Part fund, part accelerator, Contrary Capital invests in student entrepreneurs

First Round Capital has both the Dorm Room Fund and the Graduate Fund. General Catalyst has Rough Draft Ventures. And Prototype Capital and a few other micro-funds focus on investing in student founders, but overall, there’s a shortage of capital set aside for entrepreneurs still making their way through school.

Contrary Capital, a soon-to-be San Francisco-based operation led by Eric Tarczynski, is raising $35 million to invest between $50,000 and $200,000 in students and recent college dropouts. The firm, which operates a summer accelerator program for its portfolio companies, closed on $2.2 million for its debut, proof-of-concept fund in 2018.

“We really care about the founders building a great company who don’t have the proverbial rich uncle,” Tarczynski, a former founder and startup employee, told TechCrunch. “We thought, ‘What if there was a fund that could democratize access to both world-class capital and mentorship, and really increase the probability of success for bright university-based founders wherever they are?’ “

Contrary launched in 2016 with backing from Tesla co-founder Martin Eberhard, Reddit co-founder Steve Huffman, SoFi co-founder Dan Macklin, Twitch co-founder Emmett Shear, founding Facebook engineer Jeff Rothschild and MuleSoft founder Ross Mason. The firm has more than 100 “venture partners,” or entrepreneurial students at dozens of college campuses that help fill Contrary’s pipeline of deals.

Contrary Capital celebrating its Demo Day event last year

Last year, Contrary kicked off its summer accelerator, tapping 10 university-started companies to complete a Y Combinator -style program that culminates with a small, GP-only demo day. Admittedly, the roughly $100,000 investment Contrary deploys to its companies wouldn’t get your average Silicon Valley startup very far, but for students based in college towns across the U.S., it’s a game-changing deal.

“It gives you a tremendous amount of time to figure things out,” Tarczynski said, noting his own experience building a company while still in school. “We are trying to push them. This is the first time in many cases that these people are working on their companies full-time. This is the first time they are going all in.”

Contrary invests a good amount of its capital in Berkeley, Stanford, Harvard and MIT students, but has made a concerted effort to provide capital to students at underrepresented universities, too. To date, the team has completed three investments in teams out of Stanford, two out of MIT, two out of University of California San Diego and one each at Berekely, BYU, University of Texas-Austin, University of Pennsylvania, Columbia University and University of California Santa Cruz.

“We wanted to have more come from the 40 to 50 schools across the U.S. that have comparable if not better tech curriculums but are underserviced,” Tarczynski explained. “The only difference between Stanford and these others universities is just the volume. The caliber is just as high.”

Contrary’s portfolio includes Memora Health, the provider of productivity software for clinics; Arc, which is building metal 3D-printing technologies to deliver rocket engines; and Deal Engine, a platform for facilitating corporate travel.

“We are one giant talent scout with all these different nodes across the country,” Tarczynski added. “I’ve spent every waking moment of my life the last eight years living and breathing university entrepreneurship … it’s pretty clear to me who is an exceptional university-based founder and who is just caught up in the hype.”

Corporations and private investors are backing new “green” deals as climate worries mount

In the nine years since private equity and venture capital investments into sustainable technologies last crossed the $6 billion threshold, the problems caused by global carbon emissions have only intensified.

Now, as the world confronts the reality that there’s not much time left to reverse course on carbon emissions and the impact they will have on life on earth, both corporate and private investors are once again stepping up their commitments to startups in the space.

In 2018 global venture capital investment into startups focused on sustainability jumped 127% to $9.2 billion, the highest since 2010, according to a January report from Bloomberg New Energy Finance. Powering that boost was a $1.1 billion investment in the smart window maker, View, and another $795 million for Chinese electric vehicle firm Youxia Motors. In fact, there were no fewer than eight VC/PE financings of Chinese EV specialist companies in 2018, totaling some $3.3 billion.

That stark assessment is coming from more corners of the scientific community and the reality of the danger is being emphasized by politicians and concerned citizens around the globe.

The simple truth is that things are getting worse. And for the past two years, emissions have been increasing as countries continue to use oil and gas and coal to fuel economic growth, even as the global community realizes that carbon emissions are an increasing threat.

A recent assessment by the U.S. government put the cost of climate change caused by carbon emissions at $500 billion annually by the end of the century. And the financial toll doesn’t begin to assess the cost to the quality of human life and the potential lives that will be lost because of climate-related disasters.

This isn’t the first time that the world has realized the threat climate change poses. It’s not even the second. Back in 1979 — and throughout the next decade —  the U.S. grappled with how to craft an appropriate response to the coming climate-related crisis. Perhaps unsurprisingly, the government failed, and the issue of imminent climate disaster was set aside.

Former Vice President Al Gore, picked up the thread in the mid-2000s in the wake of his defeat in the contested 2000 Presidential election by the Connecticut yankee turned Texas oilman George W. Bush. Through advocacy work and the popular climate-focused documentary “An Inconvenient Truth”, Gore was able to proselytize among a group of technocrats looking for the next big thing in the wake of the Internet explosion that had transformed professional and personal lives.

Venture capital investors flocked to invest in renewable technologies — from biofuels to new solar energy generating technologies to new battery chemistries and beyond.

Over the next seven years billion dollar companies would rise and fall on the back of speculative investment in the promise of a cleaner energy future that would disrupt the oil industry and turn billionaires into multi-billionaires — all while saving the world.

It didn’t work out.

Problems with scaling technologies beyond a controlled laboratory setting; global economic pressures wrought by an explosion of manufacturing capacity in countries like China; and the hubris of investors who thought that their investment acumen in picking winners of the information age could work just as well in centuries-old industries like oil and gas, or electricity, found themselves floundering in complicated, regulated markets with deep-pocketed incumbents and entrenched interests in promoting the status quo.

In the process investors lost hundreds of millions of dollars in the U.S. alone and destabilized some of the oldest firms in the investment industry.

Now, companies and investors are returning to the market in a major way. Some of the largest businesses in teh food and agriculture industry are investing in new companies that are developing protein replacements and novel cultivation technologies; utilities are investing more heavily in smart grid technologies as electrification and microgrids become more real; automakers and battery manufacturers are backing new energy storage technologies; and frontier investors are backing companies tackling everything from biologically based chemical manufacturing to new construction technologies for smart homes and cities, to new kinds of nuclear power that could transform how the world conceives of energy abundance (along with geo-engineering tech to remove carbon from the atmosphere).

“In the last few years, the number of technologies ripe for investment has expanded dramatically,” Ravi Manghani, research director for energy storage at Wood Mackenzie, an energy research and consultancy firm, told CNBC in March. “It’s no longer just three or four technology verticals.”

While none of these technological advancements are a guaranteed solution to the threats carbon emissions pose, or are surefire commercially viable businesses, the fact that investors are once again looking at sustainability as a viable investment thesis — capable of producing multiple billion dollar businesses is a good step forward.

Any plan to address decarbonization has to confront industries as diverse as agriculture, construction, transportation, chemicals and consumer goods from clothes to chemicals.

Failure to confront these challenges would be catastrophic. Even if global warming is restricted to just the 2 degree Celsius target set at the Paris climate agreement, that could mean the extinction of the world’s tropical reefs and several meters of sea-level rise, as The New York Times reported last August. Already the impacts of climate change have meant tens of billions of dollars in damage for the U.S. in 2018 alone.

“The era of incrementalism on climate change is over,” said Massachusetts Senator Ed Markey, one of the architects of the “Green New Deal” legislation, in an interview with Vox. “We are now in the era of the Green New Deal. It’s not going away. It is creating an incentive for governors to do more, for mayors to do more, for companies to do more. The polling says it has political legs that will drive it right into the election of 2020, and when that cycle is done, I think we’re going to see a much greater capacity for us to take the kind of action that we need.”

With a new CEO and fresh funding from Upfront, healthy prepared food delivery service Territory looks to grow

With a new chief executive officer and $4 million in fresh funding from investors including the Los Angeles-based investment firm, Upfront Ventures, Territory Foods is poised for growth.

The company recently hired powerhouse executive Abby Coleman, the former vice president of marketing and strategy at Quidsi and head of e-commerce at Diapers.com as its new chief executive and is now looking to expand its footprint and unique approach to meal delivery beyond its current geographies.

The company uses a proprietary food recommendation engine to determine its subscribers’ personal preferences to deliver them meals that are more tailored to their individual tastes.

Territory also employs a unique business model, leveraging local chefs to prepare meals according to menus designed by the company.

The distributed workforce of gig chefs allows the company greater flexibility in planning, preparing, and distributing its meals, according to Coleman.

A lifelong vegetarian and mother of two vegetarian daughters, the 39-year-old Coleman actually began her business in the food services industry as a caterer before moving on to leadership positions at Kraft Foods and Mondelez International before taking on the vice presidential role at Quidsi.

“My coming on board was really a response to a decision that the board and Patrick [Smith] made that it was time to scale the business,” says Coleman. 

With the new cash the company intends to expand its footprint in locations beyond its hubs in major cities on the East and West coasts (and Texas), including: Baltimore, Dallas/Ft. Worth, Los Angeles, San Francisco, and the Washington metropolitan area.

There’s plenty of opportunity for growth considering that the market for healthy eating and personalized food is roughly $702 billion, according to the company. In 2018, one out of every three Americans reported to following some kind of healthy eating protocol with the percentage highest among 18-34 year olds, according to information provided by Territory.

“It’s rare to see businesses like Territory that hit major trends at the right time with the right product,” said Kara Nortman, Partner at Upfront Ventures. “Territory has been able to consistently punch above its weight with a very smart economic model and a product that consumers love, and we couldn’t be more excited to lean into this business with Abby and her team. Abby’s passionate knowledge of food and superb ecommerce skills combine to make her the perfect leader for Territory’s next phase of growth.”

Indeed, the company’s methodical approach to growth has been a strength that has led it to profitability in core markets like Los Angeles and Washington, Coleman says.

Territory wrings efficiency out of its network of chefs, which has a high retention rate and allows the company to act in an asset light way. Chefs are paid to prepare the meals, but provide the ingredients themselves and work as contractors rather than employees. They pocket the difference between the cost of the ingredients they use and the price they’re paid by Territory to prepare the meals.

Coleman says the business model leverages the excess capacity caterers have while offering them the opportunity to tailor their meals to suit local market tastes.

And just because the chefs are given a bit of free rein doesn’t mean that there’s any lack of quality control, Coleman says. “The emphasis is on the quality control that a product is up to our standards,” according to Coleman. 

Meals are $10.95 and are designed around the needs of customers — ranging from paleo, whole 30, keto, and vegetarian options. Now, Coleman is looking to aggressively expand the flexibility and menu options available to customers.

“It’s more like a restaurant and we’re going to have an entirely new menu next week,” Coleman says. “We create over 400 new dishes a year.”

Despite the woeful performance of public companies like Blue Apron, prepared food companies are still attracting investor attention and interest — especially if they’re married with a pitch to health-conscious consumers targeting a specific diet.

Territory Foods has raised $20 million to date, including the new cash from Upfront Ventures and Lewis & Clark, while Trifecta, another purveyor of prepared foods has raised $2.6 million. And the giants are still around as well, the companies like Plated, HelloFresh, Home Chef (owned by Kroger Foods), and Sun Basket, which have raised over $500 million combined.

 

Beto O’Rourke could be the first hacker president

Democratic presidential candidate Beto O’Rourke has revealed he was a member of a notorious decades-old hacking group.

The former congressman was a member of the Texas-based hacker group, the Cult of the Dead Cow, known for inspiring early hacktivism in the internet age and building exploits and hacks for Microsoft Windows. The group used the internet as a platform in the 1990s to protest real-world events, often to promote human rights and denouncing censorship. Among its many releases, the Cult of the Dead Cow was best known for its Back Orifice program, a remote access and administration tool.

O’Rourke went by the handle “Psychedelic Warlord,” as revealed by Reuters, which broke the story.

But as he climbed the political ranks, first elected to the El Paso city council in 2005, he reportedly grew concerned that his membership with the group would harm his political aspirations. The group’s members kept O’Rourke’s secret safe until the ex-hacker confirmed to Reuters his association with the group.

Reuters described him as the “most prominent ex-hacker in American political history,” who on Thursday announced his candidacy for president of the United States.

If he wins the White House, he would become the first hacker president.

O’Rourke’s history sheds light on how the candidate approaches and understands the technological issues that face the U.S. today. He’s one of the few presidential candidates to run for the White House with more than a modicum of tech knowledge — and the crucial awareness of the good and the problems tech can bring at a policy level.

“I understand the democratizing power of the internet, and how transformative it was for me personally, and how it leveraged the extraordinary intelligence of these people all over the country who were sharing ideas and techniques,” O’Rourke told Reuters.

The 46-year-old has yet to address supporters about the new revelations.

Startups Weekly: What’s up with YC? Plus, mobility layoffs and Airbnb’s grand plans

Where to begin… Netflix darling Marie Kondo is hitting up Sand Hill Road in search of $40 million to fund an ecommerce platform, Y Combinator is giving $150,000 to a startup building a $380,000 flying motorcycle (because why not) and Jibo, the social robot, is calling it quits, speaking to owners directly of its imminent shutdown.

It was a hectic week in unicorn land so, I’m just going to get right to the good stuff.

Changes at Y Combinator

Where to begin! Not only did the prolific accelerator announce long-time president Sam Altman would be making an exit, but TechCrunch scooped the firm’s decision to move its headquarters to San Francisco. Y Combinator is going through a number of changes, outlined here. Interestingly, sources tell TechCrunch that YC has no succession plans. We’re guessing that’s because Altman had already mostly transitioned away from the firm, with CEO Michael Seibel assuming his responsibilities. The question is, is Altman planning to launch a startup? Hmmmmm.

Airbnb’s a hotelier

As it gears up for an IPO, Airbnb is showing its mature side. In a bid to accelerate growth, the home-sharing unicorn is buying HotelTonight in a deal said to be valued at around $465 million. Accel, the storied venture capital firm, was the business’s first-ever investors and is now its largest stakeholder. Oughta be a nice return. We’re still wondering whether it’s a cash deal, a cash and stock deal or an all-stock deal. Let me know if you’ve got the deets.

Mobility cuts

Lyft is preparing for its imminent IPO by getting lean. The ride-hailing company is trimming 50 staff members in its scooters and bikes unit, reports TechCrunch’s Ingrid Lunden. The cuts are mostly impacting those who joined the company when it acquired the electric bike-sharing startup Motivate, a deal that closed about three months ago. I’ll point out that Lyft employs 5,000 people; these layoffs are about one percent of their total workforce. And while we’re on the topic of mobility layoffs, Mobike, the former Chinese bike-share unicorn, is closing down all international operations and putting its sole focus on China.

Munchery goes bankrupt

Several weeks after a sudden shutdown left customers and vendors in the lurch, meal-kit service Munchery has filed for bankruptcy. In the Chapter 11 filing, Munchery chief executive officer James Beriker cites increased competition, over-funding, aggressive expansion efforts and Blue Apron’s failed IPO as reasons for its demise. Here’s the story, complete with Munchery’s bankruptcy filing.

Funders fundraise

This week Precursor Ventures closed its sophomore pre-seed fund on $32 million, NEA filed to raise its largest venture fund yet ($3.6 billion), SoftBank raised $2 billion on a $5 billion target for a Latin America Fund, aMoon raised $660 million for Israeli healthcare deals and Coral Capital brought in $45 million to make early-stage investments in Japan.

Here’s your weekly reminder to send me tips, suggestions and more to kate.clark@techcrunch.com or @KateClarkTweets

Startup cash

Sea is raising up to $1.5B
Grab confirms $1.46B investment from SoftBank’s Vision Fund
Music services company Kobalt is raising roughly $100M
Eargo raises $52M for virtually invisible, rechargeable hearing aids
Matterport raises $48M to ramp up its 3D imaging platform
Netflix star and tidying expert Marie Kondo is looking to raise $40M
Blueground raises $20M for flexible apartment rentals

Netflix star and tidying expert Marie Kondo

A16z gets even bigger

Andreessen Horowitz tapped David George as its newest general partner and its first top dealmaker focused on late-stage deals. George joins from General Atlantic, where he’d backed consumer internet, enterprise software and fintech startups as a principal since 2012. The firm’s swelling team is amongst the largest of any VC firm. Most partnerships consist of one to three top dealmakers and a few partners or principals. A16z breaks the mold with its ever-expanding team of GPs. We talked to George and a16z managing director Scott Kupor.

Worth reading

The Khashoggi murder isn’t stopping SoftBank’s Vision Fund, by TechCrunch’s Jon Russell and Jonathan Shieber.

SXSW

Stopping by SXSW? Meet TechCrunch’s writers at our annual Crunch By Crunch Fest party in Austin, Texas. RSVP here to join us on Sunday, March 10th from 1pm to 4pm at the Swan Dive at 615 Red River St. @ E. 7th St., just 3 blocks from the convention center. Hang out with TechCrunchers and fellow readers, enjoy free drinks and check out a live performance by electro-RnB musician Elderbrook.  And check out the full line-up of TechCrunch panels here. I will be discussing the double standard in sex tech with Lora Haddock, the CEO of Lora DiCarlo, on Thursday, March 14th at 2pm at the Fairmont Congressional A, 101 Red River.

Listen to me talk

This week on Equity, TechCrunch’s venture capital-focused podcast, where we unpack the numbers behind the headlines, Crunchbase New’s editor-in-chief Alex Wilhelm and I discuss Y Combinator’s new HQ, Chime’s big funding round and SoftBank’s new Latin America fund. Listen here.

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Polis, the door-to-door marketer, raises another $2.5 million

Polis founder Kendall Tucker began her professional life as a campaign organizer in local Democratic politics, but — seeing an opportunity in her one-on-one conversations with everyday folks — has built a business taking that shoe leather approach to political campaigns to the business world.

Now the company she founded to test her thesis that Americans would welcome back the return of the door-to-door salesperson three years ago, is $2.5 million richer thanks to a new round of financing from Initialized Capital (the fund founded by Garry Tan and Reddit co-founder Alexis Ohanian) and Semil Shah’s Haystack.vc.

The Boston-based company currently straddles the line between political organizing tool and new marketing platform — a situation that even its founder admits is tenuous at the moment.

That tension is only exacerbated by the fact that the company is coming off one of its biggest political campaign seasons. Helping to power the get-out-the-vote initiative for Senatorial candidate Beto O’Rourke in Texas, Polis’ software managed the campaign’s outreach effort to 3 million voters across the state.

However, politically-focused software and services businesses are risky. Earlier this year the Sean Parker-backed Brigade shut down and there are rumblings that other startups targeting political action may follow suit.

“Essentially, we got really excited about going into the corporate space because online has gotten so nasty,” says Tucker. “And, at the end of the day, digital advertising isn’t as effective as it once was.”

Customer acquisition costs in the digital ad space are rising. For companies like NRG Energy and Inspire Energy (both Polis clients), the cost of acquisitions online can be as much as $300.

Polis helps identify which doors for salespeople to target and works with companies to identify the scripts that are most persuasive for consumers, according to Tucker. The company also monitors for sales success and helps manage the process so customers aren’t getting too many housecalls from persistent sales people.

“We do everything through the conversation at the door,” says Tucker. “We do targeting and we do script curation (everything from what scrpt do you use and when do you branch out of scripts) and we ahve an open api so they can push that out and they run with it through the rest of their marketing.”

 

Texas lawmaker wants to ban mobile throttling in disaster areas

The Texas state flag.

A Texas lawmaker is proposing a state law that would prohibit wireless carriers from throttling mobile Internet service in disaster areas.

Bobby Guerra, a Democratic member of the Republican-controlled Texas House of Representatives, filed the bill last week. “A mobile Internet service provider may not impair or degrade lawful mobile Internet service access in an area subject to a declared state of disaster,” the bill says. If passed, it would take effect on September 1, 2019.

The bill, reported by NPR affiliate KUT, appears to be a response to Verizon’s throttling of an “unlimited” data plan used by Santa Clara County firefighters during a wildfire response in California last year. But Guerra’s bill would prohibit throttling in disaster areas of any customer, not just public safety officials.

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Taali takes its popped water lily snacks from Y Combinator to the world

Aditya and Aarti Kochhar Kaji didn’t set out to start the snack food business Taali Foods when they were studying for their business degrees at Harvard.

The couple both hail from Mumbai and met at the University of Pennsylvania . They were married before starting at Harvard’s Business School and initially were interested in other areas — Aarti was exploring a career in venture capital and Aditya Kaji was looking at the food and beverage industry broadly in his classes at Harvard, Kochhar Kaji said.

Addicted to snack foods like chips and popcorn to fuel her Harvard study sessions, Kochhar Kaji started making popped water lily seeds as a snack — a food both she and her husband had grown up eating in India, she said.

The seeds, which are high in anti-oxidants, low in fat, have been a staple of Ayurvedic medicine — thank to their purported  anti-inflammatory properties and are a staple of Indian snacking traditions. Now, with American consumers on the hunt for healthier snacks, they’re becoming a big business in the U.S. as well.

Y Combinator is very on trend, with its decision to invest and accelerate Taali as part of its most recent cohort of startups. But in this instance you may call the accelerator a fast follower rather than a progenitor of this trend.

No less auspicious a food tastemaker than Whole Foods named water lily seeds as one of the top ten new food trends of 2019. With that attention competitors to Taali abound.

Bohana and AshaPops are just two new snack food companies floating on the popped water lily seed movement. Bohana even managed to nab the attention of PepsiCo’s Nutrition Greenhouse competitive accelerator.

It’s no secret that technology investors are investing more heavily in consumer businesses — everything from snack foods to period products and baby formula — and startups need only point to the success of Amazon as the everything store to show that there’s always money to be made in the category.

Indeed, at $1.47 trillion, the consumer packaged goods industry dwarfs technology as a share of the nation’s economy.

As Ryan Caldbeck, the head of the consumer-focused investment firm CircleUp noted last year.

The uptick in tech VC dollars going to the CPG market is partly because tech investing is brutally competitive and saturated, and largely because these VCs are awakening to the strong historical returns in CPG, especially with the trend leaning towards small brands stealing market share.

Consumer is a massive market – about 3x the size of tech, as seen below.

Despite the size of the market, the early-stage has historically been underserved by investors due to market inefficiencies like the geographic dispersion of brands and a lack of structured information sources (i.e. there is no Silicon Valley for consumer, and certainly no Crunchbase equivalents – yet).

Strong exits are already possible for consumer brands — and not necessarily from the big ticket, headline grabbing acquisitions like Dollar Shave Club. Last week This is L — the condom and period product retailer — sold for roughly $100 million after raising seed funding from investors including 500 Startups and Y Combinator.

Taali was similarly bootstrapped before it was accepted into Y Combinator . The company is already selling its snacks through Amazon and in retail locations like Fairway in New York and Central Market in Texas. The founders expect to be in stores in California in the next few months.