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The US is content with a new form of national standstill, but state and local proposals are currently defining how tech companies can (legally) operate in the US. Policies on subjects as broad as customer use and employment, or as narrow as a chemical, were chosen nationwide. The results provide a blueprint for what to expect in many more places.
Perhaps the best example is Proposition 22 in California, where a majority of voters approved new rules that allow companies like Uber and Lyft to continue to work with drivers as independent contractors. Previous state legislation and a related lawsuit would have required companies to classify many drivers as full-time employees. Here is Megan Rose Dickey on the implications of the result:
Throughout the case, Uber and Lyft have argued that reclassifying their drivers as employees would cause irreparable harm to companies. In last month's ruling, the judge said none of the companies would suffer "serious or irreparable damage if they were prohibited from breaking the law" and that their respective financial burdens "would not result in irreparable harm".
But now that Prop 22 is expected to be passed, that lawsuit has far less legal basis. It's also worth noting that Uber previously said it might pursue similar laws in other states.
Of course, the companies concerned saw their share prices spike after the vote, and Uber is already working to make the campaign global.
The 2020 US presidential election was the most technologically advanced ever, but I'll skip it as there are relatively few starting angles for us here. However, when trying to create user guidelines for politics, consider this analysis by Taylor Hatmaker on the eve of the elections of how Facebook and Twitter have changed their approaches since 2016.
Other notable startup elements from our election coverage:
Measures for the legalization of cannabis are to be adopted in 5 states
Portland, Maine, passes a referendum to ban face surveillance
Massachusetts voters pass a repair law measure that gives them unprecedented access to their vehicle data
The meditation app hit the App Store charts thanks to Calm's funny CNN advertising campaign
YC-supported non-profit VotingWorks aims to restore trust in voting systems through open source
Something else happened in government this week that wasn't about voting – but it may be relevant to your startup. The SEC will now allow companies to raise up to $ 5 million per year to crowdfund stocks, up from a previous rule of $ 1.07 million. Lucas Matney is more into extra crunch.
The next billion dollar e-commerce company will be a B2B marketplace
Business-to-business transactions are more complex beyond the consumer realm, including four types of standard payment methods, sophisticated financing tools, volume discounts, contractual prices, delivery schedules, insurance and compliance. Bain Capital Ventures' Merritt Hummer breaks it down in a big guest post for Extra Crunch:
(I) No wonder that B2B e-commerce was digitized more slowly than B2C. From product discovery to checkout, a consumer buying a bag of licorice doesn't look like a retailer buying 100,000 bags of licorice from a retailer. The good news for B2B marketplace founders is that there are plenty of creative ways to get value from transactions that go beyond the GMV rate based on the above parameters. Let's examine some of the creative ways to monetize a B2B marketplace.
Rather than trying to cut gross retail value like Apple is doing with the App Store, successful startups have to be creative. These can be data monetization, embedded financial services, targeted advertising, private label products, subscription fees, and sampling fees. Here is an excerpt from Hummer on that last one:
In most B2B industries, individual transactions are so large that the percentage charge discourages potential customers. In high-quality markets with infrequent orders, collecting a take rate for orders is perceived as unfair, especially if suppliers and buyers already know each other. However, the per-sample fee model is a unique wedge to bring together suppliers and buyers who often sample supplies before placing large orders.
One of our portfolio companies, Material Bank, has successfully applied this monetization strategy. Material Bank is a B2B marketplace for building and interior design materials that stores samples (fabric swatches, paint chips, flooring, wall coverings, etc.) from hundreds of brands. Architects and interior designers can order free samples from Material Bank and receive them the next morning. You can then return samples free of charge when they are no longer needed. Material Bank charges manufacturers a fee every time one of their samples is shipped. Manufacturers receive new customer contacts that do not require any effort to generate and are happy to outsource sample fulfillment, which in the past was a cost center and not a core competence. Other B2B markets where sampling is well established include chemicals, clothing, and packaging materials.
How to start a VC fund without already being rich
Barriers to risk investing have decreased in recent years as money poured into the asset class and opportunities for technology continue to grow. In fact, it is entirely possible to raise your own fund if you don't have a lot of assets to use. However, there are still many things you have to find out. Connie Loizos speaks to limited partners and VCs who have taken creative approaches for TechCrunch this week:
First find investors, i. H. Limited partners willing to take on less than 2% or 3% and possibly even less than 1% of the target total fund size. You are likely to find fewer investors as this "commit" shrinks. For example, Joanna Rupp, who manages the $ 1.1 billion private equity portfolio for the University of Chicago Foundation, suggests that both she and other managers she knows are ready to go to be flexible based on the “specific situation of the family doctor”.
Rupp says: "I think there are industry standards, but we have not asked younger general practitioners (complementary) commitments if we have the feeling that they do not have the financial means."
Bob Raynard, founder of the fund management company Standish Management, agrees, saying that less involvement by the general partner in exchange for special investor economics is also common. "You may see a reduced administrative fee for the LP to help them, or a reduced carry, or both, and have been for years."
Explore the administrative fee offsets. Use your existing portfolio companies as collateral. Make a deal with richer friends if you can. Get a bank loan. Take a look at the advantages of so-called frontloading.
She explains a number of tips, including:
Explore the administrative fee offsets.
Use your existing portfolio companies as collateral.
Make a deal with richer friends if you can.
Get a bank loan.
Take a look at the advantages of so-called frontloading.
The Edtech startup M&A is growing with the pandemic boom
Natasha Mascarenhas takes a look at the rationale behind the recent Extra Crunch acquisitions this week as edtech went from complementary to vital during the pandemic. Learn more about Course Hero's acquisition of Symbolab last week.
Symbolab is a math calculator that is expected to answer over 1 billion questions this year. With each answer, Symbolab adds information about the most common weaknesses and confusions of the students to its algorithm. In contrast, Course Hero is a more comprehensive service that focuses on questions and answers from a wide variety of topics. CEO Andrew Grauer says Symbolab's algorithm isn't something that Course Hero, which has been in operation since 2006, can drum up overnight. Precisely because of this, he decided "to buy rather than build … It made a lot of sense to act fast enough that it wouldn't take several years to get this technology."
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#EquityPod: Fortnite is actually a SaaS company
From Alex Wilhelm:
Hello and welcome back to Equity, TechCrunch's venture capital-focused podcast (now on Twitter!) Where we unpack the numbers behind the headlines.
What a week of us here in the United States, where the elections are still tabulated and exactly zero people are stressed out at all. But no matter what, the wheels of Equity keep turning, so Danny and Natasha and Alex and Chris got back together to talk about startups and venture capital:
There was tons of breaking news upstairs, including a U.S. government lawsuit to try to block the huge plaid visa deal. And it has been reported that Airbnb will cease its public S-1 filing early next week. This IPO is a breeze.
Next, we turned to the gaming world and looked at the risk mechanics of making and selling video games. Our hosting crew had some disagreements but were able to agree that Doom 3 was a masterpiece before moving on.
Then it was time to talk about Ant and what the hell happened to his IPO. Luckily we were in good hands with Danny on deck. What a mess.
Prop 22 has passed, which will effectively allow Uber, Instacart, and Lyft to label their gig employees as independent contractors instead of employees. As a result, Uber and Lyft stocks rose while gig worker collectives said the battle was still on.
Natasha has received a number of polling day submissions from venture capital firms. In the mix: Precursor Ventures Fund III, Hustle Fund II and Insight Partners first opportunity fund.
Finally, even though election day turns into a full week, the public markets are recovering. Will we see a boom in IPOs?
And as a special treat, we didn't even mention Maricopa County for the entire episode. Take care of yourself!
Equity declines every Monday at 7:00 a.m. PDT and as fast as possible on Thursday afternoon. So subscribe to us on Apple Podcasts, Overcast, Spotify and all casts.