All posts in “Private Equity”

Hellman & Friedman acquires controlling interest in SimpliSafe

SimpliSafe, the company behind the well-received SimpliSafe home security service, today announced that Hellman & Friedman, the massive venture fund and private equity firm, has taken a controlling interest in the company. While the two companies didn’t disclose the terms of the transaction, sources close to SimpliSafe tell us that the deal valued the company at about $1 billion.

Hellman & Friedman also currently own a number of other brands. ranging from Grocery Outlet to insurance software specialist Applied Systems (and which owned companies like Getty Images, Scout24 and others in the past).

Ahead of today’s announcement, SimpliSafe had raised about $57 million, mostly thanks to a funding round led by Sequoia Capital in 2014. The deal is expected to close in the third quarter of 2018, “subject to the waiting period under the HSR Act and other customary closing conditions.” There will be no changes in the company’s leadership due to this acquisition.

Hellman & Friedman have made a number of deals in the past that involved investments, acquisition and acquiring the controlling interest (sometimes as part of a syndicate) in companies like DoubleClick, Nielsen, Nasdaq, OpenLink and others. Today’s deal fits the group’s overall pattern of acquiring similar companies and then selling them for a profit at a later time — or guiding them to an IPO.

For SimpliSafe, the news comes on the heels of the launch of its updated hardware platform in February. But it also comes shortly after Amazon closed its acquisition of Ring, which not also offers its own security system, and the launch of Nest’s home security system. SimpliSafe says it currently protects over two million people, but while there are now more players in the market, this is also still a market with plenty of growth potential.  “Home security is at an inflection point. Despite the market’s growth, today still only 20% of homes are protected,” notes SimpliSafe CEO Chad Laurans in today’s announcement.

Nigerian logistics startup Kobo360 accepted into YC, raises $1.2 million

When Nigerian logistics startup Kobo360 interviewed for Y Combinator’s 2018 cohort, a question stood out to founder Obi Ozor. “What’s holding you back from becoming a unicorn?,” they asked. “My answer was simple,” said Ozor. “Working capital.”

Kobo360 was accepted into YC’s 2018 class and gained some working capital in the form of $1.2 million in pre-seed funding led by Western Technology Investment announced recently. Lagos-based Verod Capital Management also joined to support Kobo360.

The startup — with an Uber -like app that connects Nigerian truckers to companies with freight needs — will use the funds to pay drivers online immediately after successful hauls.

Kobo360 is also launching the Kobo Wealth Investment Network, or KoboWIN — a crowd-invest, vehicle financing program. Through it, Kobo drivers can finance new trucks through citizen investors and pay them back directly (with interest) over a 60-month period.

Ozor said Kobo360 created the platform because of limited vehicle finance options for truckers in Nigeria. “We hope KoboWIN…will inject 20,000…[additional] trucks on the Kobo platform,” he told TechCrunch.

On Kobo360’s utility, “We give drivers the demand and technology to power their businesses,” said Ozor. “An average trucker will make $3,500 a month with our app. That’s middle class territory in Nigeria.”

Kobo360 has served 324 businesses, aggregated a fleet of 5480 drivers and moved 37.6 million kilograms of cargo since 2017, per company stats. Top clients include Honeywell, Olam, Unilever and DHL.

Ozor previously headed Uber Nigeria, before teaming up with Ife Oyodeli to co-found Kobo360. They initially targeted 3PL for Nigeria’s e-commerce boom — namely Jumia (now Africa’s first unicorn) and Konga (recently purchased in a distressed acquisition).

“We started doing last-mile delivery…but the volume just wasn’t there for us, so we decided to pivot…to an asset-free model around long-haul trucking,” said Ozor.

Kobo360 was accepted into YC’s Summer ’18 batch — receiving $120,000 for 7 percent equity — and will present at an August Demo Day in front of YC investors. “We were impressed by both Obi and Ife as founders. They were growing quickly and had a strong vision for the company,” YC partner Tim Brady told TechCrunch.

Kobo360’s app currently coordinates 5,000 trips a month, according to Ozor. He thinks the startup’s asset-free, digital platform and business model can outpace traditional long-haul 3PL providers in Nigeria by handling more volume at cheaper prices.

“Owning trucks is just too difficult to manage. The best scalable model is to aggregate trucks,” he said. “We now have more trucks than providers like TSL and they’ve been here….years. By the end of this year we plan to have 20,000 trucks on our app — probably more than anyone on this continent.”

On price, Ozor named the ability of the Kobo360 app to more accurately and consistently coordinate return freight trips once truckers have dropped off first loads.

“Logistics in Nigeria have been priced based on the assumption drivers are going to run empty on the way back…When we now match freight with return trips, prices crash.”

Kobo360 is profitable, according to Ozor. Though he wouldn’t provide exact figures, he said reviewing the company’s financial performance was part of YC’s vetting process.

Logistics has become an active space in Africa’s tech sector with startup entrepreneurs connecting digital to delivery models. In Nigeria, Jumia founder Tunde Kehinde departed and founded Africa Courier Express. Startup is wrapping an app around motorcycles as an e-delivery platform. Nairobi-based Lori Systems has moved into digital coordination of trucking in East Africa. And U.S.-based Zipline is working with the government of Rwanda and partner UPS to master commercial drone delivery of medical supplies on the continent.

Kobo360 will expand in Togo, Ghana, Cote D’Ivoire and Senegal. “We’ll be in Ghana this year and next year the other countries,” said Ozor.

In addition to KoboWIN, it will also add more driver training and safety programs.

“We are driver focused. Drivers are the key to our success. Even our app is driver focused,” said Ozor. Kobo360 will launch a new version of its app in Hausa and Pidgin this August, both local languages common to drivers.

“Execution is the key thing in logistics. It has to be reliable, affordable and it has to be execution focused,” said Ozor. “If drivers are treated well, they are going to deliver things on time.”

Lies, damn lies and crypto analytics

For the past 12 years I’ve followed the rise of the startup — defined as a small business with global ambitions — from my perch at TechCrunch. During that period I watched business reporting change from a sleepy backwater on the back of the Sports section into a juggernaut, a force that controls the global conversation. Why? Because business reporting became war reporting, and the battles fought were between VCs, businesses and ideas that changed the world.

In that period, VCs rose from glorified bank tellers to rock stars. Incubators popped up to socialize nervous founders and turn them into capital F Founders and the path for startups became a codified journey from failure to success.

Now we’re seeing the same thing happen in ICOs. But something is wrong. The startups coming out of the ICO craze aren’t being judged on the character of their founders, on their technologies or their probability for success. They are being judged, quite simply, on quantitative metrics that interrogate a token with one question: “When Lambo?”

This is the wrong approach. Token-based startups must receive the same level of socialization and scrutiny as the old VC-based startup vetting process. But something is different, and it’s an important difference.

In the old VC model a group of men — and it was mostly men for a long time — would stand in judgement over an idea. If any number of arbitrary points of risk appeared they would smile and say “No” to the founder, sending them down the road for another “No.” Unless you were plugged in professionally, went to or had your own cash, seed to even late-stage investment wasn’t available and the resulting of undercapitalization sunk countless startups.

Now, however, something new is afoot. While it’s always nice to look at tokens in comparison with other tokens, this sort of quantitative masturbation can easily hide a multitude of sins. Due diligence on token-based companies must be done, but it must be done through the wisdom of crowds. Instead of trying to impress one dude in a fleece vest and chinos on Sand Hill Road a founder must impress the world. They must tell a true, human story of actual value and explain their product without mumbling and hand waving. And they have to do it again and again.

Cryptocurrencies were supposed to bring us an egalitarian age of decentralized decision-making and a mathematical certainty. But the founders forgot one thing: humans offer no mathematical certainty. Instead of looking at numbers, these startups must be assessed on the basis of their value to humanity, on their technical ability to solve a real problem and on their understanding of human-to-human interaction. The future isn’t a number. Instead, the future is a many-to-one investigation of a startup and the decision — by the decentralized crowd — whether or not to continue funding.

Again, if your primary driver is greed, then by all means check out a chart that compares TRON to TRON. It’s your right. But if your goal is to make startups that will drive us deep into the future, then the old ways are best. A lot of things are about to change.

A few years ago I spoke to Deepak Chopra about his vision for a global voting system. In short, he was working on a way to take the global temperature. If a politician wanted to spend money on a road or, god forbid, go to war, they could put the question to the crowd via their cellphones. One vote per person, defined by biometric controls. This pie-in-the-sky idea is slowly coming to fruition and I think it’s going to be very exciting. And it will find its perfect home in the future of startup funding.

The age of centralized decision-making, in which analytics were used to help make seat-of-the-pants decisions, is over. Now we enter a new world and the folks used to the old ways should probably watch out. After all, when the crowd speaks, even VCs listen.

The Hybrid and Gaza Sky Geeks are helping Arab-Israeli and Palestinian entrepreneurs overcome adversity

Imagine trying to build a business in a country where 90 percent of the water is undrinkable, electricity only works four hours a day and your travel is restricted to an area four times the size of Manhattan, and where in-person meetings are impossible because your partners can’t enter your country to meet you.

And imagine not having access to capital because of your ethnicity (as many POC entrepreneurs across the globe already do).

That’s the situation for Arab-Israeli and Palestinian entrepreneurs trying to create businesses and access the enormous engine of wealth creation that has transformed Israel into “startup nation.”

The billions of capital and transformational opportunity that building startups affords to economies has largely been denied entrepreneurs in Israel’s Arab community and in Palestine.

However, two organizations in the country and in the violence-stricken Gaza strip are working to provide access. One is Hybrid, an Israeli government-backed initiative out of Nazareth that is trying to bring the benefits of the tech economy to Israel’s Arab population. The other is Gaza Sky Geeks, an Alphabet-backed initiative based in Gaza that provides pre-seed investments, training and technology resources to Palestine’s Gazan population.

For Arab entrepreneurs living in Israel, Hybrid is a resource to help overcome the broad cultural challenges that they need to combat. Things like a perception that backing their startups is inherently riskier than investing in a company founded by a Jewish Israeli citizen. Or the cultural stigma of failure that’s more prevalent in the Arab community.

These are the things that Fadi Swidan and his Nazareth-based organization are working to combat. “There was the most important miracle that has influenced billions of people and it was the annunciation,” Swidan said onstage at TechCrunch Tel Aviv. “The next miracle for the world and for the high-tech industry will also come from Nazareth.”

The Hybrid invests in early-stage Arab-Israeli entrepreneurs and encourages Israel’s technology companies to reach out to the nation’s Arab population and bring them into startups to gain experience, skills and know-how that the nation has cultivated among its Jewish population for decades.

Meanwhile, Gaza Sky Geeks has set itself out with the no less daunting task of training entrepreneurs that are mostly confined to 140 square miles on how to build successful businesses. It’s there that potable drinking water is scarce; that electricity is intermittent; and that entrepreneurs with the dream of building big businesses are struggling every day to build thriving international businesses.

“The fact that people can’t travel is definitely the biggest obstacle,” says Ryan Sturgill, director of Gaza Sky Geeks. “You can’t meet your investor or partner… or even go out and travel professionally… Most of the entrepreneurs that we’re working with haven’t been more than 20 feet from their home.”

Even with the challenges that entrepreneurs face, both Sturgill and Swidan have successes that can promote. For example, entrepreneurs out of Gaza Sky Geeks are looking to take advantage of the wave of e-commerce growth in the Gulf countries. Zumrod, which sells high-end makeup online; Izaari; Threadless for the Middle East; and, which is a social network for mothers, are all making progress. Meanwhile, MindoLife, an industrial IoT startup, and Optima Design Innovation, focused on bringing safety to autonomous vehicles, are also showing early signs of success.

But the issue still stands. Challenges, ranging from the biases of the establishment to literally locked down borders and isolation, stand between these entrepreneurs and their dreams.

For Hybrid, and Arab-Israeli founders, one clear example was the Al-Bawader fund. The state-sponsored fund, working in collaboration with Pitango, was created to invest solely in Arab startups, looking to integrate the Arab startup scene into the much larger and more mature Israeli tech scene. But the fund didn’t adapt to the more nascent Arab tech ecosystem, attempting to write larger checks and take more equity than was seemingly appropriate, and not making as many deals as was expected.

For these emerging entrepreneurs it may not be the capital that’s the most important (although the capital is definitely important), rather it’s just an acknowledgement by the entrepreneurs — who are able to enjoy all of the fruit that the technology ecosystem offers — of the obstacles that their fellow startup founders face.

Which is why Sturgill left the audience with this:

There’s a tendency from the tech community, emanating from the Valley, that tech will bring people together… That can be a ways off…. It’s important… tech is important in that it can build empathy..

There are entrepreneurs in Gaza that are trying to build the exact same thing that businesses here are trying to build.

Try to understand that… if you’re here in this room… there are people there who are just like you… they’re facing the same challenges, but also a set of challenges that are really unique and totally outside of their control… I would encourage people here to have conversations around yourselves… The tech community is fairly influential… People can have conversations about whether it’s the right thing to have a place like that that has been closed off for a decade.

Here is where CEOs of heavily funded startups went to school

CEOs of funded startups tend to be a well-educated bunch, at least when it comes to university degrees.

Yes, it’s true college dropouts like Mark Zuckerberg and Bill Gates can still do well. But Crunchbase data shows that most startup chief executives have an advanced degree, commonly from a well-known and prestigious university.

Earlier this month, Crunchbase News looked at U.S. universities with strong track records for graduating future CEOs of funded companies. This unearthed some findings that, while interesting, were not especially surprising. Stanford and Harvard topped the list, and graduates of top-ranked business schools were particularly well-represented.

In this next installment of our CEO series, we narrowed the data set. Specifically, we looked at CEOs of U.S. companies funded in the past three years that have raised at least $100 million in total venture financing. Our intent was to see whether educational backgrounds of unicorn and near-unicorn leaders differ markedly from the broad startup CEO population.

Sort of, but not really

Here’s the broad takeaway of our analysis: Most CEOs of well-funded startups do have degrees from prestigious universities, and there are a lot of Harvard and Stanford grads. However, chief executives of the companies in our current data set are, educationally speaking, a pretty diverse bunch with degrees from multiple continents and all regions of the U.S.

In total, our data set includes 193 private U.S. companies that raised $100 million or more and closed a VC round in the past three years. In the chart below, we look at the universities most commonly attended by their CEOs:1

The rankings aren’t hugely different from the broader population of funded U.S. startups. In that data set, we also found Harvard and Stanford vying for the top slots, followed mostly by Ivy League schools and major research universities.

For heavily funded startups, we also found a high proportion of business school degrees. All of the University of Pennsylvania alum on the list attended its Wharton School of Business. More than half of Harvard-affiliated grads attended its business school. MBAs were a popular credential among other schools on the list that offer the degree.

Where the most heavily funded startup CEOs studied

When it comes to the most heavily funded startups, the degree mix gets quirkier. That makes sense, given that we looked at just 20 companies.

In the chart below, we look at alumni affiliations for CEOs of these companies, all of which have raised hundreds of millions or billions in venture and growth financing:

One surprise finding from the U.S. startup data set was the prevalence of Canadian university grads. Three CEOs on the list are alums of the University of Waterloo . Others attended multiple well-known universities. The list also offers fresh proof that it’s not necessary to graduate from college to raise billions. WeWork CEO Adam Neumann just finished his degree last year, 15 years after he started. That didn’t stop the co-working giant from securing more than $7 billion in venture and growth financing.

  1. Several CEOs attended more than one university on the list.