Cloud computing has been a revolution for the data center. Rather than investing in expensive hardware and managing a data center directly, companies are relying on public cloud providers like AWS, Google Cloud, and Microsoft Azure to provide general-purpose and high-availability compute, storage, and networking resources in a highly flexible way.
Yet as workflows have moved to the cloud, companies are increasingly realizing that those abstracted resources can be enormously expensive compared to the hardware they used to own. Few companies want to go back to managing hardware directly themselves, but they also yearn to have the price-to-performance level they used to enjoy. Plus, they want to take advantage of a whole new ecosystem of customized and specialized hardware to process unique workflows — think Tensor Processing Units for machine learning applications.
That’s where Packet comes in. The New York City-based startup’s platform offers a highly-customizable infrastructure for running bare metal in the cloud. Rather than sharing an instance with other users, Packet’s customers “own” the hardware they select, so they can use all the resources of that hardware.
Even more interesting is that Packet will also deploy custom hardware to its data centers, which currently number eighteen around the world. So, for instance, if you want to deploy a quantum computing box redundantly in half of those centers, Packet will handle the logistics of installing those boxes, setting them up, and managing that infrastructure for you.
The company was founded in 2014 by Zac Smith, Jacob Smith, and Aaron Welch, and it has raised a total of $12 million in venture capital financing according to Crunchbase, with its last round led by Softbank. “I took the usual path, I went to Juilliard,” Zac Smith, who is CEO, said to me at his office, which overlooks the World Trade Center in downtown Manhattan. Double bass was a first love, but he found his way eventually into internet hosting, working as COO of New York-based Voxel.
At Voxel, Smith said that he grew up in hosting just as the cloud started taking off. “We saw this change in the user from essentially a sysadmin who cared about Tom’s Hardware, to a developer who had never opened a computer but who was suddenly orchestrating infrastructure,” he said.
Innovation is the lifeblood of developers, yet, public clouds were increasingly abstracting away any details of the underlying infrastructure from developers. Smith explained that “infrastructure was becoming increasingly proprietary, the land of few companies.” While he once thought about leaving the hosting world post-Voxel, he and his co-founders saw an opportunity to rethink cloud infrastructure from the metal up.
“Our customer is a millennial developer, 32 years old, and they have never opened an ATX case, and how could you possibly give them IT in the same way,” Smith asked. The idea of Packet was to bring back choice in infrastructure to these developers, while abstracting away the actual data center logistics that none of them wanted to work on. “You can choose your own opinion — we are hardware independent,” he said.
Giving developers more bare metal options is an interesting proposition, but it is Packet’s long-term vision that I think is most striking. In short, the company wants to completely change the model of hardware development worldwide.
VCs are increasingly investing in specialized chips and memory to handle unique processing loads, from machine learning to quantum computing applications. In some cases, these chips can process their workloads exponentially faster compared to general purpose chips, which at scale can save companies millions of dollars.
Packet’s mission is to encourage that ecosystem by essentially becoming a marketplace, connecting original equipment manufacturers with end-user developers. “We use the WeWork model a lot,” Smith said. What he means is that Packet allows you to rent space in its global network of data centers and handle all the logistics of installing and monitoring hardware boxes, much as WeWork allows companies to rent real estate while it handles the minutia like resetting the coffee filter.
In this vision, Packet would create more discerning and diverse buyers, allowing manufacturers to start targeting more specialized niches. Gone are the generic x86 processors from Intel driving nearly all cloud purchases, and in their place could be dozens of new hardware vendors who can build up their brands among developers and own segments of the compute and storage workload.
In this way, developers can hack their infrastructure much as an earlier generation may have tricked out their personal computer. They can now test new hardware more easily, and when they find a particular piece of hardware they like, they can get it running in the cloud in short order. Packet becomes not just the infrastructure operator — but the channel connecting buyers and sellers.
That’s Packet’s big vision. Realizing it will require that hardware manufacturers increasingly build differentiated chips. More importantly, companies will have to have unique workflows, be at a scale where optimizing those workflows is imperative, and realize that they can match those workflows to specific hardware to maximize their cost performance.
That may sound like a tall order, but Packet’s dream is to create exactly that kind of marketplace. If successful, it could transform how hardware and cloud vendors work together and ultimately, the innovation of any 32-year-old millennial developer who doesn’t like plugging a box in, but wants to plug in to innovation.
Every startup needs a little skill and a little luck. BigID, a NYC-based data governance solution has been blessed with both. The company, which helps customers identify sensitive data in big data stores, launched at just about the same time that the EU announced the GDPR data privacy regulations. Today, the company is having trouble keeping up with the business.
While you can’t discount that timing element, you have to have a product that actually solves a problem and BigID appears to meet that criteria. “This how the market is changing by having and demanding more technology-based controls over how data is being used,” company CEO and co-founder Dimitri Sirota told TechCrunch.
Sirota’s company enables customers to identify the most sensitive data from among vast stores of data. In fact, he says some customers have hundreds of millions of users, but their unique advantage is having built the solution more recently. That provides a modern architecture that can scale to meet these big data requirements, while identifying the data that requires your attention in a way that legacy systems just aren’t prepared to do.
“When we first started talking about this [in 2016] people didn’t grok it. They didn’t understand why you would need a privacy-centric approach. Even after 2016 when GDPR passed, most people didn’t see this. [Today] we are seeing a secular change. The assets they collect are valuable, but also incredibly toxic,” he said. It is the responsibility of the data owner to identify and protect the personal data under their purview under the GDPR rules, and that creates a data double-edged sword because you don’t want to be fined for failing to comply.
GDPR is a set of data privacy regulations that are set to take effect in the European Union at the end of May. Companies have to comply with these rules or could face stiff fines. The thing is GDPR could be just the beginning. The company is seeing similar data privacy regulations in Canada, Australia, China and Japan. Something akin go this could also be coming to the United States after Facebook CEO, Mark Zuckerberg appeared before Congress earlier this month. At the very least we could see state-level privacy laws in the US, Sirota said.
Sirota says there are challenges getting funded as a NYC startup because there hadn’t been a strong big enterprise ecosystem in place until recently, but that’s changing. “Starting an enterprise company in New York is challenging. Ed Sim from Boldstart [A New York City early stage VC firm that invests in enterprise startups] has helped educate through investment and partnerships. More challenging, but it’s reaching a new level now,” he said.
The company launched in 2016 and has raised $16.1 million to date. It scored the bulk of that in a $14 million round at the end of January. Just this week at the RSAC Sandbox competition at the RSA Conference in San Francisco, BigID was named the Most Innovative Startup in a big recognition of the work they are doing around GDPR.
Data is the lifeblood of the modern corporation, yet acquiring, storing, processing, and analyzing it remains a remarkably challenging and expensive project. Every time data infrastructure finally catches up with the streams of information pouring in, another source and more demanding decision-making makes the existing technology obsolete.
Few cities rely on data the same way as New York City, nor has any other city so shaped the technology that underpins our data infrastructure. Back in the 1960s, banks and accounting firms helped to drive much of the original computation industry with their massive finance applications. Today, that industry has been supplanted by finance and advertising, both of which need to make microsecond decisions based on petabyte datasets and complex statistical models.
Unsurprisingly, the city’s hunger for data has led to waves of database companies finding their home in the city.
As web applications became increasingly popular in the mid-aughts, SQL databases came under increasing strain to scale, while also proving to be inflexible in terms of their data schemas for the fast-moving startups they served. That problem spawned Manhattan-based MongoDB, whose flexible “NoSQL” schemas and horizontal scaling capabilities made it the default choice for a generation of startups. The company would go on to raise $311 million according to Crunchbase, and debuted late last year on NASDAQ, trading today with a market cap of $2 billion.
At the same time that the NoSQL movement was hitting its stride, academic researchers and entrepreneurs were exploring how to evolve SQL to scale like its NoSQL competitors, while retaining the kinds of features (joining tables, transactions) that make SQL so convenient for developers.
One leading company in this next generation of database tech is New York-based Cockroach Labs, which was founded in 2015 by a trio of former Square, Viewfinder, and Google engineers. The company has gone on to raise more than $50 million according to Crunchbase from a luminary list of investors including Peter Fenton at Benchmark, Mike Volpi at Index, and Satish Dharmaraj at Redpoint, along with GV and Sequoia.
While web applications have their own peculiar data needs, the rise of the internet of things (IoT) created a whole new set of data challenges. How can streams of data from potentially millions of devices be stored in an easily analyzable manner? How could companies build real-time systems to respond to that data?
Mike Freedman and Ajay Kulkarni saw that problem increasingly manifesting itself in 2015. The two had been roommates at MIT in the late 90s, and then went on separate paths into academia and industry respectively. Freedman went to Stanford for a PhD in computer science, and nearly joined the spinout of Nicira, which sold to VMware in 2012 for $1.26 billion. Kulkarni joked that “Mike made the financially wise decision of not joining them,” and Freedman eventually went to Princeton as an assistant professor, and was awarded tenure in 2013. Kulkarni founded and worked at a variety of startups including GroupMe, as well as receiving an MBA from MIT.
The two had startup dreams, and tried building an IoT platform. As they started building it though, they realized they would need a real-time database to process the data streams coming in from devices. “There are a lot of time series databases, [so] let’s grab one off the shelf, and then we evaluated a few,” Kulkarni explained. They realized what they needed was a hybrid of SQL and NoSQL, and nothing they could find offered the feature set they required to power their platform. That challenge became the problem to be solved, and Timescale was born.
In many ways, Timescale is how you build a database in 2018. Rather than starting de novo, the team decided to build on top of Postgres, a popular open-source SQL database. “By building on top of Postgres, we became the more reliable option,” Kulkarni said of their thinking. In addition, the company opted to make the database fully open source. “In this day and age, in order to get wide adoption, you have to be an open source database company,” he said.
Since the project’s first public git commit on October 18, 2016, the company’s database has received nearly 4,500 stars on Github, and it has raised $16.1 million from Benchmark and NEA .
Far more important though are their customers, who are definitely not the typical tech startup roster and include companies from oil and gas, mining, and telecommunications. “You don’t think of them as early adopters, but they have a need, and because we built it on top of Postgres, it integrates into an ecosystem that they know,” Freedman explained. Kulkarni continued, “And the problem they have is that they have all of this time series data, and it isn’t sitting in the corner, it is integrated with their core service.”
New York has been a strong home for the two founders. Freedman continues to be a professor at Princeton, where he has built a pipeline of potential grads for the company. More widely, Kulkarni said, “Some of the most experienced people in databases are in the financial industry, and that’s here.” That’s evident in one of their investors, hedge fund Two Sigma. “Two Sigma had been the only venture firm that we talked to that already had built out their own time series database,” Kulkarni noted.
The two also benefit from paying customers. “I think the Bay Area is great for open source adoption, but a lot of Bay Area companies, they develop their own database tech, or they use an open source project and never pay for it,” Kulkarni said. Being in New York has meant closer collaboration with customers, and ultimately more revenues.
Open source plus revenues. It’s the database way, and the next wave of innovation in the NYC enterprise infrastructure ecosystem.
New York City is a marvel of infrastructure planning and engineering. There are the visible landmarks — the Brooklyn Bridge, the Lincoln Tunnel, the Empire State Building — and also the invisible ones that run the city beneath its crowded streets, such as one of the world’s most complex water tunneling and reservoir systems. That infrastructure was built for the economy of the 20th century, a market that emphasized the manufacturing and trading of goods.
Infrastructure though has a very different meaning in the 21st century. The digital economy means we no longer measure the movement of products simply as tonnage on freight ships and trucks, but rather as bits and bytes flowing from data centers to devices. The shipping container once revolutionized 20th century global trade, and now containerization is revolutionizing the way we think about delivering applications to end users.
While New York has more Fortune 500 companies than any other state, to date it hasn’t been a global leader in startups compared to hotspots like the Bay Area, particularly in the sorts of enterprise and data infrastructure startups that undergird the internet revolution.
That situation is rapidly changing. Today, New York City has numerous unicorns targeting the enterprise, and a large number of up-and-coming winners like Datadog that are commanding substantial market share. But what is truly exciting — and different from past prognostications about the success of enterprise in New York — is that we are now seeing the rise of a generation of hundreds of startups that are deeply technical and deeply committed to building the future of enterprise infrastructure and applications.
Today, TechCrunch presents a special report on the state of enterprise startups in New York City. My colleague Ron Miller and I interviewed dozens of people, and we boiled down their thoughts and insights into this series of articles. We purposely brought out focus away from the pure SaaS application world, and instead tried to go deeper into the infrastructure and security startups that are increasingly powering and protecting our internet services.
This article provides an overview of the changing exit environment for startups in NYC, the rise of a set of mafias which are incubating startups, and the changing culture of customers and how that is assisting NYC startups with their competition out west.
We then have a series of profile pieces on early but burgeoning startups: DNS provider NS1, time series database Timescale, bare metal cloud Packet, data privacy BigID, cloud monitoring Datadog, and a trio of security startups: cybersecurity analytics Security Scorecard, graph-based security ops Uplevel Security, and decentralized authentication HYPR. Finally, we put together a gallery of enterprise startups we think are going to be making waves in the coming years.
No need to search for the exits anymore
One of the on-going criticisms of the New York City startup ecosystem has been its lack of exits. Despite being a technology epicenter and a hub for some of the world’s largest and richest companies, the actual track record of startups in the city has never measured up. That’s a massive problem, since exits aren’t just trophies to put on the wall. Rather, they’re the generators of wealth which can be transformed into the lifeblood for the next generation of startups.
The exit environment in New York has started to look much better in recent years though, particularly in the enterprise space over the past year. Yext, which manages online reputation for brands, debuted on the NYSE last year and now sits at a $1.28 billion market cap. MongoDB went public late last year, and is just shy of a $2 billion valuation. Flatiron Health, which applies data analytics to cancer research, was acquired by Roche for $1.9 billion two months ago. Moat, an ad measurement company, was purchased by Oracle for $850 million last year.
Those are some hefty exits over just a couple of months, but the real depth of the NYC ecosystem can be witnessed in the startups right behind them that are becoming market leaders. Those companies include AppNexus, Datadog, UiPath, Dataminr, Sprinklr, InVision, Digital Ocean, Percolate, Namely, Compass, Infor, Zeta Global, Greenhouse, WeWork and the list continues. Together, these companies have raised billion of dollars in venture capital funding according to Crunchbase.
What’s different for New York than in the past is that the city is no longer relying on one company as the leading light that will prove the worth of the rest of the ecosystem. As we interviewed investors and founders about what companies they thought were going to be the most notable in the years ahead, what was illuminating was just how little overlap there existed between their answers. There is truly a cohort of strong startups coming of age in the city, and that gives the ecosystem much more vitality than it has ever seen before.
These aren’t your Godfather’s mafias
New York is increasingly a mafia town, and that’s a good thing.
One of Silicon Valley’s biggest advantages has been the constant renewal of its startup talent. People join startups, learn the ropes from experienced founders, meet other talented employees, and eventually decide to spin out on their own and build their startup dreams. Some companies have become so well known for this pattern that the networks they have formed are known as mafias. The PayPal mafia is perhaps the most famous example, but there are many other companies in the Valley that have become boot camps for the next generation of founders.
New York may be more notorious for its occasionally violent, often Italian mafias, but today the city is also home to a growing network of startup mafias who are building companies and firms and powering the ecosystem.
Take Voxel. The company, which was formed in New York City in 1999, built enterprise hosting solutions for customers around the world. It was acquired by Internap in 2012, in an all-cash transaction valued at $30 million.
That’s a pretty small exit by startup standards, but despite its small size, it has created an entire generation of NYC enterprise startup founders. Voxel CEO and founder Raj Dutt ended up starting Grafana, an open source time series analytics platform. Voxel COO Zac Smith left to start Packet, and Voxel principal software architect Kris Beevers started NS1.
Another stylized example is Gilt Groupe. Security Scorecard founders Sam Kassoumeh and Aleksandr Yampolskiy met at Gilt when they became the first two hires for the security team there. Yampolskiy had never heard of the company before, but “my wife was apparently a customer, so maybe I would get some clothes discounts.” When Sam showed up at noon in a sweatshirt on his first day, “I was like, I am going to fire this guy,” he said.
In the end, the two got along, and they eventually left to found Security Scorecard, which has raised more than $62 million in venture capital according to Crunchbase from a long list of luminary Valley-based investors.
The examples are endless. Edward Chiu, the founder of Catalyst, learned customer success at Digital Ocean, and ended up realizing that the company’s internal tooling could be externalized as a startup. Liz Maida, the founder of Uplevel Security, learned her trade at internet traffic juggernaut Akamai, and has taken several of the product lessons she learned there to heart. Timber.io founders Zach Sherman and Ben Johnson met at SeatGeek, where they realized that logging could be made significantly better. The networks each of these bought along helped in building their startups.
Of course, all of these are anecdotes, and it is next to impossible to systematically analyze these movements. Yet, these patterns of entrepreneurs and investors have become much more visible in the ecosystem. Startup talent is increasingly begetting startup talent, spinning out and circulating their knowledge.
But beyond these clusters of individuals lie the glue that is holding the ecosystem together: Jonathan Lehr and his team at Work-Bench and Ed Sim and Eliot Durbin at Boldstart. All three of them made the bet years ago that New York City would become an epicenter of the enterprise infrastructure software industry. Now they are reaping the rewards of those bets.
Work-Bench is both a workspace and a fund, but its core value is the community that’s been built around it. Lehr founded the New York Enterprise Tech Meetup, which hosts at Work-Bench a monthly gathering of hundreds of participants in the enterprise space, from founders to customers.
He has also built up a wide network of potential customers across industries to accelerate the early sales of his startups. “We are not just sending intros, we can backchannel which can save a lot of time” for founders, Lehr said. For instance, if a customer can’t deploy an application for another year because of internal politics, Lehr can figure that out and tell his founders that information, saving them time on a sale that might not come to fruition.
For Sim at Boldstart, the message is much the same. When he first launched the seed fund with Durbin in 2010, people thought that “there aren’t going to be enough deals to be done,” he said. “We thought of it as an experiment,” and the two raised only $1 million to get started. Now the fund has raised its third vehicle of $47 million, and plays a convening in engaging West Coast VCs. “On the West Coast, what [founders] really want is access to customers,” Sim explained “and on the East Coast, they want access to West Coast VCs.” Those West Coast VCs are showing up in New York these days more and more. “Every week there are five different firms sitting in our office trying to figure out what is happening in New York.”
Startup ecosystems take off when there is a sufficient density of talent, a strong desire to help one another, and an open ambition to compete. New York City has never lacked the latter, but it has been missing out on a dense network of helpful and experienced startup hands. The rise of mafias centered on some of the city’s leading companies as well as the development of community hubs for support are adding the final ingredients for a world-class ecosystem.
How changing customer tastes rebuilt NYC’s startup ecosystem
In the classic text Regional Advantage, AnnaLee Saxenian analyzed the cultural differences between innovation on the East Coast, epitomized by Boston’s Route 128, and the culture of Silicon Valley. She found that the East Coast was stodgy, hierarchical, and centralized around large corporate behemoths like DEC and EMC. In contrast, the West Coast was nimble, networked, and decentralized, with little social hierarchy.
Silicon Valley was believed to be dead in the early 1990s, outcompeted by Asian tigers like Singapore, Taiwan, and Korea in manufacturing the chips that gave the region its name. The Valley was saved in just the nick of time by the opening of the internet to commercial activity, and the culture of the West Coast would prove perfectly attuned to the frenetic pace of innovation that followed. The Valley swept the internet economy, and many of the world’s most important tech companies are now located in the Bay Area.
That Silicon Valley innovation culture is now been exported around the world, and that is no less true walking around New York City startup neighborhoods like the Flatiron and Union Square. It’s not just the obvious sartorial changes that have made the city more relaxed and creative. It’s also the changing personality of the people who are successful here — the finance major is now the computer science graduate.
New York’s startup culture isn’t just a transplant of the Valley’s however, but rather an evolution of it. The pure excitement of tech that can be found at San Francisco meetups is much more muted here. Instead, there is a greater focus on investing in product design by listening to customers earlier and much more closely.
That’s only possible though because customers actually want to talk. The success of New York City’s enterprise startups rests in large part on the changing nature of purchasing at Fortune 500 companies.
Lehr of Work-Bench should know. Prior to starting the fund, he evaluated potential technology vendors at Morgan Stanley. “The adage that you don’t get fired for buying IBM had longed passed,” Lehr explained. Companies have vexing problems, and they are increasingly willing to experiment with startup technology if it has the potential to solve those issues.
The West Coast culture of flexible decision-making has entered the corporate world. CIOs used to have a vice grip on technology purchasing, but now leaders across the enterprise increasingly make their own independent decisions. Lehr said that “you now need to know, as a startup, nuanced different people in enterprise, and as a VC, to stay relevant, you don’t just want to know the CIO or CTO, but the 30 other people who have pain points” across a company.
Sim at Boldstart noted “The last thing heads of IT want is salespeople in front of them. You are not selling anything because they don’t want to buy anything.” Instead, “they are willing to work with startups if you have the right … service partnership mentality,” he said.
With customers increasingly engaged, proximity has become a major boon for startups in NYC. “In the early days before you are ready to scale, it is all about relationships in the enterprise,” Lehr explained. He described the thinking of customers today looking at buying from startups. “I can trust these people to get me promoted, and they are in New York, and they can give me feedback.”
I heard this point made from nearly every person I talked to. Roman Chwyl, a sales executive with experience at AWS, Google, and IBM, noted that when it comes to customers, “We can probably do six meetings a day up and down a subway line.” That thinking was mirrored by George Avetisov, the CEO of HYPR, who said that “All of our customers are in a 10 mile radius” because of the company’s focus on financial institutions.
That customer-centric view is what has made Datadog, which is now north of $100 million in annual recurring revenue, so competitive. Olivier Pomel, the CEO and founder, said that “Mostly what is interesting is that we’re not overwhelmed by the 5,000 startups around us” like in the Valley, and “what we hear is more clearly the message from the customers and the market.” He noted that “For most of the people at Datadog, their significant others are not in tech,” and that means reality doesn’t get distorted in the way it can on the West Coast.
While East Coast customers seem to have become more aggressive early-adopters, that view is not held universally. Kris Beevers, the founder and CEO of NS1, said that “the reality of our business through 2014 and 2015 is that I flew to California twice a month for sales meetings, and that is where the bulk of our customers come from.” As major West Coast companies signed on though, they ended up acting as lighthouse customers for more conservative companies on the East Coast.
Intense pain points can solve that hesitation. Ajay Kulkarni, the founder and CEO of time series database Timescale, noted that the company has customers in conservative industries because the database solves a critical production challenge for those businesses, namely the real-time processing of internet of things data. He also noted that selling to the West Coast is not necessarily easier. “I think the Bay Area is great for open source adoption, but a lot of Bay Area companies, they develop their own database tech, or they use an open source project and never pay for it,” he said.
Lehr also pointed to tech for tech’s sake as one of the increasing challenges for Silicon Valley-based enterprise companies. “In Silicon Valley, too many people start with the whiz bang tech, rather than the dirty word of use cases,” he said.
Some technology purists may complain that customers don’t know what they want until they see it. That may be true, and there is something to be said for disruptive innovation like Docker’s containers, which no one wanted for years and now everyone is excited about. But ultimately, customers buy software because it solves their problems, and they know those problems intimately. Mixing the nimble culture of Silicon Valley with a customer focus has allowed New York to start competing far more aggressively in enterprise infrastructure, and create a leading set of successful companies.
The future is still waiting to be built
New York has come a long way, but it does still have challenges. Unlike venture capitalists on the West Coast, VCs in NYC often face significantly less competition for deals, and that means they can take significantly longer to make a decision. Almost all founders I talked to griped that — with a handful of exceptions — local VCs just aren’t willing to write the first check into their companies. In fact, for Sim at Boldstart, that has become a rallying cry. He bought firstcheck.vc, which redirects to Boldstart’s domain.
Another challenge that is a bit more peculiar to the geography of the city is just how many sub-ecosystems exist. There are distinct Manhattan and Brooklyn startup communities that overlap far less than some might expect. While there are exceptions, the fintech, biotech, and adtech worlds also keep much to themselves. University ecosystems around Columbia, NYU, Cornell Tech, and Princeton also similarly stay in their own space. These fractures are not apparent at first glance, but few leaders in the community have been able to blur these demarcations.
Ironically, New York also has a lack of showmanship. To put it frankly, there is no Elon Musk or SpaceX that is a paragon of ambition and aspiration that drives the rest of the ecosystem to (literally) shoot for the stars. The city’s strength in enterprise tech is a strong bedrock for a durable startup ecosystem, but it is hard to turn the success of, say, an advertising analytics platform into a beacon for others to try their own fortunes in the startup world.
That’s a loss for the city today, but also the opening for the enterprising individual who wants to make it big. Sim at Boldstart said that “I feel like Rodney Dangerfield: we get no respect, and over the next few years, we will get the respect we deserve.” Ultimately, that’s the story of New York: scrappiness and hustle, and trying to build the future one piece of infrastructure at a time.
I’ll be helping build a larger meetup focused on pre-ICO companies in New York on April 23 and I’d love to see you there. It will be held at Knotel on April 23 at 7pm and will feature a pitch-off with eight startups — I will write about the best ones — and two panels with some yet-unnamed stars in the space.
I’d love to see you there, so please sign up here. The team is charging for tickets so we can get some beers and pizza for the attendees.
I am looking to fill out a panel so if you’d like to join me on stage and have done extensive ICO work email me at john@techcrunch .com.
The event will be held at 551 Fifth Avenue on the 9th Floor and you can sign up to pitch here. I’ll have more information as we get closer to the event. I’m notifying companies today if they will pitch.
Orchid Labs is in the process of raising $125 million for its surveillance-free layer atop the internet
Orchid Labs, a San Francisco-based startup that’s developing a a surveillance-free layer on top of the internet, has raised a bunch of funding, according to a newly processed SEC filing that shows the year-old startup has closed on $36.1 million. The money comes just five months after Orchid closed on a separate, $4.5 million in funding from investors, including Yes VC, cofounded by serial entrepreneurs Caterina Fake and Jyri Engeström.
Others of its earliest backers include Andreessen Horowitz, DFJ, MetaStable, Compound, Box Group, Blockchain Capital, and Sequoia Capital, according to its site.
The stated goal of the Orchid is to provide anonymized internet access to people across the globe, particularly individuals who live in countries with excessive government oversight of their browsing and shopping. Part of the point also seems to be to insulate users from the many companies that now harvest and sell their data, including walled gardens like Facebook and other giants like AT&T.
In a word where one assumes the Cambridge Analytica scandal is merely the tip of the iceberg when it comes to data abuse, it’s easy to see the project’s appeal. So far, says the filing, the company has raised that $36.1 million via a SAFT agreement, an investment contract offered by cryptocurrency developers to accredited investors (42 of them in this case).
But the filing shows a target of $125,595,882 million, and based how hot particular blockchain ideas are getting, and how aggressively they’re being funded (see the Basis deal earlier this week), you can imagine more money will flow to the company if it hasn’t already. That’s also an awfully specific target on its filing.
We’ve reached out to the company for more information. You can also check out its white paper if you’re curious.
In the meantime, it’s worth noting that Orchid has five founders with varied and interesting backgrounds. They include Stephen Bell, who spent seven years as a managing director at Trilogy Ventures, shopping for opportunities in China, before returning to the states in 2015; Steve Waterhouse, long an investor with the digital currencies-focused firm Pantera Capital; former Ethereum Foundation developer Gustav Simonsson; software engineer Jay Freeman; and Brian Fox, who is credited with building the first interactive online banking software for Wells Fargo in 1995 and who was the first employee of the legendary programmer Richard Stallman’s Free Software Foundation, among other things.
Between the money involved, the mission, and the founders, this one looks like a Big Deal. Stay tuned.
Friday Night Lights, the football show that was never just about football (and one of the best shows on television), is now streaming on Hulu.
Say goodbye to the weekend is all I’m saying.
Hailed as one of the most honest depictions of a functioning adult relationship in its portrayal of the husband and wife duo of “Coach” Eric and Tammy Taylor, Friday Night Lights also worked wonders for showing the life and high school times of teens in a small Texas town.
The show is phenomenal. If you haven’t seen it, you should, and if you have (and if you’re me, you have many many many times), this weekend is as good a time as any to watch it again.
For Hulu, this is part of a clutch of shows from the ’90s and 2000s that are touchstones of popular culture. The streaming service already holds Will & Grace, Felicity, Dawson’s Creek and The O.C.
Created by writer/director Peter Berg and inspired by the wildly successful book of the same name by H.G. Bissinger, the show tells the story of football and families in a small Texas town.
The series launched (or cemented) the careers of several actors, including Kyle Chandler, Connie Britton, Adrianne Palicki, (and a post-Wire, pre-Fruitvale Station, Creed and Black Panther)Michael B. Jordan, Minka Kelly, Jesse Plemons and Gaius Charles.
Hulu isn’t the only place you can see the Taylors struggle with life in Dillon, Texas. Amazon added the series (along with Parks & Recreation, House and Eureka) to its lineup, as well.
Two photo-sharing services are teaming up, as SmugMug buys Flickr from Verizon’s digital media subsidiary Oath.
USA Today broke the news and interviewed SmugMug CEO Don MacAskill, who said he hopes to revitalize Flickr .
At the same time, he said he’s still figuring out his actual plans: “It sounds silly for the CEO to not to totally know what he’s going to do, but we haven’t built SmugMug on a master plan either. We try to listen to our customers and when enough of them ask for something that’s important to them or to the community, we go and build it.”
Flickr was founded in 2004 and sold to Yahoo a year later. Yahoo, in turn, was acquired by Verizon, which brought it together with AOL to create a new subsidiary called Oath.
Over the past couple of months, Oath (which owns TechCrunch) has been selling off some of its AOL and Yahoo properties, including Moviefone (sold to the company behind MoviePass, which Oath now has a stake in) and Polyvore (assets sold to Ssense).
In an FAQ about the deal, SmugMug says it will continue to operate Flickr as a separate site, with no merging of user accounts or photos: “Over time, we’ll be migrating Flickr onto SmugMug’s technology infrastructure, and your Flickr photos will move as a part of this migration — but the photos themselves will remain on Flickr.”
The company also uses the FAQ to describe its vision for the combined services:
SmugMug and Flickr represent the world’s most influential community of photographers, and there is strength in numbers. We want to provide photographers with both inspiration and the tools they need to tell their stories. We want to bring excitement and energy to inspire more photographers to share their perspective. And we want to be a welcome place for all photographers: hobbyist to archivist to professional.
The financial terms were not disclosed.
I’m here to tell you first-hand: Nintendo Labo is no joke. I’m a grown-up human person, who has spent many hours of his life building things: office furniture, websites, a model of the Batmobile from the 1989 Tim Burton movie. In the fourth grade, I attempted to build Mission Santa Barbara out of sugar cubes. It didn’t go great, but the point (I’m told) is that I tried.
We’re talking multiple decades of building things. Following instructions, backtracking, trying again. I’m sure there are all sorts of valuable lessons I learned along the way; self-discipline, patience, teamwork, why sugar is not a structurally sound building material. But event with all of that building under my wisened belt, Nintendo Labo is no walk in the park.
It’s literal child’s play. It says right there, on the box, “6+.” I’ve been six-plus for — let’s just say… a while now. And yet, it took me around two hours this morning to build a cardboard piano. Now I’ve got a table full of scraps, a small paper cut on my ring finger and a surprise sense of accomplishment. Oh, and the piano is pretty cool, too.
Labo is one of the most fascinating products to come across my desk in recent memory. It’s unique, bizarre and as frustrating as it is fun. In other words, it’s uniquely Nintendo — not so much out-of-the-box thinking as it is the actual box. It’s a product that’s built entirely around the premise of making kids sit still, follow instructions and fold the heck out of some cardboard. And, strangely, it totally works.
Hook, line and sinker
I wouldn’t have been my first choice to review Labo, but I was uniquely qualified, if only for the half a day I spent getting walked through the construction kit with a room full of brightly dressed and infectiously enthusiastic Nintendo employees. That experience served as the foundation for our hands on, as we were broken up into small teams and walked through a pair of increasingly complex projects.
We started with the race cars, the box’s introductory project, which is really as much about getting you used to the strange world of Labo. But even that small starter is a glimpse of the cleverness contained throughout, as the cardboard-wrapped Joy-Cons use their own haptic feedback to propel forward, as you control its speed via the touchscreen. Because there are a pair of Joy-Cons for every Switch, you can use them to race against one another.
The second hands-on project felt like a considerable step up. Nintendo puts the fishing rod’s build time at one-and-a-half to two-and-a-half hours, versus the cars’ 20 minutes total. In other words, find a comfortable spot, maybe put on some music and make sure you’re hydrated. When it’s done, however, you get a working reel with a string and a rod that vibrates when you catch a fish on screen. Pretty neat.
Having accomplished those in a well-supervised room full of Nintendo employees a few weeks back, I naturally took on the most complex project of the bunch.
Keys to the kingdom
The piano should take two-and-a-half to three-and-a-half hours, by Nintendo’s estimates. I built the thing in about two hours — an accomplishment of sorts for a grown-up person who was supposed to be working. Even so, it reflects just how large of a time sink these projects are. That’s certainly good news for parents looking for the ideal project for a rainy day. It’s a clever little play that leverages a video game system to get them to do something other than play video games. Neat trick, Nintendo.
The primary set is a big, flat and heavy box with 28 cardboard sheets, comprising six different projects. There’s a plastic bag inside, too, containing a random assortment of knick knacks — rubber bands, reflective stickers, washers — all of which will come in handy down the road. There’s no real instruction booklet, because the Switch is going to do all of the heavy lifting there.
The screen walks you through the process of building, one patient step a time. The touchscreen instructions are superior to paper in a number of ways, including a number of animated videos showing off the motions of properly working components, and the ability to pivot the camera angles to get a full 360-degree view of the build. You can rewind if you need to back up, or fast-forward when things get repetitive — like they did with the piano’s 13 keys.
Don’t go too fast, though. The kit tosses some curve balls at you — as in the case of some tabs that are folded inward, to double as springs. That, however, is the one constant. Folding. So, so much folding. Honestly, it gets pretty tedious on the longer projects. The instructions actually make light of this fact, from time to time, with little quips about the repetition. It also recommends stepping away before a particularly grueling section — probably the right move for both your sanity and health.
Once you get into the rhythm, however, it’s strangely meditative. Tap, fold. Tap, fold. Tap, fold. Tap, fold. Tap, fold. Tap, fold. Tap, fold. Tap, fold. Tap, fold. Tap, fold. Tap, fold. Tap, fold. Tap, fold. Tap, fold. Tap, fold. Tap, fold. Tap, fold. Tap, fold. Tap, fold. Tap, fold. Tap, fold. Tap, fold. Tap, fold. Tap, fold. Tap, fold. Tap, fold. Tap, fold. Tap, fold. Tap, fold. Tap, fold. Tap, fold. Tap, fold. Tap, fold. Tap, fold. Tap, fold. Tap, fold. Tap, fold. Tap, fold. Tap, fold. Tap, fold. Tap, fold. Tap, fold. Tap, fold. Tap, fold. Tap, fold. Tap, fold. Tap, fold. Tap, fold. Tap, fold. Tap, fold. Tap, fold. Tap, fold. Tap, fold. Tap, fold. Tap, fold. Tap, fold. Tap, fold. Tap, fold. Tap, fold. Tap, fold. Tap, fold. Tap, fold.
Congratulations, you’ve completely 1/6 steps.
I’d say it’s not the destination, it’s the journey, but honestly, it’s really about the destination here. The most satisfying part in all of this was how seemingly abstract shapes lock into place and create a fully formed object. These little kits are truly remarkable feats of engineering in their own right, and in the case of the piano, it’s incredible satisfying to see the object completed — and actually get to play the keys, recognizing the role each individual piece plays in the whole creation.
There are so many smart touches here, from the incorporation of the Joy-Cons, to the use of reflective tape, which triggers the Switch’s built in cameras. It’s that functionality that makes the piano keys play notes through the Switch itself. It also triggers the arms and legs on the robot through a set of pulleys.
It’s equally relieving the moment you realize you did everything right. Though I still had a few instances where I found myself having to backtrack multiple steps, because I’d missed a fold or turned something the wrong way. Also, as the instructions note, folding is at the heart of the project. A bad or incomplete fold can lead to heartbreak at the end. So fold, children. Fold like your lives depend on it.
Companies that make coding toys will usually tell you the same thing: it ultimately doesn’t matter that they’re not built in some universal programming language, so long as they teach the fundamentals. The jury is still out on all that, as far as I’m concerned, but I think there’s a lot to be said for a product that’s capable of fostering curiosity and love in some bigger idea. That, I think, is the biggest appeal of Labo. It encourages kids to step outside the console for a minute and build something with their hands.
Does building a Labo piano or fishing rod make you any more qualified to create the real thing? Not really, but it does help foster a genuine interest in the way things work. A maker friend of mine recently related a story to me about how she got into the culture. Her parents came home one day and she had disassembled and reassembled a computer, in order to install a component. From then on, she told me, they came to her for computer help.
Every maker has a story like that — a first step that often involves tearing down a computer or clock or toaster, piece by piece. Labo potentially affords the ability to explore that path without destroying some antique clock in the process. (Though, if it’s successful with your kids, I’d keep a close eye on your piano, if you have one at home.) Parental guidance is also recommended for the more complex projects, making for a great opportunity to bond with kids through creation with a side of frustration. And when you’re done, you’ve got a lovely object that looks like it stepped out of the panels of Calvin & Hobbes.
If your kids don’t have the passion to build — they’ll also learn that lesson pretty quickly. Many kids simply won’t have the patience to sit still and fold for hours on end. It’s also worth pointing out that the objects, when finished, are fragile. They are cardboard, after all. Water is their mortal enemy, and rowdy kids are a close second — pieces can easily rip or tear, even accidentally during the building process. Thankfully, the company has started selling pieces individually.
Of course, $70 isn’t an insignificant amount to pay to find all of that out. And by just about any measure, it’s a pretty steep premium for what amounts to a cardboard box full of cardboard. And, of course, that doesn’t factor in the price of the Switch itself.
But what the kit does afford is continual discovery. From there, kids can graduate to the massive Robot Kit (saving that one for a rainy weekend), which runs $80 and features a complex pulley system and a fun little game where you’re a mech trampling some poor, defenseless city. Even more compelling (and significantly less expensive), however, is Toy-Con Garage.
Built into both packs, the portal lets kids remix and hack creations, offering a breaking down of the technologies involved. If there’s a gateway to the wonderful world of making in this box, it’s this. The pre-determined kits are as much a lesson in following instructions as they are building. Toy-Con Garage, on the other hand, opens the door to true creativity.
Labo is the most bizarre, creative and uniquely Nintendo product since the Switch itself. It’s not for every kid — that much is certain. And the $70 fee will make it cost prohibitive for many parents. But those who take to it will do so like ducks to water — and hopefully won’t get that cardboard wet in the process.
With Senate Minority Leader Chuck Schumer proposing a bill to decriminalize marijuana (in a huge reversal of established policy from the Democratic leadership), this 4/20 gives cannabis-focused startups and their investors a lot to celebrate.
Since investment in cannabis companies first took off in 2014, there’s been over $700 million invested in cannabis companies, according to data from Crunchbase.
Companies that have proven to be more than one-hitters in the high-stakes industry run the gamut from conglomerates operating several business units including cultivation, delivery and branded products, to businesses that focus on delivery or point of sales and logistics solutions.
Investing in cannabis is tricky for most venture funds, because many of the pension funds and institutions that finance them restrict investments in things like alcohol, drugs or guns through what’s colloquially known as a “sin clause.”
Firms typically skirt those requirements by investing in enabling technologies or backing companies whose primary focus is medicinal.
And while the industry celebrates its success, it’s important to know that these changing times haven’t come without a huge social cost for those that bore the brunt of the country’s misguided “war on drugs.” As the Marshall Project notes:
On #420day, take a moment to reflect on Bernard Noble, a man who was sentenced to 13 years of hard labor for carrying two joints worth of weed.
After serving 7 years in prison, he was released last week. https://t.co/V7xm2logeX
— The Marshall Project (@MarshallProj) April 20, 2018
Even if the decriminalization push goes through, it’s unlikely that you’ll see many investment firms getting into recreational marijuana — unless they’re backed by wealthy individuals or get some kind of exception for cannabis startups.
Either way, it looks like these nine investments — in some cases with tens of millions behind them — are unlikely to go up in smoke.
But just in case, investors may want to heed the advice of the industry’s merry godfather:
Don’t forget to leave milk and cookies out 4 me tonite! #420eve
— Snoop Dogg (@SnoopDogg) April 20, 2018
Stock market investors showed lukewarm enthusiasm for Pivotal Software’s debut on Friday. After pricing the IPO at $15, the company closed the day at $15.73.
Although it didn’t “pop” for new investors, pricing at the midpoint of its proposed range allowed Pivotal to raise $555 million. Its public company market cap exceeded $3 billion.
The enterprise cloud computing company has been majority-owned by Dell, which came about after its merger with EMC in 2016. It was spun off from Dell, EMC and VMware in April 2013.
After that, it raised $1.7 billion in funding from Microsoft, Ford and General Electric.
Here’s how it describes its business in the S-1 filing:
Pivotal looks to “provide a leading cloud-native platform that makes software development and IT operations a strategic advantage for our customers. Our cloud-native platform, Pivotal Cloud Foundry (‘PCF’), accelerates and streamlines software development by reducing the complexity of building, deploying and operating new cloud-native applications and modernizing legacy applications.”
According to the filing, Pivotal brought in $509.4 million in revenue for its fiscal year ending in February. This is up from $416.3 million in revenue for 2017 and $280.9 million in revenue the year before.
The company is still losing a lot of money, however. Losses for fiscal 2018 stood at $163.5 million, improved from the than the negative $232.5 million seen in 2017 and $282.5 million in 2016.
“We have incurred substantial losses and may not be able to generate sufficient revenue to achieve and sustain profitability,” the company warned in the requisite “risk factors” section of its IPO filing.
Pivotal also acknowledged that it faces competition from “legacy application infrastructure and middleware form vendors” like IBM and Oracle. The company says it additionally competes with “open-source based offerings supported by vendors” like RedHat. Pivotal also faces challenges from SAP Cloud Platform, Amazon Web Services and Microsoft Azure.
The company says it believes it will stand out from the pack because of its strong security and easy-to-use platform. Pivotal also claims to have strong brand awareness and a good reputation. It has 118 U.S. patents and 73 pending and is betting that it will remain innovative.
Morgan Stanley and Goldman Sachs served as lead underwriters. Davis Polk and Fenwick & West worked as counsel.
The company listed on the New York Stock Exchange under the ticker “PVTL.”
It has been an active spring for tech IPOs, after a slow winter. Dropbox, Spotify and Zuora are amongst the companies that have gone public in recent weeks. DocuSign, Smartsheet, Carbon Black and Pluralsight are all expected to debut within the next month.
The U.S. government is following through on its promise to crack down on initial coin offering scams. On Friday, the SEC announced charges against Raymond Trapani, the third co-founder of Centra Tech Inc., which raised $32 million for a cryptocurrency debit card last year through a flashy ICO endorsed by DJ Khaled and boxer Floyd Mayweather. The company’s other two co-founders, Sam Sharma and Robert Farkas, were charged and arrested earlier this month.
“We allege that the Centra co-founders went to great lengths to create the false impression that they had developed a viable, cutting-edge technology,” the SEC’s Cyber Unit Chief Robert A. Cohen said of the ICO. “Investors should exercise caution about investments in digital assets, especially when they are marketed with claims that seem too good to be true.”
The SEC calls Trapani the “mastermind” of the fraudulent ICO scheme, which lured investors with claims of major credit card partnerships, misrepresentations about the company’s product, fake founder biographies and price manipulation of its Centra tokens (CTR).
Spending bitcoins ethereum and other types of cryptocurrency in Beverly Hill https://t.co/q9VZ3MzpK8 pic.twitter.com/BYyOFUnm8W
— Floyd Mayweather (@FloydMayweather) September 15, 2017
According to SEC documents, these particular ICO fraud artists were caught red-handed:
Text messages among the defendants reveal their fraudulent intent. After receiving a cease-and-desist letter from a major bank directing him to remove any reference to the bank from Centra’s marketing materials, Sharma texted to Farkas and Trapani: “[w]e gotta get that s[***] removed everywhere and blame freelancers lol.” And, while trying to get the CTR Tokens listed on an exchange using phony credentials, Trapani texted Sharma to “cook me up” a false document, prompting Sharma to reply, “Don’t text me that s[***] lol. Delete.
The U.S. Attorney’s Office for the Southern District of New York also unsealed criminal securities and wire fraud charges against Trapani, who was arrested Friday morning. Trapani faces one count of conspiracy to commit securities fraud, one count of conspiracy to commit wire fraud, one count of securities fraud and one count of wire fraud. Three out of the four charges carry a maximum sentence of 20 years,
“As alleged, Raymond Trapani conspired with his co-defendants to lure investors with false claims about their product and about relationships they had with credible financial institutions,” Deputy U.S. Attorney Robert Khuzami said of the criminal charges.
“While investing in virtual currencies is legal, lying to deceive investors is not.”