Daily Crunch: Citing data privacy concerns, Italy temporarily bans ChatGPT

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Fri-yay Crunch!

We are pretty excited about Disrupt 2023 getting a whole stage dedicated to fintech. And while we’re talking about events…There’s just a few hours left to save $200 on TC Early Stage tickets in Boston in a couple of weeks, so get yer tickets while you can!

On that note, enjoy your weekend! — Christine and Haje

The TechCrunch Top 3

• Italy gives ChatGPT the boot: Italy’s government has been on a blocking kick lately. A few days ago, we wrote about a possible ban on cultivated meat, and today Italy wants to block ChatGPT, citing data protection concerns. Natasha L writes that the country’s data protection authority is opening an investigation into whether OpenAI is breaching the European Union’s General Data Protection Regulation.
• Groupon gets its Czech book: Ingrid reports that Groupon has lost 99.4% of its value since its IPO and now has a new CEO who will run the business from the Czech Republic.
• Jio gets its game on: Manish writes that Mukesh Ambani, CEO of India’s streaming giant Jio, sees the Indian Premier League cricket tournament as “the perfect opportunity to revamp Jio’s service adoption strategy even as the firm recognizes that cricket streaming will not turn a profit for several years.”

Startups and VC

What do you do when you have a very successful and popular product (marijuana) that is legal in some places, but federally has been a Schedule 1 drug since 1970? Well, you can’t rely on any national institutions as your business partners, Haje reports. One of the major places that shows up is in payments and payment processing; even after recreational cannabis became legal in 21 states and decriminalized in another dozen or so, cannabis has become largely a cash business. In a world that is increasingly cashless, that’s a problem for both consumers and businesses. Smoakland is currently beta-testing a loophole that lets its customers pay by credit card. The secret, it turns out, is crypto.

Need some more to get you through the long bleak gap of “less tech news” known as the weekend? Don’tcha worry fam, we gotchu:

• Down in proverbial flames: Aria reports that Virgin Orbit burns up in uncontrolled descent.
• Teaching an old browser new tricks: Artie sidesteps the app stores by putting high-quality games in your browser, Haje reports.
• Pouring our hearts out: Haje reviewed a fancy-ass $700 coffee maker and concludes that xBloom makes perfect pour-over so you don’t have to, before asking if you would want to.
• Not worthless, but worth less: U.S. investors slash Byju’s and Swiggy valuation, reports Manish.
• This meeting could have been a summary: Ivan reports that Read’s AI-powered summary feature squeezes a meeting into a two-minute clip.

Yeah, of course, YC’s winter class is oozing with AI companies

Image Credits: Getty Images

Just over one-third of the fledgling startups in Y Combinator’s latest class say “that they are an AI company or use AI in some kind of way,” reports Rebecca Szkutak.

“You can’t blame the YC companies for leaning into AI,” she writes. “If you saw VCs dumping dollars — in a tougher fundraising market, no less — into a technology like AI that you could implement into your own business, why wouldn’t you?”

Yeah, of course, YC’s winter class is oozing with AI companies

Three more from the TC+ team:

• Okay, here’s the game plan: Anna and Alex have the lowdown on European startups looking to raise money in 2023.
• Damn the torpedoes, full steam ahead: Investors are unfazed by Q1 crypto funding decline, writes Jacquelyn.
• You’re hired! Anastasiia Kuzmenko shares three recruiting metrics that can help startups make more data-driven hiring decisions.

TechCrunch+ is our membership program that helps founders and startup teams get ahead of the pack. You can sign up here. Use code “DC” for a 15% discount on an annual subscription!

Big Tech Inc.

Checkout.com has a new president who recently spoke with Mary Ann about being bullish on a U.S. expansion and how she “welcomes” comparisons to Stripe. Céline Dufétel says of the payments industry this year: “Now more than ever amid the uncertain economic landscape, CFOs and heads of payments are narrowing in on the impact of payments on topline growth and profitability. Increasingly, business leaders are recognizing the measurable impact of high-performing payments systems in maximizing acceptance rates, minimizing costly fraud concerns, and reducing operational costs.”

And we have five more for you:

• What’s going on with the TikTok ban?: We’re so glad you asked. Taylor gives you the play-by-play.
• TV turned on its side: No, you aren’t seeing your Hulu interface wrong. The streaming company changed some things around, including a revamped sidebar on the left, Ivan and Lauren write.
• You can’t do that on social media: The lower chamber of the French parliament passed an influencer bill cracking down on risky products. Romain has more.
• Going public: Helbiz stock tumbles on reverse split, but it’s okay because they are rebranding to Micromobility.com, Rebecca writes.
• Quite taxing: Amanda played an anime dating sim that does your taxes for you and has some notes.

Daily Crunch: Citing data privacy concerns, Italy temporarily bans ChatGPT by Christine Hall originally published on TechCrunch

Stability AI CEO has the ambition to IPO in next few years

Emad Mostaque, the CEO and founder of open source platform Stability AI, hinted at plans to go public in the next few years, during the Cerebral Valley AI Conference in San Francisco on Thursday. He also shut down the idea that Stability AI, an OpenAI rival and leader in the generative artificial intelligence space, will ever get acquired.

“I think you can’t just IPO,” Mostaque said during an interview with journalist Eric Newcomer. “You need to have amazing revenue, amazing margins, distribution, and so we’ve been executing…we’re 17 months old.” He also said that the business model of Stability AI’s open source platform will be seen more properly in the next year,” but added that he doesn’t “want to give away my arbitrage opportunities.”

The generative intelligence company landed a spotlight after building Stable Diffusion, an image-generating system, along with Dance Diffusion and the development of open source music. Thus, it’s unsurprising that Mostaque feels strongly about creating open source standards in the world of generated art.

Mostaque was one of the notable 1,100+ signatories who published an open letter this week asking for more regulation in the AI space, but more specifically, for “‘all AI labs to immediately pause for at least 6 months.” His name appeared alongside Elon Musk, Steve Wozniak and Tristan Harris.

1,100+ notable signatories just signed an open letter asking ‘all AI labs to immediately pause for at least 6 months’

“OpenAI should become transparent and probably governed; what is the governance of Open AI? Nobody knows. What is transparent? Completely opaque,” Mostaque said during the panel, defending the petition, which some critics see as destructive or an attempt by some buidlers to slow down competition.

The bullishness around exits, and pause on innovation, comes as Bloomberg reports swirl that Stability AI is seeking funding that would value the business at $4 billion, up from a reported $1 billion post-money valuation that it landed in October when it raised capital from Coatue and Lightspeed Venture partners. Mostaque didn’t comment on fundraising rumors. Earlier this month, Stability AI bought imaging tool Init ML. 

Despite all the activity in the space, Mostaque doesn’t think AI is a bubble, saying that “this is bigger than 5G and self-driving customers.”

“When founders come to me, I say build good products and solve problems…most of the stuff is still surface level,” he said.

If you have a juicy tip or lead about happenings in the venture world, you can reach Natasha Mascarenhas on Twitter @nmasc_ or on Signal at +1 925 271 0912. Anonymity requests will be respected.  

Stability AI CEO has the ambition to IPO in next few years by Natasha Mascarenhas originally published on TechCrunch

Read’s AI-powered summary feature squeezes a meeting into a two-minute clip

Summarization is one of the common use cases of different AI models, and we now have multiple tools that shrink articles, PDFs, videos and transcripts into easily digestible pieces of information. Now, meeting intelligence tool Read has introduced a new feature that trims an hour-long meeting into a two-minute clip, accompanied by important pointers.

The company says it is using large language models — it didn’t specify which one — combined with video analysis to pick out the most notable parts of the meeting. Read also incorporates participants’ reactions in a highlight reel. Users can go to their recording of a meeting and turn off the “Play highlights only” toggle to see the condensed clip.

Image Credits: Read.ai

Read was co-founded in 2021 by former Foursquare CEO David Shim. The tool, which works with Zoom, Google Meet, Microsoft Teams and Webex, gives you analytics like sentiment as well as participant engagement scores to measure the effectiveness of a meeting. The company has raised $10 million in seed funding from investors including Madrona Venture Group and PSL Ventures.

Shim compared watching the two-minute reel to watching the highlights of a sports game. He also said that during the test period, the company found that some clients had an impactful increase in productivity.

“During a preview period, agency clients experienced a 30%+ increase in productivity for employees. Tedious tasks including pulling together notes were completed automatically, and the sharing of these notes along with manually generated video highlights eliminated the need to set up a meeting to talk about the last meeting,” he said in a statement.

Image Credits: Read

In January, Read introduced a text-based summary feature that was powered by OpenAI’s GPT model. The video highlight feature is an evolution of that. The demo below shows that, at times, the highlights cut off the speaker mid-sentence, which can be annoying when trying to listen to important points. The company said it is working on improving this aspect.

Read also noted that it will incorporate text summaries in the videos using captions in the coming weeks.

Tons of companies — including Otter and Zoom — are working on providing AI-aided summaries of meetings. While most of them use some kind of large language model, Read’s approach to having a TikTok-style short video summary can appeal to people looking to skim through multiple missed meetings.

Read’s AI-powered summary feature squeezes a meeting into a two-minute clip by Ivan Mehta originally published on TechCrunch

Burn, community, burn

Hello, and welcome back to Equity, a podcast about the business of startups, where we unpack the numbers and nuance behind the headlines.

AI? Crypto? Equity crowdfunding and former startup founders trying to bribe China? We had it all this week, friends, so please strap in and get ready for another catchup with your besties Mary Ann, Natasha and Alex. Here’s the show rundown in case you want to play along as you listen:

• Deals of the Week: How Seed Checks could disrupt early-stage fundraising, notes on StellarFi’s latest capital raise, and the end of the Lyft founders’ operational saga.
• All about Substack and its equity crowdfunding round, an event that we have lots of good things to say about, and one complaint.
• Then there was crypto. Let’s see: We WTF’d about the latest from FTX’s SBF, CZ is in trouble, and more.
• And we closed with notes on an open letter asking for AI development work to pause — ha — and had some fun with ChatGPT!

It was a hell of a week. We do it again starting Monday!

For episode transcripts and more, head to Equity’s Simplecast website. 

Equity drops at 7:00 a.m. PT every Monday, Wednesday and Friday, so subscribe to us on Apple Podcasts, Overcast, Spotify and all the casts. TechCrunch also has a great show on crypto, a show that interviews founders, one that details how our stories come together and more!

Burn, community, burn by Natasha Mascarenhas originally published on TechCrunch

3 recruiting metrics that can help startups make more data-driven hiring decisions

Anastasiia Kuzmenko Contributor

Anastasiia Kuzmenko is the head of talent acquisition at Flyer One Ventures, a CEE-focused international investment firm.

Navigating the current economic storm, startup founders have to focus on the key resource for their early-stage startup to survive and grow — the people. The biggest difference, however, between hiring in a healthy economy and hiring now is that there’s no room for mistakes.

According to Harvard Business Review, the price of a bad hire is 30–50% of their salary, which can hit startup budgets hard in 2023. To make fewer mistakes, founders should adopt a more data-driven approach to hiring.

A good start is to track these three metrics:

Startup founders have to focus on the key resource for their early-stage startup to survive and grow — the people.

Сost per hire

Cost per hire is one of the most essential business metrics, which must be included in a company’s profit and loss report. It helps a recruitment team test different strategies, as well as spot areas where they can trim costs and optimize hiring.

This metric is used to calculate the total expenses a company incurs to attract, recruit, and onboard employees. To calculate cost per hire, you would add up all the direct and indirect costs of the hiring process and divide it by the number of hires made within a specific period.

First, define the period. It can be a month, a quarter, half a year or a year. I track the cost per hire monthly to continually optimize the process.

Second, tally up all expenses. Take into account the internal costs such as salaries and bonuses of recruiters, licenses for corporate email accounts, the cost of applicant tracking system software and LinkedIn Premium, and education courses for new employees.

Also, include the external costs of job ads and referral programs, fees of staffing agencies, as well as background checks and relocation expenses.

Cost per hire ($) = (Internal recruiting costs + External recruiting costs) / Number of hires made

If your company spends $10,000 on recruiting per month and hires four people, the cost per hire is $10,000 / 4 = $2,500.

For an early-stage startup, a reasonable cost per hire is valued between $3,000 and $5,000. A recent study says the average benchmark is $4,700. If the cost is over $6,000, it makes sense to review your strategy.

To identify the stages incurring the highest costs and find ways to cut expenses, it’s essential to assess each recruitment stage. If candidates decline your offer, gather feedback about the reasons for rejection and conduct new research on market salaries — you may be offering too little.

When you don’t hire frequently, outsourcing recruitment may be more cost-effective than handling all operational costs internally. Compare your current recruitment expenses to the pricing plans of recruitment agencies, which usually charge 15-35% of a new hire’s annual salary.

3 recruiting metrics that can help startups make more data-driven hiring decisions by Jenna Routenberg originally published on TechCrunch

Daily Crunch: Ledger locks down another $108M to double down on hardware crypto wallets

To get a roundup of TechCrunch’s biggest and most important stories delivered to your inbox every day at 3 p.m. PDT, subscribe here.

Thursdaaaaaaaaaaaaaaaaaaay! It’s one of our favorite days of the week. Definitely in the top 7. — Christine and Haje

The TechCrunch Top 3

• Crypto wallet in disguise: Ledger, a company that designs and manufactures crypto wallets, is now flush with actual cash. Romain writes that after raising over $380 million in 2021, in today’s dollars, Ledger brought in $108 million, raising at the same valuation and from a long list of investors.
• Even contact centers need tech: Customers have lots of questions, and to provide the best experience, you need more than just a friendly voice on the other end of the phone. That’s where Parloa comes in, raising $21 million to add a little automation to contact centers, Kyle writes.
• Cashing in on the generative AI frenzy: In Kyle’s second top story of the day, Fixie, backed by $17 million in venture capital, wants to make it easier for companies to build on top of language models.

Startups and VC

“Our story starts 15 years ago,” Frédéric Utzmann, founder and CEO of Effy, told Romain. After 15 years of bootstrapping, the energy renovation company is at a crossroads and just closed a $22 million funding round from Felix Capital to make the most of the opportunities in the energy renovation space.

The layoffs continue: Indian edtech Unacademy slashes another 12% jobs, and online used-car marketplace Shift cuts workforce by 30%.

Another fistful of wisdoms and nuggets:

• Taking on Twitter, too: Twitter alternative T2 launches new verification program and hires a Discord engineering head as CTO, Sarah reports
• Computer says no to fraud: Kyle reports that Oscilar emerges from stealth to fight transactions fraud with AI.
• Computer says no to other computers: DataDome uses AI to protect against bot-based attacks. The company just raised $42 million, Kyle reports.
• A captive audience: Ingrid reports that P97 fills up its tank with $40 million to fuel its gas station mobile commerce services.
• CEOs only: Natasha M writes that Hampton is tech’s new membership community for chief executive officers.

How to build a sales development representative strategy that will fill your B2B pipeline

Image Credits: kampee patisena (opens in a new window) / Getty Images

Marketing teams deserve all of the credit for crafting innovative campaigns that break through the noise: Convincing someone to try out a new product or service takes real skill!

In practice, however, sales development representatives (SDRs) do most of the work required to land new customers, “making cold calls, writing email outreach, or sending outbound mail,” says GTM strategist Mike Tong.

Because it takes “about 15 touches for a prospect to want to see a demo,” Tong authored a TC+ guide for early-stage CEOs who need guidance around hiring and incentivizing SDR teams.

“Pipeline generation at early-stage companies is expensive and time consuming, often more so than the sales process itself. That said, getting it right is likely the most important thing you can do for your business.”

How to build a sales development representative strategy that will fill your B2B pipeline

Three more from the TC+ team:

• Bork bork bork?: Anna takes a look at Sweden’s startup scene as Techstars drops its Stockholm program.
• Let me insure you: Anna talks to six VCs who explain why embedded insurance isn’t the only hot opportunity in insurtech.
• Reaching for the sky: Haje is back with his weekly Pitch Deck Teardown, looking at Northspyre’s $25 million Series B deck, which comes with a few good surprises. And a few, er, not good surprises.

TechCrunch+ is our membership program that helps founders and startup teams get ahead of the pack. You can sign up here. Use code “DC” for a 15% discount on an annual subscription!

Big Tech Inc.

It seems we can’t go that many days without more news on a company cutting jobs. This time, Roku is doing a second round of layoffs, this time of 200 employees, or 6% of its workforce, citing “a larger plan to lower its year-over-year operating expense growth and prioritize projects that it believes will have a higher return on investment,” Sarah writes. This comes four months after Roku laid off an initial 200 people.

Meanwhile, if you want to book an environmentally friendly ride, you’re in luck. Uber expands its Comfort Electric offering to 14 new markets in the U.S. and Canada, Rebecca reports. You can choose from Tesla Models S, 3, X and Y; the Polestar 2; the Ford Mustang Mach-E; the Audi e-tron; the Porsche Taycan; and the Hyundai Ioniq.

And we have five more for you:

• Driving off into the sunset: Waymo retires its self-driving Chrysler Pacifica minivan, Kirsten reports.
• Don’t answer this call: Security firms say a new supply chain attack is targeting customers of a phone system with 12 million users, Carly writes.
• Not enough: Ivan writes that developers say the new Twitter API tiers still miss the mark.
• Game on: Netflix is working on games for the TV where people can use their iPhone as the video game controller, Lauren reports.
• Changes are coming: Lyft’s new CEO has some ideas that might include dropping shared rides, Rebecca reports.

Daily Crunch: Ledger locks down another $108M to double down on hardware crypto wallets by Christine Hall originally published on TechCrunch

Parloa raises $21M to add a little automation to contact centers

It’s estimated that over $400 billion are spent annually to run customer contact centers around the world. To cut costs, in recent years, contact centers have embraced AI and automation; research from The Harris Poll indicates that 46% of customer interactions were already automated as of 2021.

That’s good news for the vendors selling contact center automation software. VCs believe that to be the case, certainly, judging by recent investment upswing. Startups including Invoca, Replicant, PolyAI and Observe.ai have raised hundreds of millions of dollars from backers over the past year alone, reflecting the bullish views of labor-saving customer service tech.

Another winner in the contact center automation boom is Parloa, a German-based enterprise software provider that uses a combination of conversational AI tech and low-code tools to help companies lighten the load on their contact center employees (or so the sales pitch goes). Parloa today announced that it raised €20 million (~$21.67 million) in a Series A funding round led by EQT Ventures, with participation from Newion and Senovo.

The fresh cash, which brings Parloa’s total raised to €25 million (~$27.09 million), will be put toward customer acquisition efforts, opening a U.S. office and product R&D.

“AI is waiting in the wings right now to disrupt the multi-billion customer service market for good,” co-founder and CEO Malte Kosub told TechCrunch in an email interview. “The status quo in customer service is the same across Europe, Middle East, and Africa and the U.S.: not a good customer experience. So also the speed of the AI adoption in customer service will be the same in those areas.”

Parloa began as an internal effort at Future of Voice, a conversational AI agency that Kosub co-launched with Stefan Ostwald in 2017. Kosub and Ostwald built a low-code tool for developing “multi-channel voice experiences” (e.g. Alexa skills, phone bots) for Future of Voice’s clients, which they code-named Parloa. In 2020, Kosub and Ostwald sold Future of Voice and recruited the employees that had been working on Parloa to help scale the software independently.

Parloa offers a patchwork of apps and services that, when meshed together via low-code drag-and-drop dashboards, can power contact center automation flows. For instance, Parloa’s speech-to-text module — driven by Microsoft Cognitive Services, Microsoft’s set of API-based AI services — can be combined with Parloa’s natural language understanding models to create a phone dialogue tree. Or Parloa’s integrations with third-party text-generating models, including OpenAI’s recently released GPT-4, could be connected with the aforementioned speech-to-text module to answer commonly-asked customer questions and complaints.

Parloa connects various modules and services to help automate contact centers. Image Credits: Parloa

To put it in more concrete terms, a typical company might use Parloa’s tools to create a phone-answering bot that can automatically figure out what a customer’s calling about (e.g. changing their billing address) and respond to their questions in natural language. Or it might use Parloa’s translation tools to let its customer service agents speak with customers in multiple languages.

Parloa’s approach isn’t exactly novel — lots of contact center platforms offer the same type of setup — but the startup claims that its platform is superior in some ways from a technical standpoint. For instance, Parloa claims its AI tools, apps and modules can reduce spelling errors and other “unwanted conversational patterns” during calls and continue listening during natural pauses in conversations.

“The pandemic was a particular driver for the increased demands on digital customer service, which we as Parloa are helping to automate,” Kosub said. “Customer service is as old as business itself. So we are not inventing a new market environment or focusing on small sub-segments, but helping an established multi-billion market with innovative technology.”

Kosub wouldn’t say exactly how many customers Parloa currently has, save a few big names like Decathlon and German Red Cross. When asked about macroeconomic headwinds like the Silicon Valley Bank collapse, he countered with a stat he argues illustrates one of the reasons the contact center automation market will continue to grow: 71% of agents thought about leaving their job in the past six months, according to a Salesforce study.

“Companies have to deal with a decreasing availability of agents, staff shortages of agents and job unattractiveness — much of an agent’s time is spent on repetitive tasks, like authentication, that could be done by AI,” Kosub said.

One might argue that agent turnover is better avoided with higher wages and better benefits as opposed to automation. Among the common complaints from workers in the industry are high production demands and a lack of training; in 2021, call center workers at healthcare giant Cigna went so far as to circulate a petition calling for better working conditions.

Investments in automation are an easier sell, of course — particularly in a down economy. Parloa’s biggest challenge likely won’t be finding new customers, but standing out in a crowded field. Kosub says he’s up to it, fortunately.

“We weren’t affected by the slowdown or the pandemic at all. Customer service demand is growing and the pressure to be more efficient is increasing as well,” he said. “Corporate-wise, we grew from 30 employees during our seed funding to more than 100 in less than 12 months, with new joiners from Google, Salesforce, SAP, TeamViewer and Celonis.”

Parloa raises $21M to add a little automation to contact centers by Kyle Wiggers originally published on TechCrunch

Oxfam Novib and Goodwell target East African startups with €20M Pepea fund

Impact investor Goodwell Investments and Oxfam Novib, a Dutch foundation and Oxfam International affiliate, have set up Pepea, a €20 million ($21.7m) fund, to provide financing to early-stage startups in Kenya, Uganda, and Ethiopia. The fund, created with the backing of Oxfam Novib Impact Investments, will provide venture debt with a focus on mezzanine finance, which is a debt that can be turned into equity.

Pepea will target early-stage businesses that have been in existence for one to five years, and are generating revenues but yet to raise capital. Goodwell Investments, which will manage the fund’s operations, and help develop its portfolio, told TechCrunch that part of the support to startups will include ensuring that they have the right ‘structures and systems’ in place, to help them prepare and raise their first rounds.

The fund will invest in businesses in sustainable agriculture, energy, clean mobility, logistics, and waste management sectors, which produce basic goods and services that represent a huge proportion of household spending for lower-income communities. Pepea’s long-term plan is to improve the quality and affordability of these necessities.

The fund targets high-impact tech-enabled businesses, “because the combination of tech and brick-and-mortar works best in these environments. Tech enables access and affordability, and both are elementary for the end-users we aim to reach, the lower income groups on the continent,” said Goodwell Investments, managing partner, Els Boerhof.

MENA VC Flat6Labs’ new fund to back startups in East, West Africa

The fund will finance startups in Kenya, Uganda, and Ethiopia, markets where Oxfam, and Goodwell have a presence. Development organization Oxfam runs an SME incubation program in the three markets, while Goodwell’s funds are active in both Uganda and Kenya.

Pepea, the first fund by the impact investor and the non-government organization, will provide an initial check of between $100,000, and $500,000, and follow-on investments of up to $1 million, from Goodwell’s funds.

Goodwell launched its first fund in 2007, and has provided equity funding to over 20 businesses including Paga, MFS Africa, Sendy, Max.ng, and Good nature agro. While it mainly targets startups in finance, agriculture, and mobility, last year, it led a $50 million Series C round for e-commerce scaleup Copia Global. The impact investor launched its second fund last year, the $154 million UMunthu II, and currently has over € 310 million under management.

On the other hand, Oxfam Novib, launched its first investment fund in 1996, and has since 2015, provided SMEs with access to finance through its Impact SME Development (iSME) program. It plans to further this with the Pepea fund, through which it hopes to help businesses maximize their positive impact within the communities they serve.

“Oxfam Novib played a sterling role in developing the microfinance sector as a means to provide access to financial services where they were most needed. As that sector has matured beyond the realm of NGOs, we are ready to change direction towards a less-served segment of the market,”said Oxfam Novib, investment manager, Tamara Campero.

“We acknowledge the challenges of SMEs in the region (especially those that are women-owned) to access fine-tuned patient capital and we now want to play a role to address those needs,” said Campero.

Oxfam Novib and Goodwell target East African startups with €20M Pepea fund by Annie Njanja originally published on TechCrunch

After bootstrapping for 15 years, energy renovation company Effy raises $22 million

Effy is at a crossroads. The energy renovation company based in France is doing well, but it is addressing a market that is much bigger than anticipated. That’s why it is making a bet. The company just closed a €20 million funding round (roughly $22 million at today’s exchange rate) from Felix Capital. This is the first external funding round for the company.

“Our story starts 15 years ago,” founder and CEO Frédéric Utzmann told me. “We tackled this market very early on because we really believed in it.”

At first, Effy wasn’t a tech-enabled startup. The company worked on energy renovation for public buildings, residential buildings and industrial facilities. “We started with heavy energy consuming projects with a business that was very much ‘brick and mortar’, old school. But this allowed us to develop the company in a self-financed and profitable way,” Utzmann said.

Quickly after that, the company started acquiring websites and services that were useful for energy renovation projects. In 2011, the company acquired Calculeo, a tool that helps you calculate how much you can get in public subsidies for energy renovation work. In 2015, Effy acquired Quelle énergie, a VC-backed startup that could calculate how much money you would save by isolating your roof, changing your windows and more.

At the same time, Effy’s traffic started growing rapidly. Search engine optimizations led to more organic traffic. Effy started building a significant network of contractors and redirecting home owners to these partners.

In 2019, Effy chose to focus exclusively on small residential projects. Engie acquired its B2B activities for an undisclosed amount. Effy chose to reinvest everything in product development and growth. In addition to organic traffic, the company spent some money on brand awareness ads (like TV spots), as well as Google and social media ads.

And it has paid off as Effy attracted 18 million visitors to its websites in 2022. Some people just want to use Effy’s tools to see how much money they could save with energy renovation projects. Others go one step further and submit a request for some construction work.

Effy then contacts those potential customers to understand their needs. To give you a sense of Effy’s scale, last year, the company ended up contacting 500,000 individuals and completing 100,000 energy renovation projects. Effy handled €800 million in transactions on its platform.

Owning the relationship

Effy can still improve its service in several ways. In particular, its marketplace is still mostly a lead generation product for energy renovation contractors. When potential clients want to move forward with their home projects, they are connected with independent contractors.

These contractors supply quotes, which means that it creates some friction for the end customer. They have to compare quotes between multiple contractors and pick one.

Of course, Effy spends a lot of time curating its marketplace. There are currently 3,800 contractors working with Effy. The company gathered 16,000 reviews and the average rating is 4.8 stars.

Similarly, Effy can handle the paperwork to obtain subsidies for energy renovation work. The company takes a cut on this administrative process and charges contractors a small nominal fee for new potential clients.

Effy now wants to switch to a first-party marketplace model. Clients interact directly with Effy and negotiate the quote with Effy. “Historically, we had an almost 100% third-party business — it represents 90% of our business today,” Utzmann said.

It opens up some new possibilities on the product front. First, there are a lot of optimization possibilities when it comes to creating a quote, sourcing materials and everything that isn’t the construction work itself. This way, contractors can accept more jobs as Effy handles the rest.

Second, Effy could start offering some financing options with partners. For small amounts, Effy can use ‘buy now, pay later’ products. For bigger sums, Effy has an internal team that can negotiate credit lines with Sofinco and Cetelem.

Sure, energy renovation projects can be expensive. But customers often end up paying smaller bills once these projects are done. Effy could even look at the impact on your bills thanks to smart meters.

“Let’s say you pay €2,000 per year and you will pay €1,000 per year starting tomorrow. You could set aside €800 to pay back your investments. You end up saving less because you have to pay something back, but your house is also worth more money,” Utzmann said.

In addition to this product roadmap, Effy’s business could end up growing rapidly thanks to favorable market conditions. The was in Ukraine has had a significant impact on energy bills.

At the same time, the European Union wants to finance projects that have a positive impact on climate change. Residential buildings indirectly generate a ton of carbon emissions as it requires a lot of energy to heat and cool them. Many EU countries are rolling out generous subsidies to foster energy renovation projects.

Finally, Effy is only available in France for now. The company could expand to other European countries in the future, starting with Germany and Spain.

After bootstrapping for 15 years, energy renovation company Effy raises $22 million by Romain Dillet originally published on TechCrunch

Indian edtech Unacademy slashes another 12% jobs

Unacademy has laid off 12% of its workforce, or over 350 roles, in its latest round of layoffs — just over four months after cutting about 350 roles in November.

Unacademy co-founder and CEO Gaurav Munjal announced the new layoff decision in a Slack post to employees.

“We have taken every step in the right decision to make our core business profitable, yet it’s not enough. We have to go further, we have to go deeper,” he wrote in the message reviewed by TechCrunch.

“Today’s reality is a contrast from two years ago where we saw unprecedented growth because of accelerated adoption of online learning. Today, the global economy is enduring a recession, funding is scare and running a profitable business is key. We have to adapt to these changes, build and operate in a much leaner manner so we can truly create value for our users and shareholders,” he said.

The latest move comes just days after the Bengaluru-based startup hived off programming learning platform CodeChef, which it acquired in 2020.

Indian edtech giant Byju’s not acquiring Unacademy

Unacademy, valued at $3.4 billion, cut 1,000 full-time and contractual employees in April last year. The startup in June also announced a pay cut and shut down of “certain businesses” to survive the funding crunch.

Edtech startups in India are struggling to attract investments and facing challenges due to the market downturn. Unacademy competitor and India’s most valuable startup Byju’s also cut thousands of jobs last year and recently discussed shutting down coding platform WhiteHat Jr.

“To those of our employees impacted by this decision, this is never the experience I hoped you would have had at Unacademy. I take complete responsibility for the way things have turned out,” Munjal said in his message.

Unacademy, which counts Sequoia Capital India, SoftBank and Tiger Global among its key investors, will provide a severance pay equivalent of notice period and an additional one month’s pay to impacted employees. The startup has also promised to give medical insurance coverage for additional six months until September 30 and dedicated placement as well as career support and accelerate the vesting period of their stock by one year.

Exact details on which roles are affected by the move were not disclosed.

Indian edtech Unacademy slashes another 12% jobs by Jagmeet Singh originally published on TechCrunch

Daily Crunch: After raising $3M seed, global fintech platform Payday plans to secure licensing in Canada, UK

To get a roundup of TechCrunch’s biggest and most important stories delivered to your inbox every day at 3 p.m. PDT, subscribe here.

Hello, and welcome to Wednesday Crunch!

On everyone’s mind today is the power of AI and whether we’re all doomed. Connie reports that 1,100+ notable signatories just signed an open letter asking “all AI labs to immediately pause for at least 6 months.” Meanwhile, Amanda explores how everything is “Goncharov” as the meme-makers are going mainstream with a huge assist from AI tech.

— Christine and Haje

The TechCrunch Top 3

• Future of work is borderless: Payday, now flush with $3 million in new capital, plans to expand its Africa-based operations to Canada and the United Kingdom, Tage writes. The company provides a way for those working remotely to receive payments in their currency of choice.
• “Alexa, call Grandma”: A new Amazon capability brings T-Mobile customers into the fold for making and receiving calls via an Alexa-enabled device, Ivan reports.
• In-suring new funds: India-based insurtech company Acko, which is already backed by Amazon, is in talks for $120 million in new funding. Manish has more.

Startups and VC

With a drier than normal investment scene, founders are looking for more effective ways to reach the right VCs. Thousands of founders have applied to land capital through a common app, Natasha M reports. The platform they’ve been using is Seed Checks. Founders are invited to apply using a one-minute form that asks for a deck, memo and region. The app is then blasted to 16 investors.

Autio, a location-based audio entertainment app co-founded by actor Kevin Costner and formerly known as HearHere, has raised $5.9 million. The funding round was led by iHeartMedia, Aisha reports. Autio uses GPS to narrate stories of landmarks, cities and towns nearby with the aim of fostering deep connections and understandings of the places users are traveling through.

And we have five more for you:

• Yeah, but does it use outside-in compression: Deep Render lands $9 million for its AI-powered video compression tech, Kyle reports.
• A growing market: Christine writes that Italy’s ban on cultivated meat could set the industry back.
• Wait, you can’t say that: Kyle reports that LeapXpert raises $22 million to monitor employee chats for compliance.
• Is that you, Bob?: Spera raises $10 million for its identity security posture management platform, Frederic reports.
• Putting the pieces back together again: Distressed Indian startup GoMechanic acquired by Lifelong Group-led consortium, reports Manish.

Ask Sophie: What to do if selected/not selected in H-1B lottery?

Image Credits: Bryce Durbin/TechCrunch

Dear Sophie,

After three tries, I was finally selected this year in the H-1B lottery! What do we do next?

— Wondering Winner

Dear Sophie,

I’m on STEM OPT. My employer put me in this year’s H-1B lottery for the third time, but I wasn’t selected again! What do I do?

— Lottery Loser

Ask Sophie: What to do if selected/not selected in H-1B lottery?

Three more from the TC+ team:

• Substacks of cash: Alex takes a look at Substack taking a different tack to raise more capital.
• Speak up!: Carly points out that Silence gets you nowhere in a data breach.
• So which one is it?: Are cryptocurrencies commodities or securities? Well, Jacquelyn discovers that depends on which U.S. agency you ask.

TechCrunch+ is our membership program that helps founders and startup teams get ahead of the pack. You can sign up here. Use code “DC” for a 15% discount on an annual subscription!

Big Tech Inc.

Lots of Google-related news today, so let’s summarize, shall we? The TechCrunch audience was particularly enamored with Aisha’s story about a new feature on extreme heat alerts. Why? Perhaps it’s because our weather is not cooperating with the current month. Meanwhile, Frederic reports on Google Cloud launching AlloyDB Omni; Ivan has your look at Google’s new ad transparency center; Manish reports on an Android antitrust case in India; Aisha writes about new Google Search features; and Lorenzo and Carly round it out with a story on hackers using spyware to target users in the UAE.

And with that, we hope you have a Google day!

Now here’s five more for you:

• Spot-ify the new changes: Spotify is testing out new card-style user profiles so that users can have more of a social profile on the platform, Sarah reports.
• Gone fishing for competition: The U.K. Competition and Markets Authority is moving forward with an in-depth probe of the $61 billion Broadcom-VMware deal. Ron has more.
• WWYD with tickets to this show?: Apple’s developer conference, WWDC, returns to Apple Park in June, Brian writes.
• Get your digital scissors ready: Amazon Pharmacy now automatically applies coupons on select brand name drugs, Aisha reports.
• Goooooaaaal!: Sarah writes that Apple is developing a “multiview” feature for watching sports that will enable Apple TV users to watch up to four streams at the same time.

Daily Crunch: After raising $3M seed, global fintech platform Payday plans to secure licensing in Canada, UK by Christine Hall originally published on TechCrunch

6 VCs explain why embedded insurance isn’t the only hot opportunity in insurtech

If you think embedded insurance is the only hot thing in insurtech these days, we’ve got a surprise in store for you: While it’s true that startups that help sell insurance together with other products and services are enjoying tailwinds, there are plenty of other opportunities in the space, several investors told TechCrunch+.

You see, insurtech startups often need to take into account the myriad rules and regulations in place when they seek to innovate and embed insurance into products, which might make it difficult to pull it off. And given the current emphasis on achieving cost efficiency to extend runways in the broader startup ecosystem, it appears investors are open to insurtech startups that can build a sustainable business model, regardless of it including embedded insurance.

“Insurtech startups that do not offer embedded insurance, and rather provide other innovative solutions will still attract VC funding this year, especially if they can show cost-efficient and sustainable growth,” said Nina Mayer, a principal at Earlybird.

And according to David Wechsler, a principal at OMERS Ventures, “having an embedded strategy is not required for venture funding.”

Meyer added that there is particular interest in products that go beyond embedded insurance. “We are generally open to startups innovating any part of the value chain as long as the problem and market are big enough.”

This focus on cost efficiency instead of growth at all costs is driven by the same factors that affect startups more broadly. “It’s been a turbulent few months for all tech sectors, including insurtech,” said Stephen Brittain, director and co-founder of Insurtech Gateway.

There’s another reason why fundraising is harder for insurtech founders in 2023. Wechsler said, “Many firms who dabbled in insurtech (A.K.A. “tourist investors”) have left the space. This makes it much more challenging to close subsequent rounds.”

On the flip side, he predicts that corporates with venture capital arms that are “committed to the insurance sector will likely step up their involvement.”

This also seems true more broadly of venture funds with a strong insurtech thesis. “We are still bullish on insurtech and we have been active in 2023,” said Hélène Falchier, a partner at Portage Ventures.

But investors are being careful to not put all their eggs in one basket. “Beyond embedded insurance, we are also particularly excited by solutions tackling claims prevention or underwriting in verticals such as climate or cyber,” Mayer said.

Artificial intelligence will likely take longer to demonstrate its full potential for the insurance sector, but its current applications are already being tracked actively by venture capital funds.

Talking about generative AI and insurance, Astorya.vc’s founding partner, Florian Graillot, reported seeing a lot of enthusiasm around that topic. He thinks that early use cases may center on customer service, but is certain that more will follow.

“There is a lot more to expect from these generative AI solutions not only to smoothen the engagement with customers, but also to get a sense of customers’ risks, collect documents in the claim process, or maybe deliver reporting to the regulator. We are clearly in the early days, whatever the industry!”

Read on to find out what insurtech investors think about where the sector is heading in 2023, why they feel IoT and parametric insurance are a hot opportunity, how Apple will change the game if it ends up launching its insurance product and more.

We spoke with:

• Florian Graillot, founding partner, Astorya.vc
• Hélène Falchier, partner, Portage
• Stephen Brittain and Robert Lumley, directors and co-founders, Insurtech Gateway
• Nina Mayer, principal, Earlybird
• David Wechsler, principal, OMERS Ventures

---

Florian Graillot, founding partner, Astorya.vc

Embedded insurance is growing in popularity as more companies find ways to bundle insurance products with their offerings. How important will it be for insurtech startups to have an embedded insurance product to attract funding this year?

It’s true we’ve seen a lot of insurtech startups rebranding themselves towards that positioning. I’d even say it became a buzzword. But there are few players really offering third parties a way to seamlessly add insurance solutions to their customer journeys (that’s how I would define embedded insurance).

I believe the time is past when claiming such a positioning was enough to raise money. Investors have matured and the market knows B2C and embedded insurtech are two very different companies. Hence, you cannot switch from one to another overnight.

But for startups that have the right balance between tech/product and insurance, there is a huge opportunity, as more and more platforms, e-commerce and marketplaces are looking for additional revenues on their existing customer base. That’s what such insurtech startups can offer them! We have long been pushy on such an indirect distribution, having invested in four embedded insurance startups in property and casualty, bancassurance, life, and SME insurance.

How has your approach to the insurtech industry changed since the last time we spoke in Q3 2022?

Since astoryaVC’s inception, we have been investing in tech-based startups and have done a lot of B2B / enterprise software deals in the insurance space. That hasn’t changed. And the current market is rather reinforcing our investment thesis.

By the way, that makes a lot of sense when you remember that insurtech is three to four years behind fintech in terms of investments, and insurers usually lag behind banks in digital adoption rankings.

In terms of maturity, we haven’t changed our seed focus, as this is where the market is the most active (almost half of deals announced last year in [Europe’s insurtech sector] were below €3 million, see here), and anyway, insurtech is still a very young industry.

Apple is reportedly launching health insurance in 2024, for which it may leverage data from its other offerings. What impact would this have on interest for data-driven approaches in the insurtech sector?

First, let me share: I’m very excited about that perspective, as we’ve long been very pushy towards third parties entering the insurance industry. The rationale behind that is if insurance claims it is all about data, usually platforms own more data on their (vertical) market! Who owns health data? The Apple watch, not insurers. Hence, it makes perfect sense that such a company considers entering that space.

Florian Graillot, founding partner, Astorya.vc. Image Credits: Florian Graillot

Obviously, there are many challenges to tackle, but at least they have the data and customers’ trust to share this data with them. Let’s see how they are delivering. And their huge customer base could be a competitive edge. See how they are doing in the payment space with Apple Pay!

Every time a big name enters insurance, there is always a mix of skepticism from incumbents and a reminder that change is needed. In the short term, I don’t expect any impact, but if the first figures of adoption are nice, re/insurers will probably kick off similar projects. It’s worth reminding that there is already such a project, live on the market: Vitality.

Do you expect B2B companies to follow Apple in this and leverage wearables data as well?

At least they should, as I believe they have three strengths to support such initiatives:

1. they have a lot of customers;
2. they own a lot of data on their customers;
3. they have regular touch points with these customers.

We’re actually seeing more and more third parties launching insurance products. I’m thinking about Tesla in the car insurance market. In France, for instance, we have Blablacar, a ride sharing platform, and Ornikar, an online driving school, which have launched their own insurance solutions at scale. To make the link with the first question, we expect that move to accelerate as insurtech is developing “embedded insurance” solutions, which is the tech infrastructure required to plug insurance solutions to third-party platforms. For instance, it’s gaining momentum in the SME space!

As parametric insurance becomes a reality, which areas of insurance do you see extracting the most value from IoT applications?

Parametric insurance is a very exciting space: we’ve been discussing it for a few years now, but there are still only a few players delivering it at scale. Nevertheless, that addresses a real need in the market around what we call “new risks.” Not every insurer is offering such products: the risk didn’t exist a few years ago, and it is growing fast. Hence, there is a real challenge to spot relevant data sets and get a sense of them through algorithms. This opens the door to more insurtech / insurance partnership rather than competition.

In terms of use cases, weather insurance has been the hottest topic so far both in terms of the number of startups launched in that space, and by the scale of the most advanced players. But there are many other opportunities to tackle. I think about cyber insurance, which was hot recently. I also have in mind Cloud outage — we have invested in Riskwolf in that space. I think about digital assets as well: one can add new ways of working, etc.

When do you think that ChatGPT will start to have a tangible effect on insurance?

That’s a very good question. We see a lot of enthusiasm around that topic. The first use cases may be around the customer experience, and I even believe major attempts at leveraging ChatGPT in insurance recently are what we’ve long been expecting from “chatbots.”

But there is a lot more to expect from these generative AI solutions not only to smoothen the engagement with customers, but also to get a sense of customers’ risks, collect documents in the claim process, or maybe deliver reporting to the regulator. We are clearly in early days, whatever the industry!

6 VCs explain why embedded insurance isn’t the only hot opportunity in insurtech by Anna Heim originally published on TechCrunch

The market has changed, but super-voting shares are here to stay, says Mr. IPO

Yesterday, the ride-sharing company Lyft said its two co-founders, John Zimmer and Logan Green, are stepping down from managing the company’s day-to-day operations, though they are retaining their board seats. According to a related regulatory filing, they actually need to hang around as “service providers” to receive their original equity award agreements. (If Lyft is sold or they’re fired from the board, they’ll see “100% acceleration” of these “time-based” vesting conditions.)

As with so many founders who’ve used multi-class voting structures in recent years to cement their control, their original awards were fairly generous. When Lyft went public in 2019, its dual-class share structure provided Green and Zimmer with super-voting shares that entitled them to 20 votes per share in perpetuity, meaning not just for life but also for a period of nine to 18 months after the passing of the last living co-founder, during which time a trustee would retain control.

It all seemed a little extreme, even as such arrangements became more common in tech. Now, Jay Ritter, the University of Florida professor whose work tracking and analyzing IPOs has earned him the moniker Mr. IPO, suggests that if anything, Lyft’s trajectory might make shareholders even less nervous about dual-stock structures.

For one thing, with the possible exception of Google’s founders — who came up with an entirely new share class in 2012 to preserve their power — founders lose their stranglehold on power as they sell their shares, which then convert to a one-vote-per-one-share structure. Green, for example, still controls 20% of the shareholder voting rights at Lyft, while Zimmer now controls 12% of the company’s voting rights, he told the WSJ yesterday.

Further, says Ritter, even tech companies with dual-class shares are policed by shareholders who make it clear what they will or will not tolerate. Again, just look at Lyft, whose shares were trading at 86% below their offering price earlier today in a clear sign that investors have — at least for now — lost confidence in the outfit.

We talked with Ritter last night about why stakeholders aren’t likely to push too hard against super-voting shares, despite that now would seem the time to do it. Excerpts from that conversation, below, have been lightly edited for length and clarity.

TC: Majority voting power for founders became widespread over the last dozen years or so, as VCs and even exchanges did what they could to appear founder-friendly. According to your own research, between 2012 and last year, the percentage of tech companies going public with dual-class shares shot from 15% to 46%. Should we expect this to reverse course now that the market has tightened and money isn’t flowing so freely to founders?

JR: The bargaining power of founders versus VCs has changed in the last year, that’s true, and public market investors have never been enthusiastic about founders having super voting stock. But as long as things go well, there isn’t pressure on managers to give up super voting stock. One reason U.S. investors haven’t been overly concerned about dual-class structures is that, on average, companies with dual-class structures have delivered for shareholders. It’s only when stock prices decline that people start questioning: Should we have this?

Isn’t that what we are seeing currently?

With a general downturn, even if a company is executing according to plan, shares have fallen in many cases.

So you expect that investors and public shareholders will remain complacent about this issue despite the market.

In recent years, there haven’t been a lot of examples where entrenched management is doing things wrong. There have been cases where an activist hedge fund is saying, “We don’t think you’re pursuing the right strategy.” But one of the reasons for complacency is that there are checks and balances. It’s not the case where, as in Russia, a manager can loot the company and public shareholders can’t do anything about it. They can vote with their feet. There are also shareholder lawsuits. These can be abused, but the threat of them [keeps companies in check]. What’s also true, especially of tech companies where employees have so much equity-based compensation, is that CEOs are going to be happier when their stock goes up in price but they also know their employees will be happier when the stock is doing well.

Before WeWork’s original IPO plans famously imploded in the fall of 2019, Adam Neumann expected to have so much voting control over the company that he could pass it along to future generations of Neumanns.

But when the attempt to go public backfired — [with the market saying] just because SoftBank thinks it’s worth $47 billion doesn’t mean we think it’s worth that much —  he faced a trade-off. It was, “I can keep control or take a bunch of money and walk away” and “Would I rather be poorer and in control or richer and move on?” and he decided, “I’ll take the money.”

I think Lyft’s founders have the same trade-off.

Meta is perhaps a better example of a company whose CEO’s super-voting power has worried many, most recently as the company leaned into the metaverse.

A number of years ago, when Facebook was still Facebook, Mark Zuckerberg proposed doing what Larry Page and Sergey Brin had done at Google but he got a lot of pushback and backed down instead of pushing it through. Now if he wants to sell off stock to diversify his portfolio, he gives up some votes. The way most of these companies with super voting stock are structured is that if they sell it, it automatically converts into one-share-one-stock sales, so someone who buys it doesn’t get extra votes.

A story in Bloomberg earlier today asked why there are so many family dynasties in media — the Murdochs, the Sulzbergers — but not in tech. What do you think?

The media industry is different from the tech industry. Forty years ago, there was analysis of dual-class companies and, at the time, a lot of the dual-class companies were media: the [Bancroft family, which previously owned the Wall Street Journal], the Sulzbergers with the New York Times. There were also a lot of dual-class structures associated with gambling and alcohol companies before tech firms began [taking companies public with this structure in place]. But family firms are nonexistent in tech because the motivations are different; dual-class structures are [solely] meant to keep founders in control. Also, tech companies come and go pretty rapidly. With tech, you can be successful for years and then a new competitor comes along and suddenly . . .

So the bottom line, in your view, is that dual-class shares aren’t going away, no matter that shareholders don’t like them. They don’t dislike them enough to do anything about them. Is that right?

If there was concern about entrenched management pursuing stupid policies for years, investors would be demanding bigger discounts. That might have been the case with Adam Neumann; his control wasn’t something that made investors enthusiastic about the company. But for most tech companies — of which I would not consider WeWork — because you have not only the founder but employees with equity-linked compensation, there is a lot of implicit, if not explicit, pressure on shareholder value maximization rather than kowtowing to the founder’s whims. I’d be surprised if they disappeared.

The market has changed, but super-voting shares are here to stay, says Mr. IPO by Connie Loizos originally published on TechCrunch