HotelTonight, Slack stakeholder Accel stays on top with $2.5B fund

Invest early and stand by your bets. Don’t buy logos or chase unicorns. That’s the Accel philosophy. At 35 years old, it has served them well, bagging the firm dozens of high-profile exits, including nine IPOs and 12 acquisitions in the last four years.

Now, sources confirm to TechCrunch, the respected venture capital firm has nabbed $2.525 billion — its largest pool of capital yet — for three new funds: $525 million for its fourteenth early-stage fund, $1.5 billion for its fifth growth fund and $500 million for its second Leaders Fund, or a dedicated pool of capital meant to help the firm strengthen its positions on particularly competitive bets.

Accel, which operates offices in Palo Alto, San Francisco, London and Bengaluru, is hot off the heels of a big exit. Its portfolio company HotelTonight, in which it was the very first institutional investor, is selling to Airbnb in what is the home-sharing company’s largest acquisition yet. The deal is said to be worth roughly $465 million, or just above the $463 million valuation the on-demand hotel booking application garnered with a $37 million Series E in 2017.

The firm can thank Brian O’Malley, now a general partner at Forerunner Ventures, for introducing Accel to HotelTonight back when he was a general partner at Battery Ventures in 2011. Accel and Battery co-led HotelTonight’s Series A, and O’Malley went on to become a partner at Accel. The firm subsequently invested in HotelTonight’s Series B, C, D and E financings, holding true to its promise to stand by its bets.

Today, Accel is the largest stakeholder in HotelTonight and can expect a decent payout in the coming months. Workplace messaging platform Slack, however, is Accel’s true portfolio standout. The company, worth more than $7 billion, is expected to go public this year. In February, the San Francisco-based unicorn filed confidentially with the U.S. Securities and Exchange Commission to make its public market debut; whether that be via a traditional initial public offering or a direct listing, a newfangled approach to going public, is still up in the air.

Accel, at consumer technology investor Andrew Braccia’s recommendation, invested in Slack when it was still Tiny Speck, a seed-stage gaming startup that would go on to become an office necessity. When Tiny Speck pivoted to become Slack, the company’s chief executive officer Stewart Butterfield offered to pay back it’s Series A and B investors, including Accel. Braccia declined.

“The reason we invested in Tiny Speck was because we were investing in that team,” Braccia told TechCrunch in 2015. “I told Stewart, ‘if you want to continue to be an entrepreneur and build something, then I’m with you.’ ”

Now owning a roughly 20 percent stake in Slack, Braccia’s faith in Butterfield will result in a billion-dollar payday for the firm.

Some other high-profile wins for Accel include Qualtrics, which famously accepted an $8 billion acquisition offer hours before completing a Nasdaq IPO. According to Qualtrics’ IPO paperwork, Accel owned a stake worth more than $1 billion. PagerDuty, which is said to have confidentially filed in January, and CrowdStrike, a cybersecurity business that reportedly hired banks for its IPO last fall, are among Accels’ upcoming exits.

Since Accel’s 2016 fundraise got them a fresh $2 billion to invest in startups, the decades-old firm has nabbed some younger talent to help it navigate an inevitable generational transition. Shortly after that fund announcement, Accel added principals Amit Kumar and Steve Loughlin, a pair of co-founders of Accel portfolio companies CardSpring and RelateIQ, respectively. In 2018, the firm hired Maya Noeth as a principal to lead its consumer growth investments, Ethan Choi to back startups in the enterprise and consumer-subscription spaces and Cherry Miao as a vice president focused on growth-stage companies. 

Its newest cohort of dealmakers — poised to become partners down the line — indicates Accel is conscious of an impending generational transition and prepared for the older investors to pass the baton to the younger folk.

Accel is among several incumbent venture funds to raise money from limited partners in the last year. Bessemer Venture Partners, one of the oldest players in the game, closed on $1.85 billion for its tenth flagship fund in October; Insight Venture Partners brought in $6.3 billion in July; Kleiner Perkins raised $600 million for its eighteenth early-stage fund in late January; and Menlo Ventures grabbed $500 million for Series B and C rounds in February. Other outfits, NEA for example, are in the process of closing up big, big funds.

At a time when nouveau venture funds are raising funds equipped with innovative investment strategies and young teams, Accel and some of its counterparts are proving old dogs can learn new tricks — or, at least, continue to lead the pack with no new tricks at all. 

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Startups Weekly: Will Trump ruin the unicorn IPOs of our dreams?

The government shutdown entered its 21st day on Friday, upping concerns of potentially long-lasting impacts on the U.S. stock market. Private market investors around the country applauded when Uber finally filed documents with the SEC to go public. Others were giddy to hear Lyft, Pinterest, Postmates and Slack (via a direct listing, according to the latest reports) were likely to IPO in 2019, too.

Unfortunately, floats that seemed imminent may not actually surface until the second half of 2019 — that is unless President Donald Trump and other political leaders are able to reach an agreement on the federal budget ASAP.  This week, we explored the government’s shutdown’s connection to tech IPOs, recounted the demise of a well-funded AR project and introduced readers to an AI-enabled self-checkout shopping cart.

1. Postmates gets pre-IPO cash

The company, an early entrant to the billion-dollar food delivery wars, raised what will likely be its last round of private capital. The $100 million cash infusion was led by BlackRock and valued Postmates at $1.85 billion, up from the $1.2 billion valuation it garnered with its unicorn round in 2018.

2. Uber’s IPO may not be as eye-popping as we expected

To be fair, I don’t think many of us really believed the ride-hailing giant could debut with a $120 billion initial market cap. And can speculate on Uber’s valuation for days (the latest reports estimate a $90 billion IPO), but ultimately Wall Street will determine just how high Uber will fly. For now, all we can do is sit and wait for the company to relinquish its S-1 to the masses.

3. Deal of the week

N26, a German fintech startup, raised $300 million in a round led by Insight Venture Partners at a $2.7 billion valuation. TechCrunch’s Romain Dillet spoke with co-founder and CEO Valentin Stalf about the company’s global investors, financials and what the future holds for N26.

4. On the market

Bird is in the process of raising an additional $300 million on a flat pre-money valuation of $2 billion. The e-scooter startup has already raised a ton of capital in a very short time and a fresh financing would come at a time when many investors are losing faith in scooter startups’ claims to be the solution to the problem of last-mile transportation, as companies in the space display poor unit economics, faulty batteries and a general air of undependability. Plus, Aurora, the developer of a full-stack self-driving software system for automobile manufacturers, is raising at least $500 million in equity funding at more than a $2 billion valuation in a round expected to be led by new investor Sequoia Capital.

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5. A unicorn’s deal downsizes

WeWork, a co-working giant backed with billions, had planned on securing a $16 billion investment from existing backer SoftBank . Well, that’s not exactly what happened. And, oh yeah, they rebranded.

6. A startup collapses

After 20 long years, augmented reality glasses pioneer ODG has been left with just a skeleton crew after acquisition deals from Facebook and Magic Leap fell through. Here’s a story of a startup with $58 million in venture capital backing that failed to deliver on its promises.

7. Data point

Seed activity for U.S. startups has declined for the fourth straight year, as median deal sizes increased at every stage of venture capital.

8. Meanwhile, in startup land…

This week edtech startup Emeritus, a U.S.-Indian company that partners with universities to offer digital courses, landed a $40 million Series C round led by Sequoia India. Badi, which uses an algorithm to help millennials find roommates, brought in a $30 million Series B led by Goodwater Capital. And Mr Jeff, an on-demand laundry service startup, bagged a $12 million Series A.

9. Finally, Meet Caper, the AI self-checkout shopping cart

The startup, which makes a shopping cart with a built-in barcode scanner and credit card swiper, has revealed a total of $3 million, including a $2.15 million seed round led by First Round Capital .

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Ne-Yo wants to make Silicon Valley more diverse, one investment at a time

Dressed in a Naruto t-shirt and a hat emblazoned with the phrase “lone wolf,” Ne-Yo slouches over in a chair inside a Holberton School classroom. The Grammy-winning recording artist is struggling to remember the name of “that actor,” the one who’s had a successful career in both the entertainment industry and tech investing.

“I learned about all the things he was doing and I thought it was great for him,” Ne-Yo told TechCrunch. “But I didn’t really know what my place in tech would be.”

It turns out “that actor” is Ashton Kutcher, widely known in Hollywood and beyond for his role in several blockbusters and the TV sitcom That ’70s Show, and respected in Silicon Valley for his investments via Sound Ventures and A-Grade in Uber, Airbnb, Spotify, Bird and several others.

Ne-Yo, for his part, is known for a string of R&B hits including So Sick, One in a Million and Because of You. His latest album, Good Man, came out in June.

Ne-Yo, like Kutcher, is interested in pursuing a side gig in investing but he doesn’t want to waste time chasing down the next big thing. His goal, he explained, is to use his wealth to encourage people like him to view software engineering and other technical careers as viable options.

“Little black kids growing up don’t say things like ‘I want to be a coder when I grow up,’ because it’s not real to them, they don’t see people that look like me doing it,” Ne-Yo said. “But tech is changing the world, like literally by the day, by the second, so I feel like it just makes the most sense to have it accessible to everyone.”

Last year, Ne-Yo finally made the leap into venture capital investing: his first deal, an investment in Holberton School, a two-year coding academy founded by Julien Barbier and Sylvain Kalache that trains full-stack engineers. The singer returned to San Francisco earlier this month for the grand opening of Holberton’s remodeled headquarters on Mission Street in the city’s SoMa neighborhood.

Holberton, a proposed alternative to a computer science degree, is free to students until they graduate and land a job, at which point they are asked to pay 17 percent of their salaries during their first three years in the workforce.

It has a different teaching philosophy than your average coding academy or four-year university. It relies on project-based and peer learning, i.e. students helping and teaching each other; there are no formal teachers or lecturers. The concept appears to be working. Holberton says their former students are now employed at Apple, NASA, LinkedIn, Facebook, Dropbox and Tesla.

Ne-Yo participated in Holberton’s $2.3 million round in February 2017 alongside Reach Capital and Insight Venture Partners, as well as Trinity Ventures, the VC firm that introduced Ne-Yo to the edtech startup. Holberton has since raised an additional $8 million from existing and new investors like daphni, Omidyar Network, Yahoo! co-founder Jerry Yang and Slideshare co-founder Jonathan Boutelle.

Holberton has used that capital to expand beyond the Bay Area. A school in New Haven, Conn., where the company hopes to reach students who can’t afford to live in tech’s hubs, is in development.

The startup’s emphasis on diversity is what attracted Ne-Yo to the project and why he signed on as a member of the board of trustees. More than half of Holberton’s students are people of color and 35 percent are women. Since Ne-Yo got involved, the number of African American applicants has doubled from roughly 5 percent to 11.5 percent.

“I didn’t really know what my place in tech would be.”

Before Ne-Yo’s preliminary meetings with Holberton’s founders, he says he wasn’t aware of the racial and gender diversity problem in tech.

“When it was brought to my attention, I was like ‘ok, this is definitely a problem that needs to be addressed,’” he said. “It makes no sense that this thing that affects us all isn’t available to us all. If you don’t have the money or you don’t have the schooling, it’s not available to you, however, it’s affecting their lives the same way it’s affecting the rich guys’ lives.”

Holberton’s founders joked with TechCrunch that Ne-Yo has actually been more supportive and helpful in the last year than many of the venture capitalists who back Holberton. He’s very “hands-on,” they said. Despite the fact that he’s balancing a successful music career and doesn’t exactly have a lot of free time, he’s made sure to attend events at Holberton, like the recent grand opening, and will Skype with students occasionally.

“I wanted it to be grassroots and authentic.”

Ne-Yo was very careful to explain that he didn’t put money in Holberton for the good optics.

“This isn’t something I just wanted to put my name on,” he said. “I wanted to make sure [the founders] knew this was something I was going to be serious about and not just do the celebrity thing. I wanted it to be grassroots and authentic so we dropped whatever we were doing and came down, met these guys, hung out with the students and hung out at the school to see what it’s really about.”

What’s next for Ne-Yo? A career in venture capital, perhaps? He’s definitely interested and will be making more investments soon, but a full pivot into VC is unlikely.

At the end of the day, Silicon Valley doesn’t need more people with fat wallets and a hankering for the billionaire lifestyle. What it needs are people who have the money and resources necessary to bolster the right businesses and who care enough to prioritize diversity and inclusivity over yet another payday.

“Not to toot the horn or brag, but I’m not missing any meals,” Ne-Yo said. “So, if I’m going to do it, let it mean something.”

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Startups are giving writers and filmmakers more ways to make it in Hollywood

On May 11 Netflix released the teen dramedy “The Kissing Booth” just as the school year was wrapping up for teens across the country.

By June, the company had a smash hit among the tweenage set, and Wattpad, the company which owned the rights to the The Kissing Booth, had its first true breakout vehicle. The story, written on Wattpad’s publishing platform by Beth Reekles, was a proof point for the company’s thesis pitching a new twist on the old model of discovering stories and creative talent for the entertainment industry.

Behind the success of the film is a nascent movement among startup companies that are trying to open the doors of Hollywood’s dream factory to a broader group of creative professionals by riding the wave of fan fiction and user generated content all the way to the Paramount lot (or the Disney lot, or Sony Studios).  

“In this obvious period of disruption in the entertainment industry how we’re finding stories is evolving,” said Wattpad Studios chief Aron Levitz.

YouTube, the short-lived Vine app, and Instagram have all created new platforms for discovering potential on-camera talent, and Amazon, Apple, Facebook, Instagram (again), Netflix, and YouTube (again) have smashed the distribution system for television and movies. But these platforms and the traditional studios they’d like to supplant have a voracious appetite for stories to tell and (many) are reluctant to risk millions of dollars behind something unproven.

Hollywood has always borrowed (or stolen) from other media to entertain the masses, but it seems like the fields it’s foraging in for new stories have narrowed to a few serialized playgrounds (comic books, old television shows and movies, and wildly successful young adult genre fiction).

While there are thousands of flowers to be found there, new tech-enabled companies are suggesting there might be other patches where new talent can be discovered, harvested and leveraged for corporate gain and viewer delight.

Startups like Wattpad and Tongal (for directors and cinematographers), and new financing platforms like Legion M (for producing features) are aiming to elevate new talent and provide what the companies hope will be built-in audiences for successful new programming on platforms like Netflix, Apple, and others — and the hundreds of networks that are vying for attention in an increasingly fragmented media landscape.

It wasn’t always this way. When Tongal was created, roughly a decade ago. the entertainment industry looked much, much differently than it does now.

Ten years ago that Netflix announced it would let its DVD subscribers watch streaming video as well — mostly old movies and syndicated shows that had already made their millions for the big networks and studios. That was the starting gun of what would become a race to roll up talent and gain audience in a creative landscape that was becoming increasingly competitive. With new entrants joining at every new lap.

At the time, Tongal was a discovery mechanism for new talent and a way for brands to pay for user generated content they liked. The company raised $15 million from Insight Venture Partners to harness the growing popularity of social media reach to create potentially viral videos for brands.

Tongal is still working under the thesis of user generated content, but the difference now is the millions of dollars these videos and their creators can bring in — and the ability o energize and inspire a fan base to connect more directly and engage more frequently with new titles. All the while Tongal gives studios a window into a wider world of talent.

One creator on the platform, Tucker Barrie, has gone from making short videos for social media for IAMS to a career as an animator on projects like Isle of Dogs. “Tongal is a good spot for people who don’t have a lot of experience to gain a lot of experience and make a name for themselves,” Barrie said.

In the past year the company has inked a deal with National Geographic to produce a series called WILD After Dark. The first late-night series from National Geographic WILD, the new episodes will feature shorts from members of the Tongal platform on animal-related subjects. It launched with an open call for submissions in February.

More recently Tongal has linked up with Wattpad to call on its network of creators to pitch a treatment for Wattpad’s wildly successful science fiction thriller Expiration Date. In July, Tongal issued its call to filmmakers for submissions from which the partners will pick three finalists. Those finalists will receive funding to produce a “proof-of-concept” series trailer.

Then, Wattpad, Tongal and their distribution partner SYFY will award a grand prize winner additional funding to create a digital pilot episode with the potential to go on to develop the entire series for as part of its fan creators program.

“The partnership between Tongal and Wattpad flips the script on Hollywood by changing the how and who of content creation through our open platforms for talent,” said James DeJulio, Tongal’s co-founder and President, in a statement at the time. “These new global communities are made up of diverse and passionate creators, and now they’re actually developing the shows they want to watch. I’m thrilled that has opened the door for this innovative, by the fans, for the fans shift.”

This marks the second collaboration between Tongal and Wattpad on project development for a network. The two companies, which have a natural affinity as creative platforms focused on the visual and storytelling elements of a production (respectively), had worked on a similar competition for the CW Seed, and its production of Cupid’s Match, another popular Wattpad story (spoiler: it’s not very good).

“It’s one of those great proof points for Wattpad and Wattpad studios,” said Levitz, the head of Wattpad Studios in a February interview. “I think it’s the first public one that we’re talking about in a strong way.”

On Wattpad, Cupid’s Match had 32 million reads, and it was that kind of viral popularity that piqued the interest of the CW Network. “We can use the strength of an audience and get someone like CW interested in the output,” Levitz said. “We have 400 million stories on the platform. We’re able to look at the data we have the audience we have and the story we have and use data to choose the right stories for the right partner.”

Partners are lining up. Sony Pictures Television bought the rights to the Wattpad story “Death is my BFF,” and Hulu signed off on an order for “Light as a Feather”. Studios and networks including TurnerUniversal Cable Productions (a division of NBCUniversal), eOne and Paramount Pictures, have also signed on to work with the startup.

Like Tongal, Wattpad also took a circuitous path to becoming a player in Hollywoodland. The company initially started as an e-book community operator sharing fan fiction and classic works. Over time, the fan fiction side of the content marketplace won out and the Toronto-based company went from raising capital from a consortium of angel investors to raising $51 million from a consortium of investors including the Chinese internet giant, Tencent, earlier this year. It’s likely that Tencent (and the studios it’s partnering with) were drawn to Wattpad’s 60 million monthly users.

The foundation for the belief that fan fiction could be leveraged into hundreds of millions for the movie industry was laid by the success of the Fifty Shades franchise. The best-selling books, derived from Twilight fan fiction, were optioned into a series of three films and made for a cool $150 million.

By the time the last movie in the series debuted, the films were on their way to making over $1 billion at the box office.

For the past decade Hollywood has been relying on big franchises and fan-driven stories to create big numbers at the box office or online, said DeJulio.

“Fans are the lifeblood of these franchises,” DeJulio said. “We’re in this weird time right now… where marketing is very expensive and it is in a lot of ways hamstringing entertainment.”

DeJulio sees Tongal as a platform where one can influence and support the other.

“The studios, once they do get a hit… They realize that through fan communities and engaging them they can not only market it but they can actually get the work done too [of creating new content],” DeJulio said.

Mount Lee, Hollywood Hills, Hollywood, Los Angeles, California, USA.

If Wattpad and Tongal are using their network of users to find and promote talent, Legion M is hoping to use the network of fans for genre content to finance new productions.

The startup production studio has raised $3 million in equity crowdfunding over two rounds and has managed to grab a stake in well reviewed indie-projects like Colossal (starring Anne Hathaway and Jason Sudeikis) and Mandy a new Nicolas Cage vehicle already being touted as cult-classic gold. What that means as far as returns go for the shareholders that back the company’s funding campaigns is unclear, especially since the company’s Bad Samaritan project (starring David Tenant, everyone’s favorite of the new Dr. Who) was critically panned.

Founded by two serial internet entrepreneurs Paul Scanlan and Jeff Annison, and backed by partnerships with folks like the Austin-based theater chain Alamo Drafthouse, LegionM’s goal is to bring in 1 million fans as investors to back projects.

The idea is to harness fan support for sales and marketing help and to surface projects that have enough of a built-in audience to generate profits for the company.

“We believe an entertainment company owned by fans is better than one owned by Wall Street,” said Paul Scanlan, Legion M’s cofounder and CEO, in a statement announcing the company’s new crowd funding campaign.

Some of the projects Legion M affiliated itself with are based more around fan engagement than an actual dollar investment. In fact, the company isn’t a producer of the marquee Colossal film, and instead came on to provide marketing support through its network of fans, according to an interview with the director.

Scanlan and Annison launched MobiTV, which was an early developer of technology to stream digital media on mobile devices. The two went on to launch New York Rock Exchange, a company that allows fans to buy illiquid shares in songs they love. It’s like a coin offering, without the upside, and without any legal ramifications because there’s actually nothing of value that acquirers are buying.

Unlike the Rock Exchange, average investors are buying real shares in the crowd funding offerings the two co-founders are selling via the Securities and Exchange Commission’s new crowdfunding regulations. And they’re tapping into the thesis that fans and consumers are driving the creation of commercially viable content now more than ever.

Wattpad, Tongal, and Legion M aren’t alone in their efforts. Companies like Seed&Spark, Coverfly, and The Black List, are also doing their best to uncover new artists and creators for the entertainment industry to develop. While on the financing side, new cryptocurrencies like MovieCoin (which just launched a pre-sale of its tokenized financing offering for producing new movies) and TaTaTu are angling to give the moviegoing public another (ideally more transparent) way to finance movies.

“Hollywood is a notoriously difficult place to traverse in the entertainment business. What we find in content creation, and the investment process as well, is that every project is seeking an audience,” Annison said in an interview with The Niner Times (the local university paper for the University of North Carolina, Charlotte). “Among Hollywood, which is such a massive world to step into, there are limitations along with those huge companies. In essence, it’s a ‘hit-driven’ enterprise, where the lines are drawn between the artistic side of filmmaking and the business side of entertainment. That can be a complicated street to walk down.”

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Insight Venture Partners buys content management platform Episerver for $1.1 billion

Episerver, the Irvine, California-based company which provides services for marketers to manage content, was bought by Insight Venture Partners for a cool $1.1 billion from the private equity firm Accel-KKR.

The company said it would use the money to fuel its plans for global expansion

“Episerver is at the center of a global digital transformation market that IDC expects to reach $1.7 trillion through 2019 and is expertly helping businesses of all sizes to digitize, optimize and personalize customer experiences,” said Deven Parekh, Managing Director at Insight Venture Partners, in a statement.

Back in 2015, Accel-KKR (the joint venture between ;one of Silicon Valley’s premier venture capital firms, Accel Partners, and private equity giant KKR),  had merged Episerver (known as EPiServer) with Ektron (we reported on the Ektron acquisition when it happened) to bulk up the content management business.

At the time of the merger, Episerver had 8,800 customers in roughly 30 countries, serving up digital assets to over 30,000 websites.

The company’s service allows businesses to have a single repository for all of their marketing messaging to enable for information to be disseminated from a central location to different national and international websites.

The idea is to make the customization and personalization of marketing messaging easier for far flung corners of a business.

Here’s what we wrote about the market around the time that Ektron was sold to Accel -KKR before its merger with Episerver.

… web content management itself has become increasingly commoditized as vendors share a common set of functionality, making it much more difficult to differentiate products in the market. One way companies including Ektron are trying to do that is to have a greater digital focus. In fact, the entire industry is pivoting to what they are calling customer experience management where they attempt to provide the optimal experience for the customer, however they interact with a company based on what they know about them.

This means that increasingly companies are trying to provide a more customized experience, rather than give everyone the same generic content. We recently reported on how Acquia is trying to provide ways to tell marketers more about visitors and present more customized content based on what they can glean from them, even when they are anonymous. You can still understand things like device, IP address and other information even when customers don’t choose to share information explicitly about themselves.

“We knew that Episerver had world-class products and people when we made the investment.  Accel-KKR worked to augment the leadership team, make a number of strategic acquisitions, help build out a stronger channel and significantly grow SaaS revenue,” said Jason Klein and Dean Jacobson, managing directors of Accel-KKR — in a weirdly jointly attributed statement (I’m assuming the two directors dictated the statement in unison to the public relations pro who served as a stenographer for this release… seriously y’all? A joint statement? That’s just stupid).

Episerver was advised by Goldman Sachs and Lazard, while Houlihan Lokey was a special advisor to Accel-KKR

The transaction, in which Episerver worked with advisors Goldman Sachs and Lazard, Houlihan Lokey acted as special advisor to Accel-KKR, and Insight Venture Partners was advised by Evercore.

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