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Prediction Capital hits first close of €30M for new fund to back startups addressing UN SDGs • ZebethMedia

By zebethcontrolPosted on Posted in Climate, impact investing, VentureNo Comments on Prediction Capital hits first close of €30M for new fund to back startups addressing UN SDGs • ZebethMedia

Another day, another dollar, and another VC fund launches. But, refreshingly, this one will specifically address the United Nations Sustainable Development Goals. Prediction Capital is a new VC sprung out of the Swiss Family Office infinitas Capital, the investment firm of former entrepreneur and investor Robin Lauber, and formed together with Christopher Chuffart and Kilian Graulich. The fund, which has hit its first close of €30M, will focus on startups covering ConsumerTech and FinTech mainly in the German-speaking DACH region. Another focus will be on businesses that embrace the UN’s Sustainable Development Goals (SDGs), in particular Good Health and Wellbeing, Quality Education, Gender Equality, Decent Work and Economic Growth, Reduced Inequalities, Responsible Consumption and Production, Climate Action, Peace, Justice and Strong Institutions and Partnerships for the Goals.  So far it’s invested in Heritas, Foodetective (Online Infrastructure & Intelligence of the Merchant Industry, raised $2M) and House of Change. Lauber has been in real estate but also brought Dunkin’ Donuts to Switzerland where he successfully exited the business in 2020. Chuffart was most recently at Mountain Partners, a Zurich based VC before moving to i2i Logic (Australian corporate finance FinTech) to open their European HQ. Graulich is former McKinsey & Company.

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Sequoia Capital writes off its $210M investment in crypto exchange FTX • ZebethMedia

By zebethcontrolPosted on Posted in Daily Crunch, Startups, Venture, venture capitalNo Comments on Sequoia Capital writes off its $210M investment in crypto exchange FTX • ZebethMedia

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. Tech reporting is a lot of things, but it sure ain’t boring, as the chaos around Twitter, crypto, and layoffs continues. We’re just trying to hang on for dear life to try to make some sense of it all. We think we did a pretty decent job, and here, we’ve got a selection of what’s been happening in the past 24 hours of tech. — Christine and Haje. The ZebethMedia Top 3 Another domino falls: It was probably already a fiasco, but Binance deciding to not buy FTX led Sequoia Capital to claim its minority stake in FTX as nothing more than some unrealized gains, Connie reports. Investor letter and everything. Meanwhile, over at our other favorite hot mess: Elon Musk was right when he tweeted that the company would be doing “lots of dumb things.” Darrell reports on one of its latest take-backs (because they seem to accumulate before we even have time to take a breath), where all of these accounts were promised that little blue checkmark in exchange for $8, but as you all know, when you make fake accounts, that means we can’t have nice things. More Twitter changes: Another group of top dogs at Twitter decided to leave the nest. This time it is chief information security officer Lea Kissner, followed by chief compliance officer Marianne Fogarty and chief privacy officer Damien Kieran. The latter two have reportedly resigned today, according to Zack and Ingrid, who teamed up to chase down the details. Startups and VC Denver-based VC firm SpringTime Ventures is pivoting away from its original focus on its home state of Colorado, despite being the only local fund in two of the state’s 10 unicorn companies, Becca reports. It’s also now able to expand its team thanks to raising three times as much money for Fund II, giving SpringTime enough cash on hand to allow its partners to finally pay themselves “a real salary.” New crypto startups forged ahead during Alliance DAO’s demo day on Wednesday amid the FTX implosion. The most recent cohort, known as All9, for Alliance DAO, a web3 accelerator and builder community, presented their ideas on Wednesday during a demo day, exclusively covered by Jacquelyn. And here’s a smattering of other things that caught our beady little eyes today: 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 or 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.” 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. Elon Musk wants Twitter workers in the office and wants them battling spam. Those were some of the messages the new owner had for his social media staff, Ivan writes. Oh, he also told them to be ready for “difficult times ahead,” which is always something you want to hear from your leader with regard to the future of your job. After the Binance deal fell through, FTX founder Sam Bankman-Fried has some new focuses: winding down trading at Alameda Research and winding up his fundraising prowess, Manish reports. We promise, no more FTX or Twitter below:

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Use IRS Code Section 1202 to sell your multi-million dollar startup tax-free • ZebethMedia

By zebethcontrolPosted on Posted in Column, EC Column, EC How To, income tax, Startups, tax breaks, Tax law, VentureNo Comments on Use IRS Code Section 1202 to sell your multi-million dollar startup tax-free • ZebethMedia

Vincent Aiello Contributor Spencer Fane attorney and business owner Vincent Aiello helps businesses solve legal problems to secure revenue flow and reduce business risks. Whoever said you can’t have your cake and eat it too should have called their accountants and lawyers first. These professionals often receive inquiries from founders, equity investment firms and venture capitalists looking for ways to save on or avoid capital gains taxes on future business sales. Both lawyers and accountants encourage clients to examine the tax savings offered by setting up a Qualified Small Business (QSB) C-Corporation at the initial business formation stage. Using a QSB can eliminate capital gains tax due on the future business sale if the company is established and stock issued pursuant to Internal Revenue Code Section 1202. Many startups often simply default to a robotic use of S-Corporations, partnerships, and LLCs, but savvy tech founders should consider the excellent long-term tax savings afforded by IRS Code Section 1202. This article provides a general overview concerning the major requirements and tax savings provided by forming a startup entity structured to maximize the capital gains tax exclusion in IRC 1202. IRC 1202 excludes capital gains tax realized on the sale of qualified small business stock (QSBS) of non-corporate taxpayers if the stock has been held for more than five years. QSBS is stock in a C-Corporation originally issued after August 10, 1993, and acquired by the taxpayer in exchange for money, property or as compensation for services. The corporation may not have gross assets in excess of $50 million in fair market value at the time the stock is issued. The IRC 1202 gain exclusion allows stockholders, founders, private equity and venture capitalists to claim a minimum $10 million federal income tax exclusion on capital gains for the sale of QSBS. Prior to 2010, only part of the capital gain on QSBS was excluded from taxable gain under section 1202 and the portion excluded from gain was an item of tax preference subject to alternative minimum tax. This rule was changed for stock acquired after September 27, 2010, and before January 1, 2015, such that the gain on such stock was fully excluded and no portion of the gain was an item of tax preference. This change was made permanent by the Protecting Americans from Tax Hikes Act of 2015, signed into law on December 18, 2015. Given the changes to IRC 1202, it constitutes a significant tax savings benefit for entrepreneurs and small business investors. However, the effect of the exclusion ultimately depends on when the stock was acquired, the trade or business being operated, and various other factors. Qualifying for Section 1202’s capital gains tax exclusion takes careful planning The critical plan to be determined at the outset is the future stock sale, which must be structured as a sale of QSBS for federal income tax purposes to achieve capital gains tax exclusion. This can be a challenge, as buyers typically prefer asset acquisitions permitting a step-up in basis and future goodwill amortization. In many business sales today, buyers expect stockholders to roll over a portion of their equity, or receive stock or membership interests in a new entity as part of the transaction. Imprecise planning will cause the QSB stockholders to forfeit the QSBS gain exclusion and owe tax on the sale. This can happen if there is an impermissible equity rollover to an LP, or receipt of LLC equity.

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Perfekto bags $1.1M to find homes for imperfect produce in Mexico • ZebethMedia

By zebethcontrolPosted on Posted in Commerce, imperfect produce, Jan Heinvirta, Mexico, Perfekto, Startups, VentureNo Comments on Perfekto bags $1.1M to find homes for imperfect produce in Mexico • ZebethMedia

Over a third of food ends up wasted across the globe, with 6% of that occurring in the Latin America and Caribbean regions. Among that waste, the majority of it, around 70%, occurs prior to the consumer stage. This is where Perfekto believes its subscription box of imperfect food can help. Launched in 2021, the Mexico-based company works with over 70 producers to “rescue” food and delivers it to consumers. Subscribers used to get a “surprise box,” but can now personalize their box and choose how much of each type of produce they want. On the backend, the company developed software that automates routing and logistics. In the past year, the company was part of Y Combinator’s summer 2021 batch, grew to over 3,000 active monthly subscribers and reached $1 million in annual run rate, Jan Heinvirta, co-founder and CEO, told ZebethMedia. Subscribers average two boxes per month. “We saw an expensive problem that needed urgent solution,” he added. “We felt like it’s time to do this because no more time should be wasted. We also saw a trend going in the direction of consumers being more responsible.” It’s an expensive problem indeed, with the cost of food waste estimated to be around $940 billion each year. And that’s while 9.7 million people across Latin America have food insecurity. Add to that, grocery delivery businesses in the business-to-consumer space are traditionally a capital-intensive business. Even highly venture-backed companies find it difficult to reach profitability. Heinvirta said it is possible to build a grocery delivery business with positive unit economics. Since December, Perfekto also grew over 10x across all key performance indicators and rescued 1 million pounds of produce. “We have been very capital efficient, reaching $1 million in ARR having spent less than $1 million,” he added. “This is possible thanks to our subscription model, efficient logistics model and strong organic growth.” Heinvirta, who grew up in a Swiss farmer village and has a background in financial services, moved to Mexico and met Anahí Sosa, the daughter of a citrus producer who told ZebethMedia that she saw how imperfections affected her father’s business. She went on to lead Uber’s grocery initiative in Latin America and later helped launch Cornershop in Costa Rica. Together Heinvirta and Sosa, chief operating officer, started Perfekto. They recently brought on Juan Andrade as the third co-founder and chief supply chain officer. Andrade was a logistics advisor to the company since it started and previously led Walmart’s e-commerce logistics operations in Mexico. Perfekto co-founders Jan Heinvirta, Anahí Sosa, and Juan Andrade (Image credit: Perfekto) The company is among a group of startups that want to save produce and other food from ending up in landfills. Today, it announces $1.1 million in pre-seed funding to expand its program across Mexico City. Over the past year we’ve seen a number of them also get venture capital backing for their approaches. For example, Full Harvest raised $23 million in Series B funding at the end of 2021 for its business-to-business marketplace that connects produce buyers and sellers so they can quickly close deals on surplus or imperfect crops. “We have a lot of interest from other cities, and I can certainly plan our international expansion, but we’re focused on Mexico City right now because it is so big,” Heinvirta said. “We plan to reach $2 million in annual run rate within the next six to eight months, and there is an opportunity to grow as much as we can.” Perfekto is also looking at some new opportunities beyond fruits and vegetables and is working with large consumer packaged goods companies that are interested in partnering to reduce food waste for other items that have a short shelf life or damaged packaging. There is also increased interest coming from businesses that are subscribing to a box of fruit each week, he added. The company just launched a crowdfunding campaign, but in the meantime, Heinvirta intends to plug the new capital into three areas: improve operations and technology, expand its catalog of products to offer customers more variety and growth in the B2B space.

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Colorado-based SpringTime Ventures pivots its focus for new $25 million fund

By zebethcontrolPosted on Posted in emerging manager, Software, Startups, Venture, venture capitalNo Comments on Colorado-based SpringTime Ventures pivots its focus for new $25 million fund

There are a lot of changes afoot for SpringTime Ventures as it looks to deploy its freshly closed second fund. For one, the Denver-based firm is pivoting away from its original focus on its home state of Colorado, despite being the only local fund in two of the state’s 10 unicorn companies. It’s also now able to expand its team thanks to raising three times as much money for Fund II, giving SpringTime enough cash on hand to allow its partners to finally pay themselves a real salary. So far, these changes have proved positive. SpringTime is announcing a $25 million second fund to cut checks ranging from $400,000 to $600,000 into U.S.-based seed-stage software companies. The fund was raised from an LP base of 120 entities that largely consisted of high-net-worth individuals. This latest fund allows SpringTime managing partners Matt Blomstedt and Rich Maloy to ditch their consulting work to focus on investing full-time, and actually get paid for doing so, overcoming a financial hurdle that plagues many first-time fund managers but isn’t spoken about often. The firm was also able to add a principal and two additional partners. The new pool of capital will be invested across startups in sectors including fintech, insurtech, healthcare, logistics and supply chain. While Fund I largely was deployed into companies across these same sectors, Fund II’s thesis represents a deviation from where the firm first focused: filling a funding void for startups in Colorado. Blomstedt told ZebethMedia that he originally got the idea for SpringTime after moving to Colorado in 2015 after a career in the energy business in Texas. He started attending happy hours to get to know people in his new community and met a bunch of startup founders who all shared the same problem. Blomstedt saw an opportunity. “At the time, there just wasn’t a dedicated seed fund really in Colorado and the consistent theme was [local founders] were having to go to the coast or maybe to Austin, Texas, or Chicago to raise seed capital,” Blomstedt said. “I started to become pretty convicted in kind of an opportunity and the need for a seed fund in Colorado.” He decided to raise a proof-of-concept fund to back these startups. The first fund was a slog to raise, he said. He garnered $8 million, which the firm invested in 35 companies including future Colorado unicorns SonderMind (telehealth) and Veho (logistics). While the fund isn’t sticking to its original thesis of backing companies in the Centennial State, Blomstedt said that most of their existing portfolio company would fall under this new strategy anyway. The above two examples back that up. Plus, he thinks this distinction will help them better leverage their LP network — 77% of Fund I’s LPs reupped for the new approach. “They send deal flow or they help us evaluate deals, so we started just kind of gravitating toward those industries,” Blomstedt said. “It also just made us better; we can make quicker, sound decisions in a much shorter period of time by having this focus and this network around us.” He added that they can be a value add later to the firm’s portfolio companies. SpringTime also brought on a handful of operating partners for Fund II for the same reason. Now, after raising across two very different market conditions — Blomstedt said it took about the same time to raise the first $22 million and the final couple million — it’s time to deploy.

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Sequoia Capital marks its FTX investment down to zero dollars • ZebethMedia

By zebethcontrolPosted on Posted in Crypto, VentureNo Comments on Sequoia Capital marks its FTX investment down to zero dollars • ZebethMedia

Sequoia Capital just marked down to zero the value of a stake that, as of last week, represented one of the firm’s biggest unrealized returns in its 50-year history. In short, Sequoia has decided not to bail out the beleaguered crypto exchange following its abrupt implosion over the last couple of days. This story is developing: here is the letter it just sent out to its limited partners. Dear Limited Partner, We are reaching out to share an update on our investment in FTX. In recent days, a liquidity crunch has created solvency risk for FTX. The full nature and extent of this risk is not known at this time. Based on our current understanding, we are marking our investment down to $0. Sequoia Capital’s exposure to FTX is limited. We own FTX.com and FTX US in one private fund, Global Growth Fund III. FTX is not a top ten position in the fund, and our $150 million cost basis accounts for less than 3% of the committed capital of the fund. The $150 million loss is offset by ~$7.5B in realized and unrealized gains in the same fund, so the fund remains in good shape. Separately, SCGE Fund, L.P. invested $63.5M in FTX.com and FTX US, representing less than 1% of the SCGE Fund’s 9/30/2022 portfolio (at fair value). We are in the business of taking risk. Some investments will surprise to the upside, and some will surprise to the downside. We do not take this responsibility lightly and do extensive research and thorough diligence on every investment we make. At the time of our investment in FTX, we ran a rigorous diligence process. In 2021, the year of our investment, FTX generated approximately $1B in revenue and more than $250M in operating income, as was made public in August 2022. The current situation is developing quickly. We will communicate in a timely manner when more information is available. If you have any additional questions, please contact Andrew Reynolds, Marie Klemchuk and Kathleen Forte at: investorrelations@sequoiacap.com. For SCGE questions, please contact Kimberly Summe at summe@sequolacap.com. Sincerely. Team Sequoia Footnotes: Global Growth Fund III (GGFIlI) data is as of September 30, 2022 and is based on U.S. GAAP. The $7.5B is composed of $5.8B of unrealized gain and $1.7B of realized gain. which includes the General Partner distribution on May 27, 2021 pursuant to the 2021 Amendment. Past performance is not indicative of future results Global Growth Fund III (GGFIII) refers to Sequoia Capital Global Growth Fund III – Endurance Partners, L.P. and does not include Sequoia Capital Global Growth Fund III – U.S./India Annex Fund, L.P., Sequoia Capital Global Growth Fund III – China Annex Fund, L.P., and their parallel funds More on this story shortly . . .

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Meta decimates its staff as the social media giant lays off 11,000 • ZebethMedia

By zebethcontrolPosted on Posted in Daily Crunch, Startups, Venture, venture capitalNo Comments on Meta decimates its staff as the social media giant lays off 11,000 • ZebethMedia

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. Whooo-weee interesting times for crypto land, as Bitcoin crashes down to under $17,000 for the first time in a while. Wild, given that the cryptocurrency was trading at $65,000 or so a year ago. That’s a 74% decrease. What kind of winter is this — are we seeing a crypto cold snap or crypto permafrost? Answers on an immutable blockchain transaction, please. If you’re excited to make sense of the crypto world, we’ve got an event in Miami coming up in a couple of weeks — details and tickets here!  — Christine and Haje. The ZebethMedia Top 3 More social media struggles: Though the subject matter was a downer, Paul wrote a great story about Meta’s confirmed layoffs of 11,000 employees, explaining what happened, why and what it means in the greater context of Meta’s future. More in Big Tech below. It was good while it lasted: For a few hours this morning, us ZebethMediaers were elated to see our precious Twitter handle get the “Official Twitter Badge,” but as Amanda writes, what Twitter giveth, Twitter quickly taketh away. This is what really happened: It was Elon Musk, in the boardroom, with the badge code. As we just mentioned, Musk was killing spirit all over Twitter today, rolling out gray checkmarks for high-profile accounts and then deleting them. Kyle has more. Startups and VC Edge computing cloud and global data network Macrometa has raised $38 million led by Akamai Technologies, as the two announce a new partnership and product integrations, Catherine reports. The funding also included participation from Shasta Ventures and Sixty Degree Capital. Akamai Technologies CTO Andy Champagne will join Macrometa’s board. Startups might be in a funding midwinter, but the ray of sun shining on some VCs speaks of a different trend, reports Ingrid. EQT Ventures, the venture fund arm of Sweden’s investment giant EQT making early-stage bets on startups primarily in Europe, has closed its latest fund and filled its coffers with €1 billion (and $1.1 billion in total commitments). Like our headline stories, but more summarized: Three tips for managing a remote engineering team Image Credits: Inok (opens in a new window) / Getty Images Remote work is not for every business, and it may not be everyone’s cup of tea. When Greg Soh and his co-founder decided to build a distributed engineering team for their startup, numerous questions raced through their minds: Will the team be productive? How will decisions be made? How do they keep the culture alive? Today, the startup manages a remote team of about a dozen engineers, and they’ve learned quite a bit along the way. On ZebethMedia+, he shares some of the tips and advice the company has learned — most of the advice is best applicable to earlier-stage startups. 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. Following today’s Meta announcement regarding the layoff of 11,000 employees, Ingrid did a deep dive into the company’s 8-K and emerged with some fresh catch, including the predictable — that slashing expenses on hiring and capex investments will help the company’s 2023 bottom line. Meanwhile, Frederic writes about IBM’s Osprey quantum processor, which isn’t exactly the 4,000 qubits the company wants to achieve by 2025, but at 433 qubits, it’s a good start. And we have five more for you: More layoffs: You didn’t think you’d get off that easy, did you? Ron reports that Salesforce has laid off hundreds of employees, while Aria reports that Astra lays off 16% of its staff after nearly tripling it in the last year. Brrr, it’s cold in here — there must be some crypto in the atmosphere: It’s like Anita had some sixth sense or something. Earlier today, she wrote that the proposed Binance and FTX M&A deal looked unlikely to close. Lo and behold, just before this went out, Binance decided to walk away from the deal, Jacquelyn reports. Collaboration station: Ready to Freeform? Not sure it’s going to be a verb yet, but Apple hopes its collaborative whiteboard is something that sticks, Ivan reports. Sensors and software and EV, oh my!: Volvo unveiled its first all-electric SUV today, and we are drooling. Jaclyn has more. We’re guessing he didn’t win the Powerball: Elon Musk sold more of his Tesla shares, Rebecca writes. The 19.5 million shares were worth almost $4 billion. Wonder what he’s using the money for…

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Some crypto VCs see decentralization as the future following FTX collapse • ZebethMedia

By zebethcontrolPosted on Posted in Binance, blockchain, Crypto, EC Blockchain, EC Cryptocurrency, EC venture capital, FTX, Venture, venture capitalNo Comments on Some crypto VCs see decentralization as the future following FTX collapse • ZebethMedia

As the crypto market digests the past few days of chaos, venture capitalists see the moment as a warning, but also an opportunity for the growth of decentralization and maturation of the larger blockchain space. “As venture investors, we take a long-term view on the industry; despite the current market turmoil, we are actively assessing and investing in the right opportunities,” Marc Weinstein, founding partner of Mechanism Capital, said to ZebethMedia. “The premise of DeFi has, if anything, been strengthened by the collapse of centralized entities from opaque counterparty relationships.” Decentralized finance (DeFi) is often associated with trusting blockchain technology to execute services through smart contracts, while centralized finance (CeFi) usually refers to more traditional business models and involves having people manage funds and manually execute services. “Market sentiment is shaken, but committed VCs with experience from several crypto market cycles will continue to invest.” Marc Weinstein, founding partner of Mechanism Capital Historically, the venture market doesn’t get “too offended” by what transpires in secondary markets, David Gan, general partner at OP Crypto, said to ZebethMedia. Regardless, he said, the seeming death of FTX is saddening for everyone, “not just in the VC space, but across the board.” When there are massive crashes and burns, it speaks to what we’ve been seeing over the past decade: It’s the Wild West out there, Samantha Lewis, principal at Mercury, said to ZebethMedia. “When summarizing it all, I see it a continuation of the phase that started when winter hit and we saw Luna and all these crazy companies crash and burn like BlockFi, Celsius and now we have FTX,” Lewis said. “As an early-stage venture investor, it’s telling me the hype is now for sure gone. But that ushers in the maturation of the space that a lot of us have been craving for a really long time.”

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The bottom keeps dropping for software valuations • ZebethMedia

By zebethcontrolPosted on Posted in Startups, VentureNo Comments on The bottom keeps dropping for software valuations • ZebethMedia

Another day, another 52-week low. It seems that instead of finding fresh support, the value of software companies keeps discovering new basement levels to descend into. This afternoon, software stocks were off 3% or so, while the broader Nasdaq Composite was down around 2% in midafternoon trading. The dramatic collapse in the value of software stocks has been a key story starting when the trend began in late 2021. Since then, the value of a dollar of software revenue has been cut, slashed, beaten back, and then kicked in the shins. How much decline are we talking about? Here’s one way to examine the situation, the chart of the Bessemer Cloud Index:

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