be better prepared for something to go wrong than right.

We’ve learned how to stay socially distant, half-learned to wear a mask, unlearned how it might be a good idea to stay home and let things just happen. The last four years seems like a bizarre experiment in what not to do, the triumph of the worst of our instincts and fear of the other. For my generation, the thought that we would be tested so apocalyptically had never entered our mind. Free love, social media, mind-altering drugs — all ideas that seemed good at the time.

Too good to be true, it turned out. In the stampede to enjoy the fruits of our labors, we turned success into the failure of others. The space race may have spawned the computer industry, but it also reinforced the notion that we beat them to save us. And the tech boom saw us undermine the very soul, the soundtrack of how we marked our lives. Thanks, Napster.

Today, East v. West is Apple v. Android, a detente that Washington distorts into trust v. loyalty. Which is worse, the silence of the social giants or making mistakes in the open? I’m sick of beating up on Twitter for our failures, even more so our toothless tut-tutting of Facebook for spreading the lies we support by staying put.

So, let’s try something going right for a change. Take Spotify and their new plan to embed full versions of our musical heritage in podcasts. This is a complicated offer, to be sure. You can’t use partial versions of songs, talk over any portion of the song, or place ads within 60 seconds of music. Ads must have at least 10 minutes of non-music content between them. More importantly, these shows are only available on Spotify’s Anchor podcasting service.

But what really stands out is the attempt by one of the two major music streaming services to create a composite product reconstituting a post digital radio business. If Apple Music were nudged to support the idea, it would resuscitate a major platform of the tech crowd with a mashup of DJ and playlist content. This in turn would create new leaderboards or charts in old record biz terms that would jumpstart new and catalog music in media. Already we see some of that energy in Saturday Night Live clips where audience numbers are shifting to mobile and online viewing. Composite ratings of broadcast and digital are growing fast.

This evolution from broadcast to online ratings success may presage how live entertainment venues and audiences obliterated by the pandemic adapt with hybrid live/digital events. We’re seeing this act out in real time with the election, where early voting and election day registration have produced record turnout for both the safety of mail and absentee voting (mostly Democrats) and more traditional party switching (mostly Republicans or former Democrats more engaged by Trump.) This “new normal” in politics may not bear immediate fruit, but it’s at a minimum a harbinger of things to come.

Fast forward to a future dinner party in an AR/VR augmented version of our favorite restaurants, with autotesting and contact tracing making it safe enough to reconstitute weekly gettogethers not just of local friends but virtual guests from around our town and beyond. Courses are served by delivery and robot waiters as we watch party our favorite artists and comedians both professional and amateur. Election night becomes a vote-from-home proposition, with the electoral college results calculated in realtime.

As the concession speeches wind down, a vanquished candidate references the Paul Simon song:

When something goes wrong
I’m the first to admit it
I’m the first to admit it
But the last one to know
When something goes right
Well it’s likely to lose me
It’s apt to confuse me
It’s such an unusual sight
I can’t get used to something so right
Something so right

__________________

The Gillmor Gang — Frank Radice, Michael Markman, Keith Teare, Denis Pombriant, Brent Leary, and Steve Gillmor . Recorded live Friday, October 16, 2020.

Produced and directed by Tina Chase Gillmor @tinagillmor

@fradice, @mickeleh, @denispombriant, @kteare, @brentleary, @stevegillmor, @gillmorgang

For more, subscribe to the Gillmor Gang Newsletter and join the backchannel here on Telegram.

The Gillmor Gang on Facebook … and here’s our sister show G3 on Facebook.

Tesla wows on latest numbers

Tesla’s latest quarterly numbers beat analyst expectations on both revenue and earnings per share, bringing in $8.77 billion in revenues for the third quarter.

With the report that Tesla had already beaten Wall Street’s expectations for deliveries earlier this month, the question for today’s earnings call was how much efficiency (and by extension, profit) the electric car and battery company was able to wring out of its manufacturing processes.

Now we have the answer, as Tesla reported net income of $331 million* on revenues of $8.77 billion for the third quarter. That’s up 39% from the year-ago period. Wall Street had expected $8.36 billion in revenue for the quarter, according to estimates published by CNBC.

Revenue grew 30% year-on-year, something the company attributed to substantial growth in vehicle deliveries, and operating income also grew to $809 million, showing improving operating margins to 9.2%.

And while the automotive business is clearly still the star of the show, both Tesla’s solar and storage businesses showed marked improvements in the third quarter.

Energy storage reached a company record 759 Megawatt hours in the quarter, and the company said that megapack production for its large-scale batteries is growing while Powerwall demand remains strong.

“We continue to believe that the energy business will ultimately be as large as our vehicle business,” the company said.

And the solar business is also improving, according to Tesla. “Our recently introduced strategy of low-cost solar (at $1.49/watt in the U.S. after tax credit) is starting to have an impact. Total solar deployments more than doubled in Q3, to 57 MW compared to the prior quarter, with Solar Roof deployments almost tripling sequentially.”

Operating expenses for the company were also up. New factories in Austin and Brandenburg, Germany mean additional expenses, and Tesla poured $1.25 billion into operations, up 33% from the previous quarter.

Earlier this month, the company tipped its hand on the good news around deliveries, saying that it had already delivered 139,300 vehicles in the third quarter, slightly above Wall Street’s expectations, and a notable improvement from last quarter, as well as the same period a year ago.

The delivery beat marked a 43% improvement from the same quarter last year, when the company reported deliveries of 97,000 electric vehicles. And delivery numbers were up 53% quarter on quarter, as the globally spreading COVID-19 pandemic took its toll on sales and production operations for Tesla at its main U.S. factory.

The quarter also saw Tesla unveil a sweeping new vision for its battery manufacturing plans. During the shareholder presentation Tesla chief executive Elon Musk said that he expected to deliver up to 40% more electric vehicles than in 2019 and laid out the road map for better battery manufacturing efficiency.

Tesla’s earnings beat comes amid mounting competition from some of the world’s largest automakers. Yesterday GMC unveiled its Hummer EV and, in September, Ford announced that it would be slashing the price on its Mustang Mach E to “stay fully competitive.”

Meanwhile startups like Lucid Motors are proving that they could be serious contenders to Tesla’s market dominance. Lucid’s recent pricing for its Air sedan was enough to force Tesla chief executive and head of public relations, Elon Musk, to parry back with a (creatively selected) price cut on the company’s own models.

This story is developing and will be updated. 

Quibi is dead

Plagued with growth issues, Quibi, a short-form mobile-native video platform, is shutting down, according to multiple reports. The startup, co-founded by Jeffrey Katzenberg and Meg Whitman, had raised nearly $2 billion in its lifetime as a private company. Quibi did not respond to requests for comment from TechCrunch.

The company’s prolific fundraising efforts spanned prominent institutions in private equity, venture capital and Hollywood, all betting on Katzenberg’s ability to deliver another hit. The startup’s backers included Alibaba, Madrone Capital Partners, Goldman Sachs and JPMorgan, as well as Disney, Sony Pictures, Viacom, WarnerMedia and MGM, among others. The Information reports that Quibi will have $350 million left to return to shareholders.

Their pitch was highly produced bite-sized content, packed with Hollywood star power, and designed to be “mobile-first” entertainment. For the YouTubes and Snaps of the world, producing mainstream content on a shoestring budget, Quibi wanted to be an HBO for smartphones. Investors and pundits questioned the firm’s ability to monetize this vision, and it became clear soon after launch that the company had miscalculated.

Rumors that Quibi was shutting down began early this week. The Information wrote that Katzenberg has told people within the industry that the company might need to shut down, after unsuccessfully pitching itself as an acquisition to Apple, Facebook and Warner Media.

In its first few months, Quibi was downloaded 3.5 million times and had 1.5 million active users. While those figures aren’t too shabby, the company had to adjust its original projections, which put the service on a trajectory to reach 7 million users and $250 million in subscriber revenue in its first year. Admitting that the launch hadn’t gone as planned, Katzenberg blamed the coronavirus for the streaming app’s challenges.

The company expanded in Australia in August with a free ad-supported tier for users. It is unclear if the tweak in the business model brought Quibi success, or if the problems for the app had to do with the business model in the first place.

Netflix earnings from earlier this week suggest that the pandemic entertainment boom is slowing. The consumer video service disappointed on new paying customer numbers, and shares were down sharply yesterday after it released its earnings report. Those numbers also potentially showcase just how crowded the market for subscription video content has gotten in the past 12 months, with players like Apple, Disney, HBO and NBC each launching new services and collectively spending billions to acquire rights to past television hits.

Coalition for App Fairness, a group fighting for app store reforms, adds 20 new partners

The Coalition for App Fairness (CAF), a newly formed advocacy group pushing for increased regulation over app stores, has more than doubled in size with today’s announcement of 20 new partners — just one month after its launch. The organization, led by top app publishers and critics, including Epic Games, Deezer, Basecamp, Tile, Spotify and others, debuted in late September to fight back against Apple and Google’s control over app stores, and particularly the stores’ rules around in-app purchases and commissions.

The coalition claims both Apple and Google engage in anti-competitive behavior, as they require publishers to use the platforms’ own payment mechanisms, and charge 30% commission on these forced in-app purchases. In some cases, those commissions are collected from apps where Apple and Google offer a direct competitor. For example, the app stores commission Spotify, which competes with Google’s YouTube Music and Apple’s own Apple Music.

The group also calls out Apple more specifically for not allowing app publishers any other means of addressing the iOS user base except through the App Store that Apple controls. Google, however, allows apps to be sideloaded, so is less a concern on that platform.

The coalition launched last month with 13 app publishers as its initial members, and invited other interested parties to sign up to join.

Since then, CAF says “hundreds” of app developers expressed interest in the organization. It’s been working through applications to evaluate prospective members, and is today announcing its latest cohort of new partners.

This time, the app publishers aren’t necessarily big household names, like Spotify and Epic Games, but instead represent a wide variety of apps, ranging from studios to startups.

The apps also hail from a number of app store categories, including Business, Education, Entertainment, Developer Tools, Finance, Games, Health & Fitness, Lifestyle, Music, Navigation, News, Productivity, Shopping, Sport and Travel.

The new partners include: development studio Beonex, health app Breath Ball, social app Challenge by Eristica, shopping app Cladwell, fitness app Down Dog Yoga, developer tool Gift Card Offerwall, game maker Green Heart Games, app studio Imagine BC, business app Passbase, music app Qobuz, lifestyle app QuackQuack and Qustodio, game Safari Forever, news app Schibsted, app studio Snappy Mob, education app SpanishDict, navigation app Sygic, app studio Vertical Motion, education app YARXI, and the Mobile Marketing Marketing Association.

With the additions, CAF now includes members from Austria, Australia, Canada, France, Germany, India, Israel, Malaysia, Norway, Singapore, Slovakia, Spain, United Kingdom and the United States.

The new partners have a range of complaints against the app stores, and particularly Apple.

SpanishDict, for instance, was frustrated by weeks of rejections with no recourse and inconsistently applied policies, it says. It also didn’t want to use Apple’s new authentication system, Apple Sign-In, but Apple made this a requirement for being included on the App Store.

Passbase, a Sign In With Apple competitor, also argues that Apple applied its rules unfairly, denying its submission but allowing its competitors on the App Store.

While some of the app partners are speaking out against Apple for the first time, others have already detailed their struggles publicly.

Eristica posted on its own website how Apple shut down its seven-year-old social app business, which allowed users to challenge each other to dares to raise money for charity. The company claims it pre-moderated the content to ensure dangerous and harmful content wasn’t published, and employed human moderators, but was still rejected over dangerous content.

Meanwhile, TikTok remained on the App Store, despite hosting harmful challenges, like the pass out challenge, cereal challenge, salt and ice challenge and others, Eristica says.

Apple, of course, tends to use its policies to shape what kind of apps it wants to host on its App Store — and an app that focused on users daring one another may have been seen as a potential liability.

That said, Eristica presents a case where it claims to have followed all the rules and made all the changes Apple said it wanted, and yet still couldn’t get back in.

Down Dog Yoga also recently made waves by calling out Apple for rejecting its app because it refused to auto-charge customers at the end of its free trial.

Wow! Apple is rejecting our latest update because we refuse to auto-charge at the end of our free trial. They can choose to steal from their customers who forget to cancel, but we won't do the same to ours. THIS IS A LINE THAT WE WILL NOT CROSS. pic.twitter.com/s9HwD4ay4h

— Down Dog (@downdogapp) June 30, 2020

The issue, in this case, wasn’t just that Apple wants a cut of developers’ businesses, it also wanted to dictate how those businesses are run.

Another new CAF partner, Qustodio, was among the apps impacted by Apple’s 2018 parental control app ban, which arrived shortly after Apple introduced its own parental control software in iOS.

The app developer had then co-signed a letter asking Apple to release a Screen Time API rather than banning parental control apps — a consideration that TechCrunch had earlier suggested should have been Apple’s course of action in the first place.

Under increased regulatory scrutiny, Apple eventually relented and allowed the apps back on the App Store last year.

Not all partners are some little guy getting crushed by App Store rules. Some may have run afoul of rules designed to protect consumers, like Apple’s crackdown on offerwalls. Gift Card Offerwall’s SDK, for example, was used to incentivize app monetization and in-app purchases, which isn’t something consumers tend to welcome.

Despite increased regulatory pressure and antitrust investigations in their business practices, both Apple and Google have modified their app store rules in recent weeks to ensure they’re clear about their right to collect in-app purchases from developers.

Meanwhile, Apple and CAF member Epic Games are engaged in a lawsuit over the Fortnite ban, as Epic chose to challenge the legality of the app store business model in the court system.

Other CAF members, including Spotify and Tile, have testified in antitrust investigations against Apple’s business practices, as well.

“Apple must be held accountable for its anticompetitive behavior. We’re committed to creating a level playing field and fair future, and we’re just getting started,” CAF said in an announcement about the new partners. It says it’s still open to new members.

Datto trades modestly higher after pricing IPO at top of range

After pricing at $27 per share, Datto’s stock rose during regular trading. By mid-afternoon the data and security software company was worth $28.10 per share, up a hair over 4%.

The company’s IPO comes on the back of a rapid-fire Q3 in which a host of technology companies, particularly software, made it to the public markets. While the number of un-exited unicorns in the United States still rose in the quarter, Q3 brought with it a wave of liquidity that felt long coming.

Datto’s IPO is one among what appears set to be a smaller Q4 class, though offerings like Airbnb and Affirm are still tipped to be coming in short order. Airbnb and Affirm each announced that they have filed privately to float, though have yet to publicly drop their S-1 filings.

The Datto IPO was interesting for a few reasons, including its mix of slower growth and rising profitability, its place in the midst of the current Vista drama and how well it was priced.

While 2020 has brought with it many venture-backed IPOs, the year has also brought a nearly commensurate number of complaints about the IPO process itself. After many tech, and tech-ish, companies saw their values skyrocket after pricing and listing, vocal tech and venture figures argued that IPOs were effectively handing upside from companies to underwriting banks, and their customers.

There was some merit to the arguments. Datto, however, will not stoke similar fires. Up a mere few points from its IPO price, it was priced pretty much perfectly from the perspective of raising as much money as it could for itself in its debut.

Datto will use its IPO proceeds to pay down debts that it accrued during its takeover from Vista (private equity: a good deal for private equity). However, Datto’s CEO Tim Weller told TechCrunch in a call that the company will still be well-capitalized after the public offering, saying that it will have a very strong cash position.

The company should have places to deploy its remaining cash. In its S-1 filings, Datto highlighted a COVID-19 tailwind stemming from companies accelerating their digital transformation efforts. TechCrunch asked the company’s CEO whether there was an international component to that story, and whether digital transformation efforts are accelerating globally and not merely domestically. In a good omen for startups not based in the United States, the executive said that they were.

The company did not entertain a SPAC-led public debut, with Datto’s founder, Austin McChord, saying that his company had long planned a traditional public offering. Closing on the Vista front, McChord said that the removal of Vista’s Brian Sheth was immaterial to Datto’s IPO process.

Dear Sophie: What visa options exist for a grad co-founding a startup?

Sophie Alcorn
Contributor

Sophie Alcorn is the founder of Alcorn Immigration Law in Silicon Valley and 2019 Global Law Experts Awards’ “Law Firm of the Year in California for Entrepreneur Immigration Services.” She connects people with the businesses and opportunities that expand their lives.

Here’s another edition of “Dear Sophie,” the advice column that answers immigration-related questions about working at technology companies.

“Your questions are vital to the spread of knowledge that allows people all over the world to rise above borders and pursue their dreams,” says Sophie Alcorn, a Silicon Valley immigration attorney. “Whether you’re in people ops, a founder or seeking a job in Silicon Valley, I would love to answer your questions in my next column.”

Extra Crunch members receive access to weekly “Dear Sophie” columns; use promo code ALCORN to purchase a one- or two-year subscription for 50% off.


Dear Sophie:

What are the visa prospects for a graduate completing an advanced degree at a university in the United States who wants to co-found a startup after graduation? Can the new startup or my co-founders sponsor me for a visa?

—Brilliant in Berkeley

Dear Brilliant,

Thank you for your questions and for your contributions. The U.S. economy greatly benefits from entrepreneurial individuals like you who create companies — and jobs — in the U.S.

Let me take your second question first: Yes, it is theoretically possible for your startup to sponsor you for a visa, and for one of your co-founders to be your supervisor. Many visas and employment green cards require a company to sponsor you and for you to demonstrate that a valid employer-employee relationship exists.

Given your situation, timing will be key, particularly since one of your best visa options is the H-1B Visa for Specialty Occupations. The number of H-1B visas issued each year is typically capped at 85,000-60,000 for individuals with a bachelor’s degree and 25,000 for individuals with a master’s or higher degree. Because of the cap on H-1B visas and because the demand for them far outstrips the supply, U.S. Citizenship and Immigration Services (USCIS) holds a lottery once a year in the spring to determine who can apply for this visa.

This serial founder is taking on Carta with cap table management software she says is better for founders

Yin Wu has co-founded several companies since graduating from Stanford in 2011, including a computer vision company called Double Labs that sold to Microsoft, where she stayed on for a couple of years as a software engineer. In fact, it was only after that sale she she says she “actually understood all of the nuances with a company’s cap table.”

Her newest company, Pulley, a 14-month-old, Mountain View, Ca.-based maker of cap table management software aims to solve that same problem and has so far raised $10 million toward that end led by the payments company Stripe, with participation from Caffeinated Capital, General Catalyst, 8VC and numerous angel investors.

Wu is going up against some pretty powerful competition. Carta was reportedly raising $200 million in fresh funding at a $3 billion valuation as of the spring (a round the company never official confirmed or announced). Last year, it raised $300 million. Morgan Stanley has meanwhile been beefing up its stock plan administration business, acquiring Solium Capital early last year and more recently purchasing Barclay’s stock plan business.

Of course, startups often manage to find a way to take down incumbents and a distraction for Carta, at least, in the form of a very public gender discrimination lawsuit by a former VP of marketing, could be the kind of opening that Pulley needs. We emailed with Yu yesterday to ask if that might be the case. She didn’t answer directly, but she did mention “values,” as well as sharing some more details about what she sees as different about the two products.

TC: Why start this company? Has Carta’s press of late created an opening for a new upstart in the space?

YW: I left Microsoft in 2018 and started Pulley a year later. We skipped the seed and raised the A because of overwhelming demand from investors. Many wanted a better product for their portfolio companies. Many founders are increasingly thinking about choosing with companies, like Pulley, that better align with their values.

TC: How many people are working for Pulley and are any folks you pulled out of Carta?

YW: We’re a team of seven and have four people on the team who are former Y Combinator founders. We attract founders to the team because they’ve experienced firsthand the difficulties of managing a cap table and want to build a better tool for other founders. We have not pulled anyone out of Carta yet.

TC: Carta has raised a lot of funding and it has long tentacles. What can Pulley offer startups that Carta cannot?

YW: We offer startups a better product compared to our competitors. We make every interaction on Pulley easier and faster. 409A valuations take five days instead of weeks, and onboarding is the same day rather than months. By analogy, this is similar to the difference between Stripe and Braintree when Stripe initially launched. There were many different payment processes when Stripe launched. They were able to capture a large portion of the market by building a better product that resonated with developers.

One of the features that stands out on Pulley is our modeling feature [which helps founders model dilution in future rounds and helps employees understand the value of their equity as the company grows]. Founders switch from our competitors to Pulley to use our modeling tool [and it works] with pre-money SAFEs, post-money SAFEs and factors in pro-ratas and discounts. To my knowledge, Pulley’s modeling tool is the most comprehensive product on the market.

TC: How does your pricing compare with Carta’s?

YW:  Pulley is free for early-stage companies regardless of how much they raise. We’re price competitive with Carta on our paid plans. Part of the reason we started Pulley is because we had frustrations with other cap table management tools. When using other services, we had to regularly ping our accountants or lawyers to make edits, run reports or get data. Each time we involved the lawyers, it was an expensive legal fee. So there is easily a $2,000 hidden fee when using tools that aren’t self-serve for setting up and updating your cap table.

TC: Is there a business-to-business opportunity here, where maybe attorneys or accountants or wealth managers private label this service? Or are these industry professionals viewed as competitors?

YW: We think there are opportunities to white label the service for accountants and law firms. However, this is currently not our focus.

TC: How adaptable is the software? Can it deal with a complicated scenario, a corner case?

YW: We started Pulley one year ago and we’re launching today because we have invested in building an architecture that can support complex cap table scenarios as companies scale. There are two things that you have to get right with cap table systems, First, never lose the data and second, always make sure the numbers are correct. We haven’t lost data for any customer and we have a comprehensive system of tests that verifies the cap table numbers on Pulley remain accurate.

TC: At what stage does it make sense for a startup to work with Pulley, and do you have the tools to hang onto them and keep them from switching over to a competitor later?

YW: We work with companies past the Series A, like Fast and Clubhouse. Companies are not looking to change their cap table provider if Pulley has the tool to grow with them. We already have the features of our competitors, including electronic share issuance, ACH transfers for options, modeling tools for multiple rounds and more. We think we can win more startups because Pulley is also easier to use and faster to onboard.

TC: Regarding your paid plans, how much is Pulley charging and for what? How many tiers of service are there?

YW; Pulley is free for early-stage startups with less than 25 stakeholders. We charge $10 per stakeholder per month when companies scale beyond that. A stakeholder is any employee or investor on the cap table. Most companies upgrade to our premium plan after a seed round when they need a 409A valuation.

Cap table management is an area where companies don’t want a free product. Pulley takes our customers’ data privacy and security very seriously. We charge a flat fee for companies so they rest assured that their data will never be sold or used without their permission.

TC: What’s Pulley’s relationship to venture firms?

YW: We’re currently focused on founders rather than investors. We work with accelerators like Y Combinator to help their portfolio companies manage their cap table, but don’t have a formal relationship with any VC firms.

Founders don’t need to be full-time to start raising venture capital

“More than 50% of our founders still are in their current jobs,” said John Vrionis, co-founder of seed-stage fund Unusual Ventures.

The fund, which closed a $400 million investment vehicle in November 2019, has noticed that more and more startup employees are thinking about entrepreneurship as the pandemic has shown how much room there is for new innovation. To gain a competitive advantage, Unusual is investing small checks into founders before they’re full-time.

Unusual, which cuts an average of eight checks per year into seed-stage companies, isn’t doling out millions to every employee who decides to leave Stripe. The firm is conservative with its spending and takes a more focused approach, often embedding a member from the firm into a portfolio company. It’s not meant to scale to dozens of portfolio companies a year, but instead requires a methodical approach.

One with a healthy pipeline of companies to choose from.

In an Extra Crunch Live chat, Vrionis and Sarah Leary, co-founder of Nextdoor and the firm’s newest partner, said lightweight investing matters in the early days of a company.

“There were a lot of teams that needed capital to start the journey, but frankly, it would have been over burdensome if they took on $2 or $3 million,” Leary said. “[New founders] want to be in a place where they have enough money to get going but not too much money that they get locked into a ladder in terms of expectations that they’re not ready to take advantage of.” The checks that Unusual cuts in pre-seed often range between $100,000 to half a million dollars.

Leary chalks up the boom to the disruption in consumer behavior, which opens up the opportunity for new companies to win.

Boston Dynamics’ Spot is getting an arm and self-charging dock next year

Boston Dynamics’ new CEO Rob Playter told TechCrunch that the company has now sold around 260 of its sophisticated Spot robot as of his appearance at Disrupt last month. While the company faced some questions about the commercial appeal of the $75,000 robot, it’s clear that a number of verticals are interested in finding ways to deploy the tech.

Among Spot’s many appeals is its positioning as a kind of platform for developers and third-parties who can build their own accessories for a range of different applications, from construction to telemedicine. But Boston Dynamics is also actively developing its own accessories to help diversify Spot’s applications.

The company recently announced that it would be offering an arm add-on capable of performing a wide variety of tasks, including opening doors and picking up objects. The addition is a no-brainer, given that the arm was featured in the first Spot/Spot Mini videos from years back. In fact, I was honestly a little disappointed when the accessory was left out of the initial launch of the company’s first commercial product.

Image Credits: Boston Dynamics

The arm is set to arrive at some point early next near. It has six degrees of freedom and is designed to move along with the robot. “Like the base robot,” the company writes, “there’s much more to the arm than just hardware. It will ship with an intuitive UI, and be equipped to operate through both telemanipulation and supervised autonomous behaviors via the tablet.”

The arm/gripper will also be accessible to developers via an API. Applications like opening doors, and grasping and dragging objects, will be automated and offered as beta features when the arm ships.

Image Credits: Boston Dynamics

Boston Dynamics is also announcing an Enterprise-focused version of the robot that features a self-charging dock. Like a big, sophisticated Roomba, Spot will be able to return unguided to the dock for a recharge. The setup is designed for environments like oil rigs and radiation danger zones where the robot can ideally operate without humans present.


That’s also set to arrive early next year. Pricing for the above is still TBD.

Rocket Lab’s Peter Beck is coming to TC Sessions: Space 2020

Over the last few years Rocket Lab has gone from its very first orbital launch to regular commercial missions, with the goal of being the most responsive launch provider on the planet. Founder and CEO Peter Beck will join us at our all virtual TC Sessions: Space event happening on December 16 & 17 to talk about the new launch ecosystem and building a company to compete with industry giants.

Rocket Lab’s 15th mission, “In Focus,” is scheduled to take off this very afternoon, with 10 Earth observation satellites from Canon Electronics and Planet. It has already put satellites in orbit for NASA, the NRO and numerous private companies. The company’s launch cadence has slowly increased, though the loss of a mission in July soured its plan to go from months to weeks between launches.

But Beck, who has led the company from its inception in 2006, saw this as just another challenge to take head-on, and within the month Rocket Lab had gotten to the bottom of the issue and was clear to fly again.

“If you’re going to own a rocket company and launch vehicles, you have to be prepared for this kind of thing,” he said at the time. And now Electron is even more reliable than it was before, he pointed out.

Now Rocket Lab is expanding into adjacent businesses as well, with the secretive launch of its First Light satellite platform, demonstrating tech that it hoped to share with customers who don’t want to build a satellite from scratch. “It’s just really painful to go from an idea to getting something in orbit,” he said, and by making it easier to actually build a spacecraft, it both democratizes space and creates customers out of thin air.

At TC Sessions: Space, Beck will discuss all of this and more. You can get early-bird tickets right now, and save $100 before prices go up on November 13 — and you can even get a fifth person free if you bring a group of four from your company. Special discounts for current members of the government/military/nonprofit and student tickets are also available directly on the website. And if you are an early-stage space startup looking to get exposure to decision makers, you can even exhibit for the day for just $360.

Is your company interested in presenting your company at TC Sessions: Space 2020Click here to talk with us about available opportunities.

Prop 22 opponents say Yes on 22 should not be able to mail flyers as nonprofit

Opponents of California’s Proposition 22, the measure that seeks to continue classifying rideshare drivers and delivery workers as independent contractors, filed a complaint this morning with the United States Postal Service. The No on 22 campaign alleges the Yes side is not eligible for a nonprofit postal status and is asking USPS to revoke its permit.

It’s much cheaper to send campaign mailers as a nonprofit organization. For example, sending between 1 – 200,000 small mailers to every door normally costs $0.302 per piece. As a nonprofit, that costs $0.226 per piece, according to USPS. To be clear, the Yes on 22 campaign confirmed it was formed as a nonprofit organization under IRS section 501(c)(4), which pertains to social welfare organizations. But the No on 22 side says USPS erred in approving the Yes on 22 campaign.

“The Yes on 22 nonprofit permit was unlawfully issued,” a lawyer for No on 22 wrote to USPS Postmaster General Louis DeJoy. “[…] This misuse of the nonprofit permit coming from a corporate backed $200 million campaign is unprecedented and should be remedied by the Postal Service immediately.”

According to USPS, any organization that wants to send mail as a nonprofit must first be authorized by the postal service as being eligible. Those that are eligible for nonprofit privileges, according to USPS, include “some political committees” but not “certain political organizations.” The political committees that may qualify for nonprofit prices regardless of nonprofit status, according to USPS, are the national or state committees of a political party, and the Democratic or Republican congressional or senatorial campaign committees.

“Campaign committees participating in ballot measure advocacy routinely form themselves as non-profits under section 501(c)(4) of the Internal Revenue Code, as the No on 22 lawyers know well,” Yes on 22 campaign spokesperson Geoff Vetter told TechCrunch. “Furthermore, the IRS granted Yes on 22’s nonprofit status. As a 501(c)(4) organization, Yes on 22 is eligible for the appropriate nonprofit postage rates with the USPS, which we applied for and were granted by the U.S. Postmaster. Moreover, pursuant to USPS Customer Support Ruling 128 – the USPS has a long-term policy in place of allowing the ballot measure committee of a duly authorized nonprofit to mail under the nonprofit’s authorization. The above is true for many ballot measure campaigns, and as stated, like all entities, our applications were reviewed and approved by both the IRS and the USPS.”

To date, the Yes on 22 campaign has contributed $185,096,892 to its cause. The Yes on 22 committee consists of companies like Uber, Lyft, Instacart and DoorDash, as well as drivers, small businesses and public safety and community organizations. The bulk of its funding has come from Uber, Lyft and DoorDash. In comparison, No on 22 has contributed $12,166,063.

“It’s outrageous but not surprising that the app companies that are going to the mat to keep shortchanging workers would shamelessly rip off the postal service,” No on Prop 22 spokesperson Mike Roth said in a statement. “This is just more evidence of the kind of greed we are dealing with from these companies who are spending $186 million in their selfish quest to buy themselves a new law but refused to buy their workers PPE in a pandemic.”

TechCrunch has reached out to USPS and will update this story if we hear back.