All posts in “Andreessen Horowitz”

Wonderschool raises $20M to help people start in-home preschools

Educators already don’t get paid enough, and those that work in preschools or daycares often make 48% less. Meanwhile, parents struggle to find great early education programs where kids receive enough attention and there’s space, but they don’t need special connections or to pass grueling admissions interviews to get in.

Any time there’s a lousy experience people have an emotional connection to and spend a lot of money on, there’s an opportunity for a startup. Enter ‘Wonderschool‘, a company that lets licensed educators and caretakers launch in-home preschools or daycares. Wonderschool helps candidates get licensed, set up their programs, launch their websites, boost enrollment, and take payments in exchange for a 10 percent cut of tuition. The startup is now helping run 140 schools in the SF Bay, LA, and NYC where parents are happy to pay to give their kids an edge in life.

That opportunity to fill a lucrative gap in the education market has attracted a new $20 million Series A for Wonderschool led by Andreessen Horowitz . The round brings the startup to $24.1 million in total funding just two years after launch. With the cash and Andreessen partner Jeff Jordan joining its board, Wonderschool is looking to build powerful lead generation and management software to turn teachers into savvy entrepreneurs.

Finding good childcare has become one of the most difficult experiences for families. I’ve seen parents who are making a livable wage in urban cities like San Francisco and New York still struggle to find and afford quality childcare” says co-founder and CEO Chris Bennett. “We wanted to deliver a solution for parents that also had the potential to create jobs and empower the caregiver — that’s Wonderschool.”

By spawning and uniting programs across the country, Wonderschool could scale as the way software eats preschool. But without vigorous oversight of each educator, Wonderschool is also at risk of a safety mishap at one of its franchises ruining the brand for them all.

Airbnb For Schooling

Wonderschool started when co-founder Arrel Gray was having trouble finding childcare for his daughter close to home. “My little sister went to an in-home preschool, so I suggested he check them out” says Bennett. “But he wasn’t very satisfied with the options – the majority were full and some didn’t meet the expectations for his family. We also found that they didn’t use the internet much so they were hard to find and contact.”

The two were looking to pivot their social commerce startup Soldsie after Facebook algorithm changes had curtailed its growth. Their research led to the discovery of just how much lower preschool and daycare workers’ wages were. “When we had the idea we thought, ‘what the best way to test this?’ Why don’t we start a preschool ourselves’” says Bennett. “So we rented a home in the Berkeley Hills, hired an amazing educator, set up a school and started one. The school ended up being a huge success. Five-star reviews on Yelp. A high NPS. Parents loved the place.” It also scored the teacher a 3X higher salary than before.

With that proof, Wonderschool went on to raise $4.1 million from Josh Kopelman at First Round Capital, Omidyar Network, Cross Culture Ventures, Uncork Capital, Lerer Ventures, FundersClub, and Edelweiss. That let them flesh out the business. Wonderschool would recruit existing teachers and caregivers or guide people to get licensed so they could become “directors” of in-home schools. Wonderschool acts almost like Airbnb by turning them into small businesses earning money from home.

Teachers can pick whatever schedule, curriculum, or format they want, like Montesori or nature-focused learning. Wonderschool now has over 500 directors working with its software, with some making as much as $150,000 or $200,000. In exchange for its 10 percent cut of tuition, Wonderschool provides directors with a “bootcamp” to prep them for the job. It pairs them with a mentor, then helps them build their website and figure out their pricing options. Coaching guides train the directors to scout for new leads, offer appealing tours, and track their fledgling business.

The $20 million from Andreessen, OmidyarGary Community Investments and First Round will go to expanding the Wonderschool software. Each student slot it can help director fill, the more it earns. The startup will also have to compete with  companies like Wildflower Schools, which Bennett admits has a similar business model but he says “We are focused on in home and they also focus on Montessori while we are curriculum agnostic.” There’s also Cottage Class which powers homeschooling for students up to age 18, Tinkergarten that concentrates on short-term outdoor education, and VIPKid connects kids in China with U.S. teachers over video chat.

They, like Wonderschool, are trying to scale up to meet the massive existing demand. “The challenge is that there aren’t enough programs for the number of children needing public or private schooling – 1st grade or earlier – and our goal is to provide enough supply for every child” Bennett explains.

Still, safety remains a top concern. Bennett notes that “Wonderschool has a support team that helps school Directors prepare their homes for operation. With regard to safety, each state’s licensing office covers this in their approval process for being granted a license to operate.” But could a problem at one school shake the businesses of all the rest of its franchises? “We have a system of checks in balances in place that we feel confident would allow us to anticipate any potential issues, including regular, weekly check-ins with Directors and a feedback loop with parents. We also email parents on a regular cadence to get feedback from parents and we step in and work with the Director if we find that there are issues” Bennett insists.

If Wonderschool can keep its brand clean through thorough oversight, it could both create better paying jobs in a field rife with undercompensated heroes, and open early schooling to a wider range of students. Bennett’s parents moved to the U.S. from Honduras, pouring their efforts into supporting his and his sister’s education. Now he’s building the next generation of teachers the tools to give more kids a head start in life.

Magic Leap One AR headset for devs costs more than 2x the iPhone X

It’s been a long and trip-filled wait but mixed reality headgear maker Magic Leap will finally, finally be shipping its first piece of hardware this summer.

We were still waiting on the price-tag — but it’s just been officially revealed: The developer-focused Magic Leap One ‘creator edition’ headset will set you back at least $2,295. So a considerable chunk of change — albeit this bit of kit is not intended as a mass market consumer device but is an AR headset for developers to create content that could excite future consumers.

The augmented reality startup, which has raised at least $2.3 billion, according to Crunchbase, attracting a string of high profile investors including Google, Alibaba, Andreessen Horowitz and others, is only offering its first piece of reality bending eyewear to “creators in cities across the contiguous U.S.”.

Potential buyers are asked to input their zip code via its website to check if it will agree to take their money but it adds that “the list is growing daily”.

We tried the TC SF office zip and — unsurprisingly — got an affirmative of delivery there. But any folks in, for example, Hawaii wanting to spend big to space out are out of luck for now…

Magic Leap specifies it will “hand deliver” the package to buyers — and “personally get you set up”.

So evidently it wants to try to make sure its first flush of expensive hardware doesn’t get sucked down the toilet of dashed developer expectations.

It describes the computing paradigm it’s seeking to shift, with the help of enthused developers and content creators, as “spatial computing” — but it really needs a whole crowd of technical and creative people to step with it if it’s going to successfully deliver that.

Andreessen-funded dYdX plans “short Ethereum” token for haters

Crypto skeptics rejoice! A new way to short the cryptocurrency market is coming from dYdX, a decentralized financial derivatives startup. In two months it will launch its protocol for creating short and leverage positions for Ethereum and other ERC20 tokens that allow investors to amp up their bets for or against these currencies.

To get the startup there, Dydx recently closed a $2 million seed round led by Andreessen Horowitz and Polychain, and joined by Kindred and Abstract plus angels including Coinbase CEO Brian Armstrong and co-founder Fred Ehrsam, and serial investor Elad Gil.

“The main use for crypotocurrency so far has been trading and speculation — buying and holding. That’s not how sophisticated financial institutions trade” says Dydx founder Antonio Juliano. “The derivatives market is usually an order of magnitude bigger than the spot trading or buy/sell market. The cryptocurrency market is probably on the order of $5 billion to $10 billion in volume, so you’d expect the derivatives market would be 10X bigger. I think there’s a really big opportunity there.”

How dYdX works

The idea is that you buy the Short Ethereum token with ETH or a stable coin from an exchange or dYdX. The Short Ethereum’s token price is inversely pegged to ETH, so it goes up in value when ETH goes down and vice versa. You can then sell the Short Ethereum token for a profit if you correctly predicted an ETH um price drop.

On the backend, lenders earn an interest rate by providing ETH as collateral locked into smart contracts that back up the Short Ethereum tokens. Only a small number of actors have to work with the smart contract to mint or close the Short Tokens. Meanwhile, dYdX also offers Leveraged Ethereum tokens that let investors borrow to boost their profits if ETH’s price goes up.

The plan is to offer Short and Leveraged tokens for any ERC20 currency in the future. dYdX is building its own user facing application for buying the tokens, but is also partnering with exchanges to offer the margin tokens “where people are already trading” says Juliano.

“We think of it as more than just shorting your favorite shitcoin. We think of them as mature financial products.”

Infrastructure To Lure Big Funds Into Crypto

Coinbase has proven to be an incredible incubator for blockchain startup founders. Juliano was employed there as a software engineer after briefly working at Uber and graduating in computer science from Princeton in 2015. “The first thing I started was a search engine for decentralized apps. I worked for months on it full-time, but nobody was building decentralized apps so no one was searching for them. It was too early” Juliano explains.

But along the way he noticed the lack of financial instruments for decentralized derivatives despite exploding consumer interest in buying and selling cryptocurrencies. He figured the big hedge funds would eventually come knocking if someone built them a bridge into the blockchain world.

Juliano built dYdX to create a protocol to first begin offering margin tokens. It’s open source, so technically anyone can fork it to issue tokens themselves. But dYdX plans to be the standard bearer, with its version offering the maximum liquidity to investors trying to buy or sell the margin tokens. His five person team in San Francisco with experience from Google, Bloomberg, Goldman Sachs, NerdWallet, and Consensys is working to find as many investors to collateralize the tokens and exchanges to trade them as possible. “It’s a race to build liquidity faster than anyone else” says Juliano.

So how will dYdX make money? As is common in crypto, Juliano isn’t exactly sure, and just wants to build up usage first. “We plan to capture value at the protocol level in the future likely through a value adding token” the founder says. “It would’ve been easy for us to rush into adding a questionable token as we’ve seen many other protocols do, however we believe it’s worth thinking deeply about the best way to integrate a token in our ecosystem in a way that creates rather than destroys value for end users.”

“Antonio and his team are among the top engineers in the crypto ecosystem building a novel software system for peer-to-peer financial contracts. We believe this will be immensely valuable and used by millions of people” says Polychain partner Olaf Carlson-Wee. “I am not concerned with short-term revenue models but rather the opportunity to permanently improve global financial markets.”

Timing The Decentralized Revolution

With the launch under two months away, Juliano is also racing to safeguard the protocol from attacks. “You have to take smart contract security extremely seriously. We’re almost done with the second independent security audit” he tells me.

The security provided by decentralization is one of dYdX’s selling points versus centralized competitors like Poloniex that offer margin trading opportunities. There, investors have to lock up ETH as collateral for extended periods of time, putting it at risk if the exchange gets hacked, and they don’t benefit from shared liquidity like dYdX will.

It could also compete for crypto haters with the CBOE that now offers Bitcoin futures and margin trading, though it doesn’t handle Ethereum yet. Juliano hopes that since dYdX’s protocol can mint short tokens for other ERC20 tokens, you could bet for or against a certain cryptocurrency relative to the whole crypto market by mixing and matching. dYdX will have to nail the user experience and proper partnerships if it’s going to beat the convenience of centralized exchanges and the institutional futures market.

If all goes well, dYdX wants to move into offering auctions or swaps. “Those derivatives are more often traded by sophisticated traders. We don’t think there are to many traders like that in the market right now” Juliano explains. “The other types of derivatives that we’ll move to in the future will be really big once the market matures.” That ‘once the market matures’ refrain is one sung by plenty of blockchain projects. The question is who’ll survive long enough to see that future, if it ever arrives.

[Featured Image via Nuzu and Bryce Durbin]

Coinbase’s first investment, Compound, earns you interest on crypto

Compound wants to let you borrow cryptocurrency, or lend it and earn an interest rate. Most cryptocurrency is shoved in a wallet or metaphorically hidden under a mattress, failing to generate interest the way traditionally banked assets do. But Compound wants to create liquid money markets for cryptocurrency by algorithmically setting interest rates, and letting you gamble by borrowing and then short-selling coins you think will sink. It plans to launch its first five for Ether, a stable coin, and a few others, by October.

Today, Compound is announcing some ridiculously powerful allies for that quest. It’s just become the first-ever investment by crypto exchange juggernaut Coinbase’s new venture fund. It’s part of an $8.2 million seed round led by top-tier VC Andreessen Horowitz, crypto hedge fund Polychain Capital and Bain Capital Ventures — the startup arm of the big investment bank.

While right now Compound deals in cryptocurrency through the Ethereum blockchain, co-founder and CEO Robert Leshner says that eventually he wants to carry tokenized versions of real-world assets like the dollar, yen, euro or Google stock. That’s because Leshner tells me “My thesis is that almost every crypto asset is bullshit and not worth anything.”

How to get Compound interest on your crypto

Here’s how Compound tells me it’s going to work. It’s an “overnight” market that permits super-short-term lending. While it’s not a bank, it is centralized, so you loan to and borrow from it directly instead of through peers, alleviating you from negotiation. If you loan, you can earn interest. If you borrow, you have to put up 100 percent of the value of your borrow in an asset Compound supports. If prices fluctuate and your borrow becomes worth more than your collateral, some of your collateral is liquidated through a repo agreement so they’re equal.

To set the interest rate, Compound acts kind of like the Fed. It analyzes supply and demand for a particular crypto asset to set a fluctuating interest rate that adjusts as market conditions change. You’ll earn that on what you lend constantly, and can pull out your assets at any time with just a 15-second lag. You’ll pay that rate when you borrow. And Compound takes a 10 percent cut of what lenders earn in interest. For crypto-haters, it offers a way to short coins you’re convinced are doomed.

“Eventually our goal is to hand-off responsibility [for setting the interest rate] to the community. In the short-term we’re forced to be responsible. Long-term we want the community to elect the Fed,” says Leshner. If it gets the interest rate wrong, an influx of lenders or borrowers will drive it back to where it’s supposed to be. Compound already has a user interface prototyped internally, and it looked slick and solid to me.

“We think it’s a game changer. Ninety percent of assets are sitting in people’s cold storage, or wallets, or exchanges. They aren’t being used or traded,” says Leshner. Compound could let people interact with crypto in a whole new way.

The Compound creation story

Compound is actually the third company Leshner and his co-founder and CTO Geoff Hayes have started together. They’ve been teamed up for 11 years since going to college at UPenn. One of their last companies, Britches, created an index of CPG inventory at local stores and eventually got acquired by Postmates. But before that Leshner got into the banking and wealth management business, becoming a certified public accountant. A true economics nerd, he’s the chair of the SF bond oversight committee, and got into crypto five years ago.

Compound co-founder and CEO Robert Leshner

Sitting on coins, Leshner wondered, “Why can’t I realize the time value of the cryptocurrency I possess?” Compound was born in mid-2017, and came out of stealth in January.

Now with $8.2 million in funding that also came from Transmedia Capital, Compound Ventures, Abstract Ventures and Danhua Capital, Compound is pushing to build out its product and partnerships, and “hire like crazy” beyond its seven current team members based in San Francisco’s Mission District. Partners will be crucial to solve the chicken-and-egg problem of getting its first lenders and borrowers. “We are planning to launch with great partners — token projects, hedge funds and dedicated users,” says Leshner. Having hedge funds like Polychain should help.

“We shunned an ICO. We said, ‘let’s raise venture capital.’ I’m a very skeptical person and I think most ICOs are illegal,” Leshner notes. The round was just about to close when Coinbase announced Coinbase Ventures. So Leshner fired off an email asking if it wanted to join. “In 12 hours they researched us, met our team, diligenced it and evaluated it more than almost any investor had to date,” Leshner recalls. Asked if there’s any conflict of interest given Coinbase’s grand ambitions, he said, “They’re probably our favorite company in the world. I hope they survive for 100 years. It’s too early to tell they overlap.”

Conquering the money markets

There are other crypto lending platforms, but none quite like Compound. Centralized exchanges like Bitfinex and Poloniex let people trade on margin and speculate more aggressively. But they’re off-chain, while Leshner says Compound is on-chain, transparent and can be built on top of. That could make it a more critical piece of the blockchain finance stack. There’s also a risk of these exchanges getting hacked and your coins getting stolen.

Meanwhile, there are plenty of peer-to-peer crypto lending protocols on the Ethereum blockchain, like ETHLend and Dharma. But interest rates, no need for slow matching, flexibility for withdrawing money and dealing with a centralized party could attract users to Compound.

Still, the biggest looming threat for Compound is regulation. But to date, the SEC and regulators have focused on ICOs and how people fundraise, not on what people are building. People aren’t filing lawsuits against actual products. “All the operations have flown beneath the radar and I think that’s going to change in the next 12 months,” Leshner predicts. How exactly they’ll treat Compound is up in the air.

One source in the crypto hedge fund space told me about forthcoming regulation: “You’re either going to get annihilated and have to disgorge profits or dissolve. Or you pay a fine and you’re among the first legal funds in the space. This is the gamble you take before asset classes get baptized.” As Leshner confirmed, “That’s the number one risk, period.”

Money markets are just one piece of the financial infrastructure puzzle that still needs to emerge around blockchain. Custodians, auditors, administrators and banks are still largely missing. When those get hammered out to make the space safer, the big money hedge funds and investment banks could join in. For Compound, getting the logistics right will require some serious legal ballet.

Yet Leshner is happy to dream big despite all of the crypto world’s volatility. He concludes, “We want to be like Black Rock with a trillion under management, and we want to have 25 employees when we do that. They probably have [tens of thousands] of employees. Our goal is to be like them with a skeleton team.”

Bio-programming toolkit maker Asimov launches with $4.7M from Andreessen Horowitz

Biotech is one of today’s many hot frontiers of technology, but one thing holding it back is that it’s significantly less amenable to traditional computing techniques than other areas. A new startup called Asimov, spun off from research at MIT, is working on bridging the gap between the digital and the biological by creating, essentially, a set of computer-aided biology design tools. It’s a prescient enough idea that it has attracted $4.7 million in seed funding.

The problem that Asimov addresses is this. Say you’re a pharmaceutical company trying to make a tiny biocompatible machine that holds a certain amount of medication and releases it when it senses some other molecule.

In order to do so, you’d have to — well, among about a million other things — design what amounts to a logic gate and signal processor that works at the molecular scale. This is a daunting prospect, as creating molecular machinery is a labor-intensive process often involving creating thousands of variations of a given structure and testing them repeatedly to see which works.

Asimov’s innovation is to allow people to create biological circuitry like the above using familiar tools and techniques. In fact, they’d use the same tools as if they were going to build a similar circuit in silicon and copper.

The technique Asimov’s founders created — MIT’s Alec Nielsen, Raja Srinivas, Chris Voigt and Doug Densmore — translates the logic and structure of a traditional circuit into a DNA strand that can be introduced to an organism and replicated inside it, where it will perform the same type of calculation (XOR, for instance) inside the cell.

Built-in protections prevent errors at the molecular level, such as conformational problems resulting from this or that structure being too close to one another, and as a result, the creators claim the platform can tell you with 90 percent accuracy whether a circuit you’ve designed will work or not.

Some of the technical details can be found at this MIT news release from last year, or in this more recent blog post by Nielsen.

In another post, A16Z general partner Vijay Pande explains what he sees as adequate reason for investment:

With Asimov’s approach, high-accuracy simulation, and circuit building-blocks, we can greatly speed the development of biological circuits — decreasing their cost, and greatly increasing their sophistication and complexity.

We’re still in the “transistor phase” of things, so are not yet at the point where the full complexity of a modern microprocessor can be realized into the circuits of cells. But there are many initial applications where this technology can make major advances — much like how early microprocessors, as simple as they were, became a dramatically enabling technology.

The company says in a press release that the funding will allow them to “quickly scale and partner with customers in diverse areas.”

“We strive for Asimov to be the go-to resource for designing biological computation as biotechnology steadily becomes a fully-fledged engineering discipline,” wrote Nielsen. “I personally hope that this technology one day improves our ability to cure disease, empowers clean and sustainable manufacturing, and helps nourish a growing global population.”

Update: This article originally stated the amount raised was $4.5 million — it’s $4.7 million. Entirely my mistake.