Tech forgot its umbrella
Welcome to Startups Weekly, a nuanced take on this week’s startup news and trends by Senior Reporter and Equity co-host Natasha Mascarenhas. To get this in your inbox, subscribe here.
It kind of feels like tech forgot its umbrella. Like, it remembered to pack its water bottle, wear the right shoes and layer up, but when it came time to officially go outside — and say, face the year ahead — it realized that a waterproof hoodie wasn’t enough. It needs an industrial umbrella.
You know what I mean?
Here’s what I’m dancing, or, erm, writing, around. It feels like the macroeconomic environment has been reasonably volatile for the past year; and we’re still seeing entrepreneurs react to the market as if it just happened to knock on their door, trip them over and proceed to steal all their belongings. I’m not saying that founders and investors should have perfectly predicted what Q1 of this year should look like; I’m just wondering how long we’re going to get “the economy” as a catalyst for hard decisions.
What finally gets a CEO to step down? What finally gets a company to conduct its third round of layoffs? Is it the economy, or is it a uniquely human decision that comes just months after you were told to grow at all costs? When we’re talking about pivots and layoffs, I think it’s important to talk about the realities of shifting to deal with the new normal. Abstractions such as the economy just fall flat now that it’s been more than a few months since the markets have been grey.
I guess what I’m trying to say is, you can probably leave your house during a drizzle and end up at the grocery store just a little damp. If you forget your umbrella during a downpour, well, now you’re soaking wet and no one feels that bad for you. Don’t forget them, and better yet, sport them proudly.
Can you tell it’s been raining on the East Coast? Follow me on Twitter or Instagram for other subpar metaphors and thoughts. In the rest of this newsletter, we’ll talk about a fresh new venture fund that isn’t afraid to talk about privilege or honesty,
G on G
I spoke to Sophia Amoruso, the founder of Nasty Gal and Girlboss, about her new venture fund for founders, Trust Fund.
It is launching with a $5 million target, targeting a check size between $50,000 to $150,000. She’s already landed checks from the who’s who in tech. Prominent investors include a slew of a16z partners such as Marc Andreessen, Andrew Chen and Chris Dixon, as well as entrepreneur Ev Williams, icon Paris Hilton and support from investors Ryan Hoover and Cleo Capital’s Sarah Kunst.
Here’s why this is important: It’s her high-profile and rocky experience in Silicon Valley’s spotlight that has finally given Amoruso the operating experience needed to launch her own venture firm. While she is opening up a $5 million allocation to accredited investors outside her network, she said from a portfolio construction standpoint: she’s not necessarily looking for “diamonds in the rough” or a specific diversity quota.
“I plan to invest in men and women and everything in between. And if anything, like why not invest in the privilege and ride the coattails of a dude?” Amoruso said. “As a woman, why wouldn’t I want to invest in the advantage that a man has, like, feel free to publish that — it’s true.”
Discord has acquired Gas, a compliments-based social media app for teens. Reports Amanda Silberling:
On Gas, users sign up with their school, add friends and answer polls about their classmates. But the questions in the polls are intended to boost users’ confidence rather than damage it. Teens might be asked to choose which of four friends is the best DJ or has the best smile. Then the person who was chosen will get an anonymous message with their compliment, sent from a vague “boy in 10th grade” or “girl in 11th grade.”
Here’s why it’s important: When Clubhouse first rose to fame, investors and founders alike were abuzz with energy around the opportunity for innovation in the consumer social space. Since, Clubhouse has been through its share of struggles — listen to my Equity episode with the CEO here — but so has Twitter. I think Gas’ early exit and the slew of similar apps already on site, may bring some needed optimism to the conversation.
I’ve covered Clearco, formerly known as Clearbanc, for years. Like many, the Toronto-based fintech had a particularly volatile past 12 months. But this week truly marked the end of an era, with co-founder Michele Romanow stepping down from her position as chief executive of the tech unicorn.
Here’s why it’s important: Clearco has undergone numerous rounds of layoffs over the pandemic, including a cut that impacted 25% of staff. Additionally, in 2022, the Toronto-based fintech saw its other co-founder, Andrew D’Souza, step down from his CEO role to be replaced by Romanow. Now, both the co-founders will assume executive chairman positions.
“We don’t ever lie, we are under the same pressures as every other company to become a profitable business. And so we’ve just continued to make the hard decisions … and continue to be ahead of the curve,” Romanow said in an interview with TechCrunch, explaining the shift.
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With that, I’m off to enjoy a weekend in Philadelphia with some new and old friends. Is anyone else tired of my East Coast tour? No? Just me? I’ll be back in San Francisco, and your inboxes, soon.
Tesla more than tripled its Austin gigafactory workforce in 2022
Tesla’s 2,500-acre manufacturing hub in Austin, Texas tripled its workforce last year, according to the company’s annual compliance report filed with county officials. Bloomberg first reported on the news.
The report filed with Travis County’s Economic Development Program shows that Tesla increased its Austin workforce from just 3,523 contingent and permanent employees in 2021 to 12,277 by the end of 2022. Bloomberg reports that just over half of Tesla’s workers reside in the county, with the average full-time employee earning a salary of at least $47,147. Outside of Tesla’s factory, the average salary of an Austin worker is $68,060, according to data from ZipRecruiter.
TechCrunch was unable to acquire a copy of the report, so it’s not clear if those workers are all full-time. If they are, Tesla has hired a far cry more full-time employees than it is contracted to do. According to the agreement between Tesla and Travis County, the company is obligated to create 5,001 new full-time jobs over the next four years.
The contract also states that Tesla must invest about $1.1 billion in the county over the next five years. Tesla’s compliance report shows that the automaker last year invested $5.81 billion in Gigafactory Texas, which officially launched a year ago at a “Cyber Rodeo” event. In January, Tesla notified regulators that it plans to invest another $770 million into an expansion of the factory to include a battery cell testing site and cathode and drive unit manufacturing site. With that investment will come more jobs.
Tesla’s choice to move its headquarters to Texas and build a gigafactory there has helped the state lead the nation in job growth. The automaker builds its Model Y crossover there and plans to build its Cybertruck in Texas, as well. Giga Texas will also be a model for sustainable manufacturing, CEO Elon Musk has said. Last year, Tesla completed the first phase of what will become “the largest rooftop solar installation in the world,” according to the report, per Bloomberg. Tesla has begun on the second phase of installation, but already there are reports of being able to see the rooftop from space. The goal is to generate 27 megawatts of power.
Musk has also promised to turn the site into an “ecological paradise,” complete with a boardwalk and a hiking/biking trail that will open to the public. There haven’t been many updates on that front, and locals have been concerned that the site is actually more of an environmental nightmare that has led to noise and water pollution. The site, located at the intersection of State Highway 130 and Harold Green Road, east of Austin, is along the Colorado River and could create a climate catastrophe if the river overflows.
The site of Tesla’s gigafactory has also historically been the home of low-income households and has a large population of Spanish-speaking residents. It’s not clear if the jobs at the factory reflect the demographic population of the community in which it resides.
Launch startup Stoke Space rolls out software tool for complex hardware development
Stoke Space, a company that’s developing a fully reusable rocket, has unveiled a new tool to let hardware companies track the design, testing and integration of parts. The new tool, Fusion, is targeting an unsexy but essential aspect of the hardware workflow.
It’s a solution born out of “ubiquitous pain in the industry,” Stoke CEO Andy Lapsa said in a recent interview. The current parts tracking status quo is marked by cumbersome, balkanized solutions built on piles of paperwork and spreadsheets. Many of the existing tools are not optimized “for boots on the ground,” but for finance or procurement teams, or even the C-suite, Lapsa explained.
In contrast, Fusion is designed to optimize simple inventory transactions and parts organization, and it will continue to track parts through their lifespan: as they are built into larger assemblies and go through testing. In an extreme example, such as hardware failures, Fusion will help teams connect anomalous data to the exact serial numbers of the parts involved.
“If you think about aerospace in general, there’s a need and a desire to be able to understand the part pedigree of every single part number and serial number that’s in an assembly,” Lapsa said. “So not only do you understand the configuration, you understand the history of all of those parts dating back to forever.”
While Lapsa clarified that Fusion is the result of an organic in-house need for better parts management – designing a fully reusable rocket is complicated, after all – turning it into a sell-able product was a decision that the Stoke team made early on. It’s a notable example of a rocket startup generating pathways for revenue while their vehicle is still under development.
Fusion offers particular relevance to startups. Many existing tools are designed for production runs – not the fast-moving research and development environment that many hardware startups find themselves, Lapsa added. In these environments, speed and accuracy are paramount.
Brent Bradbury, Stoke’s head of software, echoed these comments.
“The parts are changing, the people are changing, the processes are changing,” he said. “This lets us capture all that as it happens without a whole lot of extra work.”
Amid a boom in AI accelerators, a UC Berkeley-focused outfit, House Fund, swings open its doors
Companies at the forefront of AI would naturally like to stay at the forefront, so it’s no surprise they want to stay close to smaller startups that are putting some of their newest advancements to work.
Last month, for example, Neo, a startup accelerator founded by Silicon Valley investor Ali Partovi, announced that OpenAI and Microsoft have offered to provide free software and advice to companies in a new track focused on artificial intelligence.
Now, another Bay Area outfit — House Fund, which invests in startups with ties to UC Berkeley — says it is launching an AI accelerator and that, similarly, OpenAI, Microsoft, Databricks, and Google’s Gradient Ventures are offering participating startups free and early access to tech from their companies, along with mentorship from top AI founders and executives at these companies.
We talked with House Fund founder Jeremy Fiance over the weekend to get a bit more color about the program, which will replace a broader-based accelerator program House Fund has run and whose alums include an additive manufacturing software company, Dyndrite, and the managed app development platform Chowbotics, whose most recent round in January brought the company’s total funding to more than $60 million.
For founders interested in learning more, the new AI accelerator program runs for two months, kicking off in early July and ending in early September. Six or so companies will be accepted, with the early application deadline coming up next week on April 13th. (The final application deadline is on June 1.) As for the time commitment involved across those two months, every startup could have a different experience, says Fiance. “We’re there when you need us, and we’re good at staying out of the way.”
There will be the requisite kickoff retreat to spark the program and founders to get to know one another. Candidates who are accepted will also have access to some of UC Berkeley’s renowned AI professors, including Michael Jordan, Ion Stoica, and Trevor Darrell. And they can opt into dinners and events in collaboration with these various constituents.
As for some of the financial dynamics, every startup that goes through the program will receive a $1 million investment on a $10 million post-money SAFE note. Importantly, too, as with the House Fund’s venture dollars, its AI accelerator is seeking startups that have at least one Berkeley-affiliated founder on the co-founding team. That includes alumni, faculty, PhDs, postdocs, staff, students, dropouts, and other affiliates.
There is no demo day. Instead, says Fiance, founders will receive “directed, personal introductions” to the VCs who best fit with their startups.
Given the buzz over AI, the new program could supercharge House Fund, the venture organization, which is already growing fast. Fiance launched it in 2016 with just $6 million and it now manages $300 million in assets, including on behalf of Berkeley Endowment Management Company and the University of California.
At the same time, the competition out there is fierce and growing more so by the day.
Though OpenAI has offered to partner with House Fund, for example, the San Francisco-based company announced its own accelerator back in November. Called Converge, the cohort was to be made up of 10 or so founders who received $1 million each and admission to five weeks of office hours, workshops and other events that ended and that received their funding from the OpenAI Startup Fund.
Y Combinator, the biggest accelerator in the world, is also oozing with AI startups right now, all of them part of a winter class that will be talking directly with investors this week via demo days that are taking place tomorrow, April 5th, and on Thursday.
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