All posts in “Fundings & Exits”

Netflix is raising $1.6B in debt as its content costs balloon


Netflix today said it was raising a very large lump of debt for the typical laundry list of uses that you’ll find in a filing with the SEC — though, the timing comes as its content costs may hit as much as $8 billion next year.

The announcement comes off a strong earnings report last week, where Netflix once again beat expectations for its subscriber growth. The company also said it expects to spend between $7 billion and $8 billion on original content in 2018, up from around $6 billion on original content this year. To be sure, original content — and racking up those Emmy awards — is critical to Netflix’s future as it looks to convert those high-quality shows (and high Metacritic scores) into new subscribers.

Netflix said it’s expecting to raise $1.6 billion in debt, though the announcement was pretty short and didn’t have a ton of detail. Here’s the boilerplate text in the filing:

The interest rate, redemption provisions, maturity date and other terms of the Notes will be determined by negotiations between Netflix and the initial purchasers.

Netflix intends to use the net proceeds from this offering for general corporate purposes, which may include content acquisitions, production and development, capital expenditures, investments, working capital and potential acquisitions and strategic transactions.

Original content is also going to be increasingly critical as it grows internationally, where it’s acquiring the majority of its new subscribers. Netflix said it would raise its prices earlier this year, and that may temper some expectations for domestic growth. The company’s future may rest on making sure that original content is strong, and also expanding into internationally-oriented original content like its original show 3%. (That show is quite good, by the way, and does a good job of demonstrating that internationally-focused content could perform well domestically as well.)

Netflix’s stock has been on an insane run in the past year, where it’s jumped more than 56% after a slight dip this morning following the announcement:

You can check out our full report on Netflix’s earnings here.

Featured Image: Ethan Miller/Getty Images

GitHub’s scandalized ex-CEO returns with Chatterbug

Translation earbuds might eliminate some utilitarian reasons to know a language, but if you want to understand jokes, read poetry, or fall in love in a foreign tongue, you’ll have to actually learn it. Unfortunately, products like Rosetta Stone leave people feeling burned after claiming the process should be easy while never helping you practice talking with a real native speaker. You know, the skill you actually want. Just memorizing vocabulary doesn’t make you fluent.

So after teaching millions of people to code better, a team of former GitHub co-founders and executives this week launched Chatterbug to combine the best of online and face-to-face foreign language learning. Starting with German, Chatterbug uses a homegrown video chat alternative to Skype that lets you simultaneously talk, type, read, and screenshare your way to becoming conversational.

But one of the co-founders’ past may cast a shadow over Chatterbug. Tom Preston-Werner resigned from his role as CEO and co-founder of GitHub following an investigation into allegations of harassment and intimidation of a female employee by he and his wife Theresa Preston-Werner.

GitHub employee Julie Horvath told TechCrunch that Theresa had bullied her about not writing negatively about the company, said she could read employees’ private chats and had spies at the startup, and verbally bullied her.

While an independent investigation claimed to have found no evidence of illegal behavior or gender-based harassment on Tom’s part, it did conclude that the former CEO showed “mistakes and errors of judgment” and “insensitivity to the impact of his spouse’s presence in the workplace and failure to enforce an agreement that his spouse should not work in the office.”

Ex-GitHub CEO and Chatterbug co-founder Tom Preston-Werner

We asked Tom how he’s building Chatterbug differently this time around. “With some hindsight, the organic management structures at GitHub were a double edged sword. It unleashed a lot of creativity, but was fragile in handling conflict” says Preston-Werner. “From the very beginning of Chatterbug I’ve had serious conversations with the other founders on how to use those experiences to create a more robust channel of communications.”

Former GitHub head of comms and Chatterbug co-founder Liz Clinkenbeard tells TechCrunch “In retrospect, I think one of the major challenges at GitHub back then was that the company’s fairly flat structure sometimes made it difficult to know who to talk to about problems, and how to resolve them before they escalated.” With Chatterbug, she says the team has “been very open and deliberate about wanting to foster a safe and supportive work environment.”

It’s possible that Tom’s inclusion on the team could make it tougher for Chatterbug to hire talent, especially women. Though at least it seems the company is taking office demeanor and harassment issues seriously as it grows.

“I’ve always tried my best to empower my teammates and create a work environment that every employee will love. I haven’t been perfect at that endeavor in the past” admits Preston-Werner. “But I’ve learned much from those experiences and intend to use that knowledge to ensure that Chatterbug is a safe, welcoming, and productive place to work for women and other folks traditionally underrepresented in the tech industry.”

Cutting Skype Out Of Language Learning

Scott Chacon discovered what was broken about the current crop of language learning tools when he tried to pick up French via Duolingo and Japanese through Skype chats before spending time in the two countries. “I realized there was a gap between the digital apps that are super flexible but aren’t very effective at teaching conversation with real people, and the tutoring systems or in-person schools that were inflexible and super difficult to do” Chacon tells TechCrunch.

So he started building his own tools that would blossom into Chatterbug. The former GitHub co-founder and CIO recruited GitHub’s Clinkenbeard, director of engineering Russell Belfer, and Preston-Werner over late 2015 and early 2016. They raised a $1.8 million seed round from SV Angel and Berlin’s Fly Ventures to have early-stage allies on both sides of the pond.

Setting goals in Chatterbug

Now after some private trials starting in March, Chatterbug just launched the public beta of its German learning program, with Spanish and French coming next. And right out of the gate, it’s trying to set reasonable expectations for how fast people can pick up a new tongue. “The most difficult part of being in the business is that Rosetta Stone and other companies try to sell the idea that language learning can be easy” Chacon says. “Learning a language is not easy. It’s like a marathon.”

That’s why one of the first things you do in Chatterbug is adjust a slider for when you want to be fluent by, and it tells you how frequently you’ll have to study and be tutored. The app then gives you a foundation of vocabulary using “spaced repetition”, a study method employed by medical students where questions you get wrong get shown more often while you’re displayed fewer questions like those you got right.

Chatterbug understands when you almost get an answer right

Then Chatterbug schedules you for one-on-one tutoring over its video chat system designed specifically for language learning. Rather than having to commit to a weekly session time, only learn when your particular tutor is available, or fall behind if you miss a group class, you just punch in when you want to practice. Chatterbug pairs you with whatever appropriate tutor is available, gets them up to speed on your progress, and provides a personalized curriculum of exercises to do together based on what you’ve been screwing up.

The heavy engineering background of the Chatterbug team allowed it to create a WebRTC-based video chat that lets you view files together with your tutor and see each other’s cursors as well as talk and type. That’s a huge improvement over trying to pass PDFs back and forth or figure out what exercise the teacher is discussing.

Chatterbug’s video chat lets you talk, type, view files, and see each other’s cursors

The pricing model flexes to accommodate your pace. You can get all the self-study features plus one live lesson a month for €15 or eight for €80 with extra sessions costing €12 each if you want to take a vacation next year. Or for €195 you get unlimited sessions and can learn a language in just a few months. Chatterbug is also going B2B, appealing to businesses trying to educate employees by offering discounts and easy expensing.

Turning Anyone Into A Teacher

Chatterbug co-founder Liz Clinkenbeard

The startup’s data-driven approach could make it quick to expand to more languages and identify what’s toughest to learn. Chatterbug gives you the option to have it store recordings of your video sessions, and even give it permission to use them for research. Clinkenbeard studied linguistics at Harvard, and is using her expertise to help the company determine what are the most common vocab and grammar mistakes to help you avoid them.

Long-term, turning native speakers into tutors could offer new employment options to those lacking other quantifiable skills. “After leaving GitHub, I wanted my next project to be something that would positively impact a lot of people. As a filter, I’d ask myself ‘could this idea lead to the creation of a million jobs?’” says Preston-Werner.

Chatterbug faces a wide range of competitors like Rosetta Stone, Duolingo, Busoo, Babbel, and HelloTalk — some with deep pockets and a penchant for downplaying the difficulty of reaching fluency. Being real with people doesn’t always make for great marketing, and people who failed with other products exhibit a “healthy amount of skepticism” says Clinkenbeard. Then there’s the looming threat of advancing translation technology, like the new Google auto-translating Pixel Buds headphones.

Still, “I don’t think it will destroy the need for language learning” says Chacon. “At some point, in-person translators will be obsolete. Not sure if that’s in 5 years or 45 years.” But even if we solve information translation, culture translation will still be in demand. “You don’t want to wear an ear bud while you’re getting married” he laughs. At a time when the world is increasingly polarized and xenophobic, understanding your fellow humans without a technological intermediary could generate some much-needed empathy.

Stitch Fix has filed for an IPO, and the numbers look good

Stitch Fix has filed to go public, finally revealing the financial guts of the startup which will be a test of modern e-commerce businesses that are looking to hit the market — and the numbers look pretty great!

Let’s start off really quick with profits: aside from the last two quarters, Stitch Fix posted a six-quarter streak of positive net income. We talk a lot about companies that are planning to go public that show pretty consistent (or even increasing) losses, but Stitch Fix looks like a company that has actually managed to build a healthy business. The company finally lost money in the last two quarters, but even then, its losses decreased quarter-over-quarter — with the company only losing around $4.5 million in the second quarter this year.

Let’s get to the chart!

(A quick note on the above: Stitch Fix considered its fiscal 2017 year beginning in July of 2016, while the above chart is labeled based on dates, with Q2 2017 meaning the quarter ended July this year.)

So, as we can see, profits! Stitch Fix is a modern spin on e-commerce where the company gathers your interests and information about your personal style, and then delivers a bunch of options to your door. You can pick the articles you want to buy, and the ones you want to return, and in theory, it’s a product that helps take away some of the anxiety around choices when it comes to online shopping. Instead of clicking around on Amazon, Stitch Fix tries to understand what you like and stick a bunch of options in front of you, as well as make it really easy to buy.

TechCrunch reported in July that the company had filed confidentially to go public. Stitch Fix is part of a wave of try-before-you-buy startups like Le Tote, MM.LaFleur, as well as others. So, naturally, it’s an area that’s going to be competitive — the most obvious one being Amazon. The company is experimenting with its recent launch of Prime Wardrobe, and the company is well known for bulldozing into segments where it sees an opportunity. Stitch Fix, as we can see, exposed a business that has a run rate of nearly $1 billion counting the year between July 30, 2016, and July 30, 2017.

Founded out of CEO Katrina Lake’s apartment in Massachusetts in 2011, Stitch Fix’s financials clearly expose a massive business that continues to scale methodically while keeping its burn under control. The last financing round in 2014 valued the company at $309.31 million, according to data from PitchBook, and it was widely pegged to be a big consumer IPO this year.

This IPO is also going to be another pretty big win for Benchmark Capital and Baseline Ventures, each of which have a more than 25 percent stake in the company. Lightspeed Venture Partners has an 11.8 percent stake, while Lake has a 16.6 percent ownership stake in the company. What’s very much worth noting, however, is that Stitch Fix in its entire lifetime has only raised $42.5 million in venture financing.

Here’s the full cap table:

We won’t dig into all of the risk factors, but Stitch Fix is in kind of a unique position as both an e-commerce startup and a brand built around fashion. As such, it faces a pretty unique set of challenges, one of which is keeping up with modern fashion trends. Here’s one of the risk factors below:

Data is the name of the game, as Intel Capital puts $60M in 15 startups, $566M in 2017 overall


Intel Capital, the investment arm of the processor giant, is today announcing its latest tranche of investments, a total of nearly $60 million going in to 15 startups that are working on solving different problems in the bigger area of big data (with a full rundown below). The investments come on the back of a big year for the group: In 2017 so far, Intel says that it’s invested $566 million in startups in its portfolio.

The focus on big data in this latest group of startups comes out of a new turn for Intel and how it’s been making strategic investments in recent times.

Intel Capital is one of the bigger names when it comes corporate tech investing. In total, it has invested $12.2 billion in 1,500 companies since 1991. But the operation went through a rocky patch in 2016 — where its parent considered selling its portfolio for $1 billion in 2016, yet instead opted instead to restructure.

Part of the outcome of that has been a lot more strategic focus for Intel Capital, where the investments are made to fit more closely with how Intel would like to position its wider business. And as Intel looks for new areas of business like connected cars and healthcare where it can carve out a position for its chipmaking operations, data is one of the pervasive themes.

“The world is undergoing a data explosion,” said Wendell Brooks, Intel SVP and president of Intel Capital, in a statement. “By 2020, every autonomous vehicle on the road will create 4 TB of data per day. A million self-driving cars will create the same amount of data every day as 3 billion people. As Intel transitions to a data company, Intel Capital is actively investing in startups across the technology spectrum that can help expand the data ecosystem and pathfind important new technologies,” Brooks said. (If you’re wondering about “pathfind” — this might help).

Another outcome has been a push for more diversity: Intel says that now 10 percent of its portfolio is led by women and other underrepresented groups in the tech industry. The cohort today meanwhile hails from the United States, Canada, China, Israel and Japan.

There have been other recent announcements that point to Intel’s more focused investing approach. For example, in September the company announced that it had invested over $1 billion in AI companies.

Intel’s making a bigger presentation about the investments in its CEO Showcase today. You can watch that event here. Here’s a rundown of the companies, and we have reached out to Intel to get an idea of the full size of the round for each, although generally Intel doesn’t break out its own individual investments. We’ll update as and when we learn more:

Amenity Analytics (New York, U.S.): text analytics platform to identify actionable signals from unstructured data using machine learning, sentiment analysis and predictive analytics.

Bigstream (Mountain View, California, U.S.): “hyper-acceleration technology” for performance gains on Apache Spark using hardware and software accelerators. Uses advanced compiler technology and transparent support for FPGAs. “Unlike other approaches, Bigstream requires no application code changes or special APIs.”

LeapMind (Tokyo, Japan): focused on improving the accuracy of neural network models and is researching and developing innovative algorithms to reduce the computational complexity of deep learning and original chip architectures for use in small computing environments.

Synthego (Redwood City, California, U.S.): genome engineering solutions. Products include software and synthetic RNA kits designed for CRISPR genome editing and research.  

AdHawk Microsystems (Kitchener, Ontario, Canada): focuses on human-computer interaction using a camera-free eye tracking system, aimed to be used in AR/VR experiences.

Trace (Los Angeles, U.S.): sports AI startup currently focused on soccer, mountain sports and water sports using sensors, video and AI to make performance insights and video highlights.

Bossa Nova Robotics (San Francisco, U.S.): autonomous service robots for the global retail industry.

EchoPixel (Mountain View, California, U.S.): 3D medical visualization software that allows medical professionals to interact with organs and tissues in a 3D space. Its product True 3D is in use at UC San Francisco, Stanford, Cleveland Clinic, Lahey Clinic and Hershey Medical Center.

Horizon Robotics (Beijing, China): integrated and open embedded AI solutions, designing “robot brains” for 1,000 categories of devices.

Reniac (Mountain View, California, U.S.): IO bottleneck solutions. Its Distributed Data Engine “is architected to benefit databases, file systems, networking and storage solutions while freeing more CPU resources to creating business value.”

TileDB Inc. (Cambridge, Massachusetts, U.S.): manages the TileDB project created at the Intel Science and Technology Center for Big Data, a collaboration between Intel Labs and MIT, focused on “managing massive, multidimensional array data that frequently arise from scientific applications.”

Alcide (Tel Aviv, Israel): network security platform for any combination of container, VM and bare metal data centers operated by multiple orchestration systems, aimed at cyberattacks. Startup is in stealth mode.

Eclypsium (Portland, Oregon, U.S.): technology for organizations to defend their systems against firmware, hardware and supply chain attacks, offering visibility for monitoring systems in their infrastructure for firmware threats and supply chain compromise.

Intezer (Tel Aviv, Israel): cybersecurity solutions for biological immune system concepts, applying a “DNA approach to code.” The world’s first “Code Genome Database” that maps “billions of small fragments of malicious and trusted software.”

Synack (Redwood City, California, U.S.): scalable, continuous, “hacker-powered” testing platform for uncovering security vulnerabilities. It’s hitting a lot of other buzzwords…. Its “on-demand crowdsourced” security platform offers practical insights, analytics and actionable data.

PayKey raises $10M for its millennial-targeted “social banking” smartphone keyboard

PayKey’s team

Banks face an increasingly crowded battlefield in the fight for millennial customers. Not only do they have to compete with services like Venmo, but many messaging apps are adding their own peer-to-peer payment services. Tel Aviv-based startup PayKey thinks it has the solution with a smartphone keyboard that lets bank customers access financial services without having to log onto a banking app. Today PayKey announced that it has raised a $10 million Series B led by MizMaa, with participation from other investors including SBI Group, Siam Commercial Bank’s financial tech subsidiary Digital Ventures, SixThirty and FinTech71.

This brings PayKey’s total funding raised to $16 million. PayKey chief marketing officer Guy Talmi says the company started as a social blockchain app, but after seeing the problems banks faced in engaging younger customers, the founders “had a lightbulb moment about how we can solve this problem for financial institutions by utilizing one of the most valuable and most used pieces of real-estate on the smartphone-the keyboard.”

After banks integrate PayKey’s white-label smartphone keyboard API (which keeps each institution’s own security and authentication systems) with their mobile apps, their customers can install it onto their smartphones and use it to send payments, check their balances and access other services from inside any app. The keyboards have a key with the bank’s logo that opens a menu of services when it’s tapped.

The idea is that by moving an extra layer of friction and not forcing customers to leave their favorite social media or messenger apps, PayKey can help financial institutions hold onto younger customers who are accustomed to the convenience of Venmo, Square Cash and Zelle and peer-to-peer payment services in messaging apps like Facebook Messenger and Snapchat.

“As these platforms develop and enhance their own financial services there will be barely any reasons left for users to use any other apps,” says Talmi. “We act as a bridge between the bank and the user’s most used apps, enabling banks to have their brand become a part of the social and messaging experience.”

PayKey has already signed commercial agreements with seven banks, including Westpac, UOB, Bank Leumi and an unnamed financial services provider that it says is one of the world’s biggest, which are now rolling out their versions of the keyboard. PayKey plans to double its customers over the next six months, with a focus on Asia, where many of its Series B investors are based. The startup also wants to start looking in other verticals, including telecom providers.

Featured Image: PayKey