Overnight success now requires a little more time

Ten years ago the iOS App Store launched — and the mobile revolution was off. Entrepreneurs everywhere rallied to take advantage, building category-defining consumer companies like Twitter, Uber, Lyft and Square, among many others.

There’s no better time for an entrepreneur to start a company than when a new platform like mobile emerges. The rising tide in these moments becomes a tsunami: Eager customers descend on services through word of mouth and new acquisition channels; there’s outsized press interest; and sales take off in part due to growth of the platform itself.

Now is not one of these periods. Mobile appears mature, and the next great enabling platform is still just past the horizon. That’s why many early-stage VCs have shifted their focus away from consumer and to other new enabling technologies, such as autonomous vehicles, blockchain and AI/ML.

I have a different view. I think now is a great time to build consumer companies, even without a new platform. There are three reasons for this. First, the internet has created big problems for humans, organizations and society, which entrepreneurs can attack at scale. Second, the first wave of mobile-enabled companies have laid a foundation — including processes, seasoned executives and business models — that new entrepreneurs can borrow. And third, mobile technology is still changing and evolving.

Let’s take a closer look at all three.

Solving big problems

The last wave of breakout companies created interactive platforms (Twitter, Snapchat, Instagram, etc.) that have entertained many. They didn’t solve big societal problems. There’s now a big need — and big opportunity — for companies that can help people save time, money and sanity, even as they build great businesses.

Most of us now realize the major problems that a connected, mobile, always-on world has wrought. These include:

  • Income inequality. Lower-income Americans are struggling more than ever. Entrepreneurs should be thinking of ways to help folks where they need it the most: the pocketbook. That might mean unlocking found money, ensuring that available financial resources are being used wisely or saving consumers from the growing number of “gotchas” imposed by financial institutions.
  • Too many choices. When you can buy or choose anything, it’s hard to pick what you actually want. There are wide-open opportunities for concierges, curation and trusted guides.
  • A lack of intimacy. With everything online and available at the touch of a keypad, genuine human interaction has become more rare. There’s a need for companies that can provide real care and curation for matters that affect our daily lives.

Newly available resources

After a decade of building companies for mobile, there are now untold stories, battle scars and people available for future companies to learn from. This makes it easier for startups to assemble playbooks and experienced teams. It also reduces the downside risk for investors, opening new paths to capital for companies that need it.

For instance, it’s now clear that consumer brands must define, own and curate an end-to-end experience. A great new example is GOAT, the online sneakerhead marketplace. Faced with a sneaker market full of rampant knock-offs, the founders invested in a capital- and time-intensive process to manually inspect every shoe for authenticity. The result is an experience that every sneakerhead loves and a breakthrough consumer brand.

Building a breakout consumer platform will be more complex, more challenging and often more capital-intensive than it was for the prior generation.

There are also lots of executives and teams that know how to lead and manage complex operations, especially on the ground. This is crucial to scale logistically complex ideas like Opendoor, Instacart and others.

The other thing needed to help scale these companies is capital. And right now, there are two particularly relevant new kinds of investors: 1) mega equity funds like SoftBank Vision Fund, and 2) alternative lending funds that provide non-dilutive capital to companies to finance the acquisition of traditional assets. Those capital sources enable companies like Opendoor (disclosure: I’m a personal investor) to own and manage a truly delightful end-to-end experience.

Mobile today is not mobile tomorrow

Mobile devices have come a long way over the last decade. And there will be many more meaningful improvements in the near future, allowing for new uses and new companies.

I anticipate breakthroughs that will boost the ability of the chips and subsystems on a phone to perform optimally for far longer. Right now, these are throttled due to heating issues and other problems. As companies solve these issues, they’ll create order of magnitude improvements on what our phones are capable of, bringing technologies like VR and AR, to take two examples, far forward into everyday use.

On the network side, 5G and subsequent buildouts will meaningfully change what kinds of bandwidth we can handle, enabling even more data and compute to be in the cloud.

Mobile today is about one-to-many broadcast platforms like Instagram, Twitter and Facebook. Tomorrow’s great consumer companies will leverage a better vector: one-to-one customer intimacy. Companies like Grove Collaborative (disclosure: Mayfield is an investor) are experiencing hypergrowth in part by using real people connecting with consumers over text to bring a curated, personalized experience to shopping for household staples. I expect this to be a major trend, with the companies that earn the right to communicate more with customers the ones that win.

Building a breakout consumer platform will be more complex, more challenging and often more capital-intensive than it was for certain titans of the prior generation. But for those with the vision and substance to bring a valuable service to the world that solves real problems, the resources and emerging technologies will be there to help create the next groundbreaking consumer brand.

Italic launches its marketplace for affordable luxury goods from top manufacturers

A new startup called Italic says it’s already received more than 100,000 signups for a marketplace where you can buy handbags, eyewear and other luxury products directly from the manufacturers who work with the world’s best-known brands.

The marketplace is officially launching today. Italic is also announcing that it’s raised $13 million in funding from Comcast Ventures, Global Founders Capital, Index Ventures, Ludlow Ventures and others.

Founder and CEO Jeremy Cai previously co-founded the Y Combinator-backed hiring startup OnboardIQ (now known as Fountain.com), so this sounds like a pretty big change. However, Cai said he comes from a family in the manufacturing business, so he was acutely aware of the challenges facing manufacturers.

“The history of manufacturing has been about margins,” he said. “Even though they make the final product, they barely make a profit.”

Under the traditional model, it’s the brands that buy the goods from the manufacturers and make the real profit by marking up prices. So Cai saw an opportunity to remove the brands from the equation — Italic handles the consumer-facing side of the business, like product design and marketing, but it doesn’t actually buy anything. Instead, it operates more like a marketplace, connecting consumers and manufacturers.

Jeremy Cai

This also means the manufacturers are assuming more of the risk around the initial cost of creating the products, but Cai said that in return, they get much more of the upside. And apparently, Italic’s initial partners “jumped at the opportunity”: “They’ve been waiting for an option like this to get to get direct-to-consumer.”

Under the Italic model, the manufacturers remain anonymous, but the company says customers will be able to purchase handbags and leather goods from factories that work with Prada, Christian Louboutin and Givenchy; eyewear from a factory that works with EssilorLuxottica; bedding factories that work with Ritz Carlton and Four Seasons; and leather jackets from the same factory as J Brand.

Cai said this model also means consumers will pay significantly less than they would for luxury goods — most of the handbags will cost less than $300, the prescription eyewear will cost less than $100, leather jackets will be around $425 and bedding will be priced between $80 and $120. You’ll certainly be able to find cheaper products elsewhere, but the idea is sell to “the middle 40 percent” of consumers who are interested in high-quality products but want to be “a lot more frugal and smart with their dollars.”

And while Cai declined to specify the commission that Italic is charging manufacturers, he did say it differs from industry to industry, and added, “Our manufacturers make several multiples more than they make with their current brand clients.”

During our conversation, Cai repeatedly emphasized the difference between Italic and many of the new direct-to-consumer brands that have emerged online (such as Warby Parker and Casper).

Italic

When I wondered whether the marketplace vs. brand distinction will be lost on most consumers, he replied, “On the design side, we’re extremely intentional. We’re designing it with the messaging that we operate differently, you’re buying from a merchant who is an anonymous manufacturer. The sole intention is that when someone asks you, ‘Where did you get that handbag?’ you say, ‘I got this handbag from Italic, on Italic.’ The goal is to operate more like a retailer without any brands.”

At the same time, he acknowledged that Italic is itself a sort of brand, albeit with a unique business model.

“At the end of the day, it’s impossible to say we aren’t building a brand,” he said. “But the brand of Italic [should be that] we can consistently bring you high quality products at an incredible price point.”

Italic will operate on a membership model, which Cai said will allow the company to control demand, since quantities are limited. It also allows the company to solicit product feedback from members, and there could be other benefits like shipping discounts. Members who signup initially will get a year for free, but it will eventually cost $120 annually.

Spotify alums create Canopy content suggester that won’t steal your data

Personalization comes at a steep price. All your data gets sucked up into a company’s servers where they can do whatever they want with it. But Canopy is a new content discovery startup that’s invented impressive technology that lets it learn about you anonymously while all your data stays on your device. Built by the co-founder and CTO of Echo Nest, the music data startup Spotify acquired to power its recommendations, Canopy wants to turn privacy into a competitive advantage. It plans to equip any content app with its tech that crunches your biographical and behavior data on your phone or computer so all it sends along are clues to what you want to see or hear next.

But first, Canopy will launch its own proof of concept app early next year that suggests long-form articles and podcasts based on your taste and activity. “There hasn’t been a great solution to private discovery. We think the reason people haven’t been excited about privacy is that they haven’t seen the opportunities” says Canopy founder and CEO Brian Whitman. “We are totally changing the value exchange of the internet” adds Canopy’s head of product strategy and former Spotify Director Of Music Publishing Annika Goldman. Matrix Partners is betting on Canopy’s privacy-safe vision for the future, leading a $4.5 million seed round for the startup.

That seems wise considering Whitman built one of the world’s most beloved content recommendation engines: Spotify’s Discover Weekly. “I’ve been doing music recommendation stuff since 2000” Whitman tells me. He left in 2015, and started to become disallusioned about “how much power we had put in algorithmic decision making and personalization. All your information goes to their servers.” Facebook’s Cambridge Analytica scandal only confirmed his views. “All this data is now being used against people. You’re getting bad recommendations, bad ads, and people are being radicalized.”

A year or two ago he started discussing the idea of building a content recommendation engine that didn’t require your actual data as inputs. He came up with a solution where “Instead of sending thousands of data points to the server we can keep all that personal data on your phone” Goldman explains. “Take Spotify for example. You listen to a song. It knows where you listened to that, it know how long you listened to it, it knows what you did next — all this stuff they don’t need to know to make music recommendations. We condense and summarize all that information and send it as a single vector – a effectively a summary of things you might like and we make it impossible to reverse engineer the vector to understand the data behind it.”

She likens the system to a model of the content world on Canopy’s servers. Rather than sending it your past activity, personal info, and intentions, it just sends a set of coordinates of where you want the recommendations to go next. The 11-person Canopy team is now building out its app that will ask you questions and watch your consumption behavior to tune its suggestions. Since podcasts and longer articles aren’t owned by any one service, they’re an easy starting point for Canopy, though it eventually hopes to be content agnostic. And since it never has to suck up your data, there’s no risk of it being stolen in a breach.

That’s a big selling point for Canopy’s software-as-a-service it plans to license its tech to other apps.”Being able to build a platform that can understand your data without the liability of user data is gamechanging” Whitman declares.

Still, the biggest question facing the company is “Do people really care about privacy?” Every day we learn of a new hack attack, data exposure, or company selling our private info, but we go right on surfing. Even Facebook’s growth rate has only dipped slightly in the wake of all its privacy troubles. But Goldman believes that’s because it’s become so overwhelming that people “have a head in the sand view on privacy. ‘Hh my god, all my data is out there. I’m at risk. What do I do about it?’ Well I want to give people a way to do something about it”. Namely, trust Canopy instead of the data grabbers.

But if people can’t be tought the value of privacy, it’s hard to see partners going to the trouble of buidling in Canopy’s system. Whitman admits that services would take a modest hit to their recommendation accuracy if they adopt Canopy. He’s hoping the long-term goodwill of users will offset that. On the horizon, he predicts “there’s a great awakening of awareness.”

LocalGlobe, the London seed-stage VC, is raising a new fund aimed at Series B

LocalGlobe, the seed-stage venture capital firm founded by father and son duo Robin and Saul Klein, and one of the most active firms in the U.K., is gearing up to launch a new separate fund aimed at Series B.

According to sources — and since confirmed by LocalGlobe — the VC firm is raising a sister fund to formally back the most promising startups in its portfolio to help them scale.

It isn’t unheard for LocalGlobe to follow on after seed during later funding rounds, having done so in successful companies such as Zoopla and TransferWise. However, the thinking here is to have a separate fund to make this more common, and provide LPs a way to double down on LocalGlobe’s most promising bets.

The new fund is to be called “Latitude,” whist a recent regulatory filing mistakenly and inadvertently surfaced “Senderwood,” the holding company of LocalGlobe and Latitude. It is not known how much Latitude is looking to raise from LPs, although this is aimed at Series B so I’d expect it to be larger than LocalGlobe’s most recent £75 million fund.

TechCrunch has also learned that Julian Rowe has joined Latitude as a Partner from JP Morgan, where having moved back from Silicon Valley he latterly was EMEA Head of Internet and Digital Media and worked closely with successful U.K. scale-ups like Farfetch and Deliveroo.

LocalGlobe’s Robin Klein will also be heavily involved in the new Series B fund, formalising a role he has increasingly taken at LocalGlobe. Saul Klein is the third member of the Latitude team.

LocalGlobe issued the following statement, confirming the existence of Latitude, but declined to comment further:

“LocalGlobe’s new and existing investors are excited about the opportunity to invest in UK tech companies, both at seed and as they scale up, justifiably since the U.K. has now produced 60 unicorns or 35% of the total from Europe and Israel. We are exploring the technicalities of laying the foundations of a new fund, to be known as Latitude, for launch in 2019. This will enable us to invest in the most successful companies that are coming through from previous LocalGlobe funds at Series B and beyond. Initial conversations with investors have been going well and they are excited about the prospect of a new way to invest in some of the UK’s best early stage tech companies.”

Update: Oscar Williams-Grut at Yahoo Finance reports that Latitude’s debut fund is looking to raise $200 million (£156.5m).

Standard Cognition raises $40M to replace retailers’ cashiers with cameras

The Amazon Go store requires hundreds of cameras to detect who’s picking up what items. Standard Cognition needs just 27 to go after the $27 trillion market of equipping regular shops with autonomous retail technology.

Walk into one of its partners’ stores and overhead cameras identify you by shape and movement, not facial recognition. Open up its iOS or Android app and a special light pattern flashes, allowing the cameras to tie you to your account and payment method. Grab whatever you want, and just walk out. Standard Cognition will bill you. It even works without an app. Shop like normal and then walk up to kiosk screen, the cameras tell it what items you nabbed, and you can pay with cash or credit card. That means Standard Cognition stores never exclude anyone, unlike Amazon Go.

“Our tagline has been ‘rehumanizing retail’” co-founder Michael Suswal tells me. “We’re removing the machines that are between people: conveyor belts, cash registers, scanners…”

The potential to help worried merchants compete with Amazon has drawn a new $40 million Series A funding round to Standard Cognition, led by Alexis Ohanian and Garry Tan’s Initialized Capital . CRV, Y Combinator, and Draper Associates joined the round that builds on the startup’s $11 million in seed funding. Just a year old, Standard Cognition already has 40 employees, but plans to hire 70 to 80 more over the next 6 months so it can speed up deployment to more partners. Suswal wouldn’t reveal Standard Cognition’s valuation but said the round was roughly in line with the traditional percentage startups sell in an A round, That’s usually about 20 to 25 percent, indicating the startup could be valued around $160 million to $200 million pre-money.

Instead of some lofty tech solution that requires a whole new store to be built around it, Standard Cognition gets retailers to pay for the capital expenditures to install its low number of ceiling cameras and a computer to run them. They can even alter their store layout without working with an engineer as they pay a monthly SAAS fee based on their store’s size, SKUs, and product changes.

Standard Cognition’s founding team

Amazon Go uses thousands of cameras to track what you pick up

Suswal tells me “Retailers’ two biggest complaints are long lines and poor customer service.” Standard Cognition lets stores eliminate the lines and reassign cashiers to become concierges who make sure customers find the perfect products. “It’s already fun to shop, but I think it’s going to become a lot more fun in the future” Suswal predicts.

Having seven co-founders is pretty atypical for startups, but it’s helped Standard Cognition move quickly. The crew came together while all working at the SEC. They’d meet up as part of a technology research group, discussing the latest findings on computer vision and machine learning. Suswal recalls that “After about a year, we said ‘if we were going to productize this somehow, what would we do?” They settled on retail, and narrowed it down to autonomous checkout. Then a bombshell dropped. Amazon Go, the first truly signficant cashierless store, was announced.

“We initially thought ‘oh no, this is bad.’ And then we quickly came to our senses that this was the best thing that could happen” Suswal explains. Retailers would be desperate for assistance to fight off Amazon. So the squad quit their jobs and started Standard Cognition.

In September, Standard Cognition opened a 1,900 sq ft flagship test store on Market St in San Francisco, besting Amazon to the punch. Customers can stuff items in their bags, reconsider and put some back, and stroll out of the store with no stop at the cashier. Standard Cognition claims its camera system is 99 percent accurate, and is trained to identify the suspicious movements and behavior of shoplifters.

The store is part of a sudden wave of autonomous retail startups including Zippen that opened the first one in SF, fellow Y Combinator startup Inokyo that launched a bare-bones pop-up in Mountain View, and Trigo Vision which is partnering with Israeli an grocery chain for more than 200 stores.

Now with plenty of capital and eager customers, Standard Cognition is equipping stores for its first four partners — all public companies. Three refuse to be named but include US grocery, drug store, and convenience store businesses. The fourth is Japan’s pharmacy chain Yakuodo. Standard Cognition is already working on its store mapping for its cameras and will begin camera installation next month, though it will be a little while until it opens.

Japan is the perfect market for Standard Cognition because their aging population has produced a labor shortage. “They literally can’t find people to work in their stores” Suswal explains. Autonomous checkout could keep Japanese retailers growing. And because 70 percent of transactions in Japan are cash-based, it also forced the startup to learn how to handle payments outside of its app. That could make Standard Cognition appealing for retailers that want to embrace the future without abandoning the past.

Getting long-running retail businesses to invest in evolving may be the startup’s biggest challenge. Since they have to pay up front for the installation, they’re gambling that the system will reliably increase sales or at least decrease labor costs. But if it makes their stores too confusing, they could see an exodus of customers instead of an influx.

As for Standard Cognition’s impact on the labor class, Suswal admits that “the major chains will have some reduction . . . no one is going to get fired but fewer people will get hired.” He believes his tech could actually save some jobs too. “I was walking around NYC talking to (small chains and mom-and-pop) retailers about problems they face, and an alarming number of them told me ‘we’re closing in a year. We’re closing in 6 months.’ And it was all tied to the next minimum wage hike” Suswal tells me.

Reducing labor costs could keep those shops viable. “These stores can stay open with a reduction of labor so people are keeping their jobs, not losing them” he claims. Whether that proves true will take some time, but at least Standard Cognition’s tech could incentivize merchants to retrain their clerks for more fulfilling roles as concierges.

Plus-sized clothing startup Dia&Co gets another $70M from Sequoia, USV

The retail industry has and continues to fail the growing number of American women size 14 or larger, says Nadia Boujarwah, the co-founder and chief executive officer of Dia&Co, a personal styling service for plus-sized women.

According to Plunkett Research, nearly 70 percent of women in the U.S. are plus-sized; Dia&Co wants to expand the options available to that growing demographic. Today, the New York-based startup is announcing that it’s brought in another $70 million in venture capital funding from existing backers Sequoia Capital and Union Square Ventures (USV).

“I’ve been a plus-sized woman my whole life and no one can convince me that this isn’t a failure of retail,” Boujarwah told TechCrunch. “The current state of the plus size market is in no way reflective of how [it] should look going forward. There is so much work ahead of us.”

Dia&Co co-founder and chief executive officer Nadia Boujarwah.

Boujarwah started Dia&Co in 2015 with Lydia Gilbert. To date, the pair have raised $95 million and accumulated 4 million users on the Stitch Fix-like direct-to-consumer marketplace. The latest investment represents a previously unannounced $30 million Series B led by Sequoia and a $40 million Series C led by USV. As part of the Series C, USV partner Rebecca Kaden will join the startup’s board of directors; Sequoia partner Alfred Lin already sits on the board.

Dia&Co has also hired Francis Nzeuton as its chief financial officer. Most recently, Nzeuton led finance for Amazon’s U.S. consumables business.

Boujarwah declined to disclose Dia&Co’s latest valuation.

Urban Massage re-brands to ‘Urban’ as it launches wellness services beyond massage

Urban Massage, the London-headquartered startup that lets you book a vetted massage therapist “on-demand”, is expanding into new wellness services in addition to changing its name.

Now simply called Urban, the company, which operates in several U.K. cities along with Paris, is adding the ability to book an expert nail technician, GOsC-regulated osteopath, or skin therapist. It will utilise the same logistics tech and app experience that enables therapists to be booked with as little as an hour’s notice.

Founder Jack Tang tells me the move into new wellness categories forms part of a wider strategy to build Europe’s leading “holistic wellness” platform. This will see the company add fitness, yoga and other mental wellbeing-focused activities in the near future, including meditation.

Further ahead, Urban has plans to integrate digital therapy services, such as counselling.

Urban founder Jack Tang

Urban founder Jack Tang

Tang says that since Urban launched back in 2014, it has provided 389,000 treatments, and today sees a 42 percent repeat rate for bookings. The company claims 101,000 active users, and 2,500 active therapists on its platform. Its wellness practitioners have collectively earned £16.4 million via Urban in the past four years, and, I’d suggest, in a much fairer deal than the “self-employed” terms often offered to massage therapists by hotels or spas.

As a side note, I’m a user of Urban, and book a regular massage after I injured my neck and shoulder earlier this year. Tang says this is pretty common, in that many people only embrace massage therapy to combat pain, but afterwards discover the longer term wellness benefits, especially in terms of managing stress within a major city.

He also says that customers were asking for additional wellness category products. Notably, many of Urban’s registered massage therapists have related expertise and treatment skills and also wanted a way to utilise them within a familiar platform.

Since TechCrunch last covered Urban, a lot has happened, including an announced funding round: In August 2016, Urban closed £3.5 million in a Series A led by Felix Capital. “We got on and focused on delivering best experiences to our customers,” says Tang, refreshingly. With no current neck pain, I reply that this was probably the right decision.

In February, Urban acquired two competitors: Milk Beauty, on the consumer side, and B2B focussed Freauty to bolster its corporate wellness offering. Most recently, the company raised a further £3.5 million in an equity crowdfunding campaign on Seedrs. This saw Urban add 800-plus new investors, the majority of whom are current customers, therapists, and staff, along with existing VC backers.

And this March, Urban launched “Urban Curates,” a collection of at-home treatments in collaboration with top beauty and wellness brands including the likes of Estee Lauder Companies, and Unilever Prestige. This, Tang explained, is viewed as a new retail channel for brands, whereby consumers want to make “experience-led” purchases as an alternative to the high street.

Legrand acquires smart home startup Netatmo

French hardware startup Netatmo got acquired by the biggest manufacturer of switches and sockets in the world, Legrand. Terms of the deal are undisclosed.

Legrand and Netatmo already collaborated together on some products. Back in 2017, the company announced that it would work with industrial groups to connect everything in your home, starting with Legrand and Velux.

With Legrand’s “Céliane with Netatmo” switches and power outlets, you could build a house with a smart electrical installation from day one. This way, you could have a wireless master switch near your entrance, activate some outlets using Amazon Alexa and control your home from Messenger.

“Our strategy is the connected home. But there are some connected features that we can’t sell to consumers because those products are sold to professionals directly,” Netatmo founder and CEO Fred Potter told me at the time of the original announcement.

Netatmo’s team is going to be integrated into Legrand. Legrand plans to release more connected objects in the future. Netatmo founder and CEO Fred Potter is becoming CTO of Legrand’s research & development division. According to the announcement, Netatmo was generating $51 million (€45 million) in annual revenue.

Netatmo’s first product was a weather station. It works over Wi-Fi and was one of the first weather stations that you could check from your phone.

More recently, the company released security products, such as a connected camera that identifies faces on the device itself, a similar camera that works outdoor and a connected smoke alarm. Some people called Netatmo the “Nest of Europe” as the company also released smart thermostats and radiator valves.