Month: January 2020

Latin America Roundup: Loft raises $175M, Softbank invests in Mexico’s Alphacredit and Rappi pulls back

Brazil’s famously-tricky real estate market has long drawn international investors to the region in search of tech solutions. This time, Brazilian startup Loft brought in a $175M Series C from first-time investor in the region, Vulcan Capital (Paul Allen’s investment arm), alongside Andreessen Horowitz. Loft is also a16z’s first and only Brazilian investment. 

Co-founded by serial entrepreneurs and investors, Mate Pencz and Florian Hagenbuch in 2018, Loft uses a proprietary algorithm to process transaction data and provide more transparent pricing for both buyers and sellers. The startup uses two models to help clients sell properties; either Loft will value the apartment for listing on the site, or they will offer to purchase the property from the buyer immediately. Many real estate platforms in the US are shifting toward a similar iBuyer model; however, this system may be even more apt for the Latin American market, where property sales are notoriously untransparent, bureaucratic, and tedious.

Loft will use the capital to expand to Rio de Janeiro in Q1 2020 and to Mexico City in Q2, bringing on at least 100 new employees in the process. It also plans to scale its financial products to include mortgages and insurance by the end of the year. 

Alphacredit raises $125M from Softbank

Mexican consumer lending startup Alphacredit became Softbank’s new Mexico bet this month, with a $125M Series B round. Alphacredit uses a programmed deduction system to provide rapid, online loans to individuals and small businesses in Mexico. To date, the startup has granted over $1B in loans to small business clients in Mexico and Colombia, many of whom have never previously had access to financing. 

Alphacredit’s programmed deductions system enables the startup to lower default rates, which in turn lowers interest rates. For over eight years, Alphacredit has encouraged financial inclusion in Mexico and Colombia through technology; this round of investment will enable the platform to consolidate its holding as one of the top lending platforms in the region. The investment is still subject to approval by Mexico’s competition authority, COFECE, which has previously blocked startup deals such as the Cornershop acquisition in 2019. 

Softbank’s biggest bets back off in Latin America

While Softbank is still rapidly deploying its Latin America-focused Innovation Fund, some of its largest companies are stepping on the brakes. In particular, Softbank’s largest LatAm investment, Rappi, recently announced that it would lay off up to 6% of its workforce in an effort to cut costs and focus on their technology. The Colombian unicorn has been expanding at a breakneck pace throughout the region using a blitzscaling technique that has helped it reach nine countries with 5,000 employees in just two years, including Ecuador in November 2019.

Rappi has stated that it will focus on technology and UX in 2020, explaining that the job cuts do not reflect its long-term growth strategy. However, Rappi is also facing legal action for alleged intellectual property theft. Mauricio Paba, José Mendoza, and Jorge Uribe are suing Rappi CEO Simon Borrero and the company for stealing the idea for the Rappi platform while providing consulting for the three founders through his firm, Imaginamos. The case is currently being processed in Colombia and the U.S. 

One of Softbank’s biggest bets in Asia, Oyo Rooms, is facing similar challenges. Just months after announcing their expansion into Mexico, Oyo fired thousands of employees in China and India. Oyo plans to be the largest hotel chain in Mexico by the end of 2020, according to a local spokesperson.

Argentina’s Agrofy breaks regional agtech records

With a $23M Series B from SP Ventures, Fall Line Capital, and Acre Venture Partners, Argentine agricultural supply marketplace Agrofy has raised the region’s largest round for an agtech startup to date. The platform provides transparency and ease for the agricultural industry, where users can buy and everything from tractors to seeds. In four years, Agrofy has established itself as the market leader in agricultural e-commerce; it was also Fall Line Capital’s first investment outside of the U.S.

Agrofy is active in nine countries and receives over five million visits per month, 60% of which come from Brazil. However, the startup faces the challenge of low connectivity in rural areas, where most of its customers live. The investment will go to improving the platform, as well as integrating new payment types directly into the site to help clients process their transactions more smoothly. 

News and Notes: Fanatiz, Pachama, Moons, Didi, and IDB

The Miami-based sports-streaming platform, Fanatiz, raised $10M in a Series A round from 777 Partners in January 2020 after registering 125% user growth since July 2019. Founded by Chilean Matias Rivera, Fanatiz provides legal international streaming of soccer and other sports through a personalized platform so that fans can follow their teams from anywhere in the world. The startup provided the Pope with an account so that he could follow his beloved team, San Lorenzo, from the Vatican. Fanatiz has previously received investment from Magma Partners and participated in 500 Startups’ Miami Scale program.

Conservation-tech startup Pachama raised $4.1M from Silicon Valley investors to continue developing a carbon offset marketplace using drone and LIDAR data. Pachama was founded by Argentine entrepreneur Diego Saez-Gil in 2019 after he noticed the effects of deforestation in the Peruvian Amazon. After participating in Y Combinator in 2019, Pachama now has 23 sites in the US and Latin America where scientists are working alongside the startup’s technology to certify forests for carbon sequestration projects. 

Mexico’s Moons, an orthodontics startup that provides low-cost invisible aligners, has raised $5M from investors such as Jaguar Ventures, Tuesday Capital, and Foundation Capital and was recently accepted into Y Combinator, bringing the startup to the US. Moons provides a free consultation and 3D scan to patients in Mexico to determine if they are a good fit for the program, then supplies them with a yearlong invisible braces regime for around $1200. With 18 locations in Mexico and two in Colombia, Moons is expanding rapidly across the region, with ambitions for providing low-cost healthcare across several verticals in Latin America. 

Chinese ridehailing startup Didi Chuxing recently launched a sustainable fleet of over 700 electric and hybrid cars for its Mexico City operations. After two years operating in Mexico, Didi announced that it would establish its headquarters in the capital city to manage its new low-emissions fleet. The company will provide financing to help its drivers acquire and use the vehicles, in an effort to reduce Didi’s environmental impact.

The IDB Lab released a report on female entrepreneurs in Latin America, finding that 54% of female founders have raised capital and 80% plan to scale internationally in the next five years. The study, entitled “wX Insights 2020: The Rise of Women STEMpreneurs,” finds that female entrepreneurship is on the rise in Latin America, particularly in the areas of fintech, edtech, healthtech, and biotech. Nonetheless, 59% of the 1,148 women surveyed still see access to capital as the most significant limitation for their companies. However, as women take center-stage in Latin American VC, such as Antonia Rojas Eing joining ALLVP as Partner, we may see funding tilt toward female-founded firms.

This month has set 2020 on a course to continue the strong growth we saw in the Latin American ecosystem in 2019. It is always exciting to see international investors make their first bets in the region, and we expect to continue seeing new VCs entering the region over the coming year.

Trump to halt immigration from Africa’s top tech hub, Nigeria

The Trump administration announced Friday it would halt immigration from Nigeria, Africa’s most populous nation with the continent’s largest economy and leading tech hub.

The restrictions would stop short of placing a full travel ban on the country of 200 million, but will suspend U.S. immigrant visas for Nigeria — along with Eritrea, Kyrgyzstan and Myanmar — starting February 21.

That applies to citizens from those countries looking to live permanently in the U.S. The latest restrictions are said not to apply to non-immigrant, temporary visas for tourists, business, and medical visits.

The news was first reported by the Associated Press, after a press briefing by Acting U.S. Homeland Security Secretary Chad Wolf. AP reporting said the stated reason for thew new restrictions was that the countries, such as Nigeria, did not meet security standards.

TechCrunch has asked the U.S. Department of Homeland Security for a clarification on that and full details of the latest restrictions.

The move follows reporting over the last week that the Trump administration was considering adding Nigeria, and several additional African states, to the list of predominantly Muslim countries on its 2017 travel ban. That ban was delayed in the courts until being upheld by the U.S. Supreme Court in 2018.

Restricting immigration to the U.S. from Nigeria, in particular, could impact commercial tech relations between the two countries.

Nigeria is the U.S.’s second largest African trading partner and the U.S. is the largest foreign investor in Nigeria, according to USTR and State Department briefs.

Increasingly, the nature of the business relationship between the two countries is shifting to tech. Nigeria is steadily becoming Africa’s capital for VC, startups, rising founders and the entry of Silicon Valley companies.

Recent reporting by VC firm Partech shows Nigeria has become the number one country in Africa for venture investment.

Much of that funding is coming from American sources and the U.S. is arguably Nigeria’s strongest partner for tech and Nigeria Silicon Valley’s chosen gateway for Africa expansion.

There are numerous examples of this new relationship.

In June 2019, Mastercard invested $50 million in Jumia — an e-commerce company headquartered in Nigeria with broader Africa presence — before it became the first tech startup on the continent to IPO on a major exchange, the NYSE.

One of Jumia’s backers, Goldman Sachs, led a $20 million round into Nigerian trucking-logistics startup, Kobo360 in August.

Software engineer company Andela, with offices in the U.S. and Lagos, raised $100 million, including from American sources, and employs 1000 engineers.

Facebook opened an innovation lab in Nigeria in 2018 called NG_Hub and Google launched its own developer space in Lagos last week.

Nigerian tech is also home to a growing number of startups with operations in U.S. Nigerian fintech company Flutterwave, whose clients range from Uber to Cardi B, is headquartered in San Francisco, with operations in Lagos. The company maintains a developer team across both countries for its B2B payments platform that helps American companies operating in Africa get paid.

MallforAfrica — a Nigerian e-commerce company that enables partners such as Macy’s, Best Buy and Auto Parts Warehouse to sell in Africa — is led by Chris Folayan, a Nigerian who studied and worked in the U.S. The company now employs Nigerians in Lagos and Americans at its Portland, Oregon processing plant.

Africa’s leading VOD startup, iROKOtv maintains a New York office that lends to production of the Nigerian (aka Nollywood) content it creates and streams globally.

Similar to Trump’s first travel ban, the latest restrictions on Nigeria may end up in courts, which could delay implementation.

More immediately, the Trump administration’s moves could put a damper on its own executive branch initiatives with Nigeria. Just today the U.S. Assistant Secretary of State for African Affairs Tibor Nagy — who was appointed by President Trump — posted a tweet welcoming Nigeria’s Foreign Affairs Minister Geoffrey Onyeama to the State Department Hosted Nigeria Bicentennial, planned to start Monday.

The theme listed for the event: “Innovation and Ingenuity, which reflects the entrepreneurial, inventive, and industrious spirit shared by the Nigerian and American people.”

Maxar and NASA will demonstrate orbital spacecraft assembly with a new robotic arm

NASA has awarded Maxar an estimated $142 million contract to demonstrate in-orbit spacecraft refueling and assembly of new components using a custom robotic platform in space.

The space infrastructure dexterous robot, or SPIDER, program will be part of NASA’s Restore-L mission to demonstrate automation of proposed orbital tasks like reconfiguring or repairing a satellite or manufacturing new components from scratch.

The first thing the Restore-L spacecraft will do is show that it can synchronize with, capture, connect with, refuel a satellite in orbit, then release it into a new orbit. Afterwards the craft will use a Maxar-built robotic arm to assemble a multi-panel antenna reflector, then test it.

Last, a separate piece of hardware, Tethers Unlimited’s MakerSat, will extrude a beam some 10-20 meters long, which will be inspected by the parent satellite, then detached and reattached to demonstrate its robustness.

There’s no hard timeline for the mission yet, so don’t expect anything for at least a year or two. This isn’t a small-scale experiment that can fly up next week in an Electron — it’s a big, expensive one that will likely take up most of a large rocket’s payload.

Although it’s only a demonstration, a Maxar representative pointed out that it is very close to what would be an operational system on other satellites in the future. It has also been previously demoed on the ground, though of course that’s no substitute for the real thing.

Robotic arms are something of a specialty for Maxar, which has delivered six total for NASA, including the one on Insight (currently on the Red Planet) and the Mars 2020 Rover (due to receive its official, inspirational name any day now).

We’ll have Maxar’s head of space robotics on stage at TC Sessions: Robotics+AI in March at UC Berkeley, so be sure to join us there if you’d like to hear more about the business of building space robots.

Customer feedback is a development opportunity

Online commerce accounted for nearly $518 billion in revenue in the United States alone last year. The growing number of online marketplaces like Amazon and eBay will command 40% of the global retail market in 2020. As the number of digital offerings — not only marketplaces but also online storefronts and company websites — available to consumers continues to grow, the primary challenge for any online platform lies in setting itself apart.

The central question for how to accomplish this: Where does differentiation matter most?

A customer’s ability to easily (and accurately) find a specific product or service with minimal barriers helps ensure they feel satisfied and confident with their choice of purchase. This ultimately becomes the differentiator that sets an online platform apart. It’s about coupling a stellar product with an exceptional experience. Often, that takes the form of simple, searchable access to a wide variety of products and services. Sometimes, it’s about surfacing a brand that meets an individual consumer’s needs or price point. In both cases, platforms are in a position to help customers avoid having to chase down a product or service through multiple clicks while offering a better way of comparing apples to apples.

To be successful, a company should adopt a consumer-first philosophy that informs its product ideation and development process. A successful consumer-first development resides in a company’s ability to expediently deliver fresh features that customers actually respond to, rather than prioritize the update that seems most profitable. The best way to inform both elements is to consistently collect and learn from customer feedback in a timely way — and sometimes, this will mean making decisions for the benefit of consumers versus what is in the best interest of companies.

Newly funded Legacy, a sperm testing and freezing service, conveys a message to men: get checked

Legacy, a male fertility startup, has just raised a fresh, $3.5 million in funding from Bill Maris’s San Diego-based venture firm, Section 32, along with Y Combinator and Bain Capital Ventures, which led a $1.5 million seed round for the Boston startup last year.

We talked earlier today with Legacy’s founder and CEO Khaled Kteily about his now two-year-old, five-person startup and its big ambitions to become the world’s preeminent male fertility center. Our biggest question was how Legacy and similar startups convince men — who are generally less concerned with their fertility than women — that they need the company’s at-home testing kits and services in the first place.

“They should be worried about [their fertility],” said Kteily, a former healthcare and life sciences consultant with a master’s degree in public policy from the Harvard Kennedy School. “Sperm counts have gone down 50 to 60% over the last 40 years.” More from our chat with Legacy, a former TechCrunch Battlefield winner, follows; it has been edited lightly for length.

TC: Why start this company?

KK: I didn’t grow up wanting to be the king of sperm [laughs]. But I had a pretty bad accident — a second-degree burn on my legs after having four hot Starbucks teas spill on my lap in a car — and between that and a colleague at the Kennedy School who’d been diagnosed with cancer and whose doctor suggested he freeze his sperm ahead of his radiation treatments, it just clicked for me that maybe I should also save my sperm. When I went into Cambridge to do this, the place was right next to the restaurant Dumpling House and it was just very awkward and expensive and I thought, there must be a better way of doing this.

TC: How do you get started on something like this?

KK: This was before Ro and Hims began taking off, but people were increasingly comfortable doing things from their own homes, so I started doing research around the idea. I joined the American Society of Reproductive Medicine. I started taking continuing education classes about sperm…

TC: Women are under so much pressure from the time they turn 30 to monitor their fertility. Aside from extreme circumstances, as with your friend, do men really think about testing their sperm? 

KK: Men should be worried about it, and they should be taking responsibility for it. What a lot of folks don’t know is for every one in seven couples that are actively trying to get pregnant, the man is equally responsible [for their fertility struggles]. Women are taught about their fertility but men aren’t, yet the quality of their sperm is degrading over the years. Sperm counts have gone down by 50 to 60% over the last 40 years, too.

TC: Wait, what? Why?

KK: [Likely culprits are] chemicals in plastics, chemicals in what we eat eat and drink, changes in lifestyle; we move less and eat more, and sperm health relates to overall health. I also think mobile phones are causing it. I will caveat this by saying there’s been mixed research, but I’m convinced that cell phones are the new smoking in that it wasn’t clear that smoking was as dangerous as it is when the research was being conducted by companies that benefited by [perpetuating cigarette use]. There’s also a generational decline in sperm quality [to consider]; it poses increased risk to the mother but also the child, as the risk of gestational diabetes goes up, as well as the rate of autism and other congenital conditions.

TC: You’re selling directly to consumers. Are you also working with companies to incorporate your tests in their overall wellness offerings?

KK: We’re investing heavily in business-to-business and expect that to be a huge acquisition channel for us. We can’t share any names yet, but we just signed a big company last week and have a few more in the works. These are mostly Bay Area companies right now; it’s an area where our experience as a YC alum was valuable because of the founders who’ve gone through and now run large companies of their own.

TC: When you’re talking with investors, how do you describe the market size? 

KK: There are four million couples that are facing fertility challenges and in all cases, we believe the man should be tested. So do [their significant others]. Almost half of purchases [of our kits] are by a female partner. We also see men in the military freezing their sperm before being deployed, same-sex couples who plan to use a surrogate at some point and transgender patients who are looking at a life-changing [moment] and want to preserve their fertility before they start the process. But we see this as something that every man might do as they go off to college, and investors see that bigger picture.

TC: How much do the kits and storage cost?

KK: The kit costs $195 up front, and if they choose to store their sperm, $145 a year. We offer different packages. You can also spend $1,995 for two deposits and 10 years of storage.

TC: Is one or two samples effective? According to the Mayo Clinic, sperm counts fluctuate meaningfully from one sample to the next, so they suggest semen analysis tests over a period of time to ensure accurate results.

KK: We encourage our clients to make multiple deposits. The scores will be variable, but they’ll gather around an average.

TC: But they are charged for these deposits separately?

KK: Yes.

TC: And what are you looking for?

KK: Volume, count, concentration, motility and morphology [meaning the shape of the sperm].

TC: Who, exactly, is doing the analysis and handling the storage?

KK: We partner with Andrology Labs in Chicago on analysis; it’s one of the top fertility labs in the country. For storage, we partner with a couple of cryo-storage providers in different geographies. We divide the samples into four, then store them in two different tanks within each of two locations. We want to make sure we’re never in a position where [the samples are accidentally destroyed, as has happened at clinics elsewhere].

TC: I can imagine fears about these samples being mishandled. How can you assure customers this won’t happen?

KK: Trust and legitimacy are core factors and a huge area of focus for us. We’re CPPA and HIPAA compliant. All [related data] is encrypted and anonymized and every customer receives a unique ID [which is a series of digits so that even the storage facilities don’t know whose sperm they are handling]. We have extreme redundancies and processes in place to ensure that we’re handling [samples] in the most scientifically rigorous way possible, as well as ensuring the safety and privacy of each [specimen].

TC: How long can sperm be frozen?

KK: Indefinitely.

TC: How will you use all the data you’ll be collecting?

KK: I could see us entering into partnerships with research institutions. What we won’t do is sell it like 23andMe.

Legacy, a sperm testing and freezing service, just raised $3.5 million to send the message to men: get checked

Legacy, a male fertility startup, has just raised a fresh, $3.5 million in funding from Bill Maris’s San Diego-based venture firm, Section 32, along with Y Combinator and Bain Capital Ventures, which led a $1.5 million seed round for the Boston startup last year.

We talked earlier today with Legacy’s founder and CEO Khaled Kteily about his now two-year-old, five-person startup and its big ambitions to become the world’s preeminent male fertility center. Our biggest question was how Legacy and similar startups convince men — who are generally less concerned with their fertility than women — that they need the company’s at-home testing kits and services in the first place.

“They should be worried about [their fertility],” said Kteily, a former healthcare and life sciences consultant with a masters degree in public policy from the Harvard Kennedy School. “Sperm counts have gone down 50 to 60 percent over the last 40 years.” More from our chat below; it has been edited lightly for length.

TC: Why start this company?

KK: I didn’t grow up wanting to be the kind of sperm [laughs]. But I had a pretty accident — a second-degree burn on my legs after having four hot Starbuck’s teas spill on my lap in a car — and between that and a colleague at the Kennedy Center who’d been diagnosed with cancer and whose doctor suggested he freeze his sperm ahead of his radiation treatments, it just clicked for me that maybe I should also save my sperm. When I went into Cambridge to do this, the place was right next to the restaurant Dumpling House and it was just very awkward and expensive and I thought, there must be a better way of doing this.

TC: How do you get started on something like this?

KK: This was before Ro and Hims began taking off, but people were increasingly comfortable doing things from the own homes, so I started doing research around the idea. I joined the American Society of Reproductive Medicine. I started taking continuing education classes about sperm…

TC: Women are under so much pressure from the time they turn 30 to monitor their fertility. Aside from extreme circumstances, as with your friend, do men really think about testing their sperm? 

KK: Men should be worried about it, and they should be taking responsibility for it. What a lot of folks don’t know in for every one in seven couples that are actively trying to get pregnant, the man is equally responsible [for their fertility struggles]. Women are taught about their fertility but men aren’t, yet the quality of their sperm is degrading over the years. Sperm counts have gone down by 50 to 60 percent over last 40 years, too.

TC: Wait, what? Why?

KK: [Likely culprits are] chemicals in plastics, chemicals in what we eat eat and drink, changes in lifestyle; we move less and eat more, and sperm health relates to overall health. I also think mobile phones are causing it. I will caveat this by saying there’s been mixed research, but I’m convinced that cell phones are the new smoking in that it wasn’t clear that smoking was as dangerous as it is when the research was being conducted by companies that benefited by [perpetuating cigarette use]. There’s also a generational decline in sperm quality [to consider]; it poses increased risk to the mother but also the child, as the risk of gestational diabetes goes up, the rate of autism, and other congenital conditions.

TC: You’re selling directly to consumers. Are you also working with companies to incorporate your tests in their overall wellness offerings?

KK: We’re investing heavily in business-to-business and expect that to be a huge acquisition channel for us. We can’t share any names yet, but we just signed a big company last week and have a few more in the works. These are mostly Bay Area companies right now; it’s an area where our experience as a YC alum was valuable because of the founders who’ve gone through and now run large companies of their own.

TC: When you’re talking with investors, how do you describe the market size? 

KK: There are four million couples that are facing fertility challenges and in all cases, we believe the man should be tested. So do [their significant others]. Almost half of purchases [of our kits] are by a female partner. We also see men in the military freezing their sperm before being deployed, same-sex couples who plan to use a surrogate at some point, and transgender patients who are looking at a life-changing [moment] and want to preserve their fertility before they start the process. But we see this as something that every man might do as they go off to college, and investors see that bigger picture.

TC: How much do the kits and storage cost?

KK: The kit cost $195 up front, and if they choose to store their sperm, $145 a year. We offer different packages. You can also spend $1,995 for two deposits and 10 years of storage.

TC: Is one or two samples effective? According to the Mayo Clinic, sperm counts fluctuate meaningfully from one sample to the next, so they suggest semen analysis tests over a period of time to ensure accurate results.

KK: We encourage our clients to make multiple deposits. The scores will be variable, but they’ll gather around an average.

TC: But they are charged for these deposits separately?

KK: Yes.

TC: And what are you looking for?

KK: Volume, count, concentration, motility, and morphology [meaning the shape of the sperm].

TC: Who, exactly, is doing the analysis and handling the storage?

KK: We partner with Andrology Labs in Chicago on analysis; it’s one of the top fertility labs in the country. For storage, we partner with a couple of cryo-storage providers in different geographies. We divide the samples into four, then store them in two different tanks within each of two locations. We want to make sure we’re never in a position where [the samples are accidentally destroyed, as has happened at clinics elsewhere].

TC: I can imagine fears about these samples being mishandled. How can you assure customers this won’t happen?

KK: Trust and legitimacy are core factors and a huge area of focus for us. We’re CPPA and HIPAA compliant. All [related data] is encrypted and anonymized and every customer receives a unique ID [which is a series of digits so that even the storage facilities don’t know whose sperm they are handling]. We have extreme redundancies and processes in place to ensure that we’re handling [samples] in the most scientifically rigorous way possible, as well as ensuring the safety and privacy of each [specimen].

TC: How long can sperm be frozen?

KK: Indefinitely.

TC: How will you use all the data you’ll be collecting?

KK: I could see us entering into partnerships with research institutions. What we won’t do is sell it like 23andMe.

You need a minimum viable company, not a minimum viable product

Hi, I’m Ann.

I was one of the first investors in Lyft, Refinery29 and Xamarin. I’ve been on the Midas List for the past three years and was recently named on The New York Times’ list of The Top 20 Venture Capitalists. In 2008, I co-founded Floodgate, one of the first seed-stage VC funds in Silicon Valley. Unlike most funds, we invest exclusively in seed, making us experts in finding product-market fit and building a minimum viable company. Seed is fundamentally different from later stages, so we’ve made it more than a specialty: It’s all we do. Each of our partners sees thousands of companies every year before electing to invest in only the top three or four.

For the past 11 years, I’ve invested at the inception phase of startups. We’ve seen startups go wildly right (Lyft, Refinery29, Twitch, Xamarin) and wildly wrong. When I reflect on the failures, the root cause inevitably stems from misconceptions around the nature of product-market fit.

True product-market fit is a minimum viable company

Before attempting to scale your minimum viable product, you should focus on cultivating your minimum viable company. Nail down your value proposition, find your place in the broader ecosystem and craft a business model that adds up. In other words, true product-market fit is actually the magical moment when three elements click together:

To have built a minimum viable company, these three elements must work in concert together:

  • People must value your product enough to be willing to pay for it. This value also determines how you package your product to the world (freemium versus free to pay versus enterprise sales).
  • Your business model and pricing must fit your ecosystem. They must also generate enough sales volume and revenue to sustain your business.
  • Your product’s value must satisfy the needs of the ecosystem and the ecosystem needs to accept your product.

Many entrepreneurs conceptualize product-market fit as the point where some subset of customers love their product’s features. This conceptualization is dangerous. Many failing companies have features that customers loved. Some even have multiple beloved features! Great features constitute only one-half of one-third of the whole puzzle. To have created a minimum viable company, a company needs all three of these elements — value propositions, business model and ecosystem — working in concert. 

So founders take heed…

Moving into “growth mode” while missing any of these elements is building your company on an unsound foundation.

Founders who tune out the latest tweet cycle on “the secrets to raising Series A” and focus instead on the intricacies of their own business will find that product-market fit is a predictable, achievable phenomenon. On the other hand, founders who prematurely focus on growth without knowing the basic ingredients of their minimum viable company often fuel an addictive and destructive cycle around their business’ fake growth, acquiring non-optimal users that contribute to their company’s destruction.

Read an extended version of this article on Extra Crunch.

Carriers ‘violated federal law’ by selling your location data, FCC tells Congress

More than a year and a half after wireless carriers were caught red-handed selling the real-time location data of their customers to anyone willing to pay for it, the FCC has determined that they committed a crime. An official documentation of exactly how these companies violated the law is forthcoming.

FCC Chairman Ajit Pai shared his finding in a letter to Congressman Frank Pallone (D-NJ), who chairs the Energy and Commerce Committee that oversees the agency. Rep. Pallone has been active on this and prodded the FCC for updates late last year, prompting today’s letter. (I expect a comment from his office shortly and will add it when they respond.)

“I wish to inform you that the FCC’s Enforcement Bureau has completed its extensive investigation and that it has concluded that one or more wireless carriers apparently violated federal law,” Pai wrote.

Extensive it must have been, since we first heard of this egregious breach of privacy in May of 2018, when multiple reports showed that every major carrier (including TechCrunch’s parent company Verizon) was selling precise location data wholesale to resellers who then either resold it or gave it away. It took nearly a year for the carriers to follow through on their promises to stop the practice. And now, 18 months later, we get the first real indication that regulators took notice.

“It’s a shame that it took so long for the FCC to reach a conclusion that was so obvious,” said Commissioner Jessica Rosenworcel in a statement issued alongside the Chairman’s letter. She has repeatedly brought up the issue in the interim, seemingly baffled that such a large-scale and obvious violation was going almost completely unacknowledged by the agency.

Commissioner Brendan Starks echoed her sentiment in his own statement: “These pay-to-track schemes violated consumers’ privacy rights and endangered to their safety. I’m glad we may finally act on these egregious allegations. My question is: what took so long?”

Chairman Pai’s letter explains that “in the coming days” he will be proposing a “Notice of Apparent Liability for Forfeiture,” or several of them. This complicated-sounding document is basically the official declaration, with evidence and legal standing, that someone has violated FCC rules and may be subject to a “forfeiture,” essentially a fine.

Right now that is all the information anyone has, including the other Commissioners, but the arrival of the notice will no doubt make things much clearer — and may help show exactly how seriously the agency took this problem and when it began to take action.

Disclosure: TechCrunch is owned by Verizon Media, a subsidiary of Verizon Wireless, but this has no effect on our coverage.

Tech companies, we see through your flimsy privacy promises

There’s a reason why Data Privacy Day pisses me off.

January 28 was the annual “Hallmark holiday” for cybersecurity, ostensibly a day devoted to promoting data privacy awareness and staying safe online. This year, as in recent years, it has become a launching pad for marketing fluff and promoting privacy practices that don’t hold up.

Privacy has become a major component of our wider views on security, and it’s in sharper focus than ever as we see multiple examples of companies that harvest too much of our data, share it with others, sell it to advertisers and third parties and use it to track our every move so they can squeeze out a few more dollars.

But as we become more aware of these issues, companies large and small clamor for attention about how their privacy practices are good for users. All too often, companies make hollow promises and empty claims that look fancy and meaningful.

Unicorn fever as One Medical’s IPO pops 40% after conservative pricing

Shares of One Medical are worth $19.50 this morning after the venture-backed unicorn priced its IPO at $14 per share last night. The company opened at $18 before rising further, according to Yahoo Finance data. At its current price, One Medical is worth about 40% more than its IPO price, a strong debut for the company.

The result is a boon for One Medical, which raised $532.1 million during its time as a private company. At $14 per share, the company was worth $1.71 billion. At 19.50, One Medical is worth $2.38 billion, a winning result for a company said to be worth around $1.5 billion as a private company.

For investors The Carlyle Group, J.P. Morgan, Redmile Group, GV and Benchmark (among others), the debut is a success, pricing their stakes in the company higher once again. For other unicorns, the news is even better. One Medical, a company with gross margins under the 50% mark, deeply minority recurring revenue and 30% revenue growth in 2019 at best is now worth about 8.5x its trailing revenues.

That is about as good a signal as one could imagine for venture-backed companies that aren’t in as good shape as Slack or Zoom were letting them know that now is the time to go public.

Unicorn directions

It’s possible to read One Medical’s new revenue multiple in a few ways. You can be positive, saying that its valuation and resulting metrics are signs of investor optimism for the medical service company. Or you could go negative and assume that its pricing looks like a case of the market being more excited about a brand than a set of accounting results.

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