16 October, 2024
New York tech investor and serial entrepreneur Kevin Ryan explains when to sell your company
Kevin Ryan has had a long and storied career as a pivotal force of New York City tech. He’s the founder and CEO of investment firm AlleyCorp, which has invested in a wide variety of startups, and is a serial founder, participating in the early stages of companies such as Business Insider, Zola, Gilt, Pearl Health, and Transcend Therapeutics. He helped build ad tech company DoubleClick as president and CEO in the 1990s and early 2000s, and Google later bought it for $3.1 billion in 2007, transforming the online advertising industry. He went on to co-found unstructured database provider 10gen, which later changed its name to MongoDB and went public in 2017.
Last Tuesday, I interviewed Ryan to discuss pivotal moments in company transformation for the benefit of the companies chosen for this year’s Startup Battlefield 200 at TechCrunch Disrupt.
As a part of the Startup Battlefield 200 program, the selected founders participate in pitch training workshops as well as a series of exclusive master classes with top-tier VCs, successful founders and operational experts. The virtual program aims to prepare and excite them for what is to come when they exhibit, demo and pitch at Disrupt in October.
During Ryan’s session, he offered a lot of useful advice for companies at all stages, from finding a great cofounder, to when and how to seek funding, to how a founder’s focus should change as a company scales.
But given his background with DoubleClick and MongoDB, I asked him how company founders should decide when and whether to take an acquisition offer, versus when they should hold on and try to go public.
“There’s no formula but what I’m thinking about is, one, what do our prospects look like?” he said. “Let’s not be delusional — how much are we growing, what is this company going to look like in three years, what are the exit strategies, then how many other people — other buyers — are there, how are we doing relative to everyone else?”
He added, “Most people underestimate the time factor, so if we’re worth $100 today, four years from now it’s got to be worth $200 just to break even because of risk, cost of capital, things like that. So are you signing up as CEO [because you believe] that we’re going to be worth $300? If you really believe that then we should hold on. But if you just think it’s going to be $150 or $170 we should probably sell today because also you need to factor in: Markets can close at any time. You and I over 25 years could name many things we didn’t see coming. The Ukraine war. No one saw inflation coming. No one saw many things coming….and all of a sudden everything’s dead.”
By and large, he said, more people should sell earlier, rather than holding out to try and become the next Mark Zuckerberg, who famously turned down a chance to sell Facebook to Yahoo for $1 billion in 2006. (Disclosure: Yahoo owns TechCrunch.)
“I think more people should sell than probably sell on average,” Ryan told me. “You’re definitely going to read the story of the $20 billion company that turned something down, but there are a lot of other examples of people that could have [sold].”
He added that lot of founders don’t think clearly when it comes to personal wealth from an acquisition, chasing ever-bigger numbers instead of settling for a life-changing amount of money. And by not settling, they often end up with zero instead.
“I had this conversation the other day,” he said. “Someone could sell now and they’re going to make $30 million. $30 million is an incredible amount of money. It’s life changing, right? And they can… a year later go off and do so many things. And you know what? $60 million doesn’t make you much happier than 30, right, but 30 it makes a big difference from zero.”
He added, “It sounds great to make 60, 90, 100. It actually doesn’t change your life very much.”
You can watch the whole interview here.
BMW says we need both battery and hydrogen EVs for a zero-emissions future
Funding for green hydrogen startups — particularly at the growth stage — has dipped. Hydrogen plants and fueling stations across the U.S. have shut down. And automakers and governments seem to be on the battery electric vehicle (BEV) buzz.
And yet, BMW recently announced plans to work with Toyota to develop a hydrogen fuel-cell consumer car for series production in 2028.
Despite hydrogen’s challenges, BMW thinks the only way to actually achieve a shift to zero-emissions transportation is through a mix of BEVs and hydrogen vehicles. And it’s a view that other industry experts share.
Juergen Guldner, general project manager of BMW’s hydrogen technology and vehicle projects, told TechCrunch that he (and his employer) thinks hydrogen vehicles can complement the growing market of BEVs by addressing the needs of customers who can’t or don’t want to have to charge their car like a phone.
Hydrogen vehicles could offer a “best of both worlds” scenario, where you get the benefits of electric driving with the convenience of refueling like traditional gasoline cars, Guldner said while speaking at a BMW event during Climate Week NYC.
“If you want to change the behavior of people, then offering choice is always the better way forward, versus just taking something away and saying, ‘This is the solution. You’ve got to live with it from now on,’” Guldner said.
Jason Munster, principal and founder of hydrogen consulting firm CleanEpic, added that a mix of BEV and hydrogen fuel cell vehicles is also more cost-effective and sustainable. “The thing about battery electric vehicles is that the more you put on the grid, the more the marginal cost goes up,” Munster told TechCrunch. “Right now in a lot of places, there’s excess grid capacity, so you can add fast chargers to the grid.”
Still, the challenges are substantial.
There is the cost to build out hydrogen infrastructure, which is much less developed than its battery electric counterpart. Hydrogen would need to be made using renewables, rather than fossil fuels, in order to make that zero-emissions claim. Both Munster and Guldner argue it’s possible if the whole ecosystem is taken into account.
“You can’t just have [hydrogen] fueling stations and vehicle companies working together,” Munster said, speaking about what went wrong with the rollout of Toyota’s hydrogen vehicle, the Mirai, in California. The state has the highest quantity of hydrogen stations in the country, but they weren’t plentiful enough for most Mirai owners to refuel with ease.
“Without all parts of the chain — the production, distribution, and end use — having skin in the game together with contracts that actually have teeth for penalties, you aren’t able to replicate the success that battery electric has had,” Munster said.
Guldner said BMW is working on building out such an ecosystem, in part by trying to drive demand through potential partnerships with commercial fleet customers. BMW has been testing a pilot fleet of hydrogen vehicles in more than 20 countries over the past 20 months and has received positive feedback so far, Guldner says.
The automaker is also working with Urban-X, a tech startup platform and VC firm by Mini, to find companies that can fit into the hydrogen equation.
The case against the VC model
Munster said that ultimately, the VC model is not well suited for hydrogen projects because of the long-term payback and the large capital requirements involved.
The Biden administration’s Inflation Reduction Act (IRA), which was signed into law in August 2022, includes tax credits for clean hydrogen production. But two years later, a lack of clarity on guidance is “holding back the entire hydrogen industry” from experiencing the type of boom that the battery industry has seen, Munster said.
He said the initial guidance for IRA hydrogen funding is “contentious,” “limiting,” and “not finalized.” The “three pillars” of the IRA hydrogen tax credit are incrementality, temporal matching, and deliverability. In other words, the goal is to ensure that hydrogen production truly results in reduced emissions by requiring new, dedicated renewable energy to power the electrolysis process (the separation of hydrogen and oxygen molecules to produce hydrogen).
The strictness of those three pillars makes it difficult for companies to qualify for subsidies. Munster has suggested more relaxed rules that allow for fossil fuels from the grid to power existing electrolyzers (the apparatus that performs electrolysis) in the short-term until a more robust renewables ecosystem is developed.
The total amount of the subsidy is also unknown — it could be anywhere from $30 billion to $300 billion.
“Everyone is really paused around their expansion plans based upon how big this subsidy ends up being,” Munster said.
Tesla Superchargers: GM, Ford, Rivian, and other EV brands with access
Eighteen months ago, Ford triggered a transformation when the U.S. automaker locked in a deal to give owners of its EVs access to the Tesla Supercharger network.
In a stunning shift, automaker after automaker — from GM and Hyundai to Rivian and Mercedes — followed suit. By the end of 2023, nearly every major automaker had agreed to adopt Tesla’s North American Charging Standard (NACS) and promised EV owners that adapters would soon be on their way.
Most non-Tesla customers are still waiting. However, GM’s recent announcement may provide an electric lining of optimism.
EV owners of GM vehicles like the Chevrolet Silverado EV and Cadillac Lyriq will now officially have access to Tesla’s Superchargers. All GM EV owners need to do is purchase, and wait for, the GM-approved adapters that will allow their cars to charge on Tesla’s ports.
More may soon follow. TechCrunch is tracking which brands have access to the Tesla Supercharging Network and will be updating this list.
The shift to the Tesla EV charging standard
In November 2022, Tesla shared its EV charging connector design in an effort to encourage network operators and automakers to adopt the technology and help make it the new standard in North America. At the time, every other automaker was using the Combined Charging Standard (CCS) in North America.
Mass adoption seemed unlikely at the time even though Tesla’s charging network was considered far superior thanks to its robust and user-friendly design and the ease of paying for the EV juice.
Six months later, Ford became the first to announce it would work with Tesla in a deal that would give its customers access to more than 12,000 Superchargers across the U.S. and Canada. But it wasn’t just about giving Ford EV owners access to a special adapter. Ford also committed to integrating its future EVs with NACS ports instead of CCS.
Rivian, GM, BMW, Honda, Hyundai, Volkwagen, Porsche, Audi, Hyundai, Kia, Lucid, and Stellantis followed.
Tesla charging FAQs
In the U.S. today, there are 36,499 NACS ports available publicly (although some of those might be from other EV charging companies that have adapted Tesla’s standard), compared to around 16,925 CCS ports. That’s despite federal dollars that have gone explicitly to the buildout of CCS chargers.
For EV owners stuck with a CCS port, they’ll have to hold out for manufacturer-approved adapters. While there are some third-party adapters that claim to be compliant with certain safety and performance standards, like Lectron’s Vortex Plug for $199, Tesla’s website says such adapters are prohibited.
A GM spokesperson told TechCrunch its adapters have been specifically designed to protect GM EV batteries while charging and that its vehicle warranty doesn’t cover damage to vehicle parts resulting from the use of non-GM approved adapters.
In late August, Tesla posted on X that it had ramped up production of adapters. That statement, combined with GM’s announcement, could mean that even more non-Tesla EVs will be pulling up to Supercharger stations soon. They’ll all have to download the Tesla app so they can pay for charging.
Tesla supercharging access checklist
Ford
Certain Ford customers officially gained access to Tesla Superchargers in February, but ongoing supply constraints have delayed the delivery of free fast-charging adapters for most customers (although Ford says the delays have affected “some” customers).
Current owners of the Mustang Mach-E and Ford F-150 Lightning who have yet to order their adapter can do so through their Ford Pass app. The deadline to apply for a free adapter is September 30.
General Motors
As of September 2024, GM has finally updated the software on its Chevy, Cadillac, and GMC EVs so customers can use Tesla’s Superchargers. If they want access soon, they need to purchase a “GM approved” adapter through their app for $225.
GM wouldn’t say how long shipping would take. A GM spokesperson said the company already has an inventory of the adapters and that it’s worked with multiple suppliers to manufacture the approved NACS DC fast-charging adapters.
From 2025 onward, GM’s EVs will be built with the NACS charge port.
Kia
Kia announced in September its plans to give EV owners access to NACS chargers starting January 15, 2025. And they’re using the announcement as something of a promotion.
Kia said customers who buy a new 2024 EV6 or 2024 or 2025 EV9 SUV from September 4, 2024 will get a free adapter mailed to them in early 2025, if there’s enough supply. Existing Kia EV6, EV9, and Niro EV customers who took delivery before September 4 will have to buy an adapter from a dealer “at a later date.”
Rivian
EV startup Rivian officially got access to 15,000 Superchargers across North America on March 18, 2024. At the time, Rivian promised to begin sending adapters to customers starting in April. A Rivian spokesperson told TechCrunch the automaker began delivery this spring and continues to ship adapters as quickly as it receives them.
As of September 2024, Rivian said that customers who order a new vehicle will have an adapter shipped to them automatically when they take delivery. Customers will receive the adapter within seven to 10 business days. The EV-maker also promised that those who already own a Rivian and are still awaiting an adapter will receive one at no cost by the end of January 2025.
TechCrunch will update the list as automakers gain official access.
Pear wants to empower up-and-coming VCs with its new emerging managers in residence program
When seed-focused Pear VC raised a $432 million fund last year, the firm co-founder Pejman Nozad said that it meant his firm had reached its “own product-market-fit.” That fourth fund was nearly three times larger than its previous $160 million fund.
The 11-year-old firm wants to help emerging venture funds follow in Pear’s footsteps. On Wednesday, Pear announced the Pear Emerging Manager in Residence program, which brings three up-and-coming pre-seed and seed venture funds into Pear’s offices for collaboration, such as deal flow sharing and due diligence.
Pear will also write a $250,000 check to invest in these managers’ funds, facilitate LP introductions and grant them early access to companies in Pear’s accelerator. The latter is a privilege typically reserved for partners at top firms like NEA, Lux Capital, and Sequoia Capital.
The firm’s emerging manager program was conceived by Pear partner Kathleen Estreich, who previously ran her own emerging firm, MKT1 Capital. Instead of raising her second fund, which would have been a very difficult endeavor in this funding environment, Estreich joined Pear a few months ago.
Prior to joining, Estreich spoke to Pear’s founders, Pejman Nozad and Mar Hershenson, about the importance of operators-turned-fund managers in the VC ecosystem. Estreich’s idea resonated with Nozad and Hershenson, and the idea of a residency program, run by Estreich, was born.
“We picked three emerging managers and gave them full access to what we do,” Nozad said. “We invested in their funds. They see our deal flow and how we evaluate deals. We give them an office, and we help them fundraise.”
To be sure, Pear is not the only VC firm that engages with emerging managers. Firms like Bain Capital Ventures have a dedicated fund-of-funds for investing in new venture funds.
Unlike BCV, Pear is investing directly out of its latest fund, Estreich told TechCrunch. “We’re making them almost an extension of Pear,” she said, “I also think seeing what the next stages of a venture fund looks like will help them get there faster.”
Pear’s emerging manager program’s inaugural members include Sarah Smith of the Sarah Smith Fund, John Gleeson at Success Venture Partners, and David Ongo Ongchoco and Adarsh Bhatt of Comma Capital.
Estreich said these funds were chosen for their unique value-add to the early-stage ecosystem. For instance, Gleeson runs the biggest customer success meetup in the country, Comma Capital has a strong community of mid-career engineers at top tech companies, and Pear could learn from Smith about her unique approach to engaging with founders.
Estreich said that the Pear Emerging Manager in Residence program will run for a year and will welcome three new VCs into its offices in about 12 months.
Meta has rebuilt Instagram and Facebook for its Quest headsets
At its annual Meta Connect event on Wednesday, Meta CEO Mark Zuckerberg announced that the company has rebuilt its social apps for mixed reality.
“We’ve got all new Instagram and Facebook experiences to bring your feeds and your Reels with you into mixed reality,” Zuckerberg said. “A really nice interface so you can lean back and enjoy your content on nice, big screens.”
The official announcement comes as Zuckerberg announced back in June that the company was testing a way for users to watch Reels on its Quest headsets.
By redesigning its social network VR apps to be better on Quest, Meta is working to tie its different apps and systems together.
The company also announced it has rebuilt Meta Horizon OS for spatial computing, bringing better support for 2D apps like YouTube, Facebook, and Instagram, and that it has added dynamic spatial audio for panels, which are the rectangular surfaces that display 2D app content in Quest.
Meta's Hyperscape lets you scan and explore real-life spaces in VR
Announced at Meta Connect 2024 on Wednesday, Meta is launching a new VR app called Hyperscape that renders recreations of real-life spaces in high fidelity, so you can explore them while wearing a Quest headset.
Available in beta in the U.S., Hyperscape lets you use a phone to scan a room and then recreate it. Alternatively, you can step into a room that someone else has scanned and shared.
Meta CEO Mark Zuckerberg showed a “hyperscape” onstage of rock band Green Day’s studio.
“We’re also bringing photorealistic spaces to the metaverse, and we call this hyperscape,” Zuckerberg said. “It’s pretty wild, and we’re planning on just adding more and more over time.”
Hyperscape is compatible with the Quest 3 and Quest 3S.
WP Engine sends cease-and-desist letter to Automattic over Mullenweg's comments
WordPress hosting service WP Engine on Monday sent a cease-and-desist letter to Automattic after the latter’s CEO Matt Mullenweg called WP Engine a “cancer to WordPress” last week.
The notice asks Automattic and Mullenweg to retract their comments and stop making statements against the company.
Today WP Engine sent what is called a “cease and desist” letter to Automattic demanding that Automattic and its CEO Matt Mullenweg stop making and retract false, harmful and disparaging statements against WP Engine. In response to misinformation he has disseminated about the…
— WP Engine (@wpengine) September 23, 2024
WP Engine, which (like Automattic itself) commercializes the open-source WordPress project, also accused Mullenweg of threatening WP Engine before the WordCamp summit held last week.
“Automattic’s CEO Matthew Mullenweg threatened that if WP Engine did not agree to pay Automattic – his for-profit entity – a very large sum of money before his September 20th keynote address at the WordCamp US Convention, he was going to embark on a self-described ‘scorched earth nuclear approach’ toward WP Engine within the WordPress community and beyond,” the letter read.
“When his outrageous financial demands were not met, Mr. Mullenweg carried out his threats by making repeated false claims disparaging WP Engine to its employees, its customers, and the world,” the letter added.
The letter goes on to allege that Automattic last week started asking WP Engine to pay it “a significant percentage of its gross revenues – tens of millions of dollars in fact – on an ongoing basis” for a license to use trademarks like “WordPress.”
WP Engine defended its use of the “WordPress” trademark under fair use laws and said it was consistent with the platform’s guidelines. The letter also has screenshots of Mullenweg’s text messages to WP Engine’s CEO and board members that appear to state that Mullenweg would make the case to ban WP Engine from WordPress community events in his talk at WordCamp if the company did not accede to Automattic’s demands.
Automattic did not immediately respond to a request for comment.
Mullenweg, who co-created WordPress, last week criticized WP Engine for raking in profits without giving much back to the open source project, while also disabling key features that make WordPress such a powerful platform in the first place.
Last week, in a blog post, Mullenweg said WP Engine was contributing 47 hours per week to the “Five for the Future” investment pledge to contribute resources towards the sustained growth of WordPress. Comparatively, he said Automattic was contributing roughly 3,900 per week. He acknowledged that while these figures are just a “proxy,” there is a large gap in contribution despite both companies being a similar size and generating around half-a-billion dollars in revenue. (WP Engine pushes back against that characterization in its C&D letter.)
In a separate blog post, he also said WP Engine gives customers a “cheap knock-off” of WordPress.
Notably, Automattic invested in WP Engine in 2011, when the company raised $1.2 million in funding. Since then, WP Engine has raised over $300 million in equity, the bulk of which came from a $250 million investment from private equity firm Silver Lake in 2018.
Ephos wants to shatter the market for AI and quantum chips with a new design based on glass
A theoretical physicist believes he has made a breakthrough in photonics research that will enable us to have faster and better processors — a major need in artificial intelligence, quantum computing, and other tech with heavy workloads. Now, his startup has received early backing from NATO, the European government, and other key investors to produce those chips.
Ephos has raised $8.5 million in seed funding that it will use to build out and operate a new R&D and manufacturing facility near Milan focused on glass-based quantum photonics.
There are others like Ephos with bight ideas about photonics, including Xanadu (valued at $1 billion), Photonic (backed by Microsoft), Oxford spinout Orca (backed by the U.S. DoD) and more. But Ephos, with its focus on chips, says that its facility will be the “world’s first dedicated to producing glass-based quantum photonic circuits.”
Andrea Rocchetto, the Italian theoretical physicist who is the CEO of Ephos (pictured here) said he came up with the idea for building Ephos and establishing it in Italy at the peak of Covid-19.
After studies in Rome, London, and Oxford, he was working on postdoctoral research at the University of Texas at Austin when the pandemic struck.
“I flew back to Italy and reconnected with the community here and realized that there was this immense talent pool that was completely outside of the big trends in technology,” he said. “There were no startups building quantum technologies.” He linked up with with three other highlydecorated quantum and computer science researchers — Francesco Ceccarelli, Giacomo Corrielli and Roberto Osellame — in 2022 and started Ephos to fill that void.
As Rocchetto sees it, that void is not just a geographic but a technological one.
Computational infrastructure, as we know by the huge revenues reaped by companies like Nvidia and the large bills that big foundational AI companies rack up for training and running models, is under stress. But it’s not just AI. New innovations like quantum computing are also putting pressure on the hardware we have today. In the U.S. alone, Rocchetto said, about 9% of the energy generated in the U.S. will be used for running data centers, so the demand is to get them to be faster and more efficient. “Photonics and quantum computing can both answer those needs,” he said.
Using chips that process light — photons, specifically — is one very efficient way to transfer data, and Ephos’s bet is that building photonics chips using (glass) fiber optics will be the best base for these and the least likely to result in photon loss. “Glass helps a lot for that,” he said. “The chips of our competitors are silicon-made, but light hates to move from one material into another. By building the entire infrastructure on glass, we can dramatically reduce those coupling losses between fibers and chips.”
Ephos has one leg in the world of deep tech, and one in the world of commercialized opportunity. Its quantum facility is already open — some of the funding was actually raised earlier in the year — but the first chips have yet to be made. These should come out in the next weeks, however, “and we expect the fab to be fully operational by the end of the year,” Rocchetto said.
Early interest has been from quantum computing startups, but he added that the startup is also seeing interest from so-called “hyperscalers,” big tech companies that build their own data centers, and the data center builders who work with them. The list of those investing are an interesting clue as to who some of those hyperscalers might be.
Starlight Ventures out of the U.S. is leading the round with Collaborative Fund, Exor Ventures, 2100 Ventures, and Unruly Capital also participating. Angels in the round include Simone Severini (Amazon Web Services’ GM overseeing quantum technologies), Diego Piacentini (formerly a senior VP at Amazon), and Joe Zadeh (former VP of Airbnb). Ephos is also getting backing from the European Innovation Council (EIC) and NATO’s Defence Innovation Accelerator (also known as DIANA).
The fact that Ephos is in Europe is not a small detail. There has been a big push across the world for regions to double down on more of their own infrastructure across a range of verticals amid geopolitcal and macroeconomic instability — collectively referred to as “resilience”. In this case, Ephos is also getting backing from the European Innovation Council (EIC) and NATO’s Defence Innovation Accelerator (also known as DIANA).
While Ephos sees its primary opportunity as one of addressing a need in computing, “As a company, we are very much interested in building transatlantic ties,” said Rocchetto. “We very much believe defense is a critical area for the growth of our company, because historically, the defense sector has been one of the first buyers of new computational technology. So we keep a close eye on the space.”