Friday, March 8, 2019



Which types of startups are most often profitable? - TechCrunch

Posted: 08 Mar 2019 03:11 PM PST

One answer: E-commerce, Chrome extensions, mobile apps, enterprise SaaS, SMB SaaS — in that order

I co-run an agency that teaches a hundred startups per year how to do growth marketing. This gives me a unique vantage point: I know which types of startups most often reach profitability.

That's an important metric, because startups that don't reach this milestone typically fail to raise additional funding — then die.

Here's what we'll learn:

  1. Companies are increasingly living and dying by ads. Because it's the startup's approach to customer acquisition — not its business model or market — that most determines its early-stage profitability.
  2. E-commerce companies lend themselves best to ads, and SMB SaaS the worst. Meanwhile, most startup founders in 2019 are starting SaaS companies. They'd benefit from the data we share in this post.
  3. In fact, our agency has found that every other type of business reaches profitability quicker than SMB SaaS, including mobile apps, Chrome extensions and enterprise SaaS.

Our sampling of startups isn't as biased as startup valuation leaderboards, because we also see those that failed. That's the key.

You can use our experience to de-risk your startup. That's what this post explores: How to change your product roadmap to pursue a path more likely to reach profitability.

The startups that frequently reach profitability

Here's the data my agency is referencing for this post:

  • We train 12+ venture-backed and bootstrapped startups every month. Half are Y Combinator graduates. This is how we study early-stage product-market fit trends.
  • We run ads full-time for between 20 and 30 mature companies per year. On average, each spends $2.5 million annually on paid acquisition. And, on average, each has 30 employees. Our clients include,,,, and
  • Our students and clients are roughly evenly distributed across D2C e-commerce, B2B, mobile apps and marketplaces.

When we try to control for founder skill and funds raised, the types of startups that first reach profitability do so in this order:

  1. E-commerce
  2. Chrome extensions
  3. Mobile apps
  4. Enterprise SaaS
  5. Small-to-medium business SaaS

On average, an e-commerce company is more likely to first reach profitability than an SMB SaaS company.

Before I explain why, let me explain how we're differentiating startups: I use the word "type" instead of "business model" or "markets" because I've learned that business model and market are often not the best predictors of success. Instead, it's your approach to customer acquisition. That's what typically determines the likelihood of profitability.

Okta to acquire workflow automation startup Azuqua for $52.5M - TechCrunch

Posted: 08 Mar 2019 06:42 AM PST

During its earnings report yesterday afternoon, Okta announced it intends to acquire Azuqua, a Seattle, Wash. workflow automation startup, for $52.5 million.

In a blog post announcing the news, Okta co-founder and COO Frederic Kerrest saw the combining of the two companies as a way to move smoothly between applications in a complex workflow without having to constantly present your credentials.

"With Okta and Azuqua, IT teams will be able to use pre-built connectors and logic to create streamlined identity processes and increase operational speed. And, product teams will be able to embed this technology in their own applications alongside Okta's core authentication and user management technology to build…integrated customer experiences," Kerrest wrote.

In a modern enterprise, people and work are constantly shifting and moving between applications and services and combining automation software with identity and access management could offer a seamless way to move between them.

This represents Okta's largest acquisition to-date and follows Stormpath almost exactly two years ago and ScaleFT last July. Taken together, you can see a company that is trying to become a more comprehensive identity platform.

Azuqua, which has raised $16 million since it launched in 2013, appears to have given investors a pretty decent return. When the deal closes, Okta intends to move the Azuqua team to its Bellevue offices, increasing its presence in the Northwest. Okta's headquarters are in San Francisco. Azuqua customers include Airbnb, McDonald's, VMware and HubSpot,

Okta was founded in 2009 and raised over $229 million before going public April, 2017.

Universities launch startups to commercialize faculty research - Crain's Chicago Business

Posted: 08 Mar 2019 12:03 PM PST

Food allergy professor Cathryn Nagler has become a celebrity of sorts. The University of Chicago's Polsky Center for Entrepreneurship & Innovation gets emails almost every week from people—oftentimes parents of children with food allergies—looking for an introduction and asking if they can support her work.

Nagler's startup, ClostraBio, develops therapies that prevent or treat allergic reactions to foods and other immune system diseases. Launched in 2016 with help from the Polsky Center, it has raised $4.5 million.

Nagler says ClostraBio and the Polsky Center developed a "novel arrangement where we're able to move fairly seamlessly between the academic and translational work."

University-backed med-tech and pharma startups like Nagler's have become more common as big companies grow increasingly reluctant to finance early-stage discoveries. The resulting investment gap could threaten universities' efforts to commercialize technologies developed in their research labs.

"Companies are moving further and further down the development path . . . and that's creating this enlarged 'valley of death,' " says Stephen Susalka, CEO of AUTM, an association of technology transfer professionals.

Startups like ClostraBio are stepping into the breach, advancing nascent technology toward commercialization. Illinois universities launched a total of 29 startups in 2017, a 32 percent increase since 2012, according to the latest data from AUTM. Meanwhile, a total of 768 inventions were disclosed in 2017, compared with 735—a 5 percent increase—in 2012.

The shift is transforming university technology transfer offices that once focused largely on patent licensing deals with private industry. Now they're helping researchers write business plans and connect with investors. UChicago last year rolled out the Polsky Life Sciences Launchpad, which touts "end-to-end support for select translational, life sciences research projects with the goal of launching them into investable startup ventures."

Starr Marcello, executive director of the Polsky Center, says faculty and students had been requesting innovation resources and support for launching ventures. "Lots of newer faculty that are coming in are looking to know, 'If I did want to commercialize some of my research, or if I did want to form relationships with corporate partners, does the university help facilitate that, and what does it look like?' " Marcello says.


The University of Illinois at Urbana-Champaign went even further, opening an engineering-based medical college last year to foster innovation. Students at the Carle Illinois College of Medicine are encouraged to turn their ideas into prototypes. In some cases, Dean King Li says, that will result in commercializing their research.

Marketable academic research generates revenue, raises a university's profile and attracts top professors and students. The University of Illinois at Chicago had about 280 active licenses and earned more than $27 million in licensing income during fiscal 2018. Its most lucrative inventions include HIV drug Prezista, bladder cancer treatment TICE BCG and shingles vaccine Shingrix. UIC says it reinvests about 40 percent of royalty income into research, innovation and commercialization initiatives.

Thanks to one prolific inventor in particular, Northwestern University has had a series of high-profile wins in a relatively short period of time—reporting nearly $8 million in licensing revenue for fiscal 2018.

Late last month, the university unveiled John Rogers' latest technology: flexible wireless body sensors that monitor premature babies, eliminating the need for constraining wires and tape in the neonatal intensive care unit. Rogers joined Northwestern in 2016 from the University of Illinois at Urbana-Champaign, where he started working on the NICU sensors. As a result, both universities have some intellectual property rights for the project.

In addition to wearable electronics, Rogers and his team are working on dissolvable devices that can be used on or in the body, as well as thin membranes that interact with organs and other 3D surfaces. He's also behind Rhaeos, a new startup that is developing a thermal sensor that monitors patients with hydrocephalus, a condition in which fluid builds up in the brain.

When it comes to research commercialization, there's more than one measure for success. Universities count the inventions disclosed, patents filed and issued, startups created, venture-capital funding received, initial public offerings made, intellectual property licenses held and, of course, revenue.

For most researchers, success also means turning an idea into a product and having a realworld impact, says Jay Walsh, Northwestern's vice president for research. Take Rogers' wearable NICU sensors, for example, which allow parents to more easily interact with their babies. "It's really going to have a significant impact on the care of infants in the neonatal intensive care unit," Walsh says. "At the end of the day, you have to look at, is this actually having an impact on society? Are patients being helped?"

Venture investors and startup execs say they don’t need Elizabeth Warren to defend them from big tech - TechCrunch

Posted: 08 Mar 2019 02:56 PM PST

Responding to Elizabeth Warren's call to regulate and break up some of the nation's largest technology companies, the venture capitalists that invest in technology companies are advising the presidential hopeful to move slowly and not break anything.

Warren's plan called for regulators to be appointed to oversee the unwinding of several acquisitions that were critical to the development of the core technology that make Alphabet's Google and the social media giant Facebook so profitable… and Zappos.

Warren also wanted regulation in place that would block companies making over $25 billion that operate as social media or search platforms or marketplaces from owning companies that also sell services on those marketplaces.

As a whole, venture capitalists viewing the policy were underwhelmed.

"As they say on Broadway, 'you gotta have a gimmick' and this is clearly Warren's," says Ben Narasin, an investor at one of the nation's largest investment firms," New Enterprise Associates, which has $18 billion in assets under management and has invested in consumer companies like Jet, an online and mobile retailer that competed with Amazon and was sold to Walmart for $3.3 billion.

"Decades ago, at the peak of Japanese growth as a technology competitor on the global stage, the U.S. government sought to break up IBM. This is not a new model, and it makes no sense," says Narasin. "We slow down our country, our economy and our ability to innovate when the government becomes excessively aggressive in efforts to break up technology companies, because they see them through a prior-decades lens, when they are operating in a future decade reality. This too shall pass."

Balaji Sirinivasan, the chief technology officer of Coinbase, took to Twitter to offer his thoughts on the Warren plan. "If big companies like Google, Facebook and Amazon are prevented from acquiring startups, that actually reduces competition," Sirinivasan writes.

"There are two separate issues here that are being conflated. One issue is do we need regulation on the full platform companies. And the answer is absolutely," says Venky Ganesan, the managing director of Menlo Ventures. "These platforms have a huge impact on society at large and they have huge influence."

But while the platforms need to be regulated, Ganesan says, Senator Warren's approach is an exercise in overreach.

"That plan is like taking a bazooka to a knife fight. It's overwhelming and it's not commensurate with the issues," Ganesan says. "I don't think at the end of the day venture capital is worrying about competition from these big platform companies. [And] as the proposal is composed it would create more obstacles rather than less."

Using Warren's own example of the antitrust cases that were brought against companies like AT&T and Microsoft is a good model for how to proceed, Ganesan says. "We want to have the technocrats at the FTC figure out the right way to bring balance."

Kara Nortman, a partner with the Los Angeles-based firm Upfront Ventures, is also concerned about the potential unforeseen consequences of Warren's proposals.

"The specifics of the policy as presented strike me as having potentially negative consequences for innovation. These companies are funding massive innovation initiatives in our country. They're creating jobs and taking risks in areas of technology development where we could potentially fall behind other countries and wind up reducing our quality of life," Nortman says. "We're not seeing that innovation or initiative come from the government — or that support for encouraging immigration and by extension embracing the talented foreign entrepreneurs that could develop new technologies and businesses."

Nortman sees the Warren announcement as an attempt to start a dialog between government regulators and big technology companies.

"My hope is that this is the beginning of a dialogue that is constructive," Nortman says. "And since Elizabeth Warren is a thoughtful policymaker, this is likely the first salvo toward an engagement with the technology community to work collaboratively on issues that we all want to see solved and that some of us are dedicating our career in venture to help solving."

YC’s latest moonshot bet is a startup building a $380K ‘flying motorcycle’ - TechCrunch

Posted: 07 Mar 2019 02:29 PM PST

David Mayman has a vision for personal aviation that he's spent the past dozen years and millions of his personal fortune chasing. He hasn't accepted the convention that jetpacks were just a misguided fantasy for the future; his company, Jetpack Aviation, has been building them and he's been zooming around in publicity-grabbing stunts in a plea to the public that there's room to dream when it comes to human flight.

And while an eight-person startup aiming to build out a fleet of $380,000 "flying motorcycles" might seem like a tall order, Y Combinator, a top accelerator known for its occasionally bizarre bets, is gambling on the company and its jet engine-obsessed CEO in one of its latest investments.

Jetpack Aviation is about to become a very different company. The startup has launched pre-orders this week for the moonshot of moonshots, the Speeder, a personal vertical take-off and landing vehicle with a svelte concept design that looks straight out of Star Wars or Halo.

Deep-pocketed, sci-fi-minded buyers are going to have to fork over $10,000 just to get a spot in the pre-order line for the first vehicles to ship, but the startup's founder seems to see the campaign as less about the money than it is about the confirmation that there are people interested in planting a stake in his wild company's future success.

"I think it's a validation statement for all of us," Mayman tells TechCrunch. "If you look at how long Tesla took to deliver the Model 3 to customers, I think people understand that this is not something that's a Kickstarted pre-delivery campaign where at the tail-end of it we're immediately going to be delivering product."

There are gambles and then there are flying motorcycles. This is frankly an atypical startup for YC to fund, but it is also an unconventional business path for Mayman, who has largely been self-financing his jetpack-building obsession for the past 12 years. For the Australian CEO, the YC investment is mainly about gaining access to Silicon Valley's network of VCs, though he also acknowledges it's a fair assumption that SF breeds the type of executive that might be interested in pre-ordering something so seemingly outlandish. 

"I can't imagine someone not being excited about a flying motorcycle," YC partner Jared Friedman told TechCrunch in an email. "Jetpack Aviation created the future with Speeder, and I look forward to seeing how this technology transforms the dreaded commute, vacation travel, and everyday errands."

While much of the excitement Mayman has raised for his company's jetpacks has relied on the spectacle of prototype demos in front of throngs of news networks (Jetpack Aviation has unsurprisingly partnered with Red Bull), the company has yet to build a full-scale prototype of the Speeder, though he says their new round of funding should get them there.

Mayman flying a jetpack around the Statue of Liberty in 2015

Can they actually build this? That's seems to be a pretty valid question.

In our conversation, Mayman acknowledges upfront that:

  1. The Speeder is "at least" two years of development time away from ending up in customer hands.
  2. The company will have to raise "tens of millions" of dollars to ship this design.
  3. There are still plenty of unknowns.

Jetpack Aviation's current design is more ambitious than most helicopter-shaped concept VTOL vehicles being pursued by companies like Uber, namely due to its relatively sleek design where the human rider is directly above a set of several gimbal-mounted jet engines.

The company claims finished designs will move faster than 150 mph at altitudes up to 15,000 feet. The flight time is still a limiting factor; max flight times for the models are estimated to be around 30 minutes. The company is planning a number of versions, including an ultralight model that complies with some federal regulations and won't require a pilot's license, the company says.

The startup's most pertinent problem is creating the autonomous stabilization technologies that will make flying the Speeder effortless and safe. Mayman notes that most VTOL designs look like quadcopters simply because the physics of putting weight directly on top of the thrust system is so challenging. "It's like trying to balance a pencil on your finger," he says.

His team has been training people to use their jetpacks — now in their 11th design iteration — and say it takes about a week to get potential flyers up-and-running with the particulars of the system. But Mayman says he wants this to be a device that just works, a design concept that made a lot of sense when Steve Jobs was using it to refer to the simplicity of the iPad, but feels a tad more aggressive when presented with the rendered images of someone flying this thing over city centers:

A lot of the industry's existing work around autonomous flight and stabilization for drone aircraft really doesn't account for Jetpack Aviation's design, though Mayman says they've already made some significant progress with their 1:3 scale prototype. He also notes that the company does have a "less elegant-looking" plan-B design if they determine the centrally clustered jet engines are too much of a stabilization liability.

Indeed, the key for getting a concept like this off the ground and ensuring the company doesn't miserably fail is being flexible about how this vision matures, Mayman says, noting that they're approaching the vehicle with multiple designs and multiple considerations for how the regulatory environment for certification shapes up, including work on a separate military version and consideration for designs more focused on emergency response like rapid medical evacuation.

Asked whether pre-orderers plunking down $10K might be disappointed by a different-looking product, the founder said that they've done enough modeling to know that what they build will fall into a roughly similar design. "It may not look exactly like what we've rendered, but I'm confident that it's still going to be the same sort of concept, a motorcycle or jet-ski size and shape."

It is certainly a unique choice for the company to launch its pre-orders already with so much in the air, but it's fairly apparent that they are looking to emulate Tesla here, and if people with nearly $400K to throw around want to buy a jet-engine jet-ski, then by all means, let the free market do its thing.

Y Combinator's $150,000 investment is an early step for the moonshot effort and a vote of confidence that places them on others' radar. Mayman, for his part, does seem genuinely thrilled about expanding the ambitions of his passion project, even if the road ahead is crowded with obstacles for realizing the vision.

"If you don't start it, you're never going to get there," Mayman says. "If our guys weren't able to wake up every morning saying, 'Holy shit, this would be freaking amazing if we can build this,' then it's sort of not worth doing. We might as well go do something else."

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