Venture

The dilemma of Chinese startups going global • ZebethMedia

By zebethcontrolPosted on November 14, 2022Posted in Government & Policy, Startups, VentureNo Comments

One day in 2020, I published an article about a Chinese hardware maker which would have otherwise been a typical funding story. Instead, I got a complaint from its PR asking me to remove all mentions of “China” from the piece. The startup wanted to be called “American” on the basis of its having a small office in California. I declined, insisting on our duty to uncover relevant facts for readers. I never heard from the company again. That turned out to be just the beginning of a trend in my interaction with Chinese startups that are expanding abroad. “We don’t want to be seen as Chinese,” many of them tell me. My attitude has over time gone from disappointment at companies’ lack of respect for journalistic independence to a growing concern that my portrayal of them might unfairly prejudice their growth. By putting the Chinese label on them, these firms might lose business partners, get stricter oversight by app stores, and receive more scrutiny from local regulators. What used to be a no-brainer geographic categorization of a company — “it is Chinese/based in China” — has become politically charged. Five years ago, a Chinese firm would be boasting its “successful entry into Europe” as a Chinese firm. These days, with rising tensions between China and the West, many globalizing Chinese companies choose to bury their origin. They worry that their links to home — however it is defined — can be viewed as a national security threat to the foreign market they serve. “We are going from longing China to longing Chinese, like Eric Yuan.” As startups build increasingly distributed teams, it’s also become harder to put a geographic pin on them. The world’s largest crypto exchange Binance, which started out in China, famously doesn’t have a headquarters. “If you look at companies such as Tiktok, Binance, Grab…these startups all started from day one with a global market in mind and built with teams located in multiple jurisdictions. It is really difficult to label them as from a certain country” said Ron Cao, who’s an early investor in Pinduoduo and founder of Sky9 Capital, an early-stage VC with a presence in China, Singapore, and the U.S. But Chinese startups aren’t just concealing their origin. Many of them are in effect moving legally and operationally to distance themselves from their homeland to reassure foreign authorities that they aren’t beholden to Beijing. The upside of decoupling is companies end up investing more in localization, which is always conducive to overseas expansion. But in the process, they also risk losing some of the advantages of being Chinese. The journey of becoming less “Chinese” is long and complicated, and the extent to which companies choose to reduce their ties to home is playing out differently across sectors and the stage of their business. But there’s one overarching sentiment shared by the dozen entrepreneurs I spoke to: They have never felt more confident about competing with international rivals, thanks to the talent and knowledge they have accumulated at home. But they are also increasingly daunted by — and weary of the geopolitical uncertainty they face in the process. Decoupling from home U.S.-China relations sharply deteriorated under former President Trump’s reign from 2017 to 2021, and President Biden seems to be staying the course, taking a firm stance on China with a sweeping chip ban. Having seen how U.S. sanctions have kneecapped Huawei’s supply chains and the spate of regulatory scrutiny on TikTok in the West, startups fear that they might be the next to get caught between the two superpowers. Companies play down their Chinese association as a result. In the past, startups might get a pass by simply claiming they are Singapore or San Francisco-based without actually having a meaningful operation in those places. Shein, for example, used to bill itself as being “founded in L.A.” when in reality it started out in Nanjing and Guangzhou as a typical Chinese e-commerce exporter leveraging the country’s robust supply chains. But scrutiny by foreign politicians and the press are driving Chinese firms to ramp up their overseas footprint, especially when they reach a critical size. Recently, Shein announced plans to open major warehouses in North America. The company has moved most of its assets to Singapore and made the island nation — which is widely regarded as politically neutral — its headquarters. Sky Xu, the founder and CEO of Shein, is also reportedly seeking Singaporean citizenship. Several entrepreneurs told me that top VC firms in China now provide passport shopping as part of their post-investment service for founders targeting overseas markets in response to a new rule on offshore IPOs: last December, China’s securities authority proposed that a company, regardless of where it’s incorporated, must go through a filing process with the Chinese government if its main management mostly consists of Chinese nationals or executives who live in China, and whose main business operation is in China. “If you look at companies such as Tiktok, Binance, Grab…these startups all started from day one with a global market in mind and built with teams located in multiple jurisdictions. It is really difficult to label them as from a certain country.” Getting the overseas legal setup is just the first step. The greater challenge lies in winning the trust of local regulators and customers. The founder of a productivity app that is targeting the U.S. market told me that “everything we use at work is non-Chinese,” so all of its data, internally or those of its end users, are kept offshore. Rather than ByteDance’s Lark and Alibaba’s Dingtalk, the startup uses Notion and Slack for internal communication, AWS for data hosting, and Stripe for payments. The company was founded in Shenzhen but is in the process of setting up a Singaporean company to be its holding entity. For enterprise software providers, the need to localize is even more pressing. While consumer app developers might gain traction without having to leave their China office, as they can

The power pendulum is swinging back to employers, isn’t it? • ZebethMedia

By zebethcontrolPosted on November 13, 2022Posted in Carta, EC Future of Work, Layoffs, meta, Startups, Twitter, VentureNo Comments

Tech layoffs may get worse before they get better — which means that the next few months will be full of companies trying to pivot their way to survival during this extended downturn. At least that’s what entrepreneur Nolan Church, who helped lead Carta’s 2020 layoffs as its chief people officer, thinks. He estimates that another 30,000 to 40,000 tech employees around the world will be laid off in Q1 2023 — a number that follows the more than 100,000 layoffs so far in 2022, according to layoffs.fyi data. Church chatted with me on Equity this past week about how his experience in the people operations world, at both Carta and DoorDash, has influenced his perspective on the best playbook for layoffs. He’s also building Continuum, a venture-backed startup that wants to match executive talent with startups for full-time and fractional opportunities. Unsurprisingly, his vision for a more flexible workforce fits well into the fact that tens of thousands of employees are now looking for work after just this week’s layoff stampede alone. My entire conversation with Church lives now wherever you find podcasts, so take a listen if you haven’t yet. Below, we extracted four key excerpts from the interview, from canned CEO statements to how he’s thinking about Twitter’s workforce reduction. The conversation Let’s talk about Twitter and ownership. We saw Jack Dorsey tweet a few days after the layoff that he ultimately owns responsibility for the fact that Twitter overhired. That delay in his response created a lot of attention, which made me wonder if the bar is getting higher when it comes to the way that employees expect CEOs to take responsibility for large-scale layoffs. Over the last 12 years, the pendulum between who has power between employees and employers has drastically swung toward employees. Now we’re in a moment where the pendulum is swinging back. If I predict where the next five to 10 years are going, the best talent is ultimately always going to be sought after. And I think employees now will continue to hold more power as they go forward. And they will remember how companies handle this moment. To your point around Jack, very candidly, I thought [his statement] was so weak. He waited to say anything; he sent out like two sentences. As somebody who has followed Jack and has been a fan of Jack for a very long time, I thought that this was the definition of weak leadership. And I would have expected more from him. And if I was an employee thinking about working for Jack in the future, I would think twice about it.

Nearly 80% of venture funds raised in just two states as US LPs retreat to the coasts

By zebethcontrolPosted on November 12, 2022Posted in EC News Analysis, EC venture capital, fundraising, limited partners, Venture, venture capitalNo Comments

Venture capital funds in the United States raised more dry powder in the first three quarters of this year than they did in all of 2021, but it’s not equally distributed: The big funds keep getting bigger while fundraising has gotten harder for the majority of other players. And Q3 data shows that where a firm is based appears to be playing an increasing role. Through the third quarter of 2022, U.S. venture firms raised $150.9 billion across 593 funds, according to data compiled by PitchBook. While this represents a boost from the $147.2 billion raised in 2021, it marks a staggering drop from the 1,139 funds closed last year. A lot of these dollars went into legacy or well-established firms, which have the clout to raise mega-funds, though some firms drew in dollars by garnering hype. Consequently, LPs are not as interested in backing firms outside of the established venture hubs this year, marking an unfortunate reversal to the COVID-induced trend of more venture money making its way to emerging ecosystems.

an “entirely avoidable tragedy” • ZebethMedia

By zebethcontrolPosted on November 12, 2022Posted in Crypto, VentureNo Comments

If you want to better understand exactly how big a deal it is that the cryptocurrency exchange FTX just imploded, you could do worse than talk with David Pakman, an entrepreneur turned venture capitalist. After logging 14 years with the investment firm Venrock, Pakman — who led Venrock’s investment in the digital collectibles company Dapper Labs and even mined bitcoin at his own home years back — leaned into his passion for digital assets and last year joined the now seven-year-old crypto venture firm CoinFund. His timing was either very good or very bad, depending on your view of the market. Indeed, in part because CoinFund was an early investor in the collapsing cryptocurrency exchange FTX, we asked Pakman to jump on the phone with us today to talk about this very wild week, one that began with high-flying FTX on the ropes, and which ended with bankruptcy filings and the resignation of FTX founder, Sam Bankman-Fried, as CEO. Excerpts of that conversation follow, edited lightly for length. TC: The last time we talked, almost two years ago, the NFT wave was just getting underway. Now, we’re talking on a day where one of the biggest cryptocurrency exchanges in the world just declared bankruptcy. Actually, it’s declaring bankruptcy for 130 additional affiliated companies. What do you make of this development? DP: I think it’s absolutely terrible on a bunch of levels. First, it was an entirely avoidable tragedy. This failure of the company was brought on by a bunch of flawed human decision-making, not by a failing business. The core business is doing great. In fact, it’s highly profitable and growing, even in a bear market. It’s not like it was running out of capital or a victim of the macro environment. But its leadership, with almost no oversight apparently, made a bunch of terrible decisions and did things really wrong. So the tragedy is how avoidable it was, and how many victims there are, including employees and shareholders and the hundreds or even thousands of customers who will be affected [by this bankruptcy]. There’s also the reputational harm to the entire crypto industry, which already suffers from questions like, ‘Isn’t this a scammy place with scammy people?’ This sort of Enron-esque meltdown of one of the most highly valued and arguably most successful companies in the space is just really bad, and it will take a long time to dig out of it. But there are also positives. Positives? Well, what’s positive is the technology did not fail; the blockchains did not fail. The smart contracts were not hacked. Everything we know about the tech behind crypto continues to work brilliantly. So it would be different if this was a meltdown because of flawed software design, or the blockchains aren’t scaling, or big hacks that injured people. The long-term promise of the software and the technology architecture about crypto is intact. It’s the people who keep making mistakes. We’ve had two or three pretty big human-generated mistakes this year. There are plenty of news stories out there outlining what happened in broad strokes. How do you explain it? I don’t have firsthand knowledge about what they really did or didn’t do. But apparently FTX and [the trading desk also owned and run by Sam Bankman-Fried] Alameda Research had a relationship that maybe was not known to all shareholders, employees, or customers. And it sounds like FTX took FTT, which is their token that was held in great amounts by Alameda, and they pledged it as collateral and took big loans in fiat against that. So they took a highly volatile asset, and they pledged as collateral. One could imagine if a board of corporate executives or investors knew about that, someone would say, ‘Hang on. What happens if FTT goes down by 50%? It happens in crypto with high frequency, right? So, like, why are we pledging this super highly volatile asset? And by the way, half a billion dollars’ worth of the asset is held by our biggest rival [Binance]. What happens if they dump it in the market?’ So just the act of borrowing against it was ill-advised. And then it sounds like they also took the proceeds of that borrowing, and they invested that in highly illiquid assets, like maybe to rescue BlockFi or all these other private companies that FTX recently bought. But it’s not like they could quickly sell out of those if they needed to return the proceeds of their borrowing. They were also apparently using customer funds and loaning that out or maybe even loaning it to their trading arm. So all this stuff is just stuff that I think a board, if they knew about it, would be like, no, no. But there was no board, which is mind blowing, considering that VCs poured $2 billion into this company. Your firm is among those firms. I joined CoinFund a little bit more than a year ago, so the investment that the firm made in FTX was a long time ago, before my time, and it’s a tiny, tiny amount. We’re barely on the cap table. We didn’t hold any FTT tokens. But I will address your big question, which I think is about the governance of this company. I come from a traditional tech investing background, where maybe 99% of the time, there’s just a standard set of governance that every entrepreneur agrees to when they take venture capital, which is: there’s going to be a board; the board is going to be made up of investors and employees and maybe outside experts; there’s going to be a set of controls; the controls usually say things like, ‘You have to disclose any related party transactions’ so you don’t shuffle coconuts between one company and something else that we don’t know about. The board also has to approve things, so that whenever you’re going to pledge assets as collateral for borrowing, you can’t issue new shares without [the board] knowing about

FTX CEO Sam Bankman-Fried quits as crypto exchange files for bankruptcy • ZebethMedia

By zebethcontrolPosted on November 11, 2022Posted in Daily Crunch, Startups, Venture, venture capitalNo Comments

To get a roundup of ZebethMedia’s biggest and most important stories delivered to your inbox every day at 3 p.m. PDT, subscribe here. Hoooo boy. As Alex would say: This week has been a long year. You just know it has been a pretty wild ride when Meta can lay off 13% of its staff, and it isn’t even really in the top 10 of crazy things that happened. Gmail no longer lets you use the old interface, you retro-loving nerd, you. Salesforce did a round of layoffs, the DOJ seized $3.36 billion worth of Silk Road crypto, Binance said it would buy FTX, then backed out, causing Sequoia to write off its entire FTX investment. Theranos’s founder Elizabeth Holmes will find out her lot next week, while Peloton’s founder gave up on exercise equipment and is selling rugs now. Then there was a wall of Twitter drama, including utter chaos with Twitter’s new “verified” system after it laid off half of its staff, before quickly making moves to hire some of them back. Oh, and we’re all #RatVerified 4lyf now, I guess. May next week be slightly more chill for you. It will be for Haje, who’s buggering off to go do some scuba diving for a week, and possibly trusting Apple with his life in the process. As he left for the day, he could be overheard muttering, “I hope there’s a bit of internet left when I come back.” Take a breather, you can always implode with stress next week instead. — Christine and Haje. The ZebethMedia Top 3 Only the beginning, we fear: If you’ve been following the whole FTX company drama, then no doubt you have a take on today’s big story that the crypto exchange founder and CEO Sam Bankman-Fried filed for Chapter 11 bankruptcy and also resigned his position. This comes after SBF thought there was a chance to save the company through other methods, like a tie-up with Binance and then some liquidity. This has been so much that Jacquelyn said on CNBC this morning that everyone should put their crypto in their own private keys. All that back-and-forth is hurting our neck: We fear that Twitter developers have spent much of their 84-hour workweek flipping the “official badge” switch on and off to appease Elon Musk’s constantly flip-flopping ideas. Natasha L has more on what’s happening. Potato, potahto, let’s call the whole thing off (and on again): Ivan has the best headline all week — “Have you tried turning it off and on again, Elon?” We’re still waiting for that answer. Startups and VC Our entire news team are flopped over in their respective sofas, slightly shell shocked after one of the wildest news weeks we’ve seen. You know, we’re so exhausted, we’re not even gonna write a proper intro. Here, make yourself a cup of tea and click through these. Or don’t. You’re the master of your own destiny. Pitch Deck Teardown: Syneroid’s $500K seed deck Image Credits: GPC Smart Tags (opens in a new window) Stolen-vehicle recovery systems have been available for decades, but a lost pet has higher emotional stakes. According to Syneroid, a startup that makes smart tags, 10 million pets are lost each year in the United States, but “less than 30% are returned home.” After raising a $500,000 seed round, the company’s founders shared their 12-slide pitch deck with ZebethMedia for a review. According to Haje Jan Kamps, “no information has been redacted or omitted.” Three more from the TC+ team: ZebethMedia+ is our membership program that helps founders and startup teams get ahead of the pack. You can sign up here. Use code “DC” for a 15% discount on an annual subscription! Big Tech Inc. Brian visited Amazon’s BOS27 robotics facility and not only watched cute robots line up, but also learned about the delivery giant’s plans for global domination. If you can’t tell by now, it involves robotics and how Amazon aims to improve the world of last-mile delivery. Need more entertainment? Here’s five more:

H-1B worker advice, managing remote teams, pitch deck teardown • ZebethMedia

By zebethcontrolPosted on November 11, 2022Posted in capital gains, EC roundup, Pitch Deck Teardown, revenue-based financing, Startups, VentureNo Comments

According to layoffs.fyi, more than 23,000 tech workers have been laid off so far this month. For comparison, the site tracked 12,463 layoffs in October. Facebook’s parent company Meta announced the first major job cuts in its history this week, eliminating 11,000 jobs. Like Twitter, Stripe, Brex, Lyft, Netflix and other tech firms based in the Bay Area, many of the employees impacted are immigrants here on worker visas. An unexpected layoff introduces an element of chaos into anyone’s life, but when an H-1B worker loses their job, a very loud clock starts clicking: unless they can land a new position or change their immigration status within 60 days, they’ll need to leave the country. And because tech companies at every size are enacting hiring freezes and planning more cuts, their ability to live and work in the U.S. is suddenly in question. Earlier today, I hosted a Q&A with immigration lawyer Sophie Alcorn for H-1B workers who have been laid off (or think they might be). “You either get a new job, you leave, or you figure out some other way to legally stay in the United States, but you have to take some action within those 60 days.” Start looking now for new opportunities, she advised, as it will take new employers time to submit paperwork to U.S. Citizenship and Immigration Services. Full ZebethMedia+ articles are only available to membersUse discount code TCPLUSROUNDUP to save 20% off a one- or two-year subscription “The best-case scenario would be that this new company files your new change of employer petition and USCIS receives the paperwork on or before the 59th day since your last day of employment,” said Alcorn. “It takes at least three weeks to prepare everything,” which means candidates and employers must move quickly as the days count down. “You probably need a signed offer around day 33,” she said. A lot of the information Alcorn provided was just as relevant for hiring managers as it was for workers who’ve been laid off: any number of factors can combine to further complicate a process that’s already hard to puzzle out. For example, what happens to H-1B workers who get laid off while they’re out of the country? Can getting married actually solve an immigration problem? (Definitely not!) Because so many people have been laid off during a season when it’s traditionally hard to land a new position, I asked Alcorn whether she thought the layoffs would cause an exodus of tech talent from Silicon Valley. “The American Dream is still really important to immigrants,” she said. “A lot of people are going to fight to find a way to stay here, even if it’s not necessarily in the in the Bay Area with the high cost of living. They still want what America represents and they’re going to reevaluate their relationship with Big Tech and the nature of work.” 3 tips for managing a remote engineering team Image Credits: Inok (opens in a new window) / Getty Images I once managed an office where the CEO and I were the only two people who weren’t on the engineering team. We occupied a pod in a co-working space, so we all sat around one large table. Outside of our group lunches, the developers rarely spoke to each other, as most communication took place via Slack, Jira and GitHub. Today, that team works remotely. In a post for TC+, entrepreneur and angel investor Kuan Wei (Greg) Soh shared his top suggestions for managing distributed engineering teams, which includes mandatory standups and at least three hours each day when everyone is available to chat. “We expect Slack messages to be replied to within an hour, that everyone be reachable if we call them, and that we would work responsibly with our assigned partners,” he says. Use IRS Code Section 1202 to sell your multimillion-dollar startup tax-free Image Credits: BrianAJackson (opens in a new window) / Getty Images Founding teams usually select a corporate structure like an LLC or S-Corp, but those who hope to exit for $10 million for more should consider starting up as a Qualified Small Business (QSB) C-Corporation, advises tax attorney Vincent Aiello. Under IRS Code Section 1202, founders who hold QSB stock for five years or longer will be exempt from paying capital gains tax after a sale. “It constitutes a significant tax savings benefit for entrepreneurs and small business investors,” Aiello says. “However, the effect of the exclusion ultimately depends on when the stock was acquired, the trade or business being operated, and various other factors.” Revenue-based financing: A new playbook for startup fundraising Image Credits: Cocoon / Getty Images (Image has been modified) Revenue-based financing can make early-stage startups less dependent on investors so they can hold onto more equity. With terms that usually range from 12-24 months, many teams use these funds for short-term projects, like sales and marketing campaigns. “Because the return on these activities may be higher than the cost of revenue-based financing, startups should use revenue-based financing to fund initiatives that will bear fruit soon,” advises Miguel Fernandez, CEO and co-founder of Capchase. Pitch Deck Teardown: Syneroid’s $500K seed deck Image Credits: GPC Smart Tags (opens in a new window) Stolen-vehicle recovery systems have been available for decades, but a lost pet has higher emotional stakes. According to Syneroid, a startup that makes smart tags, 10 million pets are lost each year in the United States, but “less than 30% are returned home.” After raising a $500,000 seed round at a a $3.9 million valuation, the company’s founders shared their 12-slide pitch deck with ZebethMedia for a review. “No information has been redacted or omitted,” writes Haje Jan Kamps.

Amid record dry powder, VCs are determined to fund anything but you

By zebethcontrolPosted on November 11, 2022Posted in EC News Analysis, EC venture capital, fundraising, Startups, Venture, venture capitalNo Comments

Seriously, anything If you had to sum up the 2022 venture capital market in one word, that word could be contradictions. Venture funds have record dry powder — deployable capital on hand — and yet funding continues to steadily decline. There is seemingly more talk of backing women and people of color in the industry than ever, and yet the numbers are headed in the opposite direction. VCs said publicly that they were focusing on companies on the path to profitability, but that wasn’t true for even a minute. So while many venture firms said they are largely sitting out investing this year as they wait for valuations to fall, it is, again, largely untrue. What does seem to be true, though, is that some VCs are using this year’s uncertainty as an excuse to avoid doing the work it takes to discuss valuations and assess TAM on potential investments into companies with real customer bases. Because they aren’t backing no one — they’re just backing everyone but you.

Pet insurance startups chase the market as pet ownership booms among Gen Z and Millennials • ZebethMedia

By zebethcontrolPosted on November 11, 2022Posted in Fintech, insurance, Pets, Startups, VentureNo Comments

Walk through any public park these days and you will see a hell of a lot more dogs than you might have done three years ago. The loneliness of the pandemic lockdowns led to an explosion in pet ownership. Plus, The demographic of pet ownership has shifted. Whereas previously it was Granny or Grandpa who tended to be the pet owner, now, Gen Z and Millennials represent around 70% of pet owners, according to some statistics. This has created a big fight between insurers over this new market, and has of course predictably led to new startups in the arena. In the UK you can find UK ManyPets, Waggle, PetPlan, while in the US there’s Lemonade, Figo, ManyPets and Trupanion. Over in the EU you’ll find Dalma (France), Lassie (Sweden) and ManyPets (Sweden). Meanwhile, pet insurance start-up Napo has decided to take a particular angle on this topic, not only offering pet insurance but also pet health prevention information, pet ownership education, and additional services. It’s now raised a £15m Series A funding round, led by DN Capital, and with the participation of the petcare-focussed Companion Fund as well as Helvetia Venture Fund, M Tech Capital, Picus Capital, dmg ventures, Sarona Partners, T0 Ventures and FJ Labs. Napo claims to have insured over 35k pets in the year since its launch last December. It offers access to 24/7 online vet consultations, obesity awareness resources, and access to expert-led live classes to help puppy train their dogs. In a statement, co-founder and CEO Jean-Philippe Doumeng said: “Our mental model is fundamentally different from traditional pet insurance. We are aligning all stakeholders to look in the same direction by helping people to take better care of their pets.” Guy Ward Thomas, who led the deal at DN Capital, added: “We met all of the ‘neo pet-insurers’ in Europe… What set Napo apart was their focus on building a virtuous circle between educating owners, providing veterinary care and improving pet health – all leading to lower claims, lower premiums and happier customers in the long-term.”

SoftBank, NEC, Sony, Toyota + more team up for Rapidus, Japan’s bid for next-gen chip domination • ZebethMedia

By zebethcontrolPosted on November 11, 2022Posted in Enterprise, Government & Policy, Japan, semiconductors, VentureNo Comments

As the tech war between the U.S. and China intensifies, Japan has spotted an opening to build a viable alternative for semiconductors — not least so that its own consumer electronics firms do not run out of memory chips. Now, eight major Japanese tech firms and car makers, including Kioxia, NEC, NTT, SoftBank, Sony and Toyota, are teaming up in a consortium to launch an advanced chip maker. Rapidus, as it will be called, aims to develop and mass-produce the next generation of logic semiconductors by 2027. The Japanese government said Friday it will back Rapidus with 70 billion yen (~$500 million), joining the eight tech corporations to reduce its dependency on chip production in other countries like Taiwan. According to Japan’s industry ministry, each participating company will invest approximately 1 billion yen (~$ 7 million) in Rapidus, with MUFG Bank injecting 300 million yen. “Semiconductors are going to be a critical component for developing new leading-edge technologies such as AI, digital industries and health-tech,” Minister of Economy, Trade and Industry Yasutoshi Nishimura said at a news conference today. “Semiconductors are becoming even more important from an economic security perspective” due to the rising geopolitical risks. Last week, Japan unveiled its plan to allocate 350 billion yen ($2.38 billion) to build a joint research center with the U.S. with the goal of developing 2-nanometer advanced chips. A number of research institutions and semiconductor companies in the U.S, Japan and Europe will participate in the research hub to collaborate. In addition to the new joint research hub investment, the Japanese government plans to invest 450 billion yen in advanced production and 370 billion yen in securing materials required for manufacturing. IBM is reportedly partnering with Rapidus, which will have to get a license from IBM to manufacture sub-2 nanometer chip technology in Japan. Rapidus aims to develop 2-nanometers chips, which can be used for 5G, quantum computing, data centers, self-driving vehicles and digital smart cities. Japan has previously subsidized global semiconductor allies, including Taiwan Semiconductor Manufacturing, Micron, and Western Digital, to expand their chip production in Japan. The idea here is to strengthen its competitiveness in the semiconductor sector with R&D and production of its own advanced chips, primarily for Japanese car makers and tech companies’ use, but potentially for others, too. While global competitors have outperformed in the industry, Japan’s latest logic semiconductor production lines are for 40-nm chips, per media outlet. Samsung has started mass production of 3 nm this year, and TSMC plans to begin its 3 nm mass production late this year.

A new playbook for startup fundraising • ZebethMedia

By zebethcontrolPosted on November 11, 2022Posted in Column, EC Column, fundraising tactics, revenue-based financing, startup financing, Startups, VentureNo Comments

Miguel Fernandez Contributor Miguel Fernandez is CEO and co-founder of Capchase, which provides non-dilutive financing to SaaS and comparable recurring-revenue companies. More posts by this contributor Use alternative financing to fuel VC-level growth without diluting ownership A few years ago, founders only had two options when starting a company — bootstrap yourself or turn to VC money, and they would use that money primarily to pursue growth. Later on, venture debt started to gain prominence. While non-dilutive, its problems are similar to that of VC equity: It takes time to secure, involves warrants, isn’t very flexible and not every startup can get it. But in recent years, more options have become available to founders. Most startups can now avail non-dilutive capital, and purpose-specific financing has entered the fray. While venture capital remains the most popular avenue for startups, founders should take advantage of all the financing options available to them. Using an optimal combination of capital sources means using cost-effective, short-term funding for imminent goals, and more expensive long-term money for activities with uncertain returns on the horizon. What is revenue-based financing? Let’s define it as capital provided based on future revenue. While venture capital remains the most popular avenue for startups, founders should take advantage of all the financing options available to them. So what is unique about revenue-based financing? Firstly, it is quick to raise. Compared with the months-long process usually involved with other forms of equity or debt financing, revenue-based financing can be set up in days or even hours. It is also flexible, meaning you don’t have to withdraw all the capital up front and choose to take it in chunks and deploy it over time. Revenue-based financing also scales as your credit availability increases. Usually, there’s only one simple fee with fixed monthly repayments. How should startups evolve their financing playbook? To optimize fundraising using different sources of capital, startups should think about aligning short- and long-term activities with short- and long-term sources of funds. Revenue-based financing is shorter term in nature, and a typical term ranges between 12 and 24 months. Venture capital and venture debt are longer-term capital sources, with a typical term of two to four years. A startup’s short-term activities may include marketing, sales, implementation and associated costs. If a startup knows its economics, CAC and LTV, it can predict how much revenue it will generate if it invests a certain amount in growth. Because the return on these activities may be higher than the cost of revenue-based financing, startups should use revenue-based financing to fund initiatives that will bear fruit soon.