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Crypto VC David Pakman on FTX: an “entirely avoidable tragedy”



If you want to better understand exactly how big a deal it is that the cryptocurrency exchange FTX just imploded, you could do worse than talk with David Pakman, an entrepreneur turned venture capitalist. After logging 14 years with the investment firm Venrock, Pakman — who led Venrock’s investment in the digital collectibles company Dapper Labs and even mined bitcoin at his own home years back — leaned into his passion for digital assets and last year joined the now seven-year-old crypto venture firm CoinFund.

His timing was either very good or very bad, depending on your view of the market. Indeed, in part because CoinFund was an early investor in the collapsing cryptocurrency exchange FTX, we asked Pakman to jump on the phone with us today to talk about this very wild week, one that began with high-flying FTX on the ropes, and which ended with bankruptcy filings and the resignation of FTX founder, Sam Bankman-Fried, as CEO. Excerpts of that conversation follow, edited lightly for length and clarity.

TC: The last time we talked, almost two years ago, the NFT wave was just getting underway. Now, we’re talking on a day where one of the biggest cryptocurrency exchanges in the world just declared bankruptcy. Actually, it’s declaring bankruptcy for 130 additional affiliated companies. What do you make of this development?

DP: I think it’s absolutely terrible on a bunch of levels. First, it was an entirely avoidable tragedy. This failure of the company was brought on by a bunch of flawed human decision-making, not by a failing business. The core business is doing great. In fact, it’s highly profitable and growing, even in a bear market. It’s not like it was running out of capital or a victim of the macro environment. But its leadership, with almost no oversight apparently, made a bunch of terrible decisions and did things really wrong. So the tragedy is how avoidable it was, and how many victims there are, including employees and shareholders and the hundreds or even thousands of customers who will be affected [by this bankruptcy].

There’s also the reputational harm to the entire crypto industry, which already suffers from questions like, ‘Isn’t this a scammy place with scammy people?’ This sort of Enron-esque meltdown of one of the most highly valued and arguably most successful companies in the space is just really bad, and it will take a long time to dig out of it. But there are also positives.


Well, what’s positive is the technology did not fail; the blockchains did not fail. The smart contracts were not hacked. Everything we know about the tech behind crypto continues to work brilliantly. So it would be different if this was a meltdown because of flawed software design, or the blockchains aren’t scaling, or big hacks that injured people. The long-term promise of the software and the technology architecture about crypto is intact. It’s the people who keep making mistakes. We’ve had two or three pretty big human-generated mistakes this year.

There are plenty of news stories out there outlining what happened in broad strokes. How do you explain it?

I don’t have firsthand knowledge about what they really did or didn’t do. But apparently FTX and [the trading desk also owned and run by Sam Bankman-Fried] Alameda Research had a relationship that maybe was not known to all shareholders, employees, or customers. And it sounds like FTX took FTT, which is their token that was held in great amounts by Alameda, and they pledged it as collateral and took big loans in fiat against that. So they took a highly volatile asset, and they pledged as collateral.

One could imagine if a board of corporate executives or investors knew about that, someone would say, ‘Hang on. What happens if FTT goes down by 50%? It happens in crypto with high frequency, right? So, like, why are we pledging this super highly volatile asset? And by the way, half a billion dollars’ worth of the asset is held by our biggest rival [Binance]. What happens if they dump it in the market?’

So just the act of borrowing against it was ill-advised. And then it sounds like they also took the proceeds of that borrowing, and they invested that in highly illiquid assets, like maybe to rescue BlockFi or all these other private companies that FTX recently bought. But it’s not like they could quickly sell out of those if they needed to return the proceeds of their borrowing. They were also apparently using customer funds and loaning that out or maybe even loaning it to their trading arm. So all this stuff is just stuff that I think a board, if they knew about it, would be like, no, no.

But there was no board, which is mind blowing, considering that VCs poured $2 billion into this company. Your firm is among those firms.

I joined CoinFund a little bit more than a year ago, so the investment that the firm made in FTX was a long time ago, before my time, and it’s a tiny, tiny amount. We’re barely on the cap table. We didn’t hold any FTT tokens.

But I will address your big question, which I think is about the governance of this company. I come from a traditional tech investing background, where maybe 99% of the time, there’s just a standard set of governance that every entrepreneur agrees to when they take venture capital, which is: there’s going to be a board; the board is going to be made up of investors and employees and maybe outside experts; there’s going to be a set of controls; the controls usually say things like, ‘You have to disclose any related party transactions so you don’t shuffle coconuts between one company and something else that we don’t know about.’ The board also has to approve things, so that whenever you’re going to pledge assets as collateral for borrowing, you can’t issue new shares without [the board] knowing about it.

The fact that none of that was present here is mind-boggling. And I hope what comes of this Enron-like moment in crypto is that whatever loose norms there were about not giving that level of oversight and governance as part of investing goes away immediately.

Everything is so highly correlated. Crypto investor Digital Currency Group is reportedly giving a $140 million equity infusion to a derivatives business in its portfolio called Genesis Global Trading because Genesis has about $175 million dollars locked in its FTX account. How bad is this going to become? What percentage of your own investment portfolio is being impacted here because of FTX’s failure?

How much are we at CoinFund impacted? It’s negligible because we had such a tiny investment in this company from one of our funds and we held none of our assets at FTX, either its U.S. or international business. [As for broader implications], I don’t think any of us knows the full, long-term impact of what’s happening here because there’s like some contagion, right? Like, how many other funds when companies and investors have assets at FTX and how long will it take to get those funds back? One must assume that the entire thing goes into a massive bankruptcy proceeding that takes many months or years to unwind. And so there’ll be this uncertainty, not just about when you’re getting money back but how much you’re getting.

The overwhelming majority of the startups that we invest in aren’t trading on FTX and so they weren’t customers. But FTX was very useful for providing a launching pad for tokens to become liquid, and then either making a market for those tokens or at least providing a place for them to trade and providing liquidity. A big part of crypto today is not just raising equity capital but creating tokens and using tokens as an incentive mechanism, and that requires at some point for these tokens to become liquid and trade on exchanges, and FTX was one of the largest places where those tokens traded. And now you lose that.

How does that affect your day-to-day business of making investments? I did see the news that CoinFund is looking to raise a new $250 million fund, that it filed SEC paperwork on November 1 after closing a $300 million fund three months ago. Will you have to put a pin in that now? I’m sure this debacle has LPs feeling nervous.

We’ve talked to a lot of our LPS in the last 48 hours. I think most people are processing. They’re asking, like you’re asking, ‘What happened here?’

I think late-stage capital will freeze up for a little bit here. The dust really needs to clear. And it’s unlikely that capital is attracted to a tragedy like this.

A more immediate impact is on startup valuations. Valuing startups is an imperfect process done by investors in non-liquid markets, and one way it’s done is to look at comparables. And one of the brightest star comps that just about everyone in crypto pointed to was FTX. If FTX is worth $40 billion, we’re worth X. So you take the most highly valued venture-backed crypto company, and it goes from $40 billion to zero, then who is the new ceiling of crypto value? It immediately impacts late-stage valuations.


A network of knockoff apparel stores exposed 330,000 customer credit cards



If you recently made a purchase from an overseas online store selling knockoff clothes and goods, there’s a chance your credit card number and personal information were exposed.

Since January 6, a database containing hundreds of thousands of unencrypted credit card numbers and corresponding cardholders’ information was spilling onto the open web. At the time it was pulled offline on Tuesday, the database had about 330,000 credit card numbers, cardholder names, and full billing addresses — and rising in real-time as customers placed new orders. The data contained all the information that a criminal would need to make fraudulent transactions and purchases using a cardholder’s information.

The credit card numbers belong to customers who made purchases through a network of near-identical online stores claiming to sell designer goods and apparel. But the stores had the same security problem in common: any time a customer made a purchase, their credit card data and billing information was saved in a database, which was left exposed to the internet without a password. Anyone who knew the IP address of the database could access reams of unencrypted financial data.

Anurag Sen, a good-faith security researcher, found the exposed credit card records and asked TechCrunch for help in reporting it to its owner. Sen has a respectable track record of scanning the internet looking for exposed servers and inadvertently published data, and reporting it to companies to get their systems secured.

But in this case, Sen wasn’t the first person to discover the spilling data. According to a ransom note left behind on the exposed database, someone else had found the spilling data and, instead of trying to identify the owner and responsibly reporting the spill, the unnamed person instead claimed to have taken a copy of the entire database’s contents of credit card data and would return it in exchange for a small sum of cryptocurrency.

A review of the data by TechCrunch shows most of the credit card numbers are owned by cardholders in the United States. Several people we contacted confirmed that their exposed credit card data was accurate.

TechCrunch has identified several online stores whose customers’ information was exposed by the leaky database. Many of the stores claim to operate out of Hong Kong. Some of the stores are designed to sound similar to big-name brands, like Sprayground, but whose websites have no discernible contact information, typos and spelling mistakes, and a conspicuous lack of customer reviews. Internet records also show the websites were set up in the past few weeks.

Some of these websites include:


If you bought something from one of those sites in the past few weeks, you might want to consider your banking card compromised and contact your bank or card provider.

It’s not clear who is responsible for this network of knockoff stores. TechCrunch contacted a person via WhatsApp whose Singapore-registered phone number was listed as the point of contact on several of the online stores. It’s not clear if the contact number listed is even involved with the stores, given one of the websites listed its location as a Chick-fil-A restaurant in Houston, Texas.

Internet records showed that the database was operated by a customer of Tencent, whose cloud services were used to host the database. TechCrunch contacted Tencent about its customer’s database leaking credit card information, and the company responded quickly. The customer’s database went offline a short time later.

“When we learned of the incident, we immediately contacted the customer who operates the database and it was shut down immediately. Data privacy and security are top priorities at Tencent. We will continue to work with our customers to ensure they maintain their databases in a safe and secure manner,” said Carrie Fan, global communications director at Tencent.

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All Raise CEO steps down again



Less than a year after assuming the role, All Raise CEO Mandela SH Dixon has stepped down from her position at the nonprofit. The entrepreneur, who previously ran Founder Gym, an online training center for underrepresented founders, said in a blog post that the decision was made after she realized “being in the field working directly with entrepreneurs everyday” is her passion. Dixon said that she will be exploring new opportunities in alignment with that.

Her resignation is effective starting February 1st, 2023. She will remain an advisor to the Bay Area-based nonprofit.

This is the second chief executive to leave All Raise since it was first founded in 2017. In 2021, Pam Kostka resigned as the helm of the nonprofit to rejoin the startup world as well; Kostka is now an operator in residence and limited partner at Operator Collective, according to her LinkedIn. With Dixon gone, Paige Hendrix Buckner, who joined the outfit as chief of staff nine months ago, will step in as interim CEO. In the same blog post, Buckner wrote that “Mandela leaves All Raise in a strong position, and I’m grateful for the opportunity to continue the hard work of diversifying the VC backed ecosystem.”

Dixon did not immediately respond to comment on the record. It is unclear if All Raise is immediately kicking off a permanent CEO search.

The nonprofit has historically defined its goals in two ways: first, it wants to increase the amount of seed funding that goes to female founders from 11% to 23% by 2030, and, second, it wants to double the percentage of female decision-makers at U.S. firms by 2028.

In previous interviews, Dixon said that the company will work on creating explicit goals around what impact it wants to have for historically overlooked individuals. The data underscores the challenge ahead. Black and LatinX women receive disproportionately less venture capital money than white women; non-binary founders can also face higher hurdles when seeking funding, as All Raise board member Aileen Lee noted in the blog post.  The nonprofit has created specific programs for Black and Latinx founders but has not disclosed a specific goal for the cohort yet. These disconnects can be lost if not tracked. All Raise’s last impact report was published in 2020 and they’re working on bringing that analysis back, Lee tells TechCrunch in an interview.

“All Raise is in great hands with Paige as interim leader and we’ve got a lot of exciting things that we’re shaping and scaling,” Lee said. “We have to all continue to link arms to try and continue to make improvements for our industry…we’ve made good progress that we can’t let up.”

Since launch, the nonprofit has raised $11 million in funding, and opened regional chapters in New York, Boston, Los Angeles, Chicago, DC and, soon, Miami.

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Shopping app Temu is using TikTok’s strategy to keep its No. 1 spot on App Store



Temu, a shopping app from Chinese e-commerce giant Pinduoduo, is having quite the run as the No. 1 app on the U.S. app stores. The mobile shopping app hit the top spot on the U.S. App Store in September and has continued to hold a highly-ranked position in the months that followed, including as the No. 1 free app on Google Play since December 29, 2022. More recently, Temu again snagged the No. 1 position again on the iOS App Store on January 3 and hasn’t dropped since — even outpacing competitor Shein’s daily installs in the U.S.

Offering cheap factory-to-consumer goods, Temu provides access to a wide range of products, including fast fashion, and pushes users to share the app with friends in exchange for free products, which may account for some of its growth. However, the large majority of its new installs come from Temu’s marketing spend, it seems.

When TechCrunch covered Temu’s rise in November, the app had then seen a little more than 5 million installs in the U.S., according to data from app intelligence firm Sensor Tower, making the U.S. its largest market. Now, the firm says the app has seen 5 million U.S. installs this January alone, up 19% from 4.2 million in the prior 22 days from December 10 through December 31.

According to Sensor Tower estimates, Temu has managed to achieve a total of 19 million lifetime installs across the U.S. App Store and Google Play, more than 18 million of which came from the U.S.

The growth now sees Temu outpacing rival Shein in terms of daily installs. In October, Temu was averaging around 43,000 daily installs in the U.S., the firm said, while Shein averaged about 62,000. In November, Temu’s average daily installs grew to 185,000 while Shein’s climbed to 70,000 and last month, Temu averaged 187,000 installs while Shein saw about 62,000.

The shopping app’s fast rise recalls how the video entertainment platform TikTok grew to become the most downloaded app worldwide in 2021, after years of outsized growth. The video app topped 2 billion lifetime downloads by 2020, including sister app Douyin in China, Sensor Tower said. Combined, the TikTok apps have now reached 4.1 billion installs.

Like Temu, much of TikTok’s early growth was driven by marketing spend. The video app grew its footprint in the U.S. and abroad by heavily leveraging Facebook, Instagram, and Snapchat’s own ad platforms to acquire its customers. TikTok was famously said to have spent $1 billion on ads in 2018, even becoming Snap’s biggest advertiser that year, for instance.

By investing in user acquisition upfront, TikTok was able to gain a following which then improved its ability to personalize its For You feed with recommendations. Over time, this algorithm became very good at recognizing what videos would attract the most interest thanks to this investment, turning TikTok into one of the most addictive apps in terms of time spent. As of 2020, kids and teens began spending more time watching TikTok than they did on YouTube. And earlier this month, Insider Intelligence data indicated all TikTok users in the U.S. were now spending an average of nearly 1 hour per day on the app (55.8 minutes), compared with just 47.5 minutes on YouTube, including YouTube TV.

While Temu is nowhere near TikTok’s sky-high figures, it appears to be leveraging a similar growth strategy. The company is heavily investing in advertising to acquire users, which it uses to personalize the shopping experience. One of Temu’s key features, in fact, is its own sort of For You page that encourages users to browse trending items “Selected for You.” In addition to gamification elements, Temu also puts heavy emphasis on recommending shops and products on its home page, which is informed by its user data.

But the app’s growth doesn’t seem to be driven by social media. While the Temu hashtag (#temu) on TikTok is nearing 250 million views, that’s not really a remarkable number for an app as big as TikTok where something like #dogs has 120.5 billion views. (Or, for a more direct comparison, #shein has 48.3 billion views.) That suggests Temu’s rise isn’t necessarily powered by viral videos among Gen Z users or influencer marketing, but rather more traditional digital advertising.

According to Meta’s ad library, for instance, Temu has run some 8,800 ads across Meta’s various platforms just this month. The ads promote Temu’s sales and its extremely discounted items, like $5 necklaces, $4 shirts, and $13 shoes, among other deals. These ads appear to be working to boost Temu’s installs, allowing the app to maintain its No. 1 slot on the App Store’s “Top Free” charts, which are heavily influenced by the number of downloads and download velocity, among other things.

Of course, having a high number of downloads doesn’t necessarily mean Temu’s app will maintain a high number of monthly active users. Nor does it mean those users won’t churn out of the app after their initial curiosity has been abated. Still, Temu’s download growth saw it ranking as the No. 1 “Breakout” shopping app by downloads in the U.S. for 2022, according to’s year-end “State of Mobile” report. ( calculates “Breakout” apps in terms of year-over-year growth across iOS and Google Play.)

Because Temu’s growth is more recent, the app did not earn a position on the Top 10 apps in 2022 in either the U.S. or globally in terms of downloads, consumer spend, or monthly active users, on this report. Instead, most of those spots still went to social media apps, streamers, and dating apps like Bumble and Tinder. The only retailer to find a spot on these lists was Amazon, which was the No. 7 app worldwide by active users and the No. 8 most downloaded in the U.S.

Temu’s marketing investment may not pay off as well as TikTok’s did, though, as other discount shopping apps saw similar growth only to later fail as consumers found that, actually, $2 shirts and jeans were deals that were too good to be true. Wish famously fumbled as consumers grew frustrated with long delivery times, fake listings, missing orders, poor customer service, and other things consumers expect from online retail in the age of Amazon.

Temu today holds a 4.7-star rating on the U.S. App Store, but those ratings have become less trustworthy over the years due to the ease with which companies can get away with fake reviews. Dig into the reviews further and you’ll find similar complaints to Wish, including scammy listings, damaged and delayed deliveries, incorrect orders and lack of customer service. Without addressing these issues, Temu seems more likely to go the way of Wish, not TikTok, no matter what it spends.

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