Startups Weekly: The opportunities & challenges for mental health tech

Hello and welcome back to Startups Weekly, a weekend newsletter that dives into the week’s noteworthy startups and venture capital news. Before I jump into today’s topic, let’s catch up a bit. Last week, I wrote about Zoom and Superhuman’s PR disasters. Before that, I noted the big uptick in VC spending in 2019.

Remember, you can send me tips, suggestions and feedback to kate.clark@techcrunch.com or on Twitter @KateClarkTweets. If you don’t subscribe to Startups Weekly yet, you can do that here.

Now let’s talk about mental health startups. VCs may be confident in the potential of teletherapy, but struggling companies in the space tell another story.

Nine months ago Basis launched a website and app for guided conversations via chat or video with pseudo-therapists or people trained in research-backed approaches but who lack the same certifications as a counseling or clinical psychologist. I wrote a story noting that the company, led by former Uber VP Andrew Chapin, had raised a $3.75 million round from Bedrock, Wave Capital and Lightspeed Venture Partners.

But last month, things took a turn for the worse. Basis quietly shut down its website and app, its co-founder and chief science officer, Lindsay Trent, a former research psychologist at Stanford, exited and a good chunk of eight-person team went out the door.

Basis was one of many startups to benefit from VCs’ growing appetite for innovative businesses in the mental health sector. As the stigma associated with seeking mental health support has dwindled and technology developments have allowed for personalized mental health tools and practices, more entrepreneurs have entered the space. Basis, despite having many of the ingredients needed for startup success, couldn’t achieve success with its direct-to-consumer approach to therapy.

Basis Team

Basis co-founder and CEO Andrew Chapin (center) with the founding team last year

When asked why the Basis app and website were no longer active, Chapin said the company is in the process of “shifting business models.” He declined to provide further details. Lightspeed declined to comment. Wave Capital and Bedrock did not respond to requests for comment.

Basis, which did not claim to treat diagnosable conditions like bipolar disorder or schizophrenia, charged $35 per 45-minute phone call with its paraprofessionals. Its use of unlicensed therapists sparked concern in the mental health provider community. Harley Therapy founder Sheri Jacobson, an accredited counselor and psychotherapist, noted flaws with the service: “For me, replacing professional therapists and all of their lived experience and empathy with telepsychiatry administered by novice advisers could be potentially dangerous,” Jacobson said in a statement. “Would you let a learner driver navigate an oil tanker?”

Consumer mental health startups continue to attract capital from private market investors. Workplace mental health service Unmind, Blackthorn Therapeutics (a neurobehavioral health company using machine learning to create personalized medicine for mental health) and Talkspace (a leader in the online counseling space) have all closed funding rounds in 2019.

Whether Basis will find its footing is TBD. What’s clear is VCs are still willing to dole out checks as they experiment with the mental health space, but if startups don’t start proving viable business models and learn to navigate the complex adoption curve, we’ll see additional startups cease operations and mental health tech’s moment in the sun will end all too soon.

Now for a quick look at the top VC and startup news of the week:

Adam Neumann (WeWork) at TechCrunch Disrupt NY 2017

Adam Neumann did what?

The eccentric co-founder and CEO of the international real estate co-working startup WeWork has reportedly cashed out of more than $700 million from his company ahead of its upcoming IPO. According to Axios, a majority of that capital came in the form of loans while the remaining $300 million came from stock sales. The size and timing of the payouts is unusual, considering that founders typically wait until after a company holds its public offering to liquidate their holdings. But even with the big sale, Neumann remains the single largest shareholder in WeWork.

Medallia soars

The customer experience management platform priced shares of its stock at $21 apiece Thursday, closing up Friday a whopping 76%. Money left on the table? I think so, and I bet Bill Gurley does too. The nearly two-decades-old company sold a total of 15.5 million shares in its IPO, raising $326 million at a $2.5 billion valuation in the process. Medallia’s $268 million in VC funding came from Sequoia Capital — which owned a roughly 40% pre-IPO stake — Saints Capital, TriplePoint Venture Growth and Grotmol Solutions.


Uber finally sets diversity and inclusion goals

Within the next three years, Uber aims to increase the percentage of women at levels L5 and higher (manager and above) to 35% and increase the percentage of underrepresented employees at levels L4 and higher to 14%. Currently, Uber is 9.3% black and 8.3% Latinx compared to just 8.1% black and 6.1% Latinx last year. Uber’s tech team, however, is just 3.6% black, 4.4% Latinx and 2.7% multi-racial. Unsurprisingly, there’s little representation of black and brown people in leadership roles. While Uber CEO Dara Khosrowshahi commented that he’s proud the promotion rates for women have improved over the last couple of years, he added, “I can’t yet say the same for promotions for people of color.”

Email platforms and productivity apps and subscription tools, oh my!

Startups focused on improving productivity and email are unstoppable this year. The latest to close VC rounds are Substack and Notion. Andreessen Horowitz is betting that there’s still a big opportunity in newsletters, leading a $15.3 million Series A in Substack. The company, which consists of just three employees working out of a living room, says that newsletters on the platform have now amassed a total of 50,000 paying subscribers (up from 25,000 in October) and that the most popular Substack authors are already making hundreds of thousands of dollars per year. As for Notion, The Information reported this week that it raised $10 million at an $800 million valuation. Notion is a note-taking and task management app that hasn’t sought much VC funding and, as a result, VCs have been desperately knocking at its door.

Other notable funding events of the week:

The trouble with blitzscaling

Silicon Valley has many dreams. One dream — the Hollywood version anyway — is for a down-and-out founder to begin tinkering and coding in their proverbial garage, eventually building a product that is loved by humans the world over and becoming a startup billionaire in the process. But when it comes to that Silicon Valley dream of a nice house from a decent return on exit, it’s getting narrower and less widely distributed. Blitzscaling is making a lot of people a lot of wealth, but early employees? Not so much.

Read more from TechCrunch editor Danny Crichton.

TechCrunch’s senior transportation reporter Kirsten Korosec.

Get ready for … The Station

TechCrunch senior transportation reporter Kirsten Korosec has something great in the works. All of us here at TechCrunch are very excited to announce The Station, a new TechCrunch newsletter all about mobility. Each week, in addition to curating the biggest transportation news, Kirsten will provide analysis, original reporting and insider tips on the fast-growing industry. Sign up here to get The Station in your inbox beginning in August.

~Extra Crunch~

While we’re on the subject of amazing TechCrunch #content, it’s probably time for a reminder for all of you to sign up for Extra Crunch. For a low price, you can learn more about the startups and venture capital ecosystem through exclusive deep dives, Q&As, newsletters, resources and recommendations and fundamental startup how-to guides. Here are some of my personal favorite EC posts from the past week:

#EquityPod

If you enjoy this newsletter, be sure to check out TechCrunch’s venture-focused podcast, Equity. In this week’s episode, available here, Equity co-host Alex Wilhelm and I debate Forbes’ latest next billion-dollar startups list.

Extra Crunch subscribers can read a transcript of each week’s episode every Saturday. Read last week’s episode here and learn more about Extra Crunch hereEquity drops every Friday at 6:00 am PT, so subscribe to us on Apple PodcastsOvercast, Pocket Casts, Downcast and all the casts.

That’s all, folks.

Deadline extended! Apply to the All Raise female founder program at Disrupt SF 2019

We’ve got great news for all the time-strapped female founders out there. Yeah, we’re looking at you, sister. We’re extending the application deadline to apply for the All Raise “ask me anything” (AMA) sessions at Disrupt SF 2019. Don’t miss this rare opportunity to meet with a leading female VC and, well, ask her anything. Apply for an AMA session by August 15.

Not familiar with All Raise? This startup nonprofit, dedicated to accelerating female founder success, will host a day-long AMA event on October 3 at Disrupt SF 2019 — in a dedicated section of Startup Alley. Each AMA session lasts 30 minutes and consists of three founders and one VC. All Raise expects more than 100 female founders to take part in at least 30 sessions scheduled throughout the day.

Don’t bring your pitches, bring your questions — the kind of questions that keep you up at night. It’s a rare opportunity to ask a leading VC advice on topics like your next raise, key hires, your competition. Imagine receiving business advice from any of these female VCs:

  • Dayna Grayson, NEA
  • Susan Lyne, BBG
  • Shauntel Garvey, Reach Capital
  • Eurie Kim, Forerunner
  • Jess Lee, Sequoia
  • Kara Nortman, Upfront
  • Sara Guo, Greylock,
  • Anarghya Vardhana, Maveron
  • Eva Ho, Fika Ventures
  • Sarah Smith, Bain Capital Ventures
  • Jess Lin, Work-Bench

You can apply for an All Raise AMA session if you’re a U.S.-based woman founder and you’ve raised at least $250,000 in a seed, A or B round. All Raise gives special consideration to founders from underrepresented groups (e.g. Black, Latinx or LGBTQIA women).

All Raise will review the applications and notify the founders. Acceptance is based on availability for session spots, investor fit with industry sector and company stage, as well as demand for certain categories.

If you’re selected, your next step is to buy any pass to Disrupt SF (including Expo Only). All Raise will send an email to let you know what time they’ve scheduled your session.

Networking opportunities of this caliber don’t come along very often — especially for women in tech. Build connections, learn from expert female VCs and move your startup forward. Take advantage of the deadline extension and apply for an AMA session before August 15. We want to see you in San Francisco!

If you are interested in sponsoring this event or exhibiting at Disrupt San Francisco 2019, fill out this form to get in contact with our sales team.

India’s Oyo valued at $10B after founder purchases $2B in shares

The fast-growing Indian hospitality business Oyo has garnered a valuation of $10 billion after its founder, Ritesh Agarwal, reportedly purchased $2 billion in shares from venture capital firms Sequoia Capital and Lightspeed Venture Partners.

Agarwal, 25, founded Oyo in 2013 at the age of 19. Following immense growth of the now global hotel chain business, Agarwal opted to increase his 10% stake to 30% via a Cayman Islands company called RA Hospitality Holdings, according to The Wall Street Journal. SoftBank has also increased its percent ownership as part of this round, now owning nearly half of the company.

Oyo has raised a whopping $1.6 billion in equity funding to date, reaching a valuation of $5 billion at its last funding round. Other investors in the company include Airbnb, Grab Holdings and Didi Chuxing.

Oyo is active in 800 cities in 80 countries, with more than 23,000 hotels in its portfolio. Recently, the company announced plans to invest $300 million in the U.S. market, where it currently operates more than 50 Oyo Hotels in 35 cities and 10 states.

Earlier this week, the Gurgaon-headquartered firm introduced Oyo Workspaces. The new entity was born out of its acquisition of Innov8, a co-working startup with more than 200 employees. The four-year-old startup was acquired for about $30 million, according to reporting by TechCrunch’s Manish Singh.

We’ve reached out to Oyo for comment.

Self-driving startup AutoX expands beyond deliveries and sets its sights on Europe

AutoX, the Hong Kong and San Jose, Calif.-based autonomous vehicle technology company, is pushing past its grocery delivery roots and into the AV supplier and robotaxi business.

And now, it’s taking its business to Europe.

AutoX has partnered with NEVS — the Swedish holding company and electric vehicle manufacturer that bought Saab’s assets out of bankruptcy — to deploy a robotaxi pilot service in Europe by the end of 2020. Under the exclusive partnership, AutoX will integrate its autonomous drive technology into a next-generation electric vehicle inspired by NEVS’s “InMotion” concept that was shown at CES Asia in 2017.

autox nevs

This next-generation vehicle is being developed by NEVS in Trollhättan, Sweden. Testing of the autonomous NEVs vehicles will begin in the third quarter of 2019. The vehicles will hit public roads in Europe next year, the companies said. 

AutoX founder and CEO Jianxiong Xiao, commonly referred to as Professor X, noted that this particular vehicle is ideal for an autonomous taxi service because it is purpose-built for this specific application, doesn’t produce tailpipe emissions, can be used 24 hours a day and can help reduce the number of vehicles in the streets.

The companies ultimately want to deploy a large fleet of robotaxis globally.

The partnership with NEVs is the latest sign that AutoX has broader ambitions for its autonomous vehicle technology than delivery services. AutoX launched in 2016 and was initially focused on using self-driving vehicles for delivering packages, namely groceries. Last August, the startup kicked off a grocery delivery and mobile store pilot in a limited area in San Jose in partnership with GrubMarket.com and local high-end grocery store DeMartini Orchard.

But more recently, the company, which has raised about $58 million from venture and strategic investors, has expanded its plans. The company now wants to supply manufacturers with autonomous vehicle technology and launch its own robotaxi service.

In June, AutoX became the second company to receive permission from California regulators to transport passengers in its robotaxis. AutoX is calling its California robotaxi service xTaxi.

The California Public Utilities Commission has also granted Pony.ai, Waymo and Zoox permits to participate in the state’s Autonomous Vehicle Passenger Service pilot, which prohibits the companies from charging for these robotaxi rides.

Professor X has previously said his mission is to open up autonomous vehicles to everyone, and so this expansion shouldn’t come as a surprise. It’s a goal the company contends can be reached using economical (and better) hardware. The company does use light detection and ranging radar, known as lidar. But instead of loading up its self-driving vehicles with numerous expensive lidar units, AutoX relies more on cameras, which it argues have better resolution. The company’s proprietary AI algorithms tie everything together.

For now, the xTaxi pilot in California will be rather limited. It will operate in the same operational design domain as the delivery service in San Jose, an area of about five square miles. But the company clearly has ambitions to expand both in size and geographic reach. AutoX has more than 115 employees, and plans to hire more than 50 people this year.

The company is also working with San Jose city government to launch another pilot downtown. It has yet to reveal details, although the pilot could launch as early as next month.

AutoX also has a permit to operate a robotaxi service in Shenzhen, China. It’s not clear whether the company will operate this service on its own or follow the model it set in Europe with NEVS. It’s possible AutoX will partner with BYD in China. AutoX is already working with the Chinese company to integrate its AV tech into BYD vehicles.

How to go to market in middle America

There comes a time for many startup companies where they either realize they need to do a nationwide roll-out, or they need to actively target buyers in the middle of the country. If you are a startup on either the east or the west coasts, it’s worth thinking about how this market might present its own set of unique challenges, and how you plan to overcome them.

There are a lot of misconceptions about what some people call “flyover country”, and as a San Francisco native who spent two decades in NY, DC, and Boston before moving to Pittsburgh, I can assure you they are almost all wrong. Without getting into specifics, the reality of “middle America” is that it’s the same as anywhere else.

Income, education, world view, and waistlines are all varied. It’s pretty accurate that San Francisco possesses a culture obsessed with fitness and entrepreneurship. But, California isn’t necessarily all like that, and if you think it is, I encourage you to go to Bakersfield, the Central Valley, or Eureka sometime.

In addition, just because the stereotypes are wrong doesn’t mean there’s nothing different about doing business here. As you think about how to conduct your rollout, here are some things you should consider:

Table of Contents

Research

As with any market, research is key since it informs every other aspect of the rollout. Start by looking into who your competition is.

Since there are fewer VC backed startups in middle America, and smaller companies tend to get less press, the research may be harder. However, there are some major universities that are actively putting money into their own Entrepreneurship programs and those spinoffs often do very well.

Can you really predict the next generation of unicorns?

Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast, where we unpack the numbers behind the headlines.

It’s a good week here at Equity HQ because our two co-hosts are both back at the same time! Kate Clark and Alex Wilhelm, after each of them taking some time off, led the show today, digging into a wealth of news and happenings.

Here’s a quick rundown of what happened on the show this week!

  • Postmates is still working on its IPO! Despite some reports indicating that the popular on-demand delivery company was talking to rival players about a possible sale, the company’s CEO said this week that his firm is still looking to go public. (It’s also picking up money this year, and talent.) Selfishly we love this, as we want to read its S-1 and see its numbers, something that wouldn’t happen if it wound up subsumed into a larger company. Say, Uber for example.
  • DouYu priced its IPO at the low-end of its range, but the offering did add lots of new capital to its coffers. Not every IPO raises its range and prices above the heightened interval, DouYu reminds us. But the company’s debut is yet another China-based unicorn going public on the U.S. markets, so we had no choice but to pay attention to the streaming and esports-themed company. Recall that Huya, a similar company, went public previously (more here).
  • CrowdStrike’s first earnings report was a success. The cybersecurity business focused on endpoint protection posted revenues of $96.1 million on GAAP net losses of $26 million in the first quarter of fiscal year 2020. The company, if you remember, completed a $612 million NASDAQ initial public offering in June.
  • The next unicorn list contains some obvious companies (Rothy’s, Next Trucking, etc.) and some surprise entries (Lattice?).
  • 100 Thieves has lots of new money, and esports is cool. That’s a quick summary, but in detail, the firm added a $35 million Series B to its accounts less than a year after it raised a $25 million Series A. When a firm raises an extra round that quickly, it usually means things are going well.
  • Patreon raised a big new round. You’re all familiar with Patreon, a platform that supports creators. Can a pivot toward SaaS accelerate its path toward a billion-dollar valuation? We think so.
  • Substack, a plucky favorite of the journalist scene, has fresh capital! Because both Alex and Kate are authors of their very own newsletters (yes, they have a podcast too, sorry), they had plenty of thoughts about this one.

Next week Kate and Alex are back and we may even have a special guest back with us. So make sure you are subscribed, and we’ll be right back in just seven days.

Equity drops every Friday at 6:00 am PT, so subscribe to us on Apple PodcastsOvercast, Pocket Casts, Downcast and all the casts.

 

Lexion raises $4.2M to bring AI to contract management

Contract management isn’t exactly an exciting subject, but it’s a real pain point for many companies. It also lends itself to automation, thanks to recent advances in machine learning and natural language processing. It’s no surprise then, that we see renewed interest in this space and that investors are putting more money into it. Earlier this week, Icertis raised a $115 million Series E round, for example, at a valuation of more than $1 billion. Icertis has been in this business for ten years, though. On the other end of the spectrum, contract management startup Lexion today announced that it has raised a $4.2 million seed round led by Madrona Venture Group and law firm Wilson Sonsini Goodrich & Rosati, which was also one of the first users of the product.

Lexion was incubated at the Allen Institute for Artificial Intelligence (AI2), one of the late Microsoft co-founders’ four scientific research institutes. The company’s co-founder and CEO, Gaurav Oberoi, is a bit of a serial entrepreneur, whose first startup, BillMonk, was first featured on TechCrunch back in 2006. His second go-around was Precision Polling, which SurveyMonkey then acquired shortly after it launched. Oberoi founded the company together with former Microsoft research software development engineering lead Emad Elwany, and engineering veteran James Baird.

4 understanding autorenewal clause

“Gaurav, Emad, and James are just the kind of entrepreneurs we love to back: smart, customer obsessed and attacking a big market with cutting edge technology,” said Madrona Venture Group managing director Tim Porter. “AI2 is turning out some of the best applied machine learning solutions, and contract management is a perfect example – it’s a huge issue for companies at every size and the demand for visibility into contracts is only increasing as companies face growing regulatory and compliance pressures.”

Contract management is becoming a bit of a crowded space, though, something Oberoi acknowledge. But he argues that Lexion is tackling a different market from many of its competitors.

5 extraction in action animation

“We think there’s growing demand and a big opportunity in the mid-market,” he said. “I think similar to how back in the 2000s, Siebel or other companies offered very expensive CRM software and now you have Salesforce — and now Salesforce is the expensive version — and you have this long tail of products in the mid-market. I think the same is happening to contracts. […] We’re working with companies that are as small as post-seed or post-Series A to a publicly-traded company.”

Given that it handles plenty of highly confidential information, it’s no surprise that Lexion says that it takes security very seriously. “I think, something that all young startups that are selling into business or enterprise in 2019 need to address upfront,” Oberoi said. “We realized, even before we raised funding and got very serious about growing this business, that security has to be part of our DNA and culture from the get-go.” He also noted that every new feature and product iteration at Lexion goes through a security review.

Like most startups at this stage, Lexion plans to invest the new funding into building out its product — and especially its AI engine — and go-to-market and sales strategy.

Hardware startups take center stage for Hardware Battlefield at TC Shenzhen

Software grabs so much attention that it even has its own catchphrase — there’s an app for that. It’s not a bad thing, but we know nothing happens without hardware. That’s why we’re hunting for the best early-stage hardware startups to take center stage at Hardware Battlefield at TC Shenzhen on November 11-12 in China.

Apply here to compete in TC Hardware Battlefield 2019, our hardware-focused pitch competition. If selected, you’ll go head-to-head against some of the world’s most innovative hardware makers for a shot at $25,000. What’s more, you’ll pitch your creations to the world’s top investors. Imagine what that kind of exposure could do for your bottom line.

This is our fifth Hardware Battlefield and our first in China. Shenzhen has a global reputation for the support it offers hardware startups through a combination of accelerators, rapid prototyping and world-class manufacturing. We’re thrilled to collaborate with our partner TechNode to host TC Hardware Battlefield 2019 as part of the larger TechCrunch Shenzhen that runs November 9-12.

Any early-stage hardware startup — from any country — can apply to this competition. We’ve seen an impressive range of hardware in previous Battlefields, including robotic arms, food testing devicesmalaria diagnostic tools, smart socks for diabetics and e-motorcycles. Show us what you’ve got!

Meet the minimum requirements listed below, and you’re qualified for consideration:

If you’ve never experienced one of our Battlefield pitch competitions, you’re in for the ride of a lifetime. Here’s how this Hardware Battlefield works.

The vetting process is very selective, and TechCrunch editors thoroughly review every qualified application. They’ll pick 10-15 outstanding hardware startups to compete. Every participating team receives extensive coaching from TechCrunch editors wise in the ways of Battlefield competitions. How extensive? Try six weeks of training that leaves you ready to step on the main stage in front of a panel of judges comprised of expert VCs, founders and technologists.

Each team has just six minutes to pitch and demo their products and then respond to an in-depth Q&A from the judges. One team will rise above the rest to become the Hardware Battlefield champion and take home a check for $25,000.

Even if you don’t win the whole shooting match, you’ll walk away with invaluable — some might say life-changing — media and investor exposure. Of course, we’ll capture the entire event on video and publish it on TechCrunch to a global audience.

Hardware Battlefield at TC Shenzhen takes place on November 11-12. Don’t miss your chance to launch your hardware startup on the world’s most famous tech stage. Apply today!

Is your company interested in sponsoring or exhibiting at Hardware Battlefield at TC Shenzhen? Contact our sponsorship sales team by filling out this form.