The fintech endgame: New supercompanies combine the best of software and financials

Welcome to Extra Crunch Friday

Now that we can transact from anywhere, a new, hybrid class of software companies with embedded financial services are scooping up consumers — and investors are following the action.

When it comes to creating value, combining software and finance is like those elementary school volcanoes comprised of vinegar and baking soda: Battery Ventures found that companies in this sector had almost double the median multiple of pure software companies.

Using data from a report about “the intersection of software and financial services,” principal Shiran Shilev and VP Aaron Rinberg created a framework that sorts these companies by business model and compares median revenue multiples.

“The more you can rely on subscription or transaction fees over interest income to generate revenue, and the less balance-sheet capacity your model requires, the higher your valuation,” they found, among other conclusions.

Thanks very much for reading Extra Crunch this week!

Walter Thompson
Senior Editor, TechCrunch
@yourprotagonist

Read More

AI startup investment is on pace for a record year

Alex Wilhelm and Anna Heim solicited feedback from investors to get a temperature on the market for AI startup investments.

“The startup investing market is crowded, expensive and rapid-fire today as venture capitalists work to preempt one another, hoping to deploy funds into hot companies before their competitors,” they write. “The AI startup market may be even hotter than the average technology niche.”

But that’s not surprising. The Exchange was on it.

“In the wake of the Microsoft-Nuance deal, The Exchange reported that it would be reasonable to anticipate an even more active and competitive market for AI-powered startups,” Alex and Anna note. “Our thesis was that after Redmond dropped nearly $20 billion for the AI company, investors would have a fresh incentive to invest in upstarts with an AI focus or strong AI component; exits, especially large transactions, have a way of spurring investor interest in related companies.”

Their expectation is coming true: Investors reported a fierce market for AI startups.

Read More

TC Early Stage 2021: Marketing & Fundraising

Sponsored by TechCrunch

Join group sessions with top investors and ecosystem experts in fields ranging from fundraising and marketplace positioning to growth marketing and content development.

Read More

After 30 years, ‘Crossing the Chasm’ is due for a refresh

Geoffrey Moore’s “Chasm,” a framework for marketing technology products that has been one of the canonical foundational concepts to product-market fit for three decades, needs a bit of an upgrade, Flybridge Capital’s Jeff Bussgang writes.

“I have been reflecting on why it is that we venture capitalists and founders keep making the same mistake over and over again — a mistake that has become even more glaring in recent years,” he writes. “

Bussgang goes on to consider the Chasm — and propose tweaks for thinking about market size in the modern era.

Read More

Insurtech is hot on both sides of the Atlantic

Alex Wilhelm and Anna Heim dug into the EU insurtech market, interviewing European VCs and collating the biggest recent funding rounds to get a temperature of the insurtech waters across the pond.

Insurtech startups are a mix of just that: insurance and tech. One VC noted that public tech-focused investors don’t always understand the insurance elements of his business, while insurance investors aren’t always great at wrapping their heads around the tech side.

“But don’t think that the startups that we’ll discuss in a moment are doomed to future public lives of being misunderstood,” Alex and Anna write. Rather, “There’s fair reason to believe that there’s a reasonable exit market in the future of insurance technology unicorns.”

Read More

How to start a company in 4 days

Pulley founder and three-time YC alum Yin Wu offers a tactical guide to getting a startup running in four days. Yes, just four days.

“The logistics of setting up a startup should be simple, because over the long run, complicated equity setups and cap tables cost more money in legal fees and administration time,” Wu notes.

Read on for guidance on how to get your business going in less than a week.

Read More

What SOSV’s Climate Tech 100 tells founders about investors in the space

SOSV’s Benjamin Joffe and Meghan Hind round up a “who’s who” from the venture capital firm’s SOSV Climate Tech 100, a list of the best startups addressing climate change that SOSV has supported from the very beginning.

“What can founders learn from the list about climate tech investors? In other words, who invested in the Climate Tech 100?” they ask.

They dug into the list, which had more than 500 investors. Here’s what they found.

Read More

Dear Sophie: What is a diversity green card and how do I apply for one?

Dear Sophie,

I started a tech company about two years ago, and ever since I’ve dreamed of expanding my company in the United States.

I would love to have a green card. Someone mentioned that I should apply for a diversity green card. Would you please provide me with more details about it and how to apply?

— Technical in Tanzania

Read More

Health clouds are set to play a key role in healthcare innovation

Innovaccer founder and CEO Abhinav Shashank and CTO Mike Sutten write in a guest column that the U.S. healthcare industry is in the middle of a massive transformation.

This shift, they suggest, “is being stimulated by federal mandates, technological innovation, and the need to improve clinical outcomes and communication between providers, patients and payers.”

Improving healthcare now means we need to process tremendous amounts of healthcare data. How do we do it? The cloud, which “plays a pivotal role in meeting the current needs of healthcare organizations.”

Read More

What do these 4 IPOs tell us about the state of the market?

Earlier this week, The Exchange assessed the looming Monday.com IPO before reading the tea leaves about that flotation and three others to sum up the overall state of the market.

So what do the Marqeta, Monday.com, Zeta Global and 1stDibs debuts tell us? We may have been too conservative.

Read More

Toast’s Aman Narang and BVP’s Kent Bennett on how customer obsession is everything

On a recent episode of Extra Crunch Live, we spoke to Toast founder Aman Narang and Kent Bennett of Bessemer Venture Partners about how they came together for a deal, what makes the difference for both founders and investors when fundraising, and the biggest lessons they’ve learned so far.

The episode also featured the Extra Crunch Live Pitch-Off, where audience members pitched their products to Bennett and Narang and received live feedback.

Extra Crunch Live is open to everyone each Wednesday at 3 p.m. EDT/noon PDT, but only Extra Crunch members are able to stream these sessions afterward and watch previous shows on-demand in our episode library.

Read More