Decide which type of investor to target for raising capital

I recently wrote Should you raise venture capital from a traditional equity VC or a Revenue-Based Investing VC? Since then, I’ve talked with a number of other firms and greatly expanded my database: Who are the major Revenue-Based (RBI) Investing VCs?

That said, venture capital is just one of many options to finance your business, typically the most expensive. The broader question is, what type of capital should you raise, and from whom?  

I find many CEOs/CFOs default to approaching investors who have the most social media followers; who have spent the most money sponsoring events; or whom they met at an event. But, fame and the chance that you met someone at a conference do not logically predict that investor is the optimal investor for you. In addition, the best-known investors are also the ones who are most difficult to raise capital from, precisely because they get the most inbound.

The first step is to decide the right capital structure for your financing. Most CFOs build an Excel model and do a rough comparison of the different options. Some firms provide tools to do this online, e.g., Capital’s Cost of Equity estimator; Lighter Capital’s Cost of Capital Calculator; 645 Ventures’ cap table simulator. A similar, open-source, highly visual tool focused on VC is Venture Dealr.

For each of the major categories of investors, you can find online databases of the major providers. Major options include:

  • Traditional equity venture capital and private equity. For early-stage startups in particular, I suggest Foundersuite*, Samir Kaji’s Master List of US Micro-VC’s and Shai Goldman’s database of VC funds at/below $200M in size. You can find other databases of investors at AngelList, CB Insights, Crunchbase, Dow Jones VentureSource, Pitchbook, Preqin, and Refinitiv Eikon
  • Revenue-based investing VC. See Who are the major Revenue-Based Investing VCs?
  • Venture debt. See FindVentureDebt and this comparison guide of debt options for SAAS companies. Watch out for double dipping, or interest on interest.
  • Merchant cash advances/factoring. See Debanked’s list.
  • Small Business Association Loans. Ravi Bhagavan, Managing Director, BRG Capital Advisors, said, “a low-cost and often convenient form of capital for small businesses is SBA loans, which are guaranteed by the Small Business Administration. SBA loans are $5k – $5M in size and are typically at a lower cost of capital compared to alternate forms of debt, since up to 85% of the loan is guaranteed by the SBA. Additionally, SBA loans have longer payment periods (5-25 years) than traditional forms of financing and come with less onerous ongoing disclosure requirements. However, SBA loans typically require a personal guarantee (PG) from the founder(s), who are scrutinized for income and credit history at the time of application. PGs can be quite daunting to founders because it puts their personal assets, including homes and investment accounts, on the line. SBA loans are available through SBA-approved banks and SBIC funds. SBICs make equity and debt investments of size $100k – $10M in qualifying small businesses. A good resource for looking up SBICs is here.” 
  • Crowdfunding, e.g., Republic*, Indiegogo*.  This option provides you capital and also market validation for desire for your product.  

Once you decide on the right category of investor, here are some tools I suggest using to find the optimal capital provider:

  • Most important, reference checking. I have a whitelist of investors I recommend to my portfolio — and a blacklist which I guide them to avoid.
  • Comparison websites: BitX, Fundera, GUD Capital, Lencred.com, Lendio, and NerdWallet Small Business Loans are all resources which can help you evaluate different options for small business financing, typically within a defined category of financing. Braavo specializes in financing app companies.
  • Financing supermarkets: Most investment firms start out with one asset class, and then over time they often add others. There are countless examples, e.g., most of the large B2B banks, Kapitus, Kalamata Capital, United Capital Source, etc. These firms can give you an apples-to-apples comparison of what different capital forms, albeit all from one provider, will cost you.

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Consumer Reports puts Tesla Model 3, Model S back on its recommended list after reliability improves

Tesla gained ground and moved up four spots in in the latest Annual Auto Reliability Survey from Consumer Reports, thanks largely to improvements with the Model 3.

Reliability has improved in the Model 3 and Model S enough that Consumer Reports can now recommend the two models.

Consumer Reports announced Thursday the results of its Annual Auto Reliability Survey, which is based on data collected from the organization’s members about their experiences with more than 400,000 vehicles. The survey covers more than 300 models.

CR does not recommend the Model X. The Model X continues to rank among the least reliable models in the survey.

The reversal is good news for Tesla. In February, Consumer Reports said it could no longer recommend the Model 3 because issues with the paint, trim and body hardware raised reliability questions.

Lexus took the top spot, followed by Mazda, Toyota, Porsche and Genesis. Tesla is still ranked in the bottom third of the survey. It now is ranked 23 out of 30 brands reviewed in the annual survey.

“The Tesla Model 3 struggled last year as the company made frequent design changes and ramped up production to meet demand,” Jake Fisher, senior director of auto testing at CR said in a statement. “But as the production stabilized, we have seen improvements to the reliability of the Model 3 and S that now allow us to recommend both models.”

While Tesla has improved, Fisher said he expects Tesla’s reliability rankings will fluctuate, given its track record to date.

Cadillac came in last place by . Audi, Acura and Volkswagen are among the brands that saw sharp drops, following the introduction of troublesome redesigned vehicles. Volkswagen, which is ranked 27th, dropped nine spots from last year due reliability issues with the Atlas and Tiguan. The Consumer Reports survey noted that the two SUVs had problems with power equipment, in-car electronics and emissions/fuel system.

 

Consumer Reports-reliability 2019

Dodge posted one of the best improved reliability scores in the annual survey, gaining 13 places to round out the top 10 after years as a lower ranked brand.

Audi also fell seven spots in its ranking. CR said the number of new or redesigned 2019 models that shared similar powertrains and the new infotainment system caused the fall in ranking. The A6 and Q8 had well below average reliability, CR said.

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Facebook quietly built “Popular Photos”, an in-app Instagram

Facebook is copying Instagram while simultaneously invading its acquisition with branding and links back to the mothership. TechCrunch has spotted Facebook testing a feature called Popular Photos, which affixes an endless scroll of algorithmically selected pics from friends beneath the full-screen view of a photo opened from the News Feed. The result is an experience that feels like the Instagram feed, but inside of Facebook.

Popular Photos could offer users a more relaxing, lean-back browsing experience that omits links you have to click through, status updates you have to read, and other content types that bog down the News Feed. Instead, users can just passively watch the pretty pictures go by.

Facebook’s text and link-heavy feed looks increasingly stodgy and exhausting compared to visual communication-based social networks like Instagram, Snapchat, and TikTok. Users have to do the work of digging into the meaning of News Feed each post rather than being instantly entertained. That experience doesn’t fit as well into short browsing sessions throughout the day, or when users are already drained from work, school, or family. Facebook used to have a dedicated Photos bookmark on desktop that would let you just browse that content type, but at some point it disappeared.

A Facebook spokesperson confirms that Facebook was running a small test of Popular Photos in October when we spotted it. That trial has concluded but the team is now iterating on the product and plans to do updated tests in the future. The company refused to disclose more details or its motives for Popular Photos.

Here’s how Popular Photos works. When users discover a photo in the News Feed or a profile, they can tap on it to see it full-screen on a black theater-view background. Typically, if users swipe or scroll on that photo, they’re just booted back out to where they came from. But with the Popular Photos feature, Facebook splays out more images for users to scroll through after the original.

By scrolling down past the Popular Photos title, they’ll see additional pics and a “See More Photos” label beckoning them to keep whipping through more public and friends-only images shared by friends and who they follow. Like on Instagram but unlike the News Feed, Facebook truncates the captions of Popular Photos after only around 65 characters so the stream doesn’t look overwhelmingly wordy. The black backgrounds give a more cinematic feel to the Popular Photos, putting emphasis on the imagery.

Facebook started showing Related Videos in 2014 when users scrolled past a video they’d opened full-screen. Now this “More Videos” feature will auto-play the next video and automatically bump users down the feed to view it. The feature even shows video ads. That could foreshadow Facebook inserting advertisers’ photos into the Popular Photos tab to monetize the extra browsing.

Facebook hasn’t been shy about trying to leverage Instagram to benefit itself. The company has placed an Open Facebook button in the Instagram navigation sidebar.

Previously, Instagram tried showing Facebook alerts in its own Notifications tab, and an annoying red counter for Facebook notifications on the three-line hamburger button that opens the Instagram sidebar in an attempt to drive referral traffic back to the Facebook app. Facebook has also tried notifying users in its app asking them to Like the Facebook Pages of people they follow on Instagram. And now, a “from Facebook” and new FACEBOOK logo can be found appended to the Instagram loading screen.

For Facebook to keep growing after 15 years in the market, it needs to fully embrace visual communication. It’s already copied Snapchat Stories and implemented the ephemeral photo and video format across its apps. Clearly it’s not above copying its own subsidiary Instagram to offer an alternative take on feed scrolling. I wonder how Instagram’s team feels about its parent company building a direct competitor?

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The ONNX format becomes the newest Linux Foundation project

The Linux Foundation today announced that ONNX, the open format that makes machine learning models more portable, is now a graduate-level project inside of the organization’s AI Foundation. ONNX was originally developed and open-sourced by Microsoft and Facebook in 2017 and has since become somewhat of a standard, with companies ranging from AWS to AMD, ARM, Baudi, HPE, IBM, Nvidia and Qualcomm supporting it. In total, over 30 companies now contribute to the ONNX code base.

It’s worth noting that only the ONNX format is included here, not the ONNX runtime, which Microsoft open-sourced a year ago. The runtime is an inference engine for models in the ONNX format and I wouldn’t be surprised if, at some point, Microsoft put that under the guidance of a foundation, too, but for now, that’s not the case.

“ONNX is not just a spec that companies endorse, it’s already being actively implemented in their products,” said Dr. Ibrahim Haddad, Executive Director of the LF AI Foundation, in today’s announcement. “This is because ONNX is an open format and is committed to developing and supporting a wide choice of frameworks and platforms. Joining the LF AI shows a determination to continue on this path, and will help accelerate technical development and connections with the wider open source AI community around the world.”

In its own announcement, Microsoft stressed that it remains committed to ONNX and highlights the work it did on making it easier to generate ONNX models from popular frameworks like PyTorch, TensorFlow, Keras and SciKit-Learn. “We are proud of the progress that ONNX has made and want to recognize the entire ONNX community for their contributions, ideas, and overall enthusiasm,” wrote Eric Boyd, the Corporate VP at Microsoft in charge of Azure AI (not Microsoft AI). “We are excited about the future of ONNX and all that is to come.”

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Daily Crunch: John Carmack steps down at Oculus

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

1. John Carmack steps down at Oculus to pursue AI passion project ‘before I get too old’

Legendary coder John Carmack is leaving Facebook’s Oculus after six years to focus on a personal project — no less than the creation of Artificial General Intelligence, or “Strong AI.” He’ll remain attached to the company in a “Consulting CTO” position, but will be spending all his time working on, perhaps, the AI that finally surpasses humanity.

This follows the departure of Oculus’ founders and early executives. His plan is to pursue his research from home, “Victorian Gentleman Scientist” style, and make his kid help.

2. Fourteen years after launching, 1Password takes a $200M Series A

1Password has been around for 14 years, and the founders grew the company the old-fashioned way — without a dime of venture capital. But when they decided to take venture help, they went all in.

3. Instagram tests hiding Like counts globally

Instagram tells TechCrunch the hidden Likes test is expanding to a subset of users globally. The change could make those users more comfortable sharing what’s important to them without the embarrassment of receiving a tiny number of likes.

4. Disney+ to launch in India, Southeast Asian markets next year

Disney plans to bring its on-demand video streaming service to India and some Southeast Asian markets as soon as the second half of next year, sources told TechCrunch. In India, the company plans to bring Disney+’s catalog to Hotstar, a popular video streaming service it owns.

5. Apple Research app arrives on iPhone and Apple Watch with three opt-in health studies

In September, Apple announced its plans for a research app that would allow U.S. consumers to participate in health studies from their Apple devices. Users can currently opt to participate in three health studies, including a women’s health study, hearing study and a heart and movement study.

6. Eigen nabs $37M to help banks and others parse huge documents using natural language and ‘small data’

Eigen is working primarily in the financial sector, but the plan is to use the funding to continue expanding to cover other verticals, such as insurance and healthcare — two other big areas that deal in large, wordy documentation that is often inconsistent in how it’s presented, full of essential fine print, and typically a strain on an organization’s resources to handle correctly.

7. Micromobility’s next big opportunities

Despite the over-saturation of the market, there are still opportunities for new players. Currently, there are two key areas that have yet to see a lot of action and are therefore ripe for disruption. (Extra Crunch membership required.)

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California’s new data privacy law brings U.S. closer to GDPR

Data privacy has become one of the defining business and cultural issues of our time.

Companies around the world are scrambling to properly protect their customers’ personal information (PI). However, new regulations have actually shifted the definition of the term, making everything more complicated. With the California Consumer Privacy Act (CCPA) taking effect in January 2020, companies have limited time to get a handle on the customer information they have and how they need to care for it. If they don’t, they not only risk being fined, but also loss of brand reputation and consumer trust — which are immeasurable.

California was one of the first states to provide an express right of privacy in its constitution and the first to pass a data breach notification law, so it was not surprising when state lawmakers in June 2018 passed the CCPA, the nation’s first statewide data privacy law. The CCPA isn’t just a state law — it will become the defacto national standard for the foreseeable future, because the sheer numbers of Californians means most businesses in the country will have to comply. The requirements aren’t insignificant. Companies will have to disclose to California customers what data of theirs has been collected, delete it and stop selling it if the customer requests. The fines could easily add up — $7,500 per violation if intentional, $2,500 for those lacking intent and $750 per affected user in civil damages.

Evolution of personal information

It used to be that the meaning of personally identifiable information (PII) from a legal standpoint was clear — data that can distinguish the identity of an individual. By contrast, the standard for mere PI was lower because there was so much more of it; if PI is a galaxy, PII was the solar system. However, CCPA, and the EU’s General Data Protection Regulation GDPR, which went into effect in 2018, have shifted the definition to include additional types of data that were once fairly benign. The CCPA enshrines personal data rights for consumers, a concept that GDPR first brought into play.

The GDPR states: “Personal data should be as broadly interpreted as possible,” which includes all data associated with an individual, which we call “contextual” information. This includes any information that can “directly or indirectly” identify a person, including real names and screen names, identification numbers, birth date, location data, network addresses, device IDs, and even characteristics that describe the “physical, physiological, genetic, mental, commercial, cultural, or social identity of a person.” This conceivably could include any piece of information about a person that isn’t anonymized.

With the CCPA, the United States is playing catch up to the GDPR and similarly expanding the scope of the definition of personal data. Under the CCPA, personal information is “information that identifies, relates to, describes, is capable of being associated with, or could reasonably be linked, directly or indirectly, with a particular consumer or household.” This includes a host of information that typically don’t raise red flags but which when combined with other data can triangulate to a specific individual like biometric data, browsing history, employment and education data, as well as inferences drawn from any of the relevant information to create a profile “reflecting the consumer’s preferences, characteristics, psychological trends, preferences, predispositions, behavior, attitudes, intelligence, abilities and aptitudes.”

Know the rules, know the data

These regulations aren’t checklist rules; they require big changes to technology and processes, and a rethinking of what data is and how it should be treated. Businesses need to understand what rules apply to them and how to manage their data. Information management has become a business imperative, but most companies lack a clear road map to do it properly. Here are some tips companies can follow to ensure they are meeting the letter and the spirit of the new regulations.

  • Figure out which regulations apply to you

The regulatory landscape is constantly changing with new rules being adopted at a rapid rate.  Every organization needs to know which regulations they need to comply with and understand the distinctions between them. Some core aspects CCPA and GDPR share include data subject rights fulfillment and automated deletion. But there will be differences so having a platform that allows you to handle a heterogenous environment at scale is important.

The new AirFly Pro is the perfect travel buddy for your AirPods Pro

Accessory maker TwelveSouth has a solid lineup of gadgets, many of which fill a niche that their products uniquely address – and address remarkably well. The AirFly Pro ($54.99) is a new iteration on one of those, providing a way to connect Bluetooth headphones to any audio source with a 3.5mm headphone jack. It’s being sold at Apple Stores, too, as part of its launch today – and there’s good reason for that: This is the ideal way to make sure you can use your AirPods Pro just about everywhere, including with airplane seatback entertainment systems.

The AirFly Pro will work with any Bluetooth headphones, not just AirPods Pro – but the latest noise cancelling earbuds from Apple are among the best available when it comes to both active noise cancellation and sound quality, both great assets for frequent travellers and people more likely to encounter an in-flight entertainment system. But the AirFly Pro has additional tricks up its sleeve that earn it the ‘Pro’ designation.

This is the first version of the product from TwelveSouth that offers the ability to stream audio in, as well as out. That means you can use it with a car stereo system that only access auxiliary audio-in, for instance, to stream directly from your iPhone to the vehicle’s sound system. The AirFly Pro can also serve that function for home stereo sound equipment, speakers or other audio equipment that accepts audio in, but not Bluetooth streaming connections.

One other neat trick the AirFly Pro packs: Audio sharing, so that you can connect two pairs of headphones at once. This is similar to the native audio sharing feature that Apple introduced for its own AirPod line in the most recent iOS update, but it works through the AirFly with any audio source, and any Bluetooth headphones. That’s yet another great feature for when you’re traveling with a partner.

I’ve had a bit of time to spend with the AirFly Pro, and so far it’s been rock solid, with easy pairing and set up, and a convenient keychain ring/3.5mm connector cap for making it easier to keep with you. It charges via USB-C, and there’s a USB-A to USB-C cable included, too. The on-board battery lasts for 16 or more hours, which is more than enough time for even the longest of flights, and again you’re getting that audio sharing feature which is super handy even around the house for just checking something out on the iPad on your couch.

Alongside the AirFly Pro, TwelveSouth also introduced new AirFly Duo and AirFly USB-C models. The difference is that neither of these offer that wireless audio input mode – but you get up to 4 more hours of battery life for the trade-off. The USB-C model also offers USB-C audio compatibility, for connecting to devices that use that connection for sound instead of 3.5mm, and both of these still also offer dual headphone connectivity, for $5 less at $49.99 each.

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Netflix is making ‘Beverly Hills Cop 4’

Netflix has acquired the rights to make “Beverly Hills Cop 4” from Paramount.

Deadline, which broke the news, said the studio has been trying to restart the franchise in several forms, including a TV show.

Even with producer Jerry Bruckheimer and star Eddie Murphy attached to the sequel, Paramount might have been a little nervous about the film’s commercial prospects, especially since it’s been 25 years since the release of “Beverly Hills Cop 3.” And the studio (which will soon be part of the reunited ViacomCBS) has had a tough few months at the box office, most recently with the disappointing performance of “Terminator: Dark Fate.”

Plus, Paramount and Netflix were already been working together, first with Netflix buying “The Cloverfield Paradox” and the international rights to “Annihilation,” and then with a multi-picture deal between the two companies announced at the end of a last year.

Murphy, meanwhile, has been getting some of his best reviews in decades for his performance in the Netflix film “Dolemite Is My Name.”

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Lyft deploys 200 long-range EVs for its rideshare rental fleet in Colorado

Lyft is making 200 new long-range EVs available to rideshare drivers as part of its Express Drive program, the company revealed today. Express Drive is a program that Lyft offers to provide rental cars to drivers on its platform, as an alternative to options like long-term leasing. Express Drive members get unlimited miles, as well as included insurance, maintenance and roadside service, with the ability to return the car after a rental period of as little as just a week.

These 200 new EVs (all Kia vehicles for this particular deployment, Lyft tells me) will be available to Express Drive Lyft drivers in December, and the rideshare company says that this is “the largest single deployment of EVs in Colorado’s history” – and there’s good financial reasoning for the timing of Lyft’s introduction of the program – in May, Colorado Governor Jared Polis signed a bill into law that provides rental programs for rideshare operators with the same incentives that it provides consumers at the state level: as much as $5,000 per car purchased.

EV deployments of this nature have benefits across all aspects of the rideshare economy: Lower operating costs for drivers are one immediate effect, for instance and Lyft says that it’s seen costs drop between $70 to $100 for drivers on average based on existing EV fleet deployments in both Seattle and Atlanta. For cities and residents, it’s obviously beneficial in terms of lowering net emissions resulting from cars on the road. The jury is still out on whether rideshare and ride-haling programs ultimately decrease the total number of cars on the roads, but if programs like this can speed the adoption of EVs and ensure they represent a higher percentage of the mix of vehicles that are driving around cities, that’s a net win.

Large fleets of EVs in operation also provide incentives for infrastructure operators to ensure that there’s a good charging network on the ground for these vehicles to take advantage of. That, in turn, means that the infrastructure is present for consumers to take advantage of, which helps with the general EV adoption curve.

Lyft also says it’s aiming to “electrify more of the Lyft fleet each year moving forward,” so expect additional cities and fleet deployments to follow as it works on those goals.

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Google finishes the install of its private Curie cable, announces Panama branch

Google today announced that it has finished the install and test of its private Curie cable. When it was announced, Curie, which connects the U.S. to Chile, was the company’s third private cable. Since then, it has announced two more, Dunant and Equiano, which will connect the U.S. to Europe and Portugal to South Africa. The 10,500 kilometers long cable will offer a total capacity of 72Tbps and will go online in Q2 of 2020. Right now, Google’s teams are working on connecting the cable to its own network.

In addition, Google also today announced that Curie will get a branch to Panama. “Once operational, this branch will enhance connectivity and bandwidth to Central America, and increase our ability to connect to other networks in the region, providing resiliency to our global cloud infrastructure,” the company says in today’s announcement.

For Curie’s Panama branch, Google will once again work with SubCom, the same engineering firm that helped it build the rest of the cable. SubCom is also working with Google on the Dunant, while Google opted to partner with Alcatel Submarine Networks for the Equiano cable to South Africa.

While Google is also partnering with other technology firms to share bandwidth on other cables, these private cables give it full control over all of the resources. The company also argues that owning and operating its own cables adds another layer of security, on top of all the other benefits.

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