VCs bet $12M on Troops, a Slackbot for sales teams

Slack wants to be the new operating system for teams, something it has made clear on more than one occasion, including in its recent S-1 filing. To accomplish that goal, it put together an in-house $80 million venture fund in 2015 to invest in third-party developers building on top of its platform.

Weeks ahead of its direct listing on The New York Stock Exchange, it continues to put that money to work.

Troops is the latest to land additional capital from the enterprise giant. The New York-based startup helps sales teams communicate with a customer relationship management tool plugged directly into Slack. In short, it automates routine sales management activities and creates visibility into important deals through integrations with employee emails and Salesforce.

Troops founder and chief executive officer Dan Reich, who previously co-founded TULA Skincare, told TechCrunch he opted to build a Slackbot rather than create an independent platform because Slack is a rocket ship and he wanted a seat on board: “When you think about where Slack will go in the future, it’s obvious to us that companies all over the world will be using it,” he said.

Troops has raised $12 million in Series B funding in a round led by Aspect Ventures, with participation from the Slack Fund, First Round Capital, Felicis Ventures, Susa Ventures, Chicago Ventures, Hone Capital, InVision founder Clark Valberg and others. The round brings Troops’ total raised to $22 million.

Launched in 2015 by New York tech veterans Reich, Scott Britton and Greg Ratner, the trio weren’t initially sure of Slack’s growth trajectory. It wasn’t until Slack confirmed its intent to support the developer ecosystem with a suite of developer tools and a fund that the team focused its efforts on building a Slackbot.

“People sometimes thought of us, at least in the early days, as a little bit crazy,” Reich said. “But now Slack is the fastest-growing SaaS company ever.”

“We think the biggest opportunity in the [enterprise SaaS] category is going to be tools oriented around the customer-facing employee (CRM), and that’s where we are innovating,” he added.

Troops’ tools are helpful for any customer-facing team, Reich explains. Envoy, WeWork, HubSpot and a few hundred others are monthly paying subscribers of the tool, using it to interact with their CRM in a messaging interface and to receive notifications when a deal has closed. Troops integrates with Salesforce, so employees can use it to search records, schedule automatic reports and celebrate company wins.

Slack, in partnership with a number of venture capital funds, including Accel, Kleiner Perkins and Index, has also deployed capital to a number of other startups, like Lattice, Drafted and Loom.

With Slack’s direct listing afoot, the Troops team is counting on the imminent and long-term growth of the company’s platform.

“We think it’s still early days,” Reich said. “In the future, we see every company using something like Troops to manage their day-to-day.”


By Kate Clark

The Slack origin story

Let’s rewind a decade.

It’s 2009. Vancouver, Canada.

Stewart Butterfield, known already for his part in building Flickr, a photo-sharing service acquired by Yahoo in 2005, decided to try his hand — again — at building a game. Flickr had been a failed attempt at a game called Game Neverending followed by a big pivot. This time, Butterfield would make it work.

To make his dreams a reality, he joined forces with Flickr’s original chief software architect Cal Henderson, as well as former Flickr employees Eric Costello and Serguei Mourachov, who like himself, had served some time at Yahoo after the acquisition. Together, they would build Tiny Speck, the company behind an artful, non-combat massively multiplayer online game.

Years later, Butterfield would pull off a pivot more massive than his last. Slack, born from the ashes of his fantastical game, would lead a shift toward online productivity tools that fundamentally change the way people work.

Glitch is born

In mid-2009, former TechCrunch reporter-turned-venture-capitalist M.G. Siegler wrote one of the first stories on Butterfield’s mysterious startup plans.

“So what is Tiny Speck all about?” Siegler wrote. “That is still not entirely clear. The word on the street has been that it’s some kind of new social gaming endeavor, but all they’ll say on the site is ‘we are working on something huge and fun and we need help.’”

Siegler would go on to invest in Slack as a general partner at GV, the venture capital arm of Alphabet .

“Clearly this is a creative project,” Siegler added. “It almost sounds like they’re making an animated movie. As awesome as that would be, with people like Henderson on board, you can bet there’s impressive engineering going on to turn this all into a game of some sort (if that is in fact what this is all about).”

After months of speculation, Tiny Speck unveiled its project: Glitch, an online game set inside the brains of 11 giants. It would be free with in-game purchases available and eventually, a paid subscription for power users.


By Kate Clark

Fintech and clean tech? An odd couple or a perfect marriage?

The Valley’s rocky history with clean tech investing has been well-documented.

Startups focused on non-emitting generation resources were once lauded as the next big cash cow, but the sector’s hype quickly got away from reality.

Complex underlying science, severe capital intensity, slow-moving customers, and high-cost business models outside the comfort zones of typical venture capital, ultimately caused a swath of venture-backed companies and investors in the clean tech boom to fall flat.

Yet, decarbonization and sustainability are issues that only seem to grow more dire and more galvanizing for founders and investors by the day, and more company builders are searching for new ways to promote environmental resilience.

While funding for clean tech startups can be hard to find nowadays, over time we’ve seen clean tech startups shift down the stack away from hardware-focused generation plays towards vertical-focused downstream software.

A far cry from past waves of venture-backed energy startups, the downstream clean tech companies offered more familiar technology with more familiar business models, geared towards more recognizable verticals and end users. Now, investors from less traditional clean tech backgrounds are coming out of the woodworks to take a swing at the energy space.

An emerging group of non-traditional investors getting involved in the clean energy space are those traditionally focused on fintech, such as New York and Europe based venture firm Anthemis — a financial services-focused team that recently sat down with our fintech contributor Gregg Schoenberg and I (check out the full meat of the conversation on Extra Crunch).

The tie between clean tech startups and fintech investors may seem tenuous at first thought. However, financial services has long played a significant role in the energy sector and is now becoming a more common end customer for energy startups focused on operations, management and analytics platforms, thus creating real opportunity for fintech investors to offer differentiated value.

Finance powering the world?

Though the conversation around energy resources and decarbonization often focuses on politics, a significant portion of decisions made in the energy generation business is driven by pure economics — Is it cheaper to run X resource relative to resources Y and Z at a given point in time? Based on bid prices for Request for Proposals (RFPs) in a specific market and the cost-competitiveness of certain resources, will a developer be able to hit their targeted rate of return if they build, buy or operate a certain type of generation asset?

Alternative generation sources like wind, solid oxide fuel cells, or large-scale or even rooftop solar have reached more competitive cost levels – in many parts of the US, wind and solar are in fact often the cheapest form of generation for power providers to run.

Thus as renewable resources have grown more cost competitive, more, infrastructure developers, and other new entrants have been emptying their wallets to buy up or build renewable assets like large scale solar or wind farms, with the American Council on Renewable Energy even forecasting cumulative private investment in renewable energy possibly reaching up to $1 trillion in the US by 2030.

A major and swelling set of renewable energy sources are now led by financial types looking for tools and platforms to better understand the operating and financial performance of their assets, in order to better maximize their return profile in an increasingly competitive marketplace.

Therefore, fintech-focused venture firms with financial service pedigrees, like Anthemis, now find themselves in pole position when it comes to understanding clean tech startup customers, how they make purchase decisions, and what they’re looking for in a product.

In certain cases, fintech firms can even offer significant insight into shaping the efficacy of a product offering. For example, Anthemis portfolio company kWh Analytics provides a risk management and analytics platform for solar investors and operators that helps break down production, financial analysis, and portfolio performance.

For platforms like kWh analytics, fintech-focused firms can better understand the value proposition offered and help platforms understand how their technology can mechanically influence rates of return or otherwise.

The financial service customers for clean energy-related platforms extends past just private equity firms. Platforms have been and are being built around energy trading, renewable energy financing (think financing for rooftop solar) or the surrounding insurance market for assets.

When speaking with several of Anthemis’ clean tech portfolio companies, founders emphasized the value of having a fintech investor on board that not only knows the customer in these cases, but that also has a deep understanding of the broader financial ecosystem that surrounds energy assets.

Founders and firms seem to be realizing that various arms of financial services are playing growing roles when it comes to the development and access to clean energy resources.

By offering platforms and surrounding infrastructure that can improve the ease of operations for the growing number of finance-driven operators or can improve the actual financial performance of energy resources, companies can influence the fight for environmental sustainability by accelerating the development and adoption of cleaner resources.

Ultimately, a massive number of energy decisions are made by financial services firms and fintech firms may often times know the customers and products of downstream clean-tech startups more than most.  And while the financial services sector has often been labeled as dirty by some, the vital role it can play in the future of sustainable energy offers the industry a real chance to clean up its image.


By Arman Tabatabai

Takeaways from KubeCon; the latest on Kubernetes and cloud native development

Extra Crunch offers members the opportunity to tune into conference calls led and moderated by the TechCrunch writers you read every day. This week, TechCrunch’s Frederic Lardinois and Ron Miller discuss major announcements that came out of the Linux Foundation’s European KubeCon/CloudNativeCon conference and discuss the future of Kubernetes and cloud-native technologies.

Nearly doubling in size year-over-year, this year’s KubeCon conference brought big news and big players, with major announcements coming from some of the world’s largest software vendors including Google, AWS, Microsoft, Red Hat, and more. Frederic and Ron discuss how the Kubernetes project grew to such significant scale and which new initiatives in cloud-native development show the most promise from both a developer and enterprise perspective.

“This ecosystem starts sprawling, and we’ve got everything from security companies to service mesh companies to storage companies. Everybody is here. The whole hall is full of them. Sometimes it’s hard to distinguish between them because there are so many competing start-ups at this point.

I’m pretty sure we’re going to see a consolidation in the next six months or so where some of the bigger players, maybe Oracle, maybe VMware, will start buying some of these smaller companies. And I’m sure the show floor will look quite different about a year from now. All the big guys are here because they’re all trying to figure out what’s next.”

Frederic and Ron also dive deeper into the startup ecosystem rapidly developing around Kubernetes and other cloud-native technologies and offer their take on what areas of opportunity may prove to be most promising for new startups and founders down the road.

For access to the full transcription and the call audio, and for the opportunity to participate in future conference calls, become a member of Extra Crunch. Learn more and try it for free. 


By Arman Tabatabai

Under the hood on Zoom’s IPO, with founder and CEO Eric Yuan

Extra Crunch offers members the opportunity to tune into conference calls led and moderated by the TechCrunch writers you read every day. This week, TechCrunch’s Kate Clark sat down with Eric Yuan, the founder and CEO of video communications startup Zoom, to go behind the curtain on the company’s recent IPO process and its path to the public markets.

Since hitting the trading desks just a few weeks ago, Zoom stock is up over 30%. But the Zoom’s path to becoming a Silicon Valley and Wall Street darling was anything but easy. Eric tells Kate how the company’s early focus on profitability, which is now helping drive the stock’s strong performance out of the gate, actually made it difficult to get VC money early on, and the company’s consistent focus on user experience led to organic growth across different customer bases.

Eric: I experienced the year 2000 dot com crash and the 2008 financial crisis, and it almost wiped out the company. I only got seed money from my friends, and also one or two VCs like AME Cloud Ventures and Qualcomm Ventures.

nd all other institutional VCs had no interest to invest in us. I was very paranoid and always thought “wow, we are not going to survive next week because we cannot raise the capital. And on the way, I thought we have to look into our own destiny. We wanted to be cash flow positive. We wanted to be profitable.

nd so by doing that, people thought I wasn’t as wise, because we’d probably be sacrificing growth, right? And a lot of other companies, they did very well and were not profitable because they focused on growth. And in the future they could be very, very profitable.

Eric and Kate also dive deeper into Zoom’s founding and Eric’s initial decision to leave WebEx to work on a better video communication solution. Eric also offers his take on what the future of video conferencing may look like in the next five to 10 years and gives advice to founders looking to build the next great company.

For access to the full transcription and the call audio, and for the opportunity to participate in future conference calls, become a member of Extra Crunch. Learn more and try it for free. 

Kate Clark: Well thanks for joining us Eric.

Eric Yuan: No problem, no problem.

Kate: Super excited to chat about Zoom’s historic IPO. Before we jump into questions, I’m just going to review some of the key events leading up to the IPO, just to give some context to any of the listeners on the call.


By Arman Tabatabai

Beyond costs, what else can we do to make housing affordable?

This week on Extra Crunch, I am exploring innovations in inclusive housing, looking at how 200+ companies are creating more access and affordability. Yesterday, I focused on startups trying to lower the costs of housing, from property acquisition to management and operations.

Today, I want to focus on innovations that improve housing inclusion more generally, such as efforts to pair housing with transit, small business creation, and mental rehabilitation. These include social impact-focused interventions, interventions that increase income and mobility, and ecosystem-builders in housing innovation.

Nonprofits and social enterprises lead many of these innovations. Yet because these areas are perceived to be not as lucrative, fewer technologists and other professionals have entered them. New business models and technologies have the opportunity to scale many of these alternative institutions — and create tremendous social value. Social impact is increasingly important to millennials, with brands like Patagonia having created loyal fan bases through purpose-driven leadership.

While each of these sections could be their own market map, this overall market map serves as an initial guide to each of these spaces.

Social impact innovations

These innovations address:


By Arman Tabatabai

Innovations in inclusive housing

Housing is big money. The industry has trillions under management and hundreds of billions under development.

And investors have noticed the potential. Opendoor raised nearly $1.3 billion to help homeowners buy and sell houses more quickly. Katerra raised $1.2 billion to optimize building development and construction, and Compass raised the same amount to help brokers sell real estate better. Even Amazon and Airbnb have entered the fray with high-profile investments.

Amidst this frenetic growth is the seed of the next wave of innovation in the sector. The housing industry — and its affordability problem — is only likely to balloon. By 2030, 84% of the population of developed countries will live in cities.

Yet innovation in housing lags compared to those of other industries. In construction, a major aspect of housing development, players spend less than 1% of their revenues on research and development. Technology companies, like the Amazons of the world, spend nearly 10% on average.

Innovations in older, highly-regulated industries, like housing and real estate, are part of what Steve Case calls the “third wave” of technology. VCs like Case’s Revolution Fund and the SoftBank Vision Fund are investing billions into what they believe is the future.

These innovations are far from silver bullets, especially if they lack involvement from underrepresented communities, avoid policy, and ignore distributive questions about who gets to benefit from more housing.

Yet there are hundreds of interventions reworking housing that cannot be ignored. To help entrepreneurs, investors, and job seekers interested in creating better housing, I mapped these innovations in this package of articles.

To make sense of this broad field, I categorize innovations into two main groups, which I detail in two separate pieces on Extra Crunch. The first (Part 1) identifies the key phases of developing and managing housing. The second (Part 2) section identifies interventions that contribute to housing inclusion more generally, such as efforts to pair housing with transit, small business creation, and mental rehabilitation.

Unfortunately, many of these tools don’t guarantee more affordability. Lowering acquisition costs, for instance, doesn’t mean that renters or homeowners will necessarily benefit from those savings. As a result, some tools likely need to be paired with others to ensure cost savings that benefit end users — and promote long-term affordability. I detail efforts here so that mission-driven advocates as well as startup founders can adopt them for their own efforts.


Topics We Explore

Today:

Coming Tomorrow:

  • Part 2. Other contributions to housing affordability
    • Social Impact Innovations
    • Landlord-Tenant Tools
    • Innovations that Increase Income
    • Innovations that Increase Transit Accessibility and Reduce Parking
    • Innovations that Improve the Ability to Regulate Housing
    • Organizations that Support the Housing Innovation Ecosystem
  • This is Just the Beginning
  • I’m Personally Closely Watching the Following Initiatives.
  • The Limitations of Technology
  • Move Fast and Protect People


Please feel free to let me know what else is exciting by adding a note to your LinkedIn invite here.

If you’re excited about this topic, feel free to subscribe to my future of inclusive housing newsletter by viewing a past issue here.


By Arman Tabatabai

Market map: the 200+ innovative startups transforming affordable housing

In this section of my exploration into innovation in inclusive housing, I am digging into the 200+ companies impacting the key phases of developing and managing housing.

Innovations have reduced costs in the most expensive phases of the housing development and management process. I explore innovations in each of these phases, including construction, land, regulatory, financing, and operational costs.

Reducing Construction Costs

This is one of the top three challenges developers face, exacerbated by rising building material costs and labor shortages.


By Arman Tabatabai

India’s Locus raises $22 million to expand its logistics management business

Locus, an Indian startup that uses AI to help businesses map out their logistics, has raised $22 million in Series B funding to expand its operations in international markets.

The financing round for the four-year-old startup was led by Falcon Edge Capital and Tiger Global Management . Existing investors Exfinity Venture Partners and Blume Ventures also participated in the round. The startup has raised $29 million to date, Nishith Rastogi, co-founder and CEO of Locus, told TechCrunch in an interview.

Locus works with companies that operate in FMCG, logistics, and e-commerce spaces. Some of its clients include Tata Group companies, Myntra, BigBasket, Lenskart, and Bluedart. It helps these clients automate their logistics workload — tasks such as planning, organizing, transporting and tracking of inventories, and finding the best path to reach a destination — that have traditionally required intensive human labor.

“Say a Lenskart representative is visiting a house or an office to offer an eye checkup, and suddenly two more people there are interested in getting their eyes checked. The representative could attend these two new potential clients, or wrap things up with the first client and take care of his or her next appointment,” said Rastogi.

Locus looks at a client’s past data, identifies patterns, and automates these kind of decisions on a large scale. In an example shared earlier with TechCrunch, Rastogi talked about how Locus had built a scanner for ecommerce companies for measuring products.

Rastogi said he will use the fresh capital to develop products and expand Locus in Southeast Asian and North American markets. The startup says half of its 110 people workforce is outside of India. Half of the IP it has built and the revenue it generates comes from its team outside of India.

He said the startup has spent the recent quarters studying these international markets, and has secured some anchor clients to expand the business. Locus is operationally profitable already and any additional capital goes into expanding its business, he added.

The logistics market in India has long been riddled with challenges. A growing number of startups, including BlackBuck — which raised $150 million last week — have emerged in recent years to tackle these problems.

The new funding also illustrates Tiger Global Management’s new strategy for the Indian market. The VC fund, which has invested in B2C businesses Flipkart and Ola in India, has made a number of investments in B2B startups in recent months. Last month, it invested $90 million in agri-tech supply chain startup Ninjacart, and weeks later, it gave cloud-based solutions provider Zenoti $50 million.


By Manish Singh

Slack to livestream pitch to shareholders on Monday ahead of direct listing

Slack, the ubiquitous workplace messaging tool, will make its pitch to prospective shareholders on Monday at an invite-only event in New York City, the company confirmed in a blog post on Wednesday. Slack stock is expected to begin trading on the New York Stock Exchange as soon as next month.

Slack, which is pursuing a direct listing, will livestream Monday’s Investor Day on its website.

An alternative to an initial public offering, direct listings allow businesses to forgo issuing new shares and instead sell existing shares held by insiders, employees and investors directly to the market. Slack, like Spotify, has been able to bypass the traditional roadshow process expected of an IPO-ready business, as well as some of the exorbitant Wall Street’s fees.

Spotify, if you remember, similarly livestreamed an event that is typically for investor’s eyes only. If Slack’s event is anything like the music streaming giant’s, Slack co-founder and chief executive officer Stewart Butterfield will speak to the company’s greater mission alongside several other executives.

Slack unveiled documents for a public listing two weeks ago. In its SEC filing, the company disclosed a net loss of $138.9 million and revenue of $400.6 million in the fiscal year ending January 31, 2019. That’s compared to a loss of $140.1 million on revenue of $220.5 million for the year before.

Additionally, the company said it reached 10 million daily active users earlier this year across more than 600,000 organizations.

Slack has previously raised a total of $1.2 billion in funding from investors including Accel, Andreessen Horowitz, Social Capital, SoftBank, Google Ventures and Kleiner Perkins.


By Kate Clark

Takeaways from F8 and Facebook’s next phase

Extra Crunch offers members the opportunity to tune into conference calls led and moderated by the TechCrunch writers you read every day. This week, TechCrunch’s Josh Constine and Frederic Lardinois discuss major announcements that came out of Facebook’s F8 conference and dig into how Facebook is trying to redefine itself for the future.

Though touted as a developer-focused conference, Facebook spent much of F8 discussing privacy upgrades, how the company is improving its social impact, and a series of new initiatives on the consumer and enterprise side. Josh and Frederic discuss which announcements seem to make the most strategic sense, and which may create attractive (or unattractive) opportunities for new startups and investment.

“This F8 was aspirational for Facebook. Instead of being about what Facebook is, and accelerating the growth of it, this F8 was about Facebook, and what Facebook wants to be in the future.

That’s not the newsfeed, that’s not pages, that’s not profiles. That’s marketplace, that’s Watch, that’s Groups. With that change, Facebook is finally going to start to decouple itself from the products that have dragged down its brand over the last few years through a series of nonstop scandals.”

(Photo by Justin Sullivan/Getty Images)

Josh and Frederic dive deeper into Facebook’s plans around its redesign, Messenger, Dating, Marketplace, WhatsApp, VR, smart home hardware and more. The two also dig into the biggest news, or lack thereof, on the developer side, including Facebook’s Ax and BoTorch initiatives.

For access to the full transcription and the call audio, and for the opportunity to participate in future conference calls, become a member of Extra Crunch. Learn more and try it for free. 


By Arman Tabatabai

The Exit: an AI startup’s McPivot

Five years ago, Dynamic Yield was courting an investment from The New York Times as it looked to shift how publishers paywalled their content. Last month, Chicago-based fast food king McDonald’s bought the Israeli company for $300 million, a source told TechCrunch, with the purpose of rethinking how people order drive-thru chicken nuggets.

The pivot from courting the grey lady to the golden arches isn’t as drastic as it sounds. In a lot of ways, it’s the result of the company learning to say “no” to certain customers. At least, that’s what Bessemer’s Adam Fisher tells us.

The Exit is a new series at TechCrunch. It’s an exit interview of sorts with a VC who was in the right place at the right time but made the right call on an investment that paid off. 

Fisher

Fisher was Dynamic Yield founder Liad Agmon’s first call when he started looking for funds from institutional investors. Bessemer bankrolled the bulk of a $1.7 million funding round which valued the startup at $5 million pre-money back in 2013. The firm ended up putting about $15 million into Dynamic Yield, which raised ~$85 million in total from backers including Marker Capital, Union Tech Ventures, Baidu and The New York Times.

Fisher and I chatted at length about the company’s challenging rise and how Israel’s tech scene is still being underestimated. Fisher has 11 years at Bessemer under his belt and 14 exits including Wix, Intucell, Ravello and Leaba.

The interview has been edited for length and clarity. 


Saying “No”

Lucas Matney: So, right off the bat, how exactly did this tool initially built for publishers end up becoming something that McDonalds wanted?

Adam Fisher: I mean, the story of Dynamic Yield is unique. Liad, the founder and CEO, he was an entrepreneur in residence in our Herzliya office back in 2011. I’d identified him earlier from his previous company, and I just said, ‘Well, that’s the kind of guy I’d love to work with.’ I didn’t like his previous company, but there was something about his charisma, his technology background, his youth, which I just felt like “Wow, he’s going to do something interesting.” And so when he sold his previous company, coincidentally to another Chicago based company called Sears, I invited him and I think he found it very flattering, so he joined us as an EIR.


By Lucas Matney

The right way to do AI in security

Artificial intelligence applied to information security can engender images of a benevolent Skynet, sagely analyzing more data than imaginable and making decisions at lightspeed, saving organizations from devastating attacks. In such a world, humans are barely needed to run security programs, their jobs largely automated out of existence, relegating them to a role as the button-pusher on particularly critical changes proposed by the otherwise omnipotent AI.

Such a vision is still in the realm of science fiction. AI in information security is more like an eager, callow puppy attempting to learn new tricks – minus the disappointment written on their faces when they consistently fail. No one’s job is in danger of being replaced by security AI; if anything, a larger staff is required to ensure security AI stays firmly leashed.

Arguably, AI’s highest use case currently is to add futuristic sheen to traditional security tools, rebranding timeworn approaches as trailblazing sorcery that will revolutionize enterprise cybersecurity as we know it. The current hype cycle for AI appears to be the roaring, ferocious crest at the end of a decade that began with bubbly excitement around the promise of “big data” in information security.

But what lies beneath the marketing gloss and quixotic lust for an AI revolution in security? How did AL ascend to supplant the lustrous zest around machine learning (“ML”) that dominated headlines in recent years? Where is there true potential to enrich information security strategy for the better – and where is it simply an entrancing distraction from more useful goals? And, naturally, how will attackers plot to circumvent security AI to continue their nefarious schemes?

How did AI grow out of this stony rubbish?

The year AI debuted as the “It Girl” in information security was 2017. The year prior, MIT completed their study showing “human-in-the-loop” AI out-performed AI and humans individually in attack detection. Likewise, DARPA conducted the Cyber Grand Challenge, a battle testing AI systems’ offensive and defensive capabilities. Until this point, security AI was imprisoned in the contrived halls of academia and government. Yet, the history of two vendors exhibits how enthusiasm surrounding security AI was driven more by growth marketing than user needs.


By Arman Tabatabai

On balance, the cloud has been a huge boon to startups

Today’s startups have a distinct advantage when it comes to launching a company because of the public cloud. You don’t have to build infrastructure or worry about what happens when you scale too quickly. The cloud vendors take care of all that for you.

But last month when Pinterest announced its IPO, the company’s cloud spend raised eyebrows. You see, the company is spending $750 million a year on cloud services, more specifically to AWS. When your business is primarily focused on photos and video, and needs to scale at a regular basis, that bill is going to be high.

That price tag prompted Erica Joy, a Microsoft engineer to publish this Tweet and start a little internal debate here at TechCrunch. Startups, after all, have a dog in this fight, and it’s worth exploring if the cloud is helping feed the startup ecosystem, or sending your bills soaring as they have with Pinterest.

For starters, it’s worth pointing out that Ms. Joy works for Microsoft, which just happens to be a primary competitor of Amazon’s in the cloud business. Regardless of her personal feelings on the matter, I’m sure Microsoft would be more than happy to take over that $750 million bill from Amazon. It’s a nice chunk of business, but all that aside, do startups benefit from having access to cloud vendors?


By Ron Miller

Okta unveils $50M in-house venture capital fund

Identity management software provider Okta, which went public two years ago in what was one of the first pure-cloud subscription-based company IPOs, wants to fund the next generation of identity, security and privacy startups.

At its big customer conference Oktane, where the company has also announced a new level of identity protection at the server level, chief operating officer Frederic Kerrest (pictured above, right, with chief executive officer Todd McKinnon) will unveil a $50 million investment fund meant to back early-stage startups leveraging artificial intelligence, machine learning and blockchain technology.

“We view this as a natural extension of what we are doing today,” Okta senior vice president Monty Gray told TechCrunch. Gray was hired last year to oversee corporate development, i.e. beef up Okta’s M&A strategy.

Gray and Kerrest tell TechCrunch that Okta Ventures will invest capital in existing Okta partners, as well as other companies in the burgeoning identity management ecosystem. The team managing the fund will look to Okta’s former backers, Sequoia, Andreessen Horowitz and Greylock, for support in the deal sourcing process.

Okta Ventures will write checks sized between $250,000 and $2 million to eight to 10 early-stage businesses per year.

“It’s just a way of making sure we are aligning all our work and support with the right companies who have the right vision and values because there’s a lot of noise around identity, ML and AI,” Kerrest said. “It’s about formalizing the support strategy we’ve had for years and making sure people are clear of the fact we are helping these organizations build because it’s helpful to our customers.”

Okta Ventures’ first bet is Trusted Key, a blockchain-based digital identity platform that previously raised $3 million from Founders Co-Op. Okta’s investment in the startup, founded by former Microsoft, Oracle and Symantec executives, represents its expanding interest in the blockchain.

“Blockchain as a backdrop for identity is cutting edge if not bleeding edge,” Gray said.

Okta, founded in 2009, had raised precisely $231 million from Sequoia, Andreessen Horowitz, Greylock, Khosla Ventures, Floodgate and others prior to its exit. The company’s stock has fared well since its IPO, debuting at $17 per share in 2017 and climbing to more than $85 apiece with a market cap of $9.6 billion as of Tuesday closing.


By Kate Clark