Venture capital at a crossroads : Change or be forgotten

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Railway crossroads serve as a reminder that trains are not the premier form of transportation they once were. The same could happen to venture capital.

Heading into the COVID crisis, Silicon Valley had reached a consensus that venture capital was going to get hit hard. In March, as the market crashed with alarming speed, new investments came to a grinding halt, and the IPO market froze completely, it seemed the most dire predictions were coming true. Today, after navigating months of uncharted waters, it is clear these doomsday expectations could not have been more wrong. However, if the industry doesn’t tread carefully, its short-term gains could pave the way to long-term self-destruction.

Venture capital in 2020 has not slowed down, it has accelerated. Whether you look at median valuation, deal count, early stage rounds, late stage mega-rounds, or IPOs, third quarter metrics across the board have raced back to historic highs. The rebound has been fueled by continued favorable macro conditions, such as tech’s outperformance in the public markets, low interest rates, regulatory tailwinds, and the fact that entrepreneurship historically outperforms in economic recessions.

The real momentum, however, stems from the much-needed structural innovation that thrives in disruption. For an industry that claims to invest in the future, it has been a long time since VC funds have been forced to innovate. Whether it is AngelList’s rolling funds, the rise of YC-style accelerators for new fund managers, or the booming popularity of direct listings and SPACs, COVID has proven to be a platform shift not only for technology, but for venture capital itself.

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The failure of this self-driving truck company tells you all you need to know about self-driving vehicles

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Starsky Robotics is a self-driving truck company that was the first company to run an unmanned semi on a public highway. It’s now shutting down though, and its co-founder has some unusually sensible and honest things to say about the industry, unusual only because the industry is stuffed with charlatans.

Stefan Seltz-Axmacher co-founded Starsky around four years ago, eventually equipping a fleet of three tractor-trailers with self-driving equipment, making them capable of navigating private truck yards and, once, nine miles of a Florida highway.

Those might seem like modest accomplishments, but they were almost intentionally so, Seltz-Axmacher told Automotive News in an exit interview of sorts. That’s because the company placed a big emphasis on safety, which, shockingly, wasn’t popular with investors.

While competitors expended effort adding machine learning-based features such as enabling trucks to change lanes on their own, Seltz-Axmacher said he threw resources into safety engineering. The company was the first autonomous trucking company to submit a Voluntary Safety Self Assessment to the U.S. Department of Transportation.

But a problem emerged: that safety focus didn’t excite investors. Venture capitalists, Seltz-Axmacher said, had trouble grasping why the company expended massive resources preparing, validating and vetting his system, then preparing a backup system, before the initial unmanned test run. That work essentially didn’t matter when he went in search of more funding.

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Automaker startup is fast and furious

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 When it comes to startup investment, automakers are still going full speed ahead.

From ride-hailing apps to driverless car technology, transportation startups have attracted unprecedented sums of investment capital from auto manufacturers in recent years. In the past few quarters, that trend has been accelerating.

An analysis of Crunchbase data shows that since the beginning of 2019, the world’s largest car and truck manufacturers have led financing rounds valued at more than $6 billion. Over that period, they’ve participated in more than 50 deals for several million dollars and up, indicating an expanded willingness to pump significant sums into rounds.

“It has been a continuation of the trends for many of the automakers that have been particularly active over the past few years,” said Chris Stallman, a partner at Detroit-based transport venture firm Fontinalis Partners. “In 2019 and 2020, however, it has been interesting to see a few automakers—particularly those in Asia—aggressively ramping up their innovation efforts.”

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How to start a business with no money

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Startup advice can be seductive. From motivational quotes to magazine profiles, there’s a persistent narrative that if you follow your passion, log 80 hours a week, and “hustle hard,” you’ll create the next Amazon or Airbnb.

It is possible.

We all know that hard work can produce incredible results. But the prevailing rise-and-grind mythology often pushes founders into business before they’re ready.

Many smart, ambitious people feel pressured to quit their jobs and go all-in. They work around the clock, sacrificing their health and happiness to chase a startup dream.

For every founder who’s battling exhaustion and surviving on protein bars, I’d like to suggest a different path.

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More start-ups have an unfamiliar message for Venture Capitalists: Get lost

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From left, Mara Zepeda, Aniyia Williams, Astrid Scholz and Jennifer Brandel of Zebras Unite. The group encourages a more ethical industry with greater gender and racial diversity.

On a sunny Saturday morning in New York a few months ago, a group of 50 start-up founders gathered in the dank basement of a Lower East Side bar. They scribbled notes at long tables, sipping coffee and LaCroix while a stack of pizza boxes emanated the odor of hot garlic. One by one, they gave testimonials taking aim at something nearly sacred in the technology industry: venture capital.

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This lab-grown beef will be in restaurants in 3 years

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Mosa Meat has raised a round of venture capital and plans of bringing $10 burgers (without any cows involved) to tables by 2018.

This lab-grown beef will be in restaurants in 3 years

When the Dutch stem-cell researcher Mark Post unveiled the first lab-grown burger in 2013–handmade fiber-by-fiber from cow cells in petri dishes–he announced that the single serving cost more than $300,000. But the research was promising enough that Post launched a startup called Mosa Meat to pursue making cultured meat at scale. The company now says that its first products will be on the market by 2021, fueled by a Series A fundraising round of $8.8 million, announced today.

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Electric scooter startup Bird is the fastest company to reach a valuation of $1 billion.

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Bird, one of many scooter startups currently sweeping the US, was last valued at $400 million after closing $100 million in series B funding in early March. In late May, Bird was reported to be raising $150 million in series C funding led by Sequoia Capital, at a $1 billion valuation.

People familiar with the deal told Quartz that at least three investors involved in that round—Sequoia, Accel, and Tusk Ventures—have already signed documents and wired money to Bird.

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The Rise of Corporate Venture Capital

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Corporate venture capital is picking up speed in the investment industry, as large companies start setting aside funds for external investment in fledgling companies or startups.

Tech giants like Intel, Dell and AMD all have strong track records with their proprietary funds, and more companies like Microsoft and Salesforce are now entering the venture-fund game. During the past four years more than 475 corporate venture funds have started, bringing the worldwide total to more than 1,100, according to Global Corporate Venturing.

With this surge comes a lot of uncertainty. How will corporate venture-capital players influence the funding ecosystem? What do entrepreneurs need to know when choosing between corporate and traditional venture-capital partnerships?

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