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Hello and welcome back to Max Q. I hope everyone had a restful Thanksgiving with loved ones. As it was a holiday week, this is an abbreviated version of the regular newsletter, and I’m writing it on Wednesday, November 23. Before we get to the news, I wanted to give a heartfelt thank you to all Max Q subscribers. Doing this would be literally and figuratively pointless without you.

In this issue:

Orion greets the moon
News from ispace, Metaspectral and more

Orion, meet Moon. Moon, meet Orion.

The spacecraft Orion made a historic fly-by of the moon last week, completing a key maneuver as part of its 25-day test flight. The spacecraft, which NASA hopes will eventually carry astronauts, was carried to orbit by the super-heavy Space Launch System during the rocket’s maiden flight earlier this month.

Orion’s journey is at the heart of the Artemis I mission. Artemis is the name NASA has given to its human spaceflight program to the moon, and (as the name suggests) this mission is the first in what the agency hopes will be many — up to four in this decade alone. But before we go about launching up astronauts, NASA is using this first mission to test the Orion capsule and ensure it’s safe to carry humans.

What does Thanksgiving weekend have in store for Orion? Well, quite a lot. Read more by clicking on the link above.

Orion is due to make its splashdown to Earth on December 11, and that will be the capstone to the mission. During the return to Earth, NASA engineers will carefully monitor the performance of the heat shield and other critical components on the spacecraft. Once the capsule lands in the Pacific, it’ll be fished out and returned to the agency for further inspection.

More news from TC and beyond

CAPSTONEofficially entered its target orbit around the moon. The spacecraft will collect data on that orbit, which could be key for future Artemis missions. (NASA)
NASAselected Rocket Lab as its new launch parter for the TROPICS missions. The two launches, which will carry two satellites each to orbit, are expected to launch from Virginia no earlier than May 1. (TechCrunch)
Rosotics, a 3D printing startup, closed a $750,000 pre-seed round to develop a more efficient 3D printer. (Payload)
Rocket Labcompleted the launch rehearsal for the upcoming Electron mission on December 7. It will mark the first time the company has launched a rocket from U.S. soil. (Rocket Lab)
Starlinkis available across all of Alaska and Canada. (SpaceX)
Stells, a startup founded in 2021, is developing a rover called Mobile Power Rover (MPR-1) that would be able to provide power via wireless charging to lunar spacecraft. (TechCrunch)
The U.S. Space Force signed a cooperative research agreement, also known as a CRADA, with Blue Origin for development on the New Glenn rocket. (Satellite)

We’re offering to Max Q subscribers free tickets to TechCrunch’s in-person space event. Find out more about the event and get your free ticket by clicking here.

Max Q is brought to you by me, Aria Alamalhodaei. If you enjoy reading Max Q, consider forwarding it to a friend.

Max Q: Thank you by Aria Alamalhodaei originally published on TechCrunch

To get a roundup of TechCrunch’s biggest and most important stories delivered to your inbox every day at 3 p.m. PDT, subscribe here.

We’re joining the Cyber Monday fun with 25% off annual subscriptions to TechCrunch+ content and analysis starting today until Wednesday, November 30. Plus, today only, get 50% off tickets to discover the vast unknown and attend TechCrunch Sessions: Space in Los Angeles!

Okay, we haven’t done a newsletter since Wednesday, and while the U.S. team was chillin’ like villains, the rest of the team was hard at work, so here’s some of the highlights from the last half-week of TechCrunchy goodness! — Christine and Haje

The TechCrunch Top 3

Talking to yourself just went digital: Instead of having that internal monologue stay in your head, now you can play out all of your thoughts to yourself in WhatsApp, Jagmeet writes. The messaging platform began rolling out an easier way to talk to yourself today after completing beta testing.
“Great Wall of porn”: That’s how Rita and Catherine describe the bot surge in China that is making it difficult to get any legitimate Twitter search results when trying to find out something about Chinese cities. Why, you ask? Rita writes that “the surge in such bot content coincides with an unprecedented wave of (COVID) protests that have swept across major Chinese cities and universities over the weekend.”
Your calendar, only more productive: Get ready for your calendar to be more than just a place to record things you have to do that day. Romain writes about Amie, a startup that grabbed $7 million to link your unscheduled to-do list with your calendar. The app also enables users to be social with coworkers.

Startups and VC

Dubai-based mass transit and shared mobility services provider SWVL has carried out its second round of layoffs, affecting 50% of its remaining headcount, Tage reports. The news is coming six months after SWVL laid off 32% (over 400 employees) of its workforce in a “portfolio optimization program” effort geared toward achieving positive cash flow next year.

There’s a couple of new funds in town, too! Harri reports that Early Light Ventures plots a second, $15 million fund for software ‘underdogs,’while Mike writes that BackingMinds raises a new €50 million fund to fund normally overlooked entrepreneurs.He also writes about Pact, an all-women led VC for mission-driven startups, backed by Anne Hathaway.

And we have five more for you:

AI just wanna take a closer look: Ingrid reports that V7 snapped up $33 million to automate training data for computer vision AI models.
Special delivery!: Brian explores Bionaut Labs and the $43 million round it raised for its tiny drug-delivery robots.
Let’s get touchy-feely: This startup is bringing precision control for gamers to the humble keyboard, Haje writes.
Sticking it to the card processors: Catherine reports that Atoa helps U.K. merchants cut down on card processing feesand raised $2.2 million in pre-seed funding.
Dat Money for Dat Bike: Catherine reports that Dat Bike gets another $8 million to put more e-bikes on Vietnam’s roads.

Lessons for raising $10M without giving up a board seat

Over the last two years, intelligent calendar platform Reclaim.ai raised $10 million “using a more incremental approach,” writes co-founder Henry Shapiro.

“We’ve done all this without giving up a single board seat, and Reclaim employees continue to own over two-thirds of the company’s equity,” rejecting conventional wisdom that founders should “raise as much as you can as fast as you can.”

In a TC+ post, Shapiro reviews the process they used to identify follow-on investors, shares the email template used to pitch the SAFE, and explains why “a larger cap table means more founder control.”

Three more from the TC+ team:

A different valuation: Interim rate of return: A better approach to valuing early-stage startups, by Andrew Ritter.
Mistakes not to make: 3 mistakes to avoid as an emerging manager, by Champ Suthipongchai.
Growing with great efficiency: Anna writes that growing efficiently is no problem at all, at least if you’re bootstrapped.

TechCrunch+ 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.

Amazon’s recent cost-cutting measures seem to be affecting more than just its delivery business. Manish writes that the company is shutting down its wholesale distribution business, called Amazon Distribution, in India. Amazon had started this unit to help neighborhood stores secure inventory. The company didn’t say why it was closing this particular business down, but Manish notes that this is the third such Amazon unit to be shuttered in India.

Meanwhile, Natasha L reports that Meta has gotten itself into trouble again with the European Union’s General Data Protection Regulation (aka, the agency that regulates data protection). Facebook’s parent company is being hit with $275 million in penalties for what the agency said was breaches in data protection that resulted in some 530 million users’ personal information being leaked.

Now enjoy six more:

UnBlocked: After weeks of reports claiming this would happen, BlockFi filed for Chapter 11 bankruptcy, and it might be FTX’s fault. Jacquelyn writes that FTX was going to buy BlockFi, and then, well, you know what happened to them. Based on the bankruptcy filing, BlockFi owes some significant cash to creditors and is unfortunately now another high-valued, heavily backed crypto company that was unable to make it work in this environment.
Into the sea, you and me: Haje managed to talk Apple into giving him early access to the Oceanic+ app and took the Apple Watch Ultra into the deep blue sea for our world-exclusive review. He also got all excited about the pricing model the app uses.
I spy: The U.S. government is banning telecommunications and video surveillance equipment from several Chinese brands, like Huawei and ZTE, citing protection of the nation’s communications network. Carly has more.
Yahoola takes this company in holy partnership?: Yahoo invests a 25% stake in Taboola, an advertising network, in a deal that will marry the two companies for the next 30 years, Romain writes.
Safety concerns: The U.K. government expands its Online Safety Bill to criminalize those who take to the internet to encourage self-harm, Natasha L reports.
An Apple a day: For his newest trick, Musk is picking a fight with Apple, reports Taylor.

Daily Crunch: WhatsApp rolls out new ‘Message Yourself’ feature globally by Christine Hall originally published on TechCrunch

It isn’t like Instagram is a beacon of truth as it is, but things are about to get a lot worse, as Nufa takes any image and sculpts you into the “after” picture dream that every gym owner wants to project into our souls as they continue on their mission to make us all look like body-building beasts with cleavage out the wazoo and abs for days.

The new mobile app “seamlessly transforms the human body into a picture in one click,” as it considers muscle structure, body type, skin color, body position and even tattoos to provide a “digital experience that hardly differs from real body transformation pics.”

“For women, we have an additional feature of transforming the breast from the 1st to the 5th size that works even with neckline clothes,” Nufa’s head of Analytics, Artem Petrikeev, said in an email to TechCrunch. “We are changing body pics similar to how Faceapp changes selfies.”

Can we be done making ourselves feel less than already?

But hey, if this is your jam, I guess you, too, can see what you’d look like if you conformed to completely unrealistic beauty standards. You do you, boo, but if you install this app, perhaps think about what it is you’re buying into. You’re perfect as you are, and if you don’t believe that, think about where that belief came from.

Nufa lets you live up to unrealistic beauty standards at the tap of an app by Haje Jan Kamps originally published on TechCrunch

On the heels of Tumblr’s decision to integrate with ActivityPub — the social protocol powering the open-source Twitter alternative Mastodon and others — it appears that photo-sharing site Flickr is now considering doing the same. Flickr CEO Don MacAskill today began to actively poll users about whether or not they’d like to see Flickr support the protocol, too. If it moved forward with this plan, Flickr would be the latest larger company to commit to joining the “fediverse” — the interconnected group of independent servers across the globe running free, open-source software that allows their users to communicate and connect with one another.

The concept presents a challenge to modern-day social networks controlled by corporations — or billionaires like Elon Musk.

ActivityPub is a key component to the fediverse, powering not only Mastodon, whose popularity has grown in the wake of Musk’s Twitter acquisition, but also other alternative social platforms including the Instagram-like Pixelfed, video streaming service PeerTube, and others. If Flickr were to add support for ActivityPub, it would no longer function only as a photo-sharing site, but would become a part of a larger web of social networks where users could find, follow and engage with one another across platforms without having to create separate accounts for each service they choose to use.

MacAskill had already been weighing Flickr’s direction with regard to the fediverse before today. Last week, following the Tumblr announcement, the Flickr CEO had tweeted that his company had been internally discussing ActivityPub support, too.

“It might be right up our alley,” MacAskill said at the time.

But in a later tweet, he cautioned that taking this path would mean having to deprioritize other projects on Flickr’s roadmap — including those customers said they wanted. That’s why it makes sense that the exec would try to gauge consumer demand for the protocol’s adoption before actually making a commitment.

MacAskill today noted that there “appears to be a lot of interest” in seeing Flickr move forward with ActivityPub, but he wanted to first gauge the type of interest more specifically.

So far, the results of a poll he published on Twitter seem to be promising. As of the time of writing, only 8.9% of respondents have said “no” to the idea of ActivityPub integration.

38.2% said yes, but only if it was free. Meanwhile, two other groups indicated that ActivityPub support could become something that encouraged them to pay for Flickr, as 37.4% said yes, and said they already pay for Flickr, while 15.4% said yes, and said they might pay for Flickr if the protocol was supported.

MacAskill ran the same poll on Mastodon, where the interest towards making the support a part of a free product is so far running even higher, at 47%. 26% and 22% said yes and they even already pay for Flickr or would consider doing so if ActivityPub was added, respectively.

Though an older site, Flickr today claims it’s used by more than 60 million people per month, according to its Jobs listings page. That would bring a significant number of new people to the fediverse, if the company chooses to add support for ActivityPub.

Flickr, of course, could use a feature that encouraged more customer engagement and adoption. Once a prominent company in the Web 2.0 era, Flickr eventually lost out to other social photo-sharing platforms, like Facebook and Instagram, as well as to more utilitarian photo-hosting services, like Google Photos and iCloud.

In April 2018, Flickr sold to SmugMugand soon the company reduced the limits for free usage, began threatening to delete photos from non-paying users, and urged users to help it find more paying subscribers to keep it afloat. Earlier this year, Flickr also began paywalling the ability to upload NSFW photos to its site.

In more recent days, MacAskill has claimed Flickr is “healthy and growing again,” and noted it has established a non-profit to preserve its images in the event that the company again falls on hard times. Flickr didn’t immediately respond to a request for comment on its ActivityPub plans, but a representative later noted MacAskill is a “wildly customer-centric leader and technologist with a long track record of successfully identifying meaningful innovations,” and, “This is potentially one of those innovations, which is why he’s exploring it publicly,” they said.

updated, 11/28/22, 5:19 pm with flickr comments

Flickr weighs support for ActivityPub, the social protocol powering Twitter alternative Mastodon by Sarah Perez originally published on TechCrunch

After decimating Twitter’s workforce, imperiling its infrastructure and emptying its ad coffers all within his first month at the company, it’s on to the next thing for Elon Musk.

The erratic billionaire picked a fight with Apple in a series of tweets on Monday, bracing for a battle — or perhaps just another volley of tweets — that would comfortably position the perpetually aggrieved Twitter owner as the David to Apple’s Goliath.

Musk is now claiming that Apple threatened to “withhold” Twitter from the App Store, implying that the iPhone maker might take action against the social app over changes under its new ownership without offering any evidence of that. TechCrunch has reached out to Apple for clarification, but for now we don’t know if Apple really contacted Twitter over content moderation concerns or something else entirely.

Twitter’s new owner also claims that Apple has pulled most of its advertising on the platform, which seems possible or even likely considering how many other major ad buyers have done the same since Musk’s takeover, citing concerns about brand safety and content moderation changes.

Whatever is really going on here, a few things are true. For one, Twitter needs to stay in the App Store and to do so it needs to clear Apple’s low bar for content moderation, which Truth Social and Parler — apps with far less mature algorithmic content moderation systems — have managed to do. Even with Musk’s threatened policy changes and his deep cuts to moderation teams, Twitter would likely still remain on Apple’s good side if those apps pulled it off.

It’s also true that Apple’s rules for what gets an app get kicked out of the App Store are vague and arbitrarily enforced. Apple warns against “content that is offensive, insensitive, upsetting, intended to disgust, in exceptionally poor taste, or just plain creepy” which would seem to rule out a lot of social apps, pre-Musk Twitter included, if it really came down to it.

At the same time that Musk is portraying Apple as a censor, he’s also railing against the fees the company charges apps that operate in its ecosystem. Musk calls this a “secret 30% tax” but in reality Apple’s cut is well-documented and much-discussed. Epic Games and Apple went to court over Apple’s fees in 2020, with Epic arguing that the iPhone maker wields monopoly power in the software market.

Whether intentional or not, Musk reigniting the App Store antitrust battle is timely. Epic’s ongoing fight with Apple is kicking off again in appeals court and Congress could be poised for another push to pass the Open Markets Act, a bipartisan bill that would crack open the App Store and “tear down coercive anticompetitive walls in the app economy,” according to its sponsors.

It’s also possible that Apple actually has cautioned Musk that reinstating thousands of accounts banned for stuff like hate speech and harassment might nudge the app afoul of the App Store’s actually quite lenient content moderation requirements. In that case, Musk could position himself as a high profile champion of the anti-Apple crowd, joining Epic’s whole thing and making nice with regulators who are rightfully concerned over Musk’s Twitter plans (or lack thereof).

But even then, Twitter needs Apple in both the short and long term and Apple certainly doesn’t need Twitter. And fighting on yet another front would stretch Musk’s attention even more when he should probably be focused on the basics, like running his myriad other companies or not bankrupting Twitter, say. You can be mad that Apple takes 30 percent of what you make on the iPhone but 30 percent of zero is still zero.

At the end of the day, Musk, the world’s literal richest man and maker of luxury cars and spaceships, generally seems to enjoy portraying himself as a scrappy upstart fighting against larger powers that be. If Musk wants to recreate that dynamic at Twitter, Apple is arguably one of the only entities that can still make the hugely influential social media company look like the little guy. Musk might be the Twitter boss now, but he knows that turning everyone against the big boss is a good way to maintain the approval of the miscellaneous internet devotees that affirm his existing beliefs and vote in his deeply unscientific tweet polls, so maybe it’s just about that.

Whatever inspired his anti-Apple tirade, waging a war on Apple is probably a losing fight. But it’s a fresh conflict that diverts attention from Musk’s embarrassing and seemingly endless parade of catastrophes as he fumbles Twitter’s policy, personnel and product alike, possibly running one of the world’s biggest social networks into the ground in the process.

Elon Musk’s next trick? Picking a fight with Apple by Taylor Hatmaker originally published on TechCrunch

Operating experience has become a buzzword over the last few years as venture capitalists pump up their resumes in a quest to set themselves apart from other sources of startup capital. Now, it seems that we are seeing the next evolution of that trend.

This year has seen a wave of startup consultant firms looking to raise venture funds of their own to take stakes in companies they are already working with or that align with their practice. In theory, this makes total sense because both consultants and venture capitalists have the same goal at the end of the day: helping companies grow.

But why are so many consultant-led venture capital funds launching now? It’s a particularly rough time in the broader venture market, and economy in general, in addition to being one of the toughest periods for emerging managers and first-time fundraisers. It’s worth noting that all of these funds are raising outside capital as opposed to investing off their balance sheets.

For one thing, the startups they were already working with were asking them to.

Move over, operators — consultants are the new nontraditional VC by Rebecca Szkutak originally published on TechCrunch

If it seems like Post News launched overnight, that’s because it kind of did. Unlike Mastodon, Hive Social, or other existing social networks being flooded with dissatisfied Twitter users, Post News emerged two weeks ago. The platform was rushed into a live beta, since its team wanted to go public in a time when the chaos of Elon Musk’s Twitter leadership was front-and-center in our collective headspace.

Post News has some similar basic functions to Twitter: you make posts, you like and repost other people’s posts, you follow interesting accounts. Yet in its beta stage, it still lacks basic functions like DMs, a native app and accessibility features like adding alt text to images (and, sparking concern for some users, the company said it was not prioritizing accessibility at this time).

Post News is trying to capitalize on the “virtual watercooler for journalists” side of Twitter. The platform describes itself as a place to access “premium news content without subscriptions or ads.” News publishers and independent writers are encouraged to share their articles on Post News under a paywall. The idea is that this would allow users to pay for individual articles from a variety of news sources. It’s an alternative, or a supplement, to paying for individual subscriptions to specific news sources.

“I believe the future newspaper is the feed and want to make it more civil for users, profitable for publishers and better for society,” wrote Post News founder Noam Bardin in a tweet announcing the endeavor. Bardin previously served as the CEO of Waze between 2009 and 2021.

As of Monday, Post News has about 335,000 users on its waitlist, according to Bardin, while about 65,000 accounts have been activated. (Users are being let in slowly as to not overload the platform’s operations and moderation capabilities). The platform has already secured an undisclosed amount of funding from Andreessen Horowitz (a16z), as well as Scott Galloway, an NYU professor and tech commentator. Silicon Valley journalist Kara Swisher said she is an advisor to the company, but is not an investor.

A16z is a curious choice for an investor in a Twitter alternative, given that the venture capital firm contributed $400 million to Musk’s Twitter acquisition. Sriram Krishnan, a crypto investor at a16z, has also been working closely with Musk at Twitter HQ. But Bardin saidthat he chose to work with a16z simply because they were the quickest investor to make a decision and fork over a check.

“This does not mean that I am a Crypto fan, that I think [a16z] should have funded some of the personalities they funded lately or that I agree with every statement of theirs,” Bardin wrote on his Post News account on Sunday. “We did discuss the Twitter investment at the highest level and I can assure you that it is not a problem – Post is separated from the people involved with Twitter and a clear line has been set.”

TechCrunch reached out to Bardin and a16z for comment.

Post News’ goals are ambitious. Not only is the platform attempting to compete with a longtime social media mainstay, but its business model relies on digital news publishers opting in to its model of charging readers per article, rather than for a subscription. Plus, the platform is rapidly growing while it is still building out key safety features, which makes things a bit precarious.

“I want to remind everyone that this is a super early beta and it is not right for everyone,” Bardin wrote on Monday. “People looking for a polished product will have to wait. It is OK to take a break and come back when things are production grade – betas are not for everyone.”

Post News, a Twitter alternative, gets funding from a16z by Amanda Silberling originally published on TechCrunch

Of all the venture capital funding invested in 2021, around one in every five dollars went to fintech. But this boom now seems behind us, as global fintech funding activity returned to pre-2021 levels.

Worse, fintech didn’t escape the recent waves of tech layoffs, with high-profile companies like Brex, Chime and Stripe making headlines for this disheartening reason over the last few weeks.

And yet, fintech startups are still getting founded and funded this year. Of the 223 companies in Y Combinator’s summer 2022 batch, 79 fell more or lessinto the fintech category.

Why are founders and investors still placing bets in fintech, and where? To find out more, we reached out to fintech-focused VC firm Fiat Ventures.

Fiat co-founders Alex Harris, Drew Glover, and Marcos Fernandez also run its sister arm, Fiat Growth, a growth consultancy working with fintech and insurtech clients. This enables them to comment not only on sector trends from an investor perspective, but also to share practical advice.

One of their key recommendations is for fintech startups to lean into customer acquisition channels whose cost is less variable or seasonal than others, but our exchange covered a wider range of topics, from financial inclusion to offline channels and more. Read on:

Editor’s note: This interview has been edited for length and clarity. Many of the linked companies are portfolio companies of Fiat Ventures or clients of Fiat Growth.

TC: What makes you say that “fintech acquisition funnels are too complicated”?

Alex Harris: Fintech products by nature have complicated acquisition funnels and enrollment flows. Some complications are unavoidable in a highly regulated environment, but superfluous complications can arise when rigorous testing is not applied and funnels include unnecessary bloat.

Even the smallest detail can generate friction. For example, in the know-your-customer (KYC) process, many fintechs will ask a customer for their entire Social Security Number. In most cases, for non-credit products, only the last four digits of the SSN are needed for identification purposes. While only a five-digit difference, this can have a meaningful impact on conversion rates that can save large sums of money at scale.

Data is certainly king, but there is a time and place for data collection and personalization. Too often, a well-intentioned data team will ask personalization and demographics questions directly in an enrollment process. However, these questions can most often come in a post-enrollment survey or periodically throughout the lifecycle of a customer. Even post-enrollment, these questions need to be thought out. We regularly see data collected for the sake of collecting it, without actionable insights derived from them.

On affinity-focused fintechs, the future of BNPL, and more by Anna Heim originally published on TechCrunch

It’s me! Hi! (I’m not the problem, just the podcast’s host, here to bring you the latest greatest in startup and tech news this fine Monday morning). Welcome back to Equity, the podcast about the business of startups, where we unpack the numbers and nuance behind the headlines. And for those of you who hummed the first sentence of this post, extra points to you.

I’m starting things off this week as a test run before Alex heads on paternity leave. We have lots to get to, so shake off the holiday feels and let’s remember how this ecosystem works?

Here’s what we got to:

The markets are broadly down, due to COVID-19 protests breaking out in China.
Blockfi filed for Chapter 11 bankruptcy. Our crypto reporter Jacquelyn Melinek has more on what happened – and she explains just how intertwined this universe is. I’ll also get to notes I took from our recent crypto conference and how the reality may be looking like Web 2.5 before it looks like Web 3.0.
We also talk about Amazon’s three-pronged retreat, and the common thread of India between them all.
After that, some good news from all-women led venture firm Pact and its debut fund. More funding for climate startups, please. Tim keeps writing about really cool ones.
We end with a note on Pipe, a $2 billion fintech that announced all of its co-founders are stepping down from their roles last week. Soon after that decision was announced, rumors and allegations began flying about tensions under the hood at the fintech. Mary Ann Azevedo has the story and keep reading the site today for the follow up. As I said on Twitter, on one end, when three founders step down in a single moment, people are undoubtedly going to talk and worry (out loud) about the stability of the company.

That was fun. Thanks for letting me spend a bit of your Monday with you. More to come! You can follow me on Twitter @nmasc_ or on Instagram @natashathereporter.

Equity drops at 7 a.m. PT every Monday and Wednesday, and at 6 a.m. PT on Fridays, so subscribe to us onApple Podcasts,Overcast,Spotifyandall the casts. TechCrunch also has agreat show on crypto, ashow that interviews founders, one thatdetails how our stories come together, and more!

What’s the next on crypto’s chopping block? by Natasha Mascarenhas originally published on TechCrunch

Cofactr is a logistics and supply chain tech company that provides scalable warehousing and procurement for electronics manufacturers. The company today announced it raised a $6 million round of seed funding, to “lead the next generation of agile hardware materials management.” The company raised on a SAFE note with a $25 million cap. We spoke to the company’s team to learn more about its vision of the future.

Cofactr addresses a suite of challenges for electronics producers through pre-manufacturing, third-party logistics services and supply chain automation. By providing these products as a unified strategic solution, the goal is to enable hardware manufacturers the ability to get to production volume without investing in the specialized facilities or headcount historically needed to manage electronic components.

“Both Phil [Gulley, the company’s CRO and co-founder] and I are driven by the desire to solve problems. Before Cofactr, we were working on the engineering and solutions side of hardware with our previous company, BeSide Digital, starting off in the entertainment industry and growing to support companies like Zoox, Google and CrowdStrike across product and custom hardware for marketing,” said Matthew Haber, co-founder and CEO of Cofactr in an interview with TechCrunch. “A challenge we had, and saw reflected in the processes of our clients, was that building and scaling hardware felt incredibly laborious in comparison to software. After we sold BeSide, electronic supply chain and logistics was the biggest and most personal problem we could address.”

The company told me that the journey to Cofactr’s current state wasn’t entirely linear. The company initially built and ran a contract manufacturer for circuit board assembly, but realized that wasn’t the right context to tackle these problems. From there, the company evolved to build electronics-specific third-party logistics and procurement automation.

“Having worked in hardware and software we had the opportunity to experience both ecosystems and knew how easy things could be when technology bridges gaps between ideas and scale,” said Gulley. “That was the insight that Cofactr was born out of. It’s the company we wished existed when we were on the engineering side of the table.”

The investment round was led by Bain Capital Ventures with participation from Y Combinator, Broom Ventures, Cathexis Ventures, Sweet Spot Capital, Pioneer Fund, Seed River, Litani Ventures, Correlation Ventures and a few angel investors.

“The big players on the cap table are Bain Capital Ventures (BCV) and Y Combinator. YC helped us focus on finding and providing the things that people really loved about Cofactr and set us up to meet Ajay Agarwal at BCV, which immediately felt like a match. The BCV team understood the opportunities that can come out of a business that integrates hardware, logistics and software into a single solution, as well as the challenges that come with building in many areas simultaneously,” says Gulley.

The investors, in turn, see a future where the Cofactr team can put a dent in how electronics are manufactured.

“When we first met Cofactr founders, I was really impressed with their understanding of the challenges of electronic component procurement. We’ve never seen anything similar to the integrated software and logistics system they’ve built. It combines cloud procurement software, a network of suppliers and a turn-key logistics platform that handles shipping, customs management, counterfeit insurance, inventory, kitting and shipping management,” says Agarwal, partner at BCV, in an interview with TechCrunch. “With the Cofactr platform, hardware manufacturers can find electronic components, check pricing, order parts, handle replenishment and send parts to their partner manufacturers. Behind the scenes, Cofactr handles everything including the acquisition of the parts, storage and management of the inventory, control checks to ensure the inventory is not counterfeit and regular shipments of components to manufacturers.”

Cofactr appears to represent a continuation of BCV’s focus on logistics and supply chain. The investor has backed companies such as Kiva Systems (robotic fulfillment sold to Amazon); FourKites (supply chain visibility — which raised $30 million back in August); ShipBob (cloud fulfillment for e-commerce brands); TruckSmarter (mobile app to allow freight drivers to find and book their next load) and now Cofactr. In addition, it made an investment in Flux, which operates in a similar space, last year.

Of course, the pandemic, in particular, exposed many cracks in the supply chain. Ford, for example, warned its investors that it had to eat an additional $1 billion of costs in Q3 this year, largely due to supply chain challenges, and GM saw a 40% drop in profits in Q2 this year. It ain’t pretty out there, but that’s the fertile ground in which supply chain startups get to sow their opportunities.

“Electronics components were particularly hard to come by. That meant a lot of challenges for hardware companies, whether they’re building dishwashers, robots or smart speakers. In a handful of industries, we think there is an opportunity to create a vertically integrated software and logistics solution,” Agarwal explains. “A good example of this is ShipBob and what they built for mid-market e-commerce brands. Cofactr is doing this for procurement of electronic components, with a complete software-and-logistics solution for hardware manufacturers.”

The ultimate goal for Cofactr is to make hardware not-so-hard, the founders quip.

“There is starting to be a real groundswell of startups attacking the hardware engineering space, but we all have to interconnect and work together in the same way that software development tools do. You’ll be seeing more collaboration between Cofactr, other startups and well-established organizations that serve hardware,” says Gulley. “Fast-forward a few years and we see Cofactr as the cloud solution for pre-manufacturing infrastructure. Our vision feels something like the hardware manufacturing version of AWS; on-demand, cloud-based solutions for physical manufacturing. Today, companies can take a software product from MVP to massive scale without crippling infrastructure investments. In a decade, the same will be true for building hardware products and we believe that Cofactr will be a core enabler of that transformation.”

All of this makes a lot of sense in the context of the U.S. wanting to build a more reliable and resilient on-shore manufacturing capacity. The CHIPS act is making some real waves in the semiconductor industry, and there’s been a fair chunk of investment in logistics and electronics manufacturing in the past year. Last month, Makersite raised $18 million and Altana picked up $100 million.

Logistics and procurement on autopilot is the future Cofactr wants to live in by Haje Jan Kamps originally published on TechCrunch