If you’re feeling confused about the state of startup investing, join the club. Public company shares have been relentlessly hammered in recent months amid rising fears of a recession, yet startup funding seems as brisk as ever and, more surprising, to us, VCs are still routinely announcing enormous new funds as they have for many years.
To better understand what’s going on, we talked this week with Index Ventures cofounder Danny Rimer, who grew up in Geneva, where Index has an office, but who now splits his time between London and San Francisco, where Index also has offices. (It just opened an office in New York, too.)
We happened to catch Rimer — whose bets include Discord, 1stdibs, Glossier, and Good Eggs, among others — in California. Our conversation has been edited lightly for length.
TC: This week, Lightspeed Venture Partners announced $7 billion across several funds. Battery Ventures said it has closed on $3.8 billion. Oak HC/FT announced almost $2 billion. Usually when the public market is this far down, institutional investors are less able to commit to new funds when the public market is down, so where is this money coming from?
DR: It’s a great question. I think that we should remember that there have been extraordinary gains for a lot of these institutions over the last few years — call it actually the last decade. And their positions have really mushroomed as well during this period. So what you’re seeing is an allocation to funds that most likely have been around for a while. . . . and have actually provided very good returns over the years. I think that investors are looking to put their money into institutions that understand how to allocate this fresh new money in any market.
These funds keep getting bigger and bigger. Are there new funding sources? We’ve obviously seen sovereign wealth funds play a bigger role in venture funds in recent years. Does Index look farther afield than it once did?
There certainly has been this bifurcation in the market between funds that are probably more in the business of asset aggregation and funds that are trying to continue the artisanal practice of venture and we play in the latter camp. So in relative terms, our fund sizes have not become very significant. They have not grown dramatically, because we’ve been very clear that we want to keep it small, keep our craft alive and continue to go down that route. What that means is that when it comes to our institutional investor base, first of all, we don’t have any family offices, and we don’t take sovereign wealth fund money. We really are talking about endowments, pension funds, nonprofits and funds of funds that make up our base of investors. And we’re fortunate enough that most of those folks have been with us for close to 20 years now.
You do have quite a bit of money under management, you announced $3 billion in new funds last year. That’s not a tiny amount.
No, it’s not tiny, but relative to the funds that you’re alluding to — the funds that have have grown a lot and have done sector funds or crossover funds — if you look at how much Index has raised [since the outset] versus most of our peers, it’s actually a very different story.
How much has Index raised over the history of the firm?
We should check. I wish I could have the exact number at the tip of my tongue.
It’s sort of refreshing that you don’t know. Are you in the market now? It does feel like it’s been one year on and one year off in terms of fundraising for most firms, and that this isn’t changing.
We’re not in the market to fundraise. We are obviously in the market to invest.
We’re starting to see a lot of companies reset their valuations. Are you having talks with your portfolio companies about doing the same?
We’re having all types of discussions with companies within our portfolio; nothing is off the table. We absolutely do not want to suspend disbelief when it comes to the realities of the situation. I wouldn’t say that it’s an umbrella discussion that we’re having with all our companies. But we consistently try and make sure that our companies understand the current climate, the conditions that are specific to them, and make sure that they’re as realistic as possible when it comes to their future.
Depending on the company, sometimes the valuations have gotten well ahead of themselves, and we can’t count on the crossover funds coming back . . . they have to defend their public positions. So some of these companies have to just weather the storm and make sure they’re prepared for difficult times ahead. Other companies really have an opportunity to lean in during this period and capture significant market share.
Like a lot of VCs, you say you’d prefer that a startup conduct a ‘down round’ rather than agree to onerous terms to maintain a specific valuation. Do you think founders have gotten the memo that down rounds are acceptable in this climate?
It really depends. I think you probably have some new funds that started during this period — you have some new sector funds — that make it complicated because [they’re] not investing in the best business. [They’re] investing in the best business, or trying to fund the best business, within that sector. So there are probably some pressures with respect to some of the VCs that’s being felt by some of the entrepreneurs.
I do want to highlight that not all companies need to take a cold shower with respect to valuation. There are a lot of companies that are doing very well, even in this environment.
Fast, an online login and checkout company, quickly shut down earlier this year, and Index was razzed a bit online for quickly removing the company from its website. What happened there and, in retrospect, what more could Index have done in that situation? I’m guessing your team had a postmortem on this one.
I wasn’t aware that we took it down from our website. I guess it’s probably there but probably harder to find, is what I suspect. We do promote the companies that are doing great.
You’re right, we did digest it as a firm and really tried to take the lessons learned from there. There are a number of factors that we’re still digesting or we can’t know about but probably what was difficult during COVID was really evaluating talent and understanding the folks that we were working with. And I’m sure that my partners who were responsible for the company would have been able to spend more time and really understand the entrepreneurial culture of the company in a lot more detail had we been able to spend more time with them in person.
(We’ll have more from this interview in podcast form next week; stay tuned.)
Match restructures executive leadership, hires former Snap VP of Product as new CTO
Match Group, the parent company of several popular dating apps, including Tinder and Hinge, has announced a revamped executive leadership team. Most notably, the company is bringing on former Vice President of Product at Snap Will Wu as its new chief technology officer in a newly created role. Wu will oversee product innovation across Match’s portfolio of apps, the company says.
During his time at Snap, Wu led the team charged with the creation and commercialization of Snap’s developer platforms. Wu led the creation of many of Snap’s popular features, including the “Discover” content platform, the “Chat” messaging feature and Snap’s social gaming initiative. Match says Wu will now work directly with its executives to launch new features, emerging technologies and innovative products.
“Will is truly a product savant,” said Match Group CEO Bernard Kim in a statement. “For nine years, he has forged new technologies at scale that have redefined user experiences and expectations of social products, particularly amongst Gen Z. I’ve known him for a long time, and have seen the massive impact he’s had on the way people connect at Snap, and I can’t wait to see what he will bring to the dating experience. This leadership team has a deep bench of knowledge, proven track records, and we are all ready to collaborate and capitalize on the opportunities ahead.”
The company also announced that Gary Swindler, who was previously the chief operating officer and vhief financial officer of Match, will become the president and chief financial officer of Group. In addition, Malgosia Green, who was previously CEO of Plenty of Fish, will become chief executive officer of Match Group Asia.
Another leadership change will see Hesam Hosseini, the CEO of Match and Affinity brands, taking on a newly created role as Match Group CEO of Evergreen & Emerging Brands. In this position, Hosseini will oversee Match, Meetic, Plenty of Fish and OkCupid, in addition to emerging brands such as The League, BLK and Chispa. Last, Justin McLeod, the founder and CEO of Hinge, will now report directly to Kim.
Match says the new changes are designed to maximize profitability, enhance growth, streamline operations and prioritize new business opportunities. The move comes as Match is looking to grow its business beyond traditional, swipe-based matchmaking and into the so-called “metaverse.” Match has spoken previously about its plans for a dating metaverse, complete with a virtual goods-based economy, real-time audio and the ability for online daters to meet up in a virtual space to have conversations.
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.
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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