Image Credits: Koldunova Anna (opens in a new window) / Getty Images
SaaS founders trying to figure out what it takes to raise their next round can refer to Point Nine’s famous yearly SaaS Funding Napkin. (The term refers to “back of the napkin” plans or calculations.)
Now European hardware deep tech teams have a similar resource from First Momentum, a pre-seed fund investing in technical B2B and deep tech startups.
With its Deep Tech Hardware Napkin, the German VC firm hopes to democratize knowledge and benchmarks on funding, team, product ,and commercialization, broken down by stage. It focuses on Europe’s blossoming deep tech sector, which gives quite different results from what one might see in global SaaS.
Image Credits: First Momentum Ventures
Benchmarks are particularly helpful to first-time founders or those without a big network in startups and VC. This is especially true in deep tech, where many entrepreneurs come from a research background. “They don’t know what’s a wrong decision or a good one, because they don’t have data on it; they are not in entrepreneurial circles, they don’t have 10 to 15 friends who have started companies before,” general partner David Meiborg told TechCrunch.
First Momentum conducted a survey of 30 deep tech VCs from eight countries to counter this lack of knowledge and opaqueness, Meiborg said. The results are compiled not only in a “napkin” but also a full report.
The firm kept its observations to a minimum in the report, as it wanted it to be objective. But Meiborg and Maximilian Ochs (one of the members of First Momentum’s investment team) agreed to discuss with TechCrunch one interesting finding: “At seed and Series A, teams led by very technical CEOs (with no business background) raise significantly more funding than teams led by CEOs with a business-related background.”
Image Credits: First Momentum Ventures
There’s a bit of sample bias at play: “Startups that pop up in our survey are relatively successful for a given stage because they either raised VC money, or they’re about to.” This means that the technical CEOs in the sample aren’t fully representative; if they managed to raise funding, it’s likely because they also have commercial savviness.
Nonetheless, it shows that founders with technical profiles can benefit greatly if they add business skills and knowledge to their toolset. With a strong pipeline of university spinouts, there’s a lot that Europe can achieve if founders can get it right.
First Momentum hopes to help these technical founders not only with this report but also with a community called Clueless No More, where aspiring “European scientist entrepreneurs” can learn from each other. For instance, they can discuss a sore point brought up by Runa Capital associate Francesco Ricciuti: “Cap tables matter. Don’t let poor technology transfer reduce your chances of success,” he cautioned in the report.
How deep tech differs: Bigger rounds, longer road to success
The report notes that pre-seed and Series A deep tech hardware rounds were bigger in 2023 than in 2022, which First Momentum interprets as indicating growing investor appetite for the sector. The data checks out: Globally, deep tech claims a 20% share of venture capital funding, up from about 10% a decade ago. Some of this is the nature of the sector: Because deep tech requires significant upfront investment, rounds have been typically larger than average.
Intuitively, Meiborg already knew that the data would look different from the average startup. “The specific thing about deep tech investing is that you mainly take on technical risk, but it gets compensated by less market or commercialization risk,” he said. He gave the example of a startup that would find a cancer cure: Hard to do, but not hard to sell.
This explains the report’s finding that even at the Series A stage, only 29% of startups have reached a repeatable sales motion and meaningful revenue. Ochs didn’t find this surprising but saw this as a confirmation that getting to revenue takes time for a deep tech startup.
This requires reverse engineering, Ochs said: Entrepreneurs need to identify which milestones they can reach to get investors to finance their next round. First Momentum also refers to the process as “de-risking,” with Ochs suggesting to founders to understand their costs, the gross margins they can realistically achieve, and how expensive their end goal is.
Julien Macquet and Clement Van Driessen from Elaia, one of the VC firms that took part in the survey, also referred to the Series A hurdle, telling TechCrunch, “where many hardware startups struggle due to insufficient proof of market fit.” According to the duo, this requires a strategic approach with substantial capital — ideally from global investors.
As European dynamism gathers momentum, Elaia and partners double down with new deep tech fund
“Engaging a global investor syndication from day one ensures not only the necessary funding for this capex-intensive journey but also fosters critical support to achieve key business milestones,” they observed.
Image Credits: David Ryder/Bloomberg / Getty Images
Microsoft has reached an agreement with Cloud Infrastructure Services Providers in Europe (CISPE), nearly two years after the European not-for-profit trade association filed an antitrust complaint with the European Commission (EC) alleging that Microsoft was using its market dominance in the business software realm to tether customers to its Azure cloud.
Settlement discussions kicked off in April last year as Microsoft sought to keep regulators at bay, though neither party would reveal what the proposed changes to the status quo were. Some 15 months on, we can now confirm what’s happening.
The core issue relates to a 2019 licensing change whereby Microsoft made it more expensive to run Microsoft’s enterprise software on rival cloud services.
The deal reached Wednesday includes a memorandum of understanding signed by CISPE members and Microsoft, whereby Microsoft commits to make changes to address CISPE’s complaints. This includes a collaboration between all the parties to release an “enhanced version of Azure Stack HCI” for European cloud providers, which will offer features such as multi-session virtual desktop infrastructure based on Windows 11; free Extended Security Updates (ESU); and pay-as-you-go licensing for SQL Server.
“This is a significant victory for European cloud providers; CISPE has given Microsoft the benefit of the doubt and believes that this agreement will provide a level playing field for European cloud infrastructure service providers and their customers,” Francisco Mingorance, CISPE secretary general, said in a statement issued to TechCrunch.
CISPE also said it would set up an independent European Cloud Observatory (ECO) “to monitor the development and ongoing evaluation” of the changes, which Microsoft has nine months to deliver on.
Microsoft president and vice chair Brad Smith said that the deal would help increase competition in the global cloud market.
“After working with CISPE and its European members for more than a year, I am pleased that we’ve not only resolved their concerns of the past, but also worked together to define a path forward that brings even more competition to the cloud computing market in Europe and beyond,” Smith said in a statement issued to TechCrunch.
Notably, CISPE counts AWS as one of its members, sitting alongside smaller European cloud services providers such as Anexia and UpCloud. However, the agreement announced today excludes AWS, which wasn’t part of the negotiations, according to CISPE. And of course, it doesn’t include other major cloud providers such as Google or Alibaba, which aren’t CISPE members anyway.
This seemingly goes against the “red lines” criteria that CISPE laid out last year, detailing the parameters within which it would negotiate with Microsoft — these included a declaration that any deal reached should “apply to all cloud infrastructure providers operating in Europe,” which this clearly doesn’t given the omission of the other major cloud providers.
In a statement issued to TechCrunch, an AWS spokesperson pointed out that Microsoft selectively making these changes for some CISPE members shows that there are no technical barriers that prevent Microsoft from making its software more easily available to rival cloud providers, while Google Cloud head of platform Amit Zavery added that the deal struck today is tantamount to a pay-off, with reports indicating that Microsoft is paying as much as $22 million as part of the settlement. CISPE did confirm that Microsoft would be paying a “lump sum” to cover litigation and campaigning costs over the past couple of years, with CISPE withdrawing its antitrust complaint with the EC in return. However, CISPE wouldn’t confirm the lump sum figure, which seems to contravene another of its “red line” stipulations it set out last year, which is that any settlement “must be transparent and clear, [and] open to scrutiny.”
“Microsoft’s playbook of paying off complainants rather than addressing the substance of their complaint hurts businesses and shouldn’t fool anyone,” Zavery said. “Many regulatory bodies have opened inquiries into Microsoft’s licensing practices, and we are hopeful there will be remedies to protect the cloud market from Microsoft’s anti-competitive behavior. We are exploring our options to continue to fight against Microsoft’s anti-competitive licensing in order to promote choice, innovation, and the growth of the digital economy in Europe.”
Ryan Triplette, executive director for the Coalition for Fair Software (CFSL), said that the move merely benefits a handful of providers in Europe and underscores the need for the issue to be addressed globally.
“This settlement is Microsoft’s latest attempt to avoid regulatory scrutiny without addressing the underlying anticompetitive practices that impact millions of cloud customers worldwide,” Triplette said. “Even after this agreement is in place, Microsoft will continue to use its unfair software licensing practices to limit choice, drive up costs, and lock in customers. A settlement with some smaller European providers that excludes the vast majority of customers and cloud providers does nothing to address Microsoft’s global anti-competitive behavior.”
The European Union has accepted commitments from Apple over how it operates Apple Pay to settle a long-running competition investigation. Commission EVP Margrethe Vestager, who heads up the EU’s competition division, announced the development in a press conference Thursday.
Apple has until July 25 to implement changes that will allow developers of rival mobile wallets to offer contactless payment by the predominant technology used in the EU (NFC) — enabling them to offer their users “tap and go” payments, she said. They will also be able to access key iOS features, such as double click to launch their apps as well as Face ID, Touch ID and passcodes for authentication.
Apple will also let users set a third-party wallet app as their default, rather than its own Apple Wallet.
The bloc’s competition division opened a formal investigation of Apple Pay, Apple’s mobile payment and mobile wallet technology, back in June 2020, following a number of complaints. Initially the probe was scoped to look at Apple Pay as a whole. Later the case narrowed to focus on the use of Apple’s technology for contactless payments.
Reporting preliminary findings two years later in May 2022, the EU’s Commission said it had found Apple abused a dominant position to block competitors from providing NFC-enabled contactless payments on the iPhone — meaning they were unable to develop rival mobile wallets and compete fairly with Apple Pay.
The EU took specific issue with Apple restricting the ability of rivals to build wallet apps that can wirelessly communicate with NFC payments terminals, as Apple Pay can. It suspected the restriction of enabling Apple’s contactless payment tech to gain market share unfairly. And the EU said it wanted Apple to provide full access to NFC to allow competitors to develop alternative wallets.
Apple was invited to respond to the EU’s May 2022 Statement of Objections. The next major development came in January 2024 when it offered to make changes aimed at settling the case. Its proposal offered to let third parties developing mobile wallet and payment services gain fuller access to NFC functionality on iOS devices, free of charge, via a set of APIs without having to use Apple’s payment or wallet tech.
The offer would still bar rivals from accessing a special chip on Apple devices called the secure element, which it uses to enhance the security of transactions made using Apple Pay. But Apple said it would provide “equivalent access” to NFC components through a mechanism called “Host Card Emulation (‘HCE’) mode”. It said this would let third-party wallets store payment credentials and complete transactions using NFC securely, without accessing the secure element.
Other commitments Apple offered at the time included pledges to provide third parties with additional features and functionality, such as defaulting of preferred payment apps and access to authentication features like Face ID, its biometric authentication tech. It also promised to apply FRAND (Fair, Reasonable and Non-Discriminatory) terms when deciding whether to grant access to NFC.
Stronger commitments
Vestager said Thursday the Commission has accepted Apple’s offer after pressing for some improvements.
“By excluding competitors from the market, it may have had a negative impact on innovation. This reduction in choice and innovation is harmful. It’s harmful to consumers and is illegal under EU competition rules. To address these concerns, Apple offered a set of commitments earlier this year,” she said.
“Over the last month, we tested a package, we got feedback on whether the remedies could work, if they could address our concerns. The issue raised a lot of interest. Many banks, app developers, card issuers, financial associations gave us their feedback. We looked very carefully at those comments, and we asked Apple to improve their commitments. Then Apple offered improved remedies, and here we are today, making those remedies binding on Apple.”
Details of exactly how Apple’s enhanced its January offer following industry feedback are set out in the Commission’s press release — but they include committing to:
Removingthe requirement for developers to have a licence as a Payment Service Provider (PSP) or a binding agreement with a PSP to access the NFC input;Evolving the HCE architecture to comply with evolving industry standards used by Apple Pay;And shortening deadlines for resolving any disputes, among others.
Since the EU opened the Apple Pay antitrust case the bloc has passed an update to its competition rulebook which is intended to boost the contestibility of digital markets by applying upfront obligations on a number of major platforms, including Apple’s iOS, so that tech giants cannot block competitors from accessing key infrastructure they operate. EU lawmakers want the Digital Markets Act (DMA) to speed up the process of resetting digital dominance and restoring competition to tipped markets.
Shortly after the EU announced it was consulting with industry stakeholders on Apple’s Apple Pay offer, the company suggested the changes it had proposed also comply with DMA requirements.
Vestager said Apple’s commitments on Apple Pay that the EU has accepted go further than what’s required by the DMA. “For instance, they include monitoring and dispute resolution resolution mechanisms,” she noted, adding: “This shows that antitrust enforcement goes hand in hand with the DMA.”
“From now on, Apple can no longer use its control or the iPhone ecosystem to keep mobile wallets out of the market. Competing wallet developers as well as consumers will benefit from these changes, opening up innovation and choice while, of course, keeping payments secure.”
The commitments are binding on Apple for 10 years. Failure to abide by them could be met with stiff penalties.
“Today’s decision makes the commitments offered by Apple legally binding. If Apple does not honour such commitments, the Commission may impose a fine of up to 10% of its total annual turnover, without having to find an infringement of EU antitrust rules, or a periodic penalty payment of 5% per day of its daily turnover for every day of non-compliance,” an EU spokesperson told us.
Reached for comment, an Apple spokesperson sent this statement: “Apple is providing developers in the European Economic Area with an option to enable NFC contactless payments and contactless transactions for car keys, closed loop transit, corporate badges, home keys, hotel keys, merchant loyalty/rewards, and event tickets from within their iOS apps using Host Card Emulation based APIs. Apple Pay and Apple Wallet will continue to be available in the EEA for users and developers, and will continue to provide an easy, secure and private way to pay, as well as present passes seamlessly from Apple Wallet.”
This report was updated with comment from the Commission
Apple offers EU set of pledges aimed at settling Apple Pay antitrust probe
Image Credits: grinvalds (opens in a new window) / Getty Images
As competition with TikTok and Reels heats up, YouTube on Thursday announced a slate of new features designed to make its short-form video product, YouTube Shorts, more compelling. In a video update for creators, YouTube Chief Product Officer Johanna Voolich introduced six new tools that will help creators craft their Shorts videos, including those that will automatically transform longer videos into Shorts, among others, as well as tools to inspire creation, like an “Add Yours” sticker that prompts others to share their own content related to a creator’s video.
“One thing I love is that anyone can build a Short — even I can build a Short — because we have all these tools that make it a very accessible way to become a creator,” Voolich said ahead of the introduction of the new tools and features.
Image Credits: YouTube
Two of the offerings focus on how you want to present the audio and speech in your video. For instance, one lets you create auto-generated captions that you can edit and customize with different fonts and colors, while another lets you choose from four voices to have your text narrated or spoken out loud.
Image Credits: YouTube
In addition to the “Add Yours” sticker, creators are gaining access to two new effects celebrating the popular game Minecraft’s 15th anniversary. One, Minecraft Spring, lets you film a video inside the world of Minecraft, and Minecraft Rush adds a new mini-game that can be played inside the Shorts player. For the latter, the goal is to record yourself tapping to clear the blocks as quickly as you can, then share that video with others to see who’s faster.
However, the new tools that let YouTube capitalize on its existing and sizable collection of public videos are of particular interest.
With a new auto layout tool, arriving soon, creators will be able to turn their regular videos into Shorts more easily. Building on last year’s launch of tools to create Shorts from long-form content, the new auto-layout offering, initially available on Android, will automatically track the video’s main subject when turning the video into a Short. That means it will automatically and dynamically pan, zoom and crop the video for you, according to YouTube.
Image Credits: YouTube
Another tool will let people remix a remix. Remixes are Shorts videos that incorporate a video segment from another user’s YouTube video or Shorts video, so long as the video is public and the creator hasn’t opted out of having their content reused in this way. While YouTube already offers various tools for remixing videos, the new addition will let creators create remixes from existing remixes, instead of only from other long-form or Shorts videos.
Image Credits: YouTube
Voolich said that Shorts videos now receive 70 billion daily views, which, perhaps concerningly, is the same figure YouTube announced last September. She also hinted that YouTube may test Shorts videos that extend beyond 60 seconds.
“It seems like some people want shorter Shorts and some people want longer Shorts, so we’re trying to figure out what is the right cutoff,” Voolich said.
Some of the new features are newly available but still rolling out, while others will be launched “soon,” YouTube said.
Hank Green has had a while to think about how social media has changed us. He started making YouTube videos in 2007 with his brother, novelist John Green, at a time when the first iPhone was in development, Myspace was still relevant and Instagram didn’t exist. Seventeen years later, posting videos on the internet is no longer just a hobby, but a $250 billion industry. And yet, after all this time, the Green brothers remain two of the longest-tenured and most respected creators in the game.
Now, in a time of addictive infinite scrolling and increased loneliness, Hank has grown pensive about his role as a content creator. But Green isn’t an ordinary creator — he’s started so many companies and projects online that fans created a website counting how many days it’s been since he’s started something new.
Green founded the crowdfunding platform Subbable, which Patreon acquired in 2015, and he co-founded the companies DFTBA (an e-commerce company for creators) and Complexly (an educational media company). He was CEO of both of those companies until 2023, when he stepped down after he was diagnosed with Hodgkin lymphoma. Fortunately, Green is now in remission. He even performed a standup comedy special about the experience of cancer treatment, because he’s Hank Green, and even chemotherapy can’t stop him from making new things.
Green’s experience running startups, coupled with his tenure as a creator, gives him a valuable perspective on where the creator economy is going. As the downsides of social media become more obvious, Green is thoughtful about the power and attention that creators command.
On one hand, the Green brothers have shown that social media can be used to change the world for the better. The brothers grew their fanbase of millions and harnessed their online community for good, from fundraising with Partners in Health for a maternal health center in Sierra Leone, to persuading pharmaceutical company Danaher to lower the price of life-saving tuberculosis tests. Aside from their main channel vlogbrothers, the Greens also founded Crash Course, a free, educational YouTube channel with 15.7 million subscribers, which has become ubiquitous in American classrooms.
But for all the good that the internet can do, it’s still isolating. If you’re feeling lonely, it’s a lot easier to keep scrolling TikTok than to call a friend.
“I am part of this problem — it’s not just the algorithms; it’s the content,” Green told TechCrunch. “I have been trained by the algorithms and by my colleagues to be extraordinarily good at grabbing and holding people’s attention. I hope I use that skill for good, but I also use it for distracting people from whatever else they would be doing.”
Creators of Green’s stature have a lot of power — they can reach millions of people at the push of a button. But they’re making those connections on the platforms’ turf, whether that’s TikTok, YouTube or Instagram.
“I think I feel my power more than [social media executives] do, because I have more direct connection to audience, so I see the impact in a way that they don’t,” Green said. “When I’m talking to people who are making really big, important decisions at these platforms, they very much want to believe that they aren’t important, and I don’t get that luxury of believing that I am not that important, because I get people who say, ‘You know, that video you made really hurt me,’ or ‘That video helped.’”
Investing in creators
At this year’s VidCon — the online video conference that the Green brothers co-founded in 2010, then sold to Paramount — the creator economy is navigating its increased attention from the broader tech world. In the expo hall, teenagers are still cosplaying as Hatsune Miku and lining up for meet-and-greets with Minecraft YouTubers. But the scene is different upstairs on the “industry track,” where venture capitalists like Slow Ventures’ Megan Lightcap are detailing the strategy behind investing in creators, and MatPat explains how he managed to become one of the first creators to successfully sell their company.
All creators are business owners, but Green goes beyond what’s standard. During the industry’s boom in VC funding, Green thought about investing in tools for creators, which makes sense given his background in founding Subbable.
“Honestly, in that moment, I was like, ‘I should have done this. I should have started a fund,’” he said. “Not that I didn’t have other stuff to do … and it turns out it’s very good I was too distracted, because probably I would’ve lost a bunch of people’s money, because it’s hard to build businesses at all.”
That’s especially true for the creator economy, where there are so many different kinds of creators whose needs are ever-changing.
“Creators are so diverse in their needs that, to create a product that is scalable — and that doesn’t cost a ton of money trying to individualize itself for each individual creator — you end up creating a bad product,” Green said.
In some cases, VCs have decided to invest in creators like they’re individual startups. Other companies like Spotter give creators upfront capital in exchange for the ad revenue from their back catalog on YouTube. Green is interested in these funding models, though he describes investing in content creators as “deeply antithetical to the Silicon Valley VC playbook.” That’s not because he doesn’t believe creators are a good investment, but because creators don’t scale at the same speed as the kind of startups that typically attract VCs.
“This is just regular investing,” Green said. “This isn’t something that’s going to 10x.”
Even though the creator economy is less of a buzzword in Silicon Valley these days, the space is still growing — creator startups in the U.S. have already raised more money this year than all of last year, mostly because of the AI boom, which Green sees as a fad.
“My gut says that people want to connect with people,” he said. “A relationship with a creator is already artificial in some way. … But I don’t think AI will be that good at building audiences.”
Creators wrestle with platforms’ power
Creators navigate the same challenges as any small business owner, but they’re also subject to the unpredictability of social platforms and consumers’ changing interests. These Big Tech companies are incentivized to generate as much engagement as they can, and if a small tweak to an algorithm can mean your videos stop showing up on TikTok’s For You page, then creators are left feeling helpless. And if a creator loses access to their account — sometimes via coordinated reporting campaigns by bad actors — it’s not likely they’ll be able to get in touch with someone from the platform to help.
Green tried forming a trade organization called the Internet Creators Guild in 2016, but it only stayed afloat for three years — it’s proven challenging to form a unified advocacy body for creators, since the industry is so decentralized.
“[SAG-AFTRA members] do the same job for the same few companies, but we all do very different jobs for the same companies,” Green said, referring to creators’ dependence on platforms like YouTube, TikTok, Instagram and others. “A person doing textile art and then selling it on Etsy has a very different set of needs than a musician.”
“There are some things that everyone agrees on — like, there should be recourse when your account stops existing,” Green said. “If I lived in a town and started a business there, the town shouldn’t be able to just come and put a bike lock on my door and say, ‘You don’t own that business anymore.’”
Even creators who watch their star rise live with the anxiety that they might not always retain their audience. That’s a power that social media platforms have over the creators who make their apps worth our time.
“The bad part of TikTok — being that you’re infinitely replaceable — is also the good part of TikTok,” he said. “People are so easy to discover. Talent discovery has never been this powerful.”
Andy Warhol’s adage about our 15 minutes of fame has never been more realistic. Characters like Reesa Teesa, the “Hawk Tuah” girl and the Four Seasons Orlando baby capture our attention, then rush to sign with talent agencies and try to turn their one shining moment into a full-fledged career. But the speed at which these people become household names — at least temporarily — is evidence of a growing anxiety among creators that their fortune could run out.
And then there’s creators like Hank Green. He was there when you were a kid struggling with biology, he’s still here when he pops up on your TikTok with a weird science fact, and hopefully, he’ll stick around a while longer.
Get ready for a prime week of savings at TechCrunch Disrupt 2024 with the launch of Disrupt Deal Days! From now to July 19 at 11:59 p.m. PT, we’re going back to early-bird ticket prices, allowing attendees to save up to $800 on their passes. This limited-time offer is the perfect opportunity to secure your spot at one of the most anticipated tech events of the year.
Grab your passes here.
Why attend TechCrunch Disrupt 2024?
Whether you’re looking to learn, share, or grow, TechCrunch Disrupt 2024 offers unparalleled opportunities to expand your knowledge and network:
Connect with 10,000 startup leaders through 1:1 or small-group Braindates.Get your questions answered in one of the 300+ sessions, roundtables or breakouts.Rub elbows with Silicon Valley’s best at one of the 100+ Side Events happening during Disrupt Week.And so much more.
Also, we’re hosting some of the top thought leaders at Disrupt, offering you the chance to gain insights from a few of the most influential figures in the tech industry.
Alex Pall, Producer, The Chainsmokers and Investment Partner, Mantis Venture Capital.Arian Simone, CEO and Founding Partner, Fearless Fund.Dayna Grayson, Co-founder and Managing Partner, Construct Capital.Denise Dresser, Chief Executive Officer, Slack.Mary Barra, Chair and CEO, General Motors.Navin Chaddha, Managing Partner, Mayfield Fund.Peter Beck, Founder and CEO, Rocket Lab.Vinod Khosla, Founder and Partner, Khosla Ventures.
Don’t miss out, and book your pass today during our Disrupt Deal Days event and pocket some major ticket savings.
Today is the final chance to save up to $800 on TechCrunch Disrupt 2024 tickets. Disrupt Deal Days event will end tonight at 11:59 p.m. PT. Don’t miss out on this opportunity to save big on the tech conference of the year.
Book your last-minute ticket savings here.
Why attend TechCrunch Disrupt 2024?
TechCrunch Disrupt 2024 offers unparalleled opportunities to learn, share and expand your network.
Connect with 10,000 startup leaders through 1:1 or small-group Braindates. Get your questions answered in over 300 sessions, roundtables, or breakouts. Network with Silicon Valley’s finest at any of the 100+ Side Events during Disrupt Week. And so much more.
For over a decade, TechCrunch Disrupt has been one of the most anticipated tech conferences of the year. Bringing together thousands of startup heads, investors, tech thought leaders, and visionaries.
Disrupt 2024 will showcase numerous influential thought leaders who will share their invaluable insights. Here’s a glimpse of some of the speakers who were featured in last year’s Disrupt.
Anamitra Banerji, Co-founder and Managing Partner, Afore CapitalAsh Jhaveri, Vice President of Partnerships, MetaCathy Gao, Partner, Sapphire VenturesDan Roesbery, VP, Fintech Business Development, VisaJen Carter, Global Head of Technology, Google.orgNaba Banerjee, Head of Trust and Safety, AirbnbSherrod DeGrippo, Director Threat Intelligence, MicrosoftS. Ko-yung Lee, Investor and Coach, Launch Lab/Fika VenturesThomas Dohmke, CEO, GitHubThomas Kurian, CEO, Google CloudAnd much, much more.
Hurry — these are the final hours to save big on TechCrunch Disrupt 2024 tickets. Grab yours today before prices go back up.
When is a startup not a startup? When it’s a public company with 1,300 employees and $2.5 billion in capital. If that failed to conjure so much as a smile, that’s because it’s not a joke — it’s very much the reality for Nebius, a fledgling AI infrastructure business that has emerged from the ashes of Yandex; a multibillion-dollar juggernaut once touted as the “Google of Russia.”
“It’s like a startup because we are ‘starting up,’ but it’s an unusually big one,” Arkady Volozh, Yandex co-founder and former CEO, told TechCrunch in an interview this week. “But what we’re trying to build will actually require even more resources, more people and much more capital.”
Volozh was forced out of Yandex in 2022 after the European Union placed him on a sanctions list in the wake of Russia’s Ukraine invasion. The EU removed Volozh from the list in March this year, paving the way for his return to the fold as CEO of Yandex’s next incarnation — one whose team and data centers are entirely outside Russia.
The Yandex implosion
The entity known as Yandex was always a little convoluted. When discussing “Yandex,” most people mean Yandex LLC, the Russian company founded in 1997 that built everything from search, e-commerce and advertising products, to maps, transportation and more. However, while Yandex’s core audience was in Russia and a smattering of neighboring markets, its parent was a Dutch holding organization called Yandex N.V. which went public on the Nasdaq in 2011, followed by a secondary listing three years later on the Moscow Exchange.
A Yandex self-driving taxi in action.Image Credits: Yandex
Yandex N.V. was doing relatively well as a public company, hitting a peak market cap of $31 billion at the tail-end of 2021. But that all changed with the Russia-Ukraine conflict, with the Nasdaq putting a halt on trading due to sanctions. While the Nasdaq initially said that it would delist Yandex entirely — alongside several other Russian-affiliated companies — Yandex appealed, and Nasdaq agreed to maintain the company’s listing, but keep the pause on trading as the Dutch entity went through the arduous process of severing all Russian ties.
That process entered its final stages in February, with Yandex N.V. revealing its exit strategy. The entirety of its Russian assets — which also happened to be the lion’s share of its business — would be sold at a $5.4 billion valuation to a Russian consortium, with $2.5 billion paid in cash and the remainder paid in its own shares.
The transaction was something of a fire sale, constituting half of Yandex’s market capitalization at that time. The reason? A Russian government-imposed rule that demands a mandatory discount of at least 50% for any divestments involving parent companies incorporated in countries regarded as “unfriendly” by Russia. The Netherlands, being a signed-up member of an EU bloc that imposed sanctions on Russia, would certainly fall into that category.
Nonetheless, the transaction closed this week, and Yandex N.V. has swiftly moved to distance itself from any remnants of its past — the most obvious one being its name. Subject to shareholder approval, Yandex N.V. is adopting the name of one of its few remaining assets, an AI cloud platform called Nebius AI which it birthed last year.
AI compute demand
Nebius is vying for a market that includes all the major “big tech” cloud hyperscalers, but its main competition is arguably the swathe of dedicated “GPU-as-a-service” startups that have emerged off the back of demand for AI compute. These include the likes of U.S.-based CoreWeave, a $19 billion business that pivoted from cryptocurrency mining, and which is currently expanding its own infrastructure into Europe. There is also at least one domestic alternative in the form of Flex AI, a French startup which recently exited stealth with $30 million in seed funding to rent GPU compute out to AI companies.
However, Nebius finds itself in something of a unique position. Technically speaking it’s not a startup, but it’s having to start afresh with the few assets it has left, which is really the result of pure chance — it’s just what happened to exist outside of Russian territory when the conflict started two years ago. This includes an autonomous vehicle company called Avride, based in Texas; a generative AI and LLM company called Toloka AI; edtech platform TripleTen; and, most notably in terms of this new direction, a Finnish data center and AI cloud platform called Nebius AI.
Accordingly, the company is now positioning itself as a full-stack AI infrastructure company with plans for a large-scale network of GPUs (graphics processing units) en route to becoming a leading player in Europe. This is enabled by its data center in Finland and an existing partnership with Nvidia which goes back some time.
“We launched Nebius less than a year ago, and we now have thousands of GPUs,” Volozh said. “We have a great cloud partner in Nvidia, they’ve known us for ages because we were one of its largest clients in Europe — so really, it’s just the same people talking to the same people. They know us, and they know what we can do. Fortunately, one of the data centers of Yandex was built outside of Russia, and this is what we inherited and are now rapidly increasing its capacity.”
Volozh says that Nebius is looking to triple the capacity at its current owned facility in Finland, with plans to get it to almost 100 megawatts. However, it’s also looking to start building out additional data centers across Europe in the coming years.
“We produce the full stack — data centers, motherboards, servers, racks, connectivity — everything is our own,” Volozh said. “We are now negotiating for several greenfields [data center built from scratch] in several countries, which we will sign very soon. But this will take time. And before that time, we will be renting at co-location facilities.”
Volozh confirmed that the company intends to regain its full unfettered public status now that it’s untethered from its Russian assets, and is actively working with both the Securities and Exchange Commission (SEC) and Nasdaq to achieve that.
But wouldn’t it be easier to go private and scale the good old-fashioned startup way — away from the pressures of the public glare?
“I would say the opposite,” Volozh said. “Building infrastructure is the most capital intensive thing. Who’s building it? It’s the big tech guys who have billions of dollars of revenues, and they have their own ecosystems where whatever you launch gives you an extra couple percent of profits. They’re investing like hell, and for a reason. Everybody wants to be there first.”
So the Microsofts and Googles of the worlds are all-in, as are those in the “second tier” market such as CoreWeave, Lambda and numerous others that are capitalizing on their relationships with GPU kingpin Nvidia. But the capital required not only to build this, but develop a full system of interconnected GPUs that can communicate and share data and workloads dynamically, is significant — which is why we’re seeing these younger players raise multiple massive rounds of funding in close proximity, spanning debt and equity.
Nebius, for its part, is starting with a couple of billion dollars in capital, a figure that may deplete fairly quickly if a buy-back proposal to procure dormant shares is taken up by its existing shareholders. However, Volozh reckons that it will be far easier — and cheaper — to raise capital as a public company. Moreover, Nebius is positioned strongly as it’s operating in one of the hottest spaces in technology right now.
“It’s [AI infrastructure] probably the unsexiest ‘thing’ within a very sexy market,” Volozh said. “AI is very interesting — it’s very real, and it’s not hype like the internet wasn’t hype 20 to 30 years ago. With infrastructure, we are in a very sweet spot. We’re starting off with a couple of billion [dollars], and we will build enough capacity to scale initially.”
So as a public company, Nebius could serve as an attractive alternative for those looking for skin in the game without having to bet on the usual players.
“I don’t know of any other public company in AI infrastructure outside of ‘big tech’ — if you’re an investor, and you want exposure to this area, we’re very promising,” Volozh said. “Of course, you could buy Microsoft or Google stock, or you can buy this stock. So that is why it’s good to be public.”
Talent pool
While Nebius is not alone in its endeavors, it has something other younger players in the space don’t have — and that’s experience building out compute infrastructure at scale. Of the company’s 1,300 employees, around 1,000 of them are engineers, mostly transitioning over from the old Yandex business, according to Volozh.
“Technologically, this is what this whole team has been doing for the past 15 to 20 years,” he said. “They have built pretty large infrastructure globally, with hundreds of megawatts of data centers. Now, we need to build it again, and these things are easier when you’re doing it a second time.”
When Yandex N.V. was a corporate holding company, Amsterdam was little more than an address. Today, the Dutch capital is the company’s biggest hub with some 500 people, with the remainder of its headcount split across various other locations including Israel, the U.S. (Austin, Texas) and Belgrade. While Amsterdam will remain home, its other bases will be fluid and evolve in line with the demands of the business.
This geographical spread has largely been down to chance, a combination of where its subsidiaries were originally based and, more recently, which countries have been willing to accept workers fleeing the conflict.
“It has been quite a journey. When the war broke out in February, ’22, a lot of people started leaving the country [Russia],” Volozh said. “There’s a lot of families, but to move a family is a brave move just to drop everything and just move. But they realized that they don’t want to support it [the war]. They don’t want it to happen in their name. When they all started leaving, we started helping them.”
Israel, where Volozh himself has officially been based for the best part of a decade, was the first country to start accepting his workers.
“Because it’s a visa-free country for Russia, it was easier for them to come as tourists — and then they started getting work permits pretty quickly,” Volozh said. “Later in 2022, across Europe and specifically the Netherlands recognized what was going on and actually invited us — they issued hundreds of work permits. So that’s why people started moving to Amsterdam, and I think it’s a big win for the Netherlands. We’re a big AI company, and we have well-paid, high-level engineers — everybody will be contributing a lot of taxes here.”
It’s difficult to overstate the sheer scale of the effort involved in getting to where Nebius is today. It’s a shadow of its former self, for sure, but much like the companies that pivoted from crypto to cash in on the AI gold rush, Nebius is repurposing the resources it has to meet a demand that is showing little sign of waning.
“It was a lot of work to move all these people, while also separating the company in parallel,” Volozh said. “It has been a lot like a startup, in that we had to build the company from scratch, though we needed to be sure that all the technology is totally separate — for example, ensure that the same Finnish data center doesn’t transmit anything back across the border [to Russia]. Now the deal is done, the money is in the bank, the company is separated. And the people are here.”
Volozh, for his part, is technically based in Tel Aviv though he adds that in reality he “lives on a plane,” splitting his time between the various hubs his work takes him to. But he remains upbeat about his new venture’s prospects.
“I’ve never been so excited about the future,” he said. “Yandex was not my first company, but even at Yandex we started all these business units almost every year — Yandex grew to be much more than a search company, and it really was just like launching [new] companies. So… here’s yet another company to launch.”
Image Credits: Yuichiro Chino (opens in a new window) / Getty Images
Identity management is one of the most common fulcrums around which security breaches have pivoted in the last several years. One of the main reasons it has become the gift that keeps on giving to malicious hackers is that it’s a nightmare for organizations to track.
A security startup founded in Tel Aviv called Linx has been quietly building technology using AI and analytics to address this, and today, on the back of picking up customers in stealth mode, it’s coming out into the open with $33 million in funding to take on the challenge of identity management more aggressively.
Linx’s funding is being announced in a single sum, but more specifically, it’s coming in two tranches that speak to its momentum while in stealth. The latest is a $27 million round co-led by Index Ventures and Cyberstarts, and before that, Linx raised $6 million in a round led by Cyberstarts.
Other investors in Linx speak to the founders’ reputation in the Israeli security community: they include Mickey Boodaei (Imperva, Trusteer, Transmit), Rakesh Loonkar (Trusteer, Transmit) and Assaf Rappaport and Yinon Costica (Wiz, Adallom). Other investors in the round are Cerca Partners and Knollwood Investment Advisory.
Linx Security has been around for just over a year, but it has an interesting backstory. The two co-founders, Israel Duanis (CEO) and Niv Goldenberg (CPO), originally met and became friends when they were enlisted together in the army in the 8200 cyber unit. They were not the only ones in that particular cohort: Assaf Rappaport and the other Wiz founders were also in that group.
Both founders went on to work for cybersecurity companies: Duanis with Checkpoint Software, and Goldenberg with Adallom, Microsoft and Transmit. Duanis also later ranged away from the space, founding, running and eventually selling (to Via) an automotive fleet management tech company called Fleetonomy. Yet, Duanis still felt like there was something in security that he needed to do.
“When I looked at the past 20 years, I felt like ID has always been overlooked,” he said in an interview. At Checkpoint, he recalled, access management and permissions were essentially IT issues, not security, “but so many attacks now are ID-driven.” A quick look at some of the most high-profile breaches of the last several years — Equifax, T-Mobile and Snowflake, to name just a few — underscores how identity, specifically ungoverned credentials, could be exploited by malicious hackers. “These were all credentials issues,” said Duanis.
The founders’ bet was that a platform that could understand and fix this from the perspectives of compliance, security and efficiency “could create a real impact,” he said.
“Today, identity is the new perimeter, and so you need to address that.”
Ultimately, the Rappaport Rapport (heh) was pretty strong. When Duanis told Assaf he was thinking about forming a startup to focus on ID management, Assaf introduced him to Gili Raanan at Cyberstarts — kind of a kingmaker in Israeli cybersecurity. The seed deal was done within 24 hours and Linx Security was born.
Linx is not disclosing who its customers are, nor much detail about how it works, but the basic idea goes a little something like this:
Organizations typically use or have used hundreds, if not thousands, of different apps and software. Each will require user authentication, but when an app is no longer used regularly, or when workers come and go, a business might not comprehensively eliminate all of the identity information in sync with those changes.
Over time, an organization can accrue a stockpile of so-called “ungoverned identity information,” and that soon becomes a big liability: All that valuable information is sitting there, ignored, until a malicious actor picks something up and uses it to access the whole system.
Linx’s approach is to use analytics and AI to scan and understand the landscape of an organization’s system to link (hence the name) all identities together and to actual, active employees. In the process, it also finds IDs that are no longer connected to active users so that they can be removed.
The resulting data then yields a map that can be used to track the system over time. So when an ID is picked up and used unexpectedly, the company will know about it.
Although AI has quickly become a hackneyed term in tech, Duanis said that Linx’s use of it is very targeted. “AI is overused as a term,” he admitted, “but I think that once you’re able to take the essence of [a network] and run [algorithms] very quickly on the development side, and use that power to provide suggestions and automations, that has created a real impact. It’s created a place for real change in the way that people manage today.” He said that work that could have taken months to weed out ungoverned identities can now be done “in hours.”
Raanan at Cyberstarts made the deal to back Linx quickly because of how he could see the market evolving.
“Identity is the top threat vector for the modern enterprise,” he said in a statement. “Identity teams under the CISO are struggling to cope with a growing number of tasks and suffer from antiquated legacy solutions.”
Skip, a wearable tech startup that began as a secretive project inside Alphabet, exited stealth this week to announce a partnership with outdoor clothing specialist Arc’teryx. The deal is the first to bring Skip’s technology to market: “powered pants” that utilize a soft exoskeleton.
The tech, called MO/GO, short for “mountain goat,” is a hybrid soft/rigid system designed to assist wearer mobility and boost the wearer while walking. Rather than actually walking for a person, it provides a 40% energy assistance to the quadricep and hamstring, while offloading work from the knees.
Reservations for the technology open this week, with plans to begin shipments later this year. MO/GO is getting a soft launch in late-summer, early-fall as a rental, offered near hiking destinations like the Grand Canyon.
TechCrunch first wrote about the technology in 2021, while it was still a project being developed in-house at Alphabet’s X Labs moonshot factory.
But between late 2023 and early 2024, Alphabet reportedly began cutting resources at X as part of company-wide layoffs. The Google parent includes X Labs in a unit called “Other Bets,” which lost $1.19 billion in Q3 of last year.
“Toward the end of 2023 was when it started becoming clearer that it wouldn’t really make sense as a project within Alphabet,” founder and CEO Kathryn Zealand tells TechCrunch. “That was also a time in the world where there was a lot of cost cutting, and this was going to be tricky. We had to start fundraising.”
Alphabet wouldn’t sell Skip’s foundational IP to Zealand as an individual, so she engaged with VCs in a bid to form the spinout. To date, the startup has raised $6 million through a combination of funding and grants.
As it began to strike out on its own, signing a fashion partner became an increasing focus for Skip’s go-to-market.
“I have a terrible fashion sense,” Zealand says with a laugh. “It was clear, even when we were working in X, that the technology had potential. People would come in and they’d have knee pain or struggle with stairs. They would put on a prototype and they could do it.”
Zealand tells the story of a woman who hadn’t climbed up a flight of stairs in 25 years, only to do it twice in quick succession while wearing the technology. “But the jump from ‘it works in the lab’ to what would be a viable consumer product that people would use every day — a lot of these were wearability challenges,” she says.
Skip initially explored multiple clothing partnerships, ultimately settling on launching with just one. Arc’teryx “ticked all the boxes,” according to Zealand. The Vancouver, BC-based company produces clothing but also “hard goods” like harnesses and ski boots — a cross section between form and function that was right in Skip’s sweet spot.
Hiking rentals will provide anonymous data collection to test MO/GO in rugged, real-world scenarios, but Skip’s ultimate focus is everyday wear. The launch cost of $4,500 will almost certainly restrict its use for the non-mobility limited. Zealand says the company is currently in clinical trials to test the system’s efficacy in assisting conditions like Parkinson’s.
Any potential to have the system classified as a medical device is, however, is likely still years off. In the shorter term, Skip is looking toward having its system covered by FSA to help bring down the price for users. Scaling manufacturing will help bring the price down as well over time.
Alphabet has employed a variety of different methods for working with X Labs spinouts over the years. Big bets like Waymo tend to receive more foundational support from the tech giant, while smaller projects are nudged from the nest and encouraged to fly on their own.
The latter model looks to become a more frequent option, as Alphabet has scaled back resources. Iyo founder and CEO Jason Rugolo told us a similar story when we spoke about his company’s generative AI headphones back in May, noting that Alphabet served as an early investor but opted against taking a seat on the startup’s board.
