Drama and quirk aren’t necessary for startup success

Many of the stories in our EC-1 series tell tales of startups in the wilderness hacking out green field opportunities. Klaviyo is a different breed of company: One that went into an established market and challenged powerful incumbents, ultimately finding success with a new, more data-oriented generation of email marketers.

As such, the lessons that it offers are, perhaps, more subtle; its insights bordering on common sense.

But as the saying goes, common sense to an uncommon degree becomes wisdom. Here are four pieces of wisdom I’ve gleaned from Klaviyo’s story:

Drama and sizzle help companies stand out, undoubtedly. But are they necessary for success? Klaviyo’s story suggests otherwise.

Lesson 1: Drama and quirk aren’t necessary for startup success

Silicon Valley has become a showcase for oddity. Ironically, we all enjoy “Silicon Valley” (the show) or “The Social Network.” Unironically, we toss around phrases like “the hustle” and “sweat equity.” Hot companies often stand out with stories of intense struggle and failure, a larger-than-life founder or a chaotic (and often toxic) management structure.

Drama and sizzle help companies stand out, undoubtedly. But are they necessary for success? Klaviyo’s story suggests otherwise.


By Danny Crichton

Marketing in 2021 is emotional and not just transactional

Brands are emotions made physical. The clothes we wear, the media we consume, the devices we use — all signal not only to others what we value and see in ourselves, they also are a way to construct our very identities. Experimenting to deepen that bond has been at the core of the marketing profession for a century; its origins rooted in Freudian psychoanalysis.

There had always been one critical limitation, though: Marketers had to appeal to the masses. Radio, television and print media allowed brands to deliver only one message to everyone, no matter if their product conferred luxury or smart cost-consciousness.

On the internet, the masses have been shattered into ever smaller shards, shifting that marketing calculus toward targeted audiences and social network interest groups. Today, niche brands, large corporations and every business in between are reaching ever-narrower audiences.

Marketers who become expert at personalization, especially for existing customers through owned marketing platforms like email, will hold an edge over their competitors.

Yet, advertising and social networks are competitive marketplaces. Over time, prices to reach niche audiences rise, and strategies that once worked become unviable. In 2021, these perpetual challenges are joined by two new factors: a fresh influx of new e-commerce brands and changing privacy policies on third-party platforms.

Klaviyo benefits from these secular trends. While the cost or difficulty of acquiring new customers may increase, as we looked at in the second part of this EC-1, the cost of emailing an existing one remains much the same. Marketers who become expert at personalization, especially for existing customers through owned marketing platforms like email, will hold an edge over their competitors. It’s no longer about marketing to narrow slices of audiences — it’s about building an emotional bond with an audience of one.

To a booming economy, now ad inflation

While 2020 was a banner year for e-commerce in the wake of the COVID-19 pandemic, the early months of 2021 have brought about a new problem: Customer acquisition costs are rising, sometimes to a worrying degree. For instance, one company interviewed by TechCrunch that did not wish to be named said it has seen its return on investment for Facebook ads fall by nearly half in the first months of 2021. Such inflation has also been predicted by firms like ECI Media Management.

There are two possible reasons for this increase. First, an unprecedented number of companies are moving online, spurred by COVID-19 and worldwide lockdowns.


By Danny Crichton

How Klaviyo used data and no-code to transform owned marketing

Email is the communication medium that refuses to die.

“Eventually, every technology is trumped by something new and better. And I feel that email is ready to be trumped. But by what?” wrote the venture capitalist Fred Wilson in 2007. Three years later, he updated readers that other forms of messaging had outgrown email. “It looks like email’s reign as the king of communication is ending and social networking is now supreme,” he said. (To be fair to Wilson, his view was nuanced enough to continue investing in email tech.)

Despite the competition, Klaviyo didn’t just break into the market — it has also achieved an unusual level of excitement and loyalty among marketers despite its youthful history.

Investors weren’t alone — marketers have also spent years anticipating the next big thing.

“It was SMS, it was YouTube, it was Instagram. Before that it was Facebook, then it was Snapchat and TikTok. I kinda feel like individually all those things are fleeting. I think people found: You know what? Everyone still opens their emails every day,” says Darin Hager, a former sneaker entrepreneur who is now an email marketing manager at Adjust Media.

Email has an estimated four billion users today and continues to grow steadily even as mature social networks plateau. Estimates of the number of nonspam messages sent each day range from 25 billion to over 300 billion.

Unsurprisingly for a marketing channel with so much volume, there’s voluminous competition to send and program those emails. Yet, despite the competition, Klaviyo didn’t just break into the market — it has also achieved an unusual level of excitement and loyalty among marketers despite its youthful history.

“If you’re not using Klaviyo and you’re in e-commerce, then it’s not very professional. If you see ‘Sent by Constant Contact or Mailchimp’ at the bottom of an email by a brand, it makes it look like they’re not really there yet,” Hager said.

How did Klaviyo become the standard solution among email marketers?

In Klaviyo’s origin story, we delved into part of the answer: The company began life as an e-commerce analytics service. Once it matured to compete as an email service provider, Klaviyo benefited from the edge given by its deeper, more comprehensive focus on data.

However, that leaves several questions unanswered. Why is email so important to e-commerce? What are the substantive differences between Klaviyo’s feature set and those of its competitors? And why did several large, well-funded incumbents fail to capitalize on building an advantage in data first?

In this section, we’ll answer those questions — as well as laying out the significance of COVID-19 on the e-commerce market, and how newsletters and AI figure into the company’s future.

A positive Outlook on email’s longevity

Email is one of the oldest tech verticals: Constant Contact, one of the most venerable email service providers (ESPs), was founded in 1995, went public in 2007 and was taken private in 2015 for $1 billion. By the time Klaviyo started in 2012, the space was well served by numerous incumbents.


By Danny Crichton

The Klaviyo EC-1

E-commerce is booming as retailers race to transform their brick-and-mortar footprints into online storefronts. By some counts, the market grew an astonishing 42% in 2020 in the wake of the COVID-19 pandemic, and estimates show that online spending in the U.S. will surpass $1 trillion by 2022. It’s a bonanza, and everyone is figuring out this new terrain.

Consumers are likely familiar with the front-end brands for these storefronts — with companies like Amazon, Shopify, Square, and Stripe owning attention — but it’s the tooling behind the curtain that is increasingly determining the competitiveness of individual stores.

Klaviyo may not be a household name to consumers (at least, not yet), but in many ways, this startup has become the standard by which email marketers are judged today, triangulating against veterans Mailchimp and Constant Contact and riding the e-commerce wave to new heights.

Founded in 2012, this Boston-based company helps marketers personalize and automate their email messaging to customers. By now, most people are intimately familiar with these kinds of emails; if you’ve ever given your email address to an online store, the entreaties to come back to your abandoned cart or browse the latest sale are Klaviyo’s bread and butter.

It may seem obvious in retrospect that email would grow to become a premier platform for marketing, but this wasn’t the case even a few years ago when social ads and search engine marketing were the dominant paradigm. Today, owned marketing and customer experience management are white-hot trends, and Klaviyo has surged from a lifestyle business to a multi-billion dollar behemoth in just a few short years. Its story is at the heart of the internet economy today, and the future.

TechCrunch’s writer and analyst for this EC-1 is Chris Morrison. Morrison, who previously wrote our EC-1 on Roblox, has been a writer and independent game developer covering the video game industry and the marketing challenges that come with publishing. As an analyst and a potential user, he’s in a unique position to explain the Klaviyo story. The lead editor for this package was Danny Crichton, the assistant editor was Ram Iyer, the copy editor was Richard Dal Porto and illustrations were created by Nigel Sussman.

Klaviyo had no say in the content of this analysis and did not get advance access to it. Morrison has no financial ties to Klaviyo or other conflicts of interest to disclose.

The Klaviyo EC-1 comprises four main articles numbering 9,700 words and a reading time of 43 minutes. Let’s take a look:

  • Part 1: Origin storyHow Klaviyo transformed from a lifestyle business into a $4.15B email titan” (2,600 words/10 minutes) — Explores the rise of Klaviyo from a database for e-commerce data into a modern email powerhouse as it successively learned from customers and bootstrapped in the absence of funding from accelerators and early VCs.
  • Part 2: Business and growthHow Klaviyo used data and no-code to transform owned marketing” (3,000 words/12 minutes) — Analyzes Klaviyo’s recent growth and how marketers increasingly focus on owned marketing channels and customer experience management.
  • Part 3: Dynamics of e-commerce marketingMarketing in 2021 is emotional and not just transactional” (2,200 words/9 minutes) — To fully understand Klaviyo and this new world of martech, this article contextualizes how and why marketers are increasingly trying to personalize and build deeper emotional bonds with their customers outside of social media channels.
  • Part 4: Lessons on startup growthDrama and quirk aren’t necessary for startup success” (1,900 words/8 minutes) — Founders shouldn’t have to keep learning the same lessons over and over again. Klaviyo offers a number of tried-and-true tutorials to understand how to build a competitive startup and not get bogged down in finding product-market fit and scaling.

We’re always iterating on the EC-1 format. If you have questions, comments or ideas, please send an email to TechCrunch Managing Editor Danny Crichton at [email protected].


By Danny Crichton

Docugami’s new model for understanding documents cuts its teeth on NASA archives

You hear so much about data these days that you might forget that a huge amount of the world runs on documents: a veritable menagerie of heterogeneous files and formats holding enormous value yet incompatible with the new era of clean, structured databases. Docugami plans to change that with a system that intuitively understands any set of documents and intelligently indexes their contents — and NASA is already on board.

If Docugami’s product works as planned, anyone will be able to take piles of documents accumulated over the years and near-instantly convert them to the kind of data that’s actually useful to people.

Because it turns out that running just about any business ends up producing a ton of documents. Contracts and briefs in legal work, leases and agreements in real estate, proposals and releases in marketing, medical charts, etc, etc. Not to mention the various formats: Word docs, PDFs, scans of paper printouts of PDFs exported from Word docs, and so on.

Over the last decade there’s been an effort to corral this problem, but movement has largely been on the organizational side: put all your documents in one place, share and edit them collaboratively. Understanding the document itself has pretty much been left to the people who handle them, and for good reason — understanding documents is hard!

Think of a rental contract. We humans understand when the renter is named as Jill Jackson, that later on, “the renter” also refers to that person. Furthermore, in any of a hundred other contracts, we understand that the renters in those documents are the same type of person or concept in the context of the document, but not the same actual person. These are surprisingly difficult concepts for machine learning and natural language understanding systems to grasp and apply. Yet if they could be mastered, an enormous amount of useful information could be extracted from the millions of documents squirreled away around the world.

What’s up, .docx?

Docugami founder Jean Paoli says they’ve cracked the problem wide open, and while it’s a major claim, he’s one of few people who could credibly make it. Paoli was a major figure at Microsoft for decades, and among other things helped create the XML format — you know all those files that end in x, like .docx and .xlsx? Paoli is at least partly to thank for them.

“Data and documents aren’t the same thing,” he told me. “There’s a thing you understand, called documents, and there’s something that computers understand, called data. Why are they not the same thing? So my first job [at Microsoft] was to create a format that can represent documents as data. I created XML with friends in the industry, and Bill accepted it.” (Yes, that Bill.)

The formats became ubiquitous, yet 20 years later the same problem persists, having grown in scale with the digitization of industry after industry. But for Paoli the solution is the same. At the core of XML was the idea that a document should be structured almost like a webpage: boxes within boxes, each clearly defined by metadata — a hierarchical model more easily understood by computers.

Illustration showing a document corresponding to pieces of another document.

Image Credits: Docugami

“A few years ago I drank the AI kool-aid, got the idea to transform documents into data. I needed an algorithm that navigates the hierarchical model, and they told me that the algorithm you want does not exist,” he explained. “The XML model, where every piece is inside another, and each has a different name to represent the data it contains — that has not been married to the AI model we have today. That’s just a fact. I hoped the AI people would go and jump on it, but it didn’t happen.” (“I was busy doing something else,” he added, to excuse himself.)

The lack of compatibility with this new model of computing shouldn’t come as a surprise — every emerging technology carries with it certain assumptions and limitations, and AI has focused on a few other, equally crucial areas like speech understanding and computer vision. The approach taken there doesn’t match the needs of systematically understanding a document.

“Many people think that documents are like cats. You train the AI to look for their eyes, for their tails… documents are not like cats,” he said.

It sounds obvious, but it’s a real limitation: advanced AI methods like segmentation, scene understanding, multimodal context, and such are all a sort of hyper-advanced cat detection that has moved beyond cats to detect dogs, car types, facial expressions, locations, etc. Documents are too different from one another, or in other ways too similar, for these approaches to do much more than roughly categorize them.

And as for language understanding, it’s good in some ways but not in the ways Paoli needed. “They’re working sort of at the English language level,” he said. “They look at the text but they disconnect it from the document where they found it. I love NLP people, half my team is NLP people — but NLP people don’t think about business processes. You need to mix them with XML people, people who understand computer vision, then you start looking at the document at a different level.”

Docugami in action

Illustration showing a person interacting with a digital document.

Image Credits: Docugami

Paoli’s goal couldn’t be reached by adapting existing tools (beyond mature primitives like optical character recognition), so he assembled his own private AI lab, where a multi-disciplinary team has been tinkering away for about two years.

“We did core science, self-funded, in stealth mode, and we sent a bunch of patents to the patent office,” he said. “Then we went to see the VCs, and Signalfire basically volunteered to lead the seed round at $10 million.”

Coverage of the round didn’t really get into the actual experience of using Docugami, but Paoli walked me through the platform with some live documents. I wasn’t given access myself and the company wouldn’t provide screenshots or video, saying it is still working on the integrations and UI, so you’ll have to use your imagination… but if you picture pretty much any enterprise SaaS service, you’re 90 percent of the way there.

As the user, you upload any number of documents to Docugami, from a couple dozen to hundreds or thousands. These enter a machine understanding workflow that parses the documents, whether they’re scanned PDFs, Word files, or something else, into an XML-esque hierarchical organization unique to the contents.

“Say you’ve got 500 documents, we try to categorize it in document sets, these 30 look the same, those 20 look the same, those 5 together. We group them with a mix of hints coming from how the document looked, what it’s talking about, what we think people are using it for, etc,” said Paoli. Other services might be able to tell the difference between a lease and an NDA, but documents are too diverse to slot into pre-trained ideas of categories and expect it to work out. Every set of documents is potentially unique, and so Docugami trains itself anew every time, even for a set of one. “Once we group them, we understand the overall structure and hierarchy of that particular set of documents, because that’s how documents become useful: together.”

Illustration showing a document being turned into a report and a spreadsheet.

Image Credits: Docugami

That doesn’t just mean it picks up on header text and creates an index, or lets you search for words. The data that is in the document, for example who is paying whom, how much and when, and under what conditions, all that becomes structured and editable within the context of similar documents. (It asks for a little input to double check what it has deduced.)

It can be a little hard to picture, but now just imagine that you want to put together a report on your company’s active loans. All you need to do is highlight the information that’s important to you in an example document — literally, you just click “Jane Roe” and “$20,000” and “5 years” anywhere they occur — and then select the other documents you want to pull corresponding information from. A few seconds later you have an ordered spreadsheet with names, amounts, dates, anything you wanted out of that set of documents.

All this data is meant to be portable too, of course — there are integrations planned with various other common pipes and services in business, allowing for automatic reports, alerts if certain conditions are reached, automated creation of templates and standard documents (no more keeping an old one around with underscores where the principals go).

Remember, this is all half an hour after you uploaded them in the first place, no labeling or pre-processing or cleaning required. And the AI isn’t working from some preconceived notion or format of what a lease document looks like. It’s learned all it needs to know from the actual docs you uploaded — how they’re structured, where things like names and dates figure relative to one another, and so on. And it works across verticals and uses an interface anyone can figure out a few minutes. Whether you’re in healthcare data entry or construction contract management, the tool should make sense.

The web interface where you ingest and create new documents is one of the main tools, while the other lives inside Word. There Docugami acts as a sort of assistant that’s fully aware of every other document of whatever type you’re in, so you can create new ones, fill in standard information, comply with regulations, and so on.

Okay, so processing legal documents isn’t exactly the most exciting application of machine learning in the world. But I wouldn’t be writing this (at all, let alone at this length) if I didn’t think this was a big deal. This sort of deep understanding of document types can be found here and there among established industries with standard document types (such as police or medical reports), but have fun waiting until someone trains a bespoke model for your kayak rental service. But small businesses have just as much value locked up in documents as large enterprises — and they can’t afford to hire a team of data scientists. And even the big organizations can’t do it all manually.

NASA’s treasure trove

Image Credits: NASA

The problem is extremely difficult, yet to humans seems almost trivial. You or I could glance through 20 similar documents and a list of names and amounts easily, perhaps even in less time than it takes for Docugami to crawl them and train itself.

But AI, after all, is meant to imitate and excel human capacity, and it’s one thing for an account manager to do monthly reports on 20 contracts — quite another to do a daily report on a thousand. Yet Docugami accomplishes the latter and former equally easily — which is where it fits into both the enterprise system, where scaling this kind of operation is crucial, and to NASA, which is buried under a backlog of documentation from which it hopes to glean clean data and insights.

If there’s one thing NASA’s got a lot of, it’s documents. Its reasonably well maintained archives go back to its founding, and many important ones are available by various means — I’ve spent many a pleasant hour perusing its cache of historical documents.

But NASA isn’t looking for new insights into Apollo 11. Through its many past and present programs, solicitations, grant programs, budgets, and of course engineering projects, it generates a huge amount of documents — being, after all, very much a part of the federal bureaucracy. And as with any large organization with its paperwork spread over decades, NASA’s document stash represents untapped potential.

Expert opinions, research precursors, engineering solutions, and a dozen more categories of important information are sitting in files searchable perhaps by basic word matching but otherwise unstructured. Wouldn’t it be nice for someone at JPL to get it in their head to look at the evolution of nozzle design, and within a few minutes have a complete and current list of documents on that topic, organized by type, date, author, and status? What about the patent advisor who needs to provide a NIAC grant recipient information on prior art — shouldn’t they be able to pull those old patents and applications up with more specificity than any with a given keyword?

The NASA SBIR grant, awarded last summer, isn’t for any specific work, like collecting all the documents of such and such a type from Johnson Space Center or something. It’s an exploratory or investigative agreement, as many of these grants are, and Docugami is working with NASA scientists on the best ways to apply the technology to their archives. (One of the best applications may be to the SBIR and other small business funding programs themselves.)

Another SBIR grant with the NSF differs in that, while at NASA the team is looking into better organizing tons of disparate types of documents with some overlapping information, at NSF they’re aiming to better identify “small data.” “We are looking at the tiny things, the tiny details,” said Paoli. “For instance, if you have a name, is it the lender or the borrower? The doctor or the patient name? When you read a patient record, penicillin is mentioned, is it prescribed or prohibited? If there’s a section called allergies and another called prescriptions, we can make that connection.”

“Maybe it’s because I’m French”

When I pointed out the rather small budgets involved with SBIR grants and how his company couldn’t possibly survive on these, he laughed.

“Oh, we’re not running on grants! This isn’t our business. For me, this is a way to work with scientists, with the best labs in the world,” he said, while noting many more grant projects were in the offing. “Science for me is a fuel. The business model is very simple – a service that you subscribe to, like Docusign or Dropbox.”

The company is only just now beginning its real business operations, having made a few connections with integration partners and testers. But over the next year it will expand its private beta and eventually open it up — though there’s no timeline on that just yet.

“We’re very young. A year ago we were like five, six people, now we went and got this $10M seed round and boom,” said Paoli. But he’s certain that this is a business that will be not just lucrative but will represent an important change in how companies work.

“People love documents. Maybe it’s because I’m French,” he said, “but I think text and books and writing are critical — that’s just how humans work. We really think people can help machines think better, and machines can help people think better.”


By Devin Coldewey

Immersion cooling to offset data centers’ massive power demands gains a big booster in Microsoft

LiquidStack does it. So does Submer. They’re both dropping servers carrying sensitive data into goop in an effort to save the planet. Now they’re joined by one of the biggest tech companies in the world in their efforts to improve the energy efficiency of data centers, because Microsoft is getting into the liquid-immersion cooling market.

Microsoft is using a liquid it developed in-house that’s engineered to boil at 122 degrees Fahrenheit (lower than the boiling point of water) to act as a heat sink, reducing the temperature inside the servers so they can operate at full power without any risks from overheating.

The vapor from the boiling fluid is converted back into a liquid through contact with a cooled condenser in the lid of the tank that stores the servers.

“We are the first cloud provider that is running two-phase immersion cooling in a production environment,” said Husam Alissa, a principal hardware engineer on Microsoft’s team for datacenter advanced development in Redmond, Washington, in a statement on the company’s internal blog. 

While that claim may be true, liquid cooling is a well-known approach to dealing with moving heat around to keep systems working. Cars use liquid cooling to keep their motors humming as they head out on the highway.

As technology companies confront the physical limits of Moore’s Law, the demand for faster, higher performance processors mean designing new architectures that can handle more power, the company wrote in a blog post. Power flowing through central processing units has increased from 150 watts to more than 300 watts per chip and the GPUs responsible for much of Bitcoin mining, artificial intelligence applications and high end graphics each consume more than 700 watts per chip.

It’s worth noting that Microsoft isn’t the first tech company to apply liquid cooling to data centers and the distinction that the company uses of being the first “cloud provider” is doing a lot of work. That’s because bitcoin mining operations have been using the tech for years. Indeed, LiquidStack was spun out from a bitcoin miner to commercialize its liquid immersion cooling tech and bring it to the masses.

“Air cooling is not enough”

More power flowing through the processors means hotter chips, which means the need for better cooling or the chips will malfunction.

“Air cooling is not enough,” said Christian Belady, vice president of Microsoft’s datacenter advanced development group in Redmond, in an interview for the company’s internal blog. “That’s what’s driving us to immersion cooling, where we can directly boil off the surfaces of the chip.”

For Belady, the use of liquid cooling technology brings the density and compression of Moore’s Law up to the datacenter level

The results, from an energy consumption perspective, are impressive. The company found that using two-phase immersion cooling reduced power consumption for a server by anywhere from 5 percent to 15 percent (every little bit helps).

Microsoft investigated liquid immersion as a cooling solution for high performance computing applications such as AI. Among other things, the investigation revealed that two-phase immersion cooling reduced power consumption for any given server by 5% to 15%. 

Meanwhile, companies like Submer claim they reduce energy consumption by 50%, water use by 99%, and take up 85% less space.

For cloud computing companies, the ability to keep these servers up and running even during spikes in demand, when they’d consume even more power, adds flexibility and ensures uptime even when servers are overtaxed, according to Microsoft.

“[We] know that with Teams when you get to 1 o’clock or 2 o’clock, there is a huge spike because people are joining meetings at the same time,” Marcus Fontoura, a vice president on Microsoft’s Azure team, said on the company’s internal blog. “Immersion cooling gives us more flexibility to deal with these burst-y workloads.”

At this point, data centers are a critical component of the internet infrastructure that much of the world relies on for… well… pretty much every tech-enabled service. That reliance however has come at a significant environmental cost.

“Data centers power human advancement. Their role as a core infrastructure has become more apparent than ever and emerging technologies such as AI and IoT will continue to drive computing needs. However, the environmental footprint of the industry is growing at an alarming rate,” Alexander Danielsson, an investment manager at Norrsken VC noted last year when discussing that firm’s investment in Submer.

Solutions under the sea

If submerging servers in experimental liquids offers one potential solution to the problem — then sinking them in the ocean is another way that companies are trying to cool data centers without expending too much power.

Microsoft has already been operating an undersea data center for the past two years. The company actually trotted out the tech as part of a push from the tech company to aid in the search for a COVID-19 vaccine last year.

These pre-packed, shipping container-sized data centers can be spun up on demand and run deep under the ocean’s surface for sustainable, high-efficiency and powerful compute operations, the company said.

The liquid cooling project shares most similarity with Microsoft’s Project Natick, which is exploring the potential of underwater datacenters that are quick to deploy and can operate for years on the seabed sealed inside submarine-like tubes without any onsite maintenance by people. 

In those data centers nitrogen air replaces an engineered fluid and the servers are cooled with fans and a heat exchanger that pumps seawater through a sealed tube.

Startups are also staking claims to cool data centers out on the ocean (the seaweed is always greener in somebody else’s lake).

Nautilus Data Technologies, for instance, has raised over $100 million (according to Crunchbase) to develop data centers dotting the surface of Davey Jones’ Locker. The company is currently developing a data center project co-located with a sustainable energy project in a tributary near Stockton, Calif.

With the double-immersion cooling tech Microsoft is hoping to bring the benefits of ocean-cooling tech onto the shore. “We brought the sea to the servers rather than put the datacenter under the sea,” Microsoft’s Alissa said in a company statement.

Ioannis Manousakis, a principal software engineer with Azure (left), and Husam Alissa, a principal hardware engineer on Microsoft’s team for datacenter advanced development (right), walk past a container at a Microsoft datacenter where computer servers in a two-phase immersion cooling tank are processing workloads. Photo by Gene Twedt for Microsoft.


By Jonathan Shieber

Kintent nabs $4M seed to automate compliance questionnaire process

Every tech vendor has to pass security muster with customers, typically a tedious activity involving answering long questionnaires. Kintent, a new startup that wants to automate this process, announced a $4 million seed today led by Tola Capital with help from a bunch of tech industry angel investors.

After company co-founder and CEO Sravish Sridhar sold his previous startup Kinvey, which provided Backend as a Service to mobile app developers, he took a couple of years off while he decided what to do next. The sale to Progress Software in 2017 gave him that luxury.

He knew first-hand from his experience at Kinvey, that companies like his had to adhere to a lot of compliance standards and the idea for the next company began to form in his head. He wanted to create a new startup that could make it easier to figure out how to become compliant with a given standard, measure the current state of compliance and get recommendations on how to improve. He created Kintent to achieve that goal.

“So the big picture idea is can we build a system of record for trust and our first use case is information security and data privacy compliance, specifically if you’re a company that is building a SaaS business and you’re storing customer data or PHI, which is health information,” Sridhar explained.

The company’s product is called Trust Cloud. He says that they begin by looking at the lay of your technology land in terms of systems and the types of information you are storing, looking at how compliant each system is with whatever standard you are trying to adhere to.

Then based on how you classify your data, the Trust Cloud generates a list of best practices to stay in compliance with your desired standard, and finally it provides the means to keep testing to validate what you’ve done and that you are remaining in compliance.

The company launched in 2019, spent the first part of 2020 developing the product, and began selling it last October. Today, it has 35 paying customers. “We’re in the high six figures in revenue. We’ve been growing at about 20-30% month-over-month consistently since we launched in October, and the customers are across 11 verticals already,” he said.

With 14 employees and some money in the bank from this funding round, he is thinking ahead to adding people. He says that diversity has to be more than something you just talk about, and he has made it one of the core founding values of the company, and one he takes very seriously.

“I’m very conscious with every hire that we make that we’re really pushing to extend ourselves to [find] people from different walks of life, different statuses and so on,” he said.

The company is also working on a DEI component for the Trust Cloud, which it will be offering for free, which enables companies to provide a set of diversity metrics to measure against and then report on how well you are doing, and how you can improve your numbers.


By Ron Miller

Salesforce updates includes sales info overlay for Zoom meetings

The pandemic has clearly had an impact on the way we work, and this is especially true for salespeople. Salesforce introduced a number updates to Sales Cloud this morning including Salesforce Meetings, a smart overlay for Zoom meetings that gives information and advice to the sales team as they interact with potential customers in online meetings.

Bill Patterson, EVP and General Manager of CRM applications at Salesforce says that the company wanted to help sales teams manage these types of interactions better and take advantage of the fact they are digital.

“There’s a broad recognition, not just from Salesforce, but really from every sales organization that selling is forever changed, and I think that there’s been a broad understanding, and maybe a surprise in learning how effective we can be in the from anywhere kind of times, whether that’s in office or not in office or whatever,” Patterson explained.

Salesforce Meetings gives that overlay of information, whether it’s advice to slow down the pace of your speech or information about the person speaking. It can also compile action items and present a To Do list to participants at the end of each meeting to make sure that tasks don’t fall through the cracks.

This is made possible in part through the Einstein intelligence layer that is built across the entire Salesforce platform. In this case, it takes advantage of a new tool called Einstein Intelligent Insights, which the company is also exposing as a feature for developers to build their own solutions using this tool.

For sales people who might find the tool a bit too invasive, you can dial the confidence level of the information up or down on an individual basis, so that you can get a lot of information or a little depending on your needs.

For now, it works with Zoom and the company has been working closely with the Zoom development team to provide the API and SDK tooling it needs to pull something like this off, according to Patterson. He notes that plans are in the works to make it compatible with WebEx and Microsoft Teams in the future.

While the idea was in the works prior to the pandemic, COVID created a sense of urgency for this kind of feature, as well as other features announced today like Pipeline Inspection, which uses AI to analyze the sales pipeline. It searches for changes to deals over time with the goal of finding the ones that could benefit most from coaching or managerial support to get them over the finish line.

Brent Leary, founder and principal analyst at CRM Essentials says that this ability to capture information in online meetings is changing the way we think about CRM.

“The thing the caught my attention is how tightly integrated video meetings/collaboration is now into sales process. This is really compelling because meeting interactions that may not find their way into the CRM system are now automatically captured,” Leary told me.

Salesforce Meetings is available today, while Pipeline Inspection is expected to be available this summer.


By Ron Miller

Box shares rise on report company is exploring sale

Shares of Box, a well-known content-and-collaboration company that went public in 2015, rose today after Reuters reported that the company is exploring a sale. TechCrunch previously discussed rising investor pressure for Box to ignite its share-price after years in the public-market wilderness.

At the close today Box’s equity was worth $23.65 per share, up around 5% from its opening value, but lower than its intraday peak of $26.47, reached after the news broke. The company went public a little over five years ago at $14 per share, only to see its share price rise to around the same level it returned today during its first day’s trading.

Box, famous during its startup phase thanks in part to its ubiquitous CEO and co-founder Aaron Levie, has continued to grow while public, albeit at a declining pace. Dropbox, a long-term rival, has also seen its growth rate decline since going public. Both have stressed rising profitability over revenue expansion in recent quarters.

But the problem that Box has encountered while public, namely hyper-scale platform companies with competing offerings, could also prove a lifeline; Google and Microsoft could be a future home for Levie’s company, after years of the duo challenging Box for deals.

As recently as last week, Box announced a deal for tighter integration with Microsoft Office 365. Given the timing of the release, it was easy to speculate the news could be landing ahead of a potential deal. The Reuters article adds fuel to the possibility.

While we can’t know for sure if the Reuters article is accurate, the possible sale of Box makes sense.

The article indicated that one of the possible acquisition options for Box could be taking it private again via private equity. Perhaps a firm like Vista or Thoma Bravo, two firms that tend to like mature SaaS companies with decent revenue and some issues, could swoop in to buy the struggling SaaS company. By taking companies off the market, reducing investor pressure and giving them room to maneuver, software companies can at times find new vigor.

Consider the case of Marketo, a company that Vista purchased in 2016 for $1.6 billion before turning it around and selling to Adobe in 2018 for $4.75 billion. The end result generated a strong profit for Vista, and a final landing for Marketo as part of a company with a broader platform of marketing tools.

If there are expenses at Box that could be trimmed, or a sales process that could be improved is not clear. But Box’s market value of $3.78 billion could put it within grasp of larger private-equity funds. Or well within the reaches of a host of larger enterprise software companies that might covet its list of business customers, technology, or both.

If the rumors are true, it could be a startling fall from grace for the company, moving from Silicon Valley startup-darling to IPO to sold entity in just six years. While it’s important to note these are just rumors, the writing could be on the wall for the company and it could just be a matter of when and not if.


By Ron Miller

Nigeria’s Termii raises $1.4M seed led by Future Africa and Kepple Africa Ventures

Ideally, it is expected of every business to reach its customers effectively. However, that’s not the case as limiting factors that hinder proper digital communication come into play at different growth stages. Termii, a Nigerian communications platform-as-a-service startup that solves this problem for African businesses, announced today that it has closed a $1.4 million seed round.

The round was co-led by African early-stage VC firm Future Africa and Japanese but Africa-focused VC Kepple Africa Ventures. Other investors include Acuity Ventures, Aidi Ventures, Assembly Capital, Kairos Angels, Nama Ventures, RallyCap Ventures, and Remapped Ventures.

Angel investors like Ham Serunjogi, co-founder and CEO of Chipper Cash; Josh Jones, former co-founder and CTO, Dreamhost; and Tayo Oviosu, co-founder and CEO of Paga also participated.

Gbolade Emmanuel and Ayomide Awe launched Termii after Emmanuel’s experience as a digital marketer helped him recognize the need for businesses to have exceptional communication channels. The CEO consulted for these companies and leveraged emails to retain customers, but as he found out that this process was lethargic, he sought other channels as a replacement.

“That got me to start thinking about multichannel messaging. What it meant was that we needed to find how to allow companies to use WhatsApp, voice, SMS effectively,” he said to TechCrunch. “And we had to make the process simple because in the African market, you can’t do complex stuff. You have to be as simple as possible.”

In 2017, the company officially launched and subsequently secured investment from Lagos-based VC Microtraction. Emmanuel says the company found product-market fit two years later after collating enough data from companies in different industries to understand what they really wanted.

Termii found out that in addition to assisting businesses to retain customers, there was a clear need to verify, authenticate and engage them.

“Many of these businesses we started engaging said they required tools to effectively communicate and verify customers because they were losing money at those points. For us, we saw it was a bigger problem,” Emmanuel added.

After making some tweaks, the team began to see an increase in customers numbers, especially amongst fintech startups. Positioning itself in the fast-moving space, Termii created an API-based communication infrastructure that caters to over 500 fintech startups across the continent. That’s not all. More than 1,000 businesses and developers are also using Termii’s API.

Some of these businesses include uLesson, Yassir, Helium Health, Piggyvest, Bankly, Paga, and TeamApt.

Playing in a $3.6 billion B2C communications market estimated to grow 6% annually, Termii runs a B2B2C model. But how does it make money? While a subscription-based model would’ve made sense, the two years spent by the company trying to find PMF made them think otherwise.

So the company leverages a virtual wallet system tied to a bank account and customers can make payments to the platform using mobile money, bank transfer, and credit cards. The startup charges these wallets on a per-message basis. It also does the same on every successful customer verification made towards customers’ contacts.

The Termii team

In early 2020, Termii started seeing immense progress and this coincided with their acceptance into Y Combinator. The growth continued throughout the year, growing its messaging transactions by 1000% and experiencing a 400% increase in its ARR.

Spilling into this year, Emmanuel says the company’s revenue is growing 60% month-on-month as a result of the surge in online financial transactions which to date makes up for 68% of the company’s total messaging transactions.

The seed investment that is coming a year after Termii graduated from the YC will be used for expansion and launch more messaging offerings across Africa.

Emmanuel says the company has its sights on North Africa with a physical presence in Algeria for the expansion. The reason lies behind the fact that in this quarter, Nigeria has accounted for 76% of the company’s messaging transactions, while Algeria currently accounts for 15%.

With this new fundraising, the company plans to tap into the wealth of experience from some of its new investors like Oviosu and Serunjogi who have also taken local companies into expansion phases.

Termii’s round is also noteworthy because it strays away from the usual fintech, mobility, agritech and cleantech sectors that investors typically notice. In fact, there are only a handful of venture-backed communications platform-as-a-service companies on the continent. A notable example is Kenya’s Africa Talking. It might be a stretch to say we might see more funding activity from this segment but one thing is apparent — investors are willing to place bets on less popular sectors.

Another highlight of Termii’s investment is that while foreign investors continue to dominate rounds in African tech startups, local and Africa-focused firms are beginning to step up by leading some which is a good sign for the bubbling ecosystem.

This round is also a big step for Future Africa. According to publicly available information, the firm is leading a million-dollar round for the first time since officially launching last year. This achievement is a continuation of its work over the past three quarters having invested in more than 10 African startups in the last three quarters and 30 startups in general. 

Kepple Africa Ventures, the co-lead, is also an active investor and can be argued to be the most early-stage VC firm on the continent — in terms of the number of deals made. So far, the firm has invested in 79 companies across 11 countries. 

Speaking on the investment for Kepple Africa, Satoshi Shinada, a partner at the firm, said, “Fragmented and unstable communication channels are one of the biggest challenges for the digitization of businesses in Africa. Emmanuel has proven that with his visionary goals and solid implementation of iterations on the ground, his team is unparalleled to build an innovative solution in this space.”


By Tage Kene-Okafor

Customer experience startup Sprinklr files confidential S-1 with SEC

Sprinklr, a New York-based customer experience company, announced today it has filed a confidential S-1 ahead of a possible IPO.

“Sprinklr today announced that it has confidentially submitted a draft registration statement on Form S-1 with the Securities and Exchange Commission (the “SEC”) relating to the proposed initial public offering of its common stock,” the company said in a statement.

It also indicated that it will determine the exact number of shares and the price range at a later point after it receives approval from the SEC to go public.

The company most recently raised $200 million on a $2.7 billion valuation last year. It was its first fundraise in 4 years. At the time, founder and CEO Ragy Thomas said his company expected to end 2020 with $400 million in ARR, certainly a healthy number on which to embark as a public company.

He also said that Sprinklr’s next fundraise would be an IPO, making him true to his word. “I’ve been public about the pathway around this, and the path is that the next financial milestone will be an IPO,” he told me at the time of the $200 million round. He said that with COVID, it probably was a year or so away, but the timing appears to have sped up.

Sprinklr sees customer experience management as a natural extension of CRM, and as such a huge market potentially worth a $100 billion, according to Thomas. But he also admitted that he was up against some big competitors like Salesforce and Adobe, helping explain why he fundraised last year.

Sprinklr was founded in 2009 with a focus on social media listening, but it announced a hard push into customer experience in 2017 when it added marketing, advertising, research, customer and e-commerce to its social efforts.

The company has raised $585 million to-date, and has also been highly acquisitive buying 11 companies along the way as it added functionality to the base platform, according to Crunchbase data.


By Ron Miller

ServiceNow adds new no-code capabilities

As we’ve made our way through this pandemic, it has forced businesses to rethink and accelerate trends. One such trend is the movement to no-code tools to allow line-of-business users to create apps and workflows without engineering help. To help answer that demand, ServiceNow released a couple of new tools today as part of their latest release.

Dave Wright, the chief innovation officer at ServiceNow, says that COVID has forced more teams to work in a distributed fashion, and that has in turn has advanced the idea of putting software building into the hands of every employee.

“So because people haven’t had the same support networks and are distributed, you need to be able to produce software that has a consumer grade feel to it. And if you could get that in place, then you can get people to use the system. If you get people to use the system, then you start to get better employee productivity and employee engagement,” Wright explained.

This has typically revolved around the three main areas of focus on the ServiceNow platform — customer service, IT and HR — but in order to step outside those three categories, the company has decided to develop a new area called Creator Workflows, which are designed to help workers build new workflows suited to their needs.

Low code/no code is hot

The company has come up with a couple of new tools to help these Creators: AppEngine Studio and AppEngine Templates, which work together to help these folks build these no-code workflows wherever they work across an organization.

AppEngine studio provides the main development environment where users can drag and drop the components they need to build workflows that make sense for them. The templates take that ease of use a step further by providing a framework for some common tasks.

The new release also incorporates a couple of recent acquisitions: Loom Systems and Attivio. The company has taken the latter and repurposed it to be a platform-wide search tool called AI Search.

“It allows you to deliver contextualized consumer grade results. So it means that we can personalize the results that you get from a search back to you so that it’s more relevant to you and more focused on giving you that context that you really need to make sure you get actionable information,” he said.

Another company that they purchased was Loom Systems, which gave the company an AIOps component and the ability to inject that AI across the platform. Gab Menachem, who was CEO and co-founder at Loom prior to the acquisition, says the process of becoming part of ServiceNow has been smooth.

“Vendors in this space find themselves kind of giving customers a science project. In ServiceNow the whole focus of this year has been to incorporate [Loom] into the workflow and make work flow naturally, so that employee productivity would be boosted, and the engagement will be high. And that’s what we focus on, and I think it was a really easy transition into a big company because it just made all of our customers a lot happier,” Menachem said.

This new tooling is available starting today.


By Ron Miller

Dropbox to acquire secure document sharing startup DocSend for $165M

Dropbox announced today that it plans to acquire DocSend for $165 million The company helps customers share and track documents by sending a secure link instead of an attachment.

“We’re announcing that we’re acquiring DocSend to help us deliver an even broader set of tools for remote work, and DocSend helps customers securely manage and share their business critical documents, backed by powerful engagement analytics,” Houston told me.

When combined with the electronic signature capability of HelloSign, which Dropbox acquired in 2019, the acquisition gives the company an end-to-end document sharing workflow it had been missing. “Dropbox, DocSend and HelloSign will be able to offer a full suite of self-serve products to help our millions of customers manage the entire critical document workflows and give more control over all aspects of that,” Houston explained.

Houston and DocSend co-founder and CEO Russ Heddleston have known each for other years, and have an established relationship. In fact, Heddleston worked for Dropbox as a summer in intern in 2010. He even ran the idea for the company by Houston prior to launching in 2013, who gave it his seal of approval, and the two companies have been partners for some time.

“We’ve just been following the thread of external sending, which has just kind of evolved and opened up into all these different workflows. And it’s just really interesting that by just being laser focused on that we’ve been able to create a really differentiated product that users love a ton,” Heddleston said.

Those workflows include creative, sales, client services or startups using DocSend to deliver proposals or pitch decks and track engagement. In fact, among the earliest use cases for the company was helping startups track engagement with their pitch decks at VC firms.

The company raised a modest amount of the money along the way, just $15.3 million, according to Crunchbase, but Heddleston says that he wanted to build a company that was self-sufficient and raising more VC dollars was never a priority or necessity. “We had [VCs] chase us to give us more money all the time, and what we would tell our employees is that we don’t keep count based on money raised or headcount. It’s just about building a great company,” he said.

That builder’s attitude was one of the things that attracted Houston to the company. “We’re big believers in the model of product growth and capital efficiency, and building really intuitive products that are viral, and that’s a lot of what what attracted us to DocSend,” Houston said. While DocSend has 17,000 customers, Houston says the acquisition gives the company the opportunity to get in front of a much larger customer base as part of Dropbox.

It’s worth noting that Box offers a similar secure document sharing capability enabling users to share a link instead of using an attachment. It recently bought e-signature startup SignRequest for $55 million with an eye toward building more complex document workflows similar to what Dropbox now has with HelloSign and DocSend. PandaDoc is another competitor in this space.

Both Dropbox and SendDoc participated in the TechCrunch Disrupt Battlefield with Houston debuting Dropbox in 2008 at the TechCrunch 50, the original name of the event. Meanwhile, DocSend participated in 2014 at TechCrunch Disrupt in New York City.

DocSend’s approximately 50 employees will be joining Dropbox when the deal closes, which should happen soon, subject to standard regulatory oversight.


By Ron Miller

As activist investors loom, what’s next for Box?

Box could be facing troubled times if a Reuters story from last week is accurate. Activist investor Starboard Value took a 7.9% stake in the storage company in September 2019, and a year ago took three board seats as its involvement in the cloud company deepened. It seemed only a matter of time before another shoe dropped.

Activist investor Starboard Value is reportedly after three additional board seats.

That thunk you just heard could be said shoe as Starboard is reportedly after three additional board seats. Those include current CEO Aaron Levie’s and two independent board members, all of whom have their seats coming up for election in June. If the firm were to obtain three additional seats, it would control six of nine votes and could have its way with Box.

What could the future hold for the company given this development (assuming it’s true)? It seems changes are coming for Box.

Below, we’ll explore how Box got to this point. And if an acquisition is in Box’s future, just who might be in the market for a cloud-native content management company built to scale in the enterprise? There would very likely be multiple suitors.

Box’s fickle financial fate

Starboard may have reason to be frustrated by Box’s performance. The cloud company’s stock price and market cap remain stubbornly low. Its share price is mired around $18 a share, not much higher than the price it went public at in 2015 when it was valued at $14 per share. Its market cap today is $3 billion, which is lacking in comparison to fellow cloud stalwarts like Dropbox at $9 billion, Slack at $23 billion or Okta at $34 billion.

Remember back in March 2014 when Box announced it was going public? It then did something highly unusual, delaying the deed 10 months until January 2015. One thing or another kept the company from pulling the trigger and just doing it. Perhaps it was a sign.

Instead, Box raised $150 million more after its S-1 filing received a lackluster response from the market. Looking back, you could argue that the SaaS model was simply less well known in 2014 than it is today. Certainly public investors are more sympathetic to software companies that run deficits in the name of growth than they were back then.

But when Box did file again, finally pricing at $14 per share in 2015, it received a strong welcome. The company had priced above its $11 to $13 per-share IPO range as TechCrunch reported at the time and instantly shot higher. We wrote on its IPO day that the cloud company quickly “surged to over $20 a share and [was then] trading at $23.67.”

A year later, our continuing coverage had flipped with the share price stuck at $10 in January 2016.

When growth won’t come


By Ron Miller