Investors tell Indian startups to ‘prepare for the worst’ as Covid-19 uncertainty continues

Just three months after capping what was the best year for Indian startups, having raised a record $14.5 billion in 2019, they are beginning to struggle to raise new capital as prominent investors urge them to “prepare for the worst”, cut spending and warn that it could be challenging to secure additional money for the next few months.

In an open letter to startup founders in India, ten global and local private equity and venture capitalist firms including Accel, Lightspeed, Sequoia Capital, and Matrix Partners cautioned that the current changes to the macro environment could make it difficult for a startup to close their next fundraising deal.

The firms, which included Kalaari Capital, SAIF Partners, and Nexus Venture Partners — some of the prominent names in India to back early-stage startups — asked founders to be prepared to not see their startups’ jump in the coming rounds and have a 12-18 month runway with what they raise.

“Assumptions from bull market financings or even from a few weeks ago do not apply. Many investors will move away from thinking about ‘growth at all costs’ to ‘reasonable growth with a path to profitability.’ Adjust your business plan and messaging accordingly,” they added.

Signs are beginning to emerge that investors are losing appetite to invest in the current scenario.

Indian startups participated in 79 deals to raise $496 million in March, down from $2.86 billion that they raised across 104 deals in February and $1.24 billion they raised from 93 deals in January this year, research firm Tracxn told TechCrunch. In March last year, Indian startups had raised $2.1 billion across 153 deals, the firm said.

New Delhi ordered a complete nation-wide lockdown for its 1.3 billion people for three weeks earlier this month in a bid to curtail the spread of COVID-19.

The lockdown, as you can imagine, has severely disrupted businesses of many startups, several founders told TechCrunch.

VCs warn coronavirus will impact fundraising for the next 2 quarters

Vivekananda Hallekere, co-founder and chief executive of mobility firm Bounce, said he is prepared for a 90-day slowdown in the business.

Founder of a Bangalore-based startup, which was in advanced stages to raise more than $100 million, said investors have called off the deal for now. He requested anonymity.

Food delivery firm Zomato, which raised $150 million in January, said it would secure an additional $450 million by the end of the month. Two months later, that money is yet to arrive.

Many startups are already beginning to cut salaries of their employees and let go of some people to survive an environment that aforementioned VC firms have described as “uncharted territory.”

Travel and hotel booking service Ixigo said it had cut the pay of its top management team by 60% and rest of the employees by up to 30%. MakeMyTrip, the giant in this category, also cut salaries of its top management team.

Beauty products and cosmetics retailer Nykaa on Tuesday suspended operations and informed its partners that it would not be able to pay their dues on time.

Investors cautioned startup founders to not take a “wait and watch” approach and assume that there will be a delay in their “receivables,” customers would likely ask for price cuts for services, and contracts would not close at the last minute.

“Through the lockdown most businesses could see revenues going down to almost zero and even post that the recovery curve may be a ‘U’ shaped one vs a ‘V’ shaped one,” they said.

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Vericool raises $19.1 million for its plant-based packaging replacement for plastic coolers

Vericool, a Livermore, Calif.-based startup that’s replacing plastic coolers and packaging with plant-based products, has raised $19.1 million in a new round of financing.

The company’s stated goal is to replace traditional packaging materials like polystyrene with plant-based insulating packaging materials.

Its technology uses 100% recycled paper fibers and other plant-based materials, according to the company, and are curbside recyclable and compostable.

Investors in the round include Radicle Impact Partners, The Ecosystem Integrity Fund, ID8 Investments and AiiM Partners, according to a statement.

“We’re pleased to support Vericool because of the company’s track record of innovation, high-performance products, well-established patent portfolio and focus on environmental resilience. We are inspired by the company’s social justice commitment to address recidivism and provide workplace opportunity to formerly incarcerated individuals,” said Dan Skaff, managing partner of Radicle Impact Partners and Vericool’s new lead director. 

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General Motors spins up global supply chain to make 50,000 face masks a day

GM today announced manufacturing details around building much-needed medical face masks. According to the company’s press release, it took the company less than seven days to go from nothing to producing the first production-made mask. The automotive giant said today in a released statement it expects to deliver 20,000 masks on April 8 and soon after, able to produce 50,000 masks a day once the production line is at full capacity.

These face masks are a vital piece of personal protective equipment (PPE) used by front-line healthcare staff to protect themselves against the virus-causing droplets that are spread by patients through coughing and sneezing in clinical settings.

GM turned to global partners to create this manufacturing line within a week. The company sourced material from GM’s existing supply chain and acquired manufacturing equipment from JR Automation in Holland, Michigan, and Esys Automation in Auburn Hills, Michigan. As the company’s press release says, GM even created an ISO Class 8-equivalent cleanroom in GM’s Warren manufacturing plant. GM and the UAW will seek two dozen volunteers to staff this new assembly line.

“The first people we called were those who work with fabric vehicle components,” said Karsten Garbe, GM plant director, Global Pre-Production Operations. “In a few days, the company’s seat belt and interior trim experts became experts in manufacturing face masks.”

While this team was creating a face mask assembly line, others within GM were working towards creating ventilators. Last Friday, March 27, President Donald Trump signed a presidential directive ordering GM to produce ventilators and to prioritize federal contracts. This came hours after the automaker announced plans to manufacture the critical medical equipment needed for patients suffering from COVID-19, the disease caused by the coronavirus.

Other automakers joined the fight, as well. Ford and GE Healthcare licensed a ventilator design from Airon Corp and plan to produce as many as 50,000 of them at a Michigan factory by July as part of a broader effort to provide a critical medical device used to treat people with COVID-19. Under this partnership, Ford said it expects to produce 1,500 Airon ventilators by the end of April, 12,00 by the end of May, and 50,000 by July.

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Axonius nabs $58M for its cybersecurity-focused network asset management platform

As companies get to grips with a wider (and, lately, more enforced) model of remote working, a startup that provides a platform to help track and manage all the devices that are accessing networked services — an essential component of cybersecurity policy — has raised a large round of growth funding. Axonius, a New York-based company that provides a way for organizations to manage and track the range of computing-based assets that are connecting to their networks — and then plug in that data to 100 different cybersecurity tools to analyse it — has picked up a Series C of $58 million, money it will use to continue investing in its technology (its R&D offices are in Tel Aviv, Israel) and expanding its business overall.

The round is being led by prolific enterprise investor Lightspeed Venture Partners, with previous backers OpenView, Bessemer Venture Partners, YL Ventures, Vertex, and WTI also participating in the round.

Dean Sysman, CEO and Co-Founder at Axonius, said in an interview that the company is not disclosing its valuation, but for some context, the company has now raised $95 million, and PitchBook noted that in its last round, $20 million in August 2019, it had a post-money valuation of $110 million.

The company has had a huge boost in business in the last year, however — not a surprise for a company that helps enable secure remote working, at a time when many businesses have gone remote in an effort to follow government policies encouraging social distancing to slow the spread of the coronavirus pandemic. As of this month, Axonius has seen customer growth increase 910% compared to a year ago.

Sysman said that this round had been in progress for some time ahead of the announcement being made, but the final stages of closing it were all done remotely last week, which has become something of a new normal in venture deals at the moment.

“We’ve all been staying at home for the last few weeks,” he said in an interview. “The crisis is not helping with deals. It’s making everything more complex for sure. But specifically for us there wasn’t a major difference in the process.”

Sysman said that he first thought of the idea for Axonius when at a previous organization — his experience includes several years with the Israeli Defense Force, as well as time at a startup called Integrity Project, acquired by Mellanox — where he realised the business itself, and all of its customers, never actually knew how many devices accessed their network, which is a crucial first step in being able to secure that network.

“Every CIO I met I would ask, do you know how many devices you have on your network? And the answer was either ‘I don’t know,’ or big range, which is just another way of saying, ‘I don’t know,'” Sysman said. “It’s not because they’re not doing their jobs but because it’s just a tough problem.” Part of the reason is because IP addresses are not precise enough, and de-duplicating and correlating numbers is gargantuan especially in the current climate of people using not just a multitude of work-provided devices, but a number of their own.

That was what prompted Sysman and his cofounders Ofri Shur and Avidor Bartov to build the algorithms that formed the basis of what Axonius is today. It’s not based on behavioural data as some cybersecurity systems are, but something that Sysman describes as “a deterministic algorithm that knows builds a unique set of identifiers that can be based on anything, including timestamp, or cloud information. We try to use every piece of data we can.”

The resulting information becomes a very valuable asset in itself that can then be used across a number of other pieces of security software to search for inconsistencies in use (the behavioural aspect) or other indicators of malicious activity — specifically following the company’s motto, “Know Your Assets, Identify Gaps, and Automate Security Policy Enforcement” — even as data itself may seem a little pedestrian on its own.

“We like to call ourselves the Toyota Camry of cybersecurity,” Sysman said. “It’s nothing exotic in a world of cutting-edge AI and advanced tech. However it’s a fundamental thing that people are struggling with, and it is what everyone needs. Just like the Camry.”

It’s a formula that has definitely seen a lot of traction with customers — which include companies like Schneider Electric, the New York Times, and Landmark Medical, among others — as well as investors.

“Any enterprise CISO’s top priority, with unwavering consistency, is asset discovery and management. You can’t protect a device if you don’t know it exists.” said Arsham Menarzadeh, general partner at Lightspeed Venture Partners, in a statement. “Axonius integrates into any security and management product to show customers their full asset landscape and automate policy enforcement. Their integrated approach and remediation capabilities position them to become the operating system and single source of truth for security and IT teams. We’re excited to play a part in helping them scale.”

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Leading VCs discuss how COVID-19 has impacted the world of digital health

In December 2019, Extra Crunch spoke to a group of investors leading the charge in health tech to discuss where they saw the most opportunity in the space leading into 2020.

At the time, respondents highlighted startups in digital therapeutics, telehealth and mental health that were improving medical practitioner efficiency or streamlining the distribution of care, amongst a variety of other digital health markets that were garnering the most attention.

Where top VCs are investing in digital health

In the months since, the COVID-19 crisis has debilitated national healthcare systems and the global economy. Weaknesses in healthcare systems have become clearer than ever, while startups and capital providers have struggled to operate while wide swaths of the market effectively shut down.

Given significant volatility and the rapid changes seen in the worlds of healthcare, venture and startups broadly, we wanted to understand which inefficiencies might have been brought to light, what new opportunities might exist for founders looking to reduce friction in healthcare systems, how digital health startups have been impacted and how health tech investing as a whole has changed.

We asked several of the VCs who participated in our last digital health survey to update us on how COVID-19 is impacting digital health startups and broader healthcare systems around the world:

• Annie Case, Kleiner Perkins
• Kristin Baker Spohn, CRV
• Deena Shakir, Lux Capital
• Jennifer Hartt, Ben Franklin Technology Partners
• John Prendergass, Ben Franklin Technology Partners
• Bill Liao, SOSV

Annie Case, Kleiner Perkins

Our current unprecedented global crisis has put a spotlight on digital health. In the last few weeks alone, we have seen what feels like a decade’s worth of societal and regulatory changes that require digital health companies to step up and embrace new challenges and opportunities.

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Fitbit adds GPS and Spotify control for the Charge 4

Let’s be real: Now isn’t the ideal time to launch a health tracker. For a majority of us, expectations have dramatically plummeted for step counts, workout minutes and other gamified metrics. But hardware launches will, for the most part, go on.

Fitbit eschewed its normal press event this time out — for increasingly good reason — instead opting to launch the Charge 4 by way of press release. The line is modest, in a wearable category that’s begun to be dominated by smartwatches, but it’s a cornerstone product that continues to do well for the soon-to-be Google-owned hardware company.

The biggest news here is built-in GPS — a big addition for the category — and Spotify control. The Spotify bit uses “Connect & Control,” requiring a premium account to play back music from playlists.

Better news for those stuck at home are a number of yoga and other workouts directly accessible through a Fitbit Premium account. That’s available as a 90-day trial for new users. Other news: on-board software updates include Active Zone Minutes, which provides more detailed workout requirements informed by the WHO and AMA, along with improved sleep measurements.

Lifestyle photo of Fitbit Charge 4

GPS is a nice addition, but nothing particularly groundbreaking here. At the very least, the update will pump a little fresh blood into what’s become a flagging category, as smartwatches (Fitbit’s included) have begun to increasingly suck the air out of the room for other wearables.

The Charge 4 will hit stores “in markets where they are still open” on April 13. It runs $150, or $170 for a special addition that includes some upgraded bands.

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Niantic squares up against Apple and Facebook with acquisition of AR startup 6D.ai

Even as the pandemic forces Niantic to shift the way its outdoor-friendly titles are played, the gaming company is charging ahead with its efforts to build out an augmented reality platform which allows users to interact with the real world.

Today, the studio behind Pokémon Go announced that it has acquired 6D.ai, a promising SF-based augmented reality startup focused on building software that allowed smartphone cameras to rapidly detect the 3D layouts of spaces around them.

The companies didn’t share terms of the deal.

Niantic’s bread-and-butter is mobile games, specifically Pokémon Go, but the company has raised nearly a half-billion dollars to do something more, building out a developer platform for augmented reality meant to rival what has been created by Facebook and Apple. Acquiring 6D.ai is an interesting step further there.

Niantic is a consumer games company and 6D.ai was primarily working with enterprise clients. While Niantic will be shutting down 6D.ai’s existing developer tools over the next month, a spokesperson tells TechCrunch that the tech will soon be integrated with the company’s Niantic Real World Platform to help developers “build AR experiences for all types of consumer and business applications, including enterprise.”

6D.ai is building AR tech that crowdsources a 3D mesh of the world

We profiled 6D.ai back in 2018 when they were fresh out of Oxford University’s Active Vision Lab. CEO Matt Miesnieks told us at the time how he hoped his startup could one day crowdsource 3D models of cities.

“One of the big things holding back engaging AR is for content to feel like it’s actually physically part of the world,” Miesnieks told TechCrunch. “To really make that effect possible, you need to have a 3D model of at least your room, if not the whole world.”

Both Apple and Facebook have made considerable investments in their augmented reality platforms, hoping to bring developers aboard and mount an early lead. Even cursory adoption of the technology has been slower than many in the tech industry have expected, and has, if anything, further isolated Apple and Facebook’s early advantages.

Niantic does host AR’s most popular consumer success story with Pokémon Go, a title which Niantic is still reportedly raking in cash from. Analytics firm SensorTower estimated that the 2016 title had its best year ever in 2019, pulling in some $900 million in revenue. The breakout success of “Go” has not been mirrored as dramatically in the early reception of the studio’s major launch of 2019, Harry Potter: Wizards Unite.

The ultimate question for Niantic is whether it’s in their best interest to aggressively compete on the tech platform side with acquisitions like these when the timeline of returns is so uncertain and their competitors can likely afford much longer bouts of uncertainty.

Building long-tail success after a breakout game

Following the acquisition, 6D.ai co-founder Victor Prisacariu will be joining Niantic’s London office with Miesnieks opting for an advisory role going forward. The startup had not fully disclosed its funding. Its seed round was led by Niko Bonatsos at General Catalyst and the startup also received funding from Oxford. Angel investors in 6D included Amitt Mahajan, Jacob Mullins and Greg Castle, among others.

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