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After the challenging year that was 2022, one might think that the coming months are not looking great for VCs or founders.

But, “dry powder” — money raised by VCs that hasn’t yet been deployed — has risen to record levels. Venture capital investors in the United States, for instance, are sitting on a $290 billion powder keg that’s ready to ignite a new wave of tech startups.1 Investors are understandably cautious. But if handled wisely, the payoff could be big, especially because valuations have normalized drastically.

But why has this happened and what does it mean for the tech industry? And why does the current market environment offer an unprecedented opportunity for investors?

Tech stocks are seeing significant valuation corrections

Tech stocks have been through a storm this past year.

The Nasdaq composite index has seen losses of 32% since last January. For instance, Meta, Amazon, Netflix and Google have seen their shares plummet by 63%, 45%, 48% and 34% since the start of 2022, respectively. For only these four stocks, such a decline has meant a decline of $2.3 trillion in market value — that is 1.4 times the cumulative market capitalization of all 40 companies in the TecDAX, Germany’s largest stock market index.2

Such declines were driven by a correction in valuation metrics. In 2021, the average enterprise value for listed cloud software companies was, at times, as high as 20x NTM revenues. Since the valuation correction in early 2022, multiples have normalized and are now at around 5x to 10x NTM revenues.3

But last year’s downturn also affected private-market startups. The average valuation of Series C rounds fell by about a third to $336 million in Q2 2022 from $500 million in Q4 2021.4

The lack of funding, skyrocketing layoffs, inflation and a recession have led some pundits to label the tough climate as the “startup apocalypse.” But despite these challenging circumstances, tech trends show signs of hope.

The tech sector has remained resilient

Strong growth in cloud and AI have kept key tech trends steady, largely in part due to huge shifts in the way we work. Spurred by the need to ensure they’re prepared for the future, organizations have poured money into upgrading their digital infrastructure and processes.

Will record levels of dry powder trigger a delayed explosion of startup investment? by Richard Dal Porto originally published on TechCrunch

AR tech sounds pretty cool, but nobody wants to be a glasshole. Today at CES, we checked out Lumus‘ bid to make AR glasses a little bit less cringe. The company creates a series of glasses that look, well, more or less like glasses, and are compatible with prescription lenses, too.

The new glasses are the second generation of its ‘Z-Lens 2D waveguide’ tech, halving the size and weight of the tech needed to make AR bloom to life.

“In order for AR glasses to penetrate the consumer market in a meaningful way, they need to be impressive both functionally and aesthetically. With Z-Lens, we’re aligning form and function, eliminating barriers-of-entry for the industry and paving the way for widespread consumer adoption,” said Ari Grobman, Lumus CEO, in an interview with TechCrunch. “Our introduction of Maximus 2D reflective waveguide technology two years ago was just the beginning. Z-Lens, with all of its improvements unlocks the future of augmented reality that consumers are eagerly waiting for.”

The lenses include a 2Kx2K resolution, surprisingly vibrant colors, and a heads-up display that can be seen even in broad daylight. Extra good news for this particular glasses wearer – the company’s tech can be bonded directly to Rx prescription glasses. The tech works by using so-called ‘reflective waveguides’ that help the tiny projectors held in the eyeglass frames to project on the inside of the semitranslucent lenses. This means that the glasses can be used as regular glasses, while also being usable as projection surfaces. The other advantage is that there’s minimal light leakage – so it’s virtually impossible to see from the front that the wearer is getting info beamed into their eyeholes.

The company tells me it has gone on a patenting binge, claiming it already has more than 430 patents granted, with an additional 540 patents pending. That both places it among the world’s top patent holders for augmented reality optics and positions it beautifully as an acquisition target for a larger company that may be scared of getting sued, bored of paying licensing fees, or both.

Lumus shows off AR glasses that don’t look too dorky by Haje Jan Kamps originally published on TechCrunch

Cloud computing giant Rackspace has confirmed hackers accessed customer data during last month’s ransomware attack.

The attack, which Rackspace first confirmed on December 6, impacted the company’s hosted Exchange email environment, forcing the web giant to shut down the hosted email service following the incident. At the time, Rackspace said it was unaware “what, if any, data was affected.”

In its latest incident response update published on Friday, Rackspace admitted that the hackers gained access to the personal data of 27 customers. Rackspace said the hackers accessed PST files, typically used to store backup and archived copies of emails, calendar events and contacts from Exchange accounts and email inboxes.

Rackspace said about 30,000 customers used its hosted Exchange service — which it will now discontinue — at the time of the ransomware attack.

“We have already communicated our findings to these customers proactively, and importantly, according to Crowdstrike, there is no evidence that the threat actor actually viewed, obtained, misused, or disseminated any of the 27 Hosted Exchange customers’ emails or data in the PSTs in any way,” said Rackspace. The company added that customers that haven’t been contacted directly can “be assured” that their data was not accessed by attackers.

Rackspace attributed the breach to the Play ransomware group, a relatively new gang that recently claimed attacks on the Belgian port city of Antwerp and the H-Hotels hospitality chain. Rackspace’s stolen data is not currently listed on the ransomware group’s leak site, and it’s unclear if Rackspace has paid a ransom demand.

According to the incident report update, Play threat actors gained access to Rackspace’s networks by exploiting CVE-2022-41080, a zero-day flaw patched by Microsoft in November that has been linked to previous ransomware incidents.

Rackspace says hackers accessed customer data during ransomware attack by Carly Page originally published on TechCrunch

Some. Good. News.

The latest Crunchbase data shows that Black startup founders in the United States raised around $264 million out of the total $33.6 billion in venture capital allocated in Q4 2022. That’s an uptick from the $178 million — or 0.43% — the group raised in Q3.

In total, U.S. Black founders raised an estimated $2.254 billion out of the $215.9 billionin U.S. venture capital allocated last year. That’s about 1%, a slight drop from the 1.3% raised in 2021. Let’s break this down.

So Black in the U.S. founders picked up around 0.79% of VC funds raised in Q4 2022. There was a fear that, during a bear market, investors would retreat to their old-school networks, and the total amount of funding Black founders received last year is practically half the amount they raised in 2021 — a record $4.340 billion (out of around $330 billion in the U.S. and $681 billion globally).

Despite the record-breaking 2021, that amount of money equates to just 1.3% of all capital raised in the U.S. alone. No matter what, it seems the actual percentage of the money raised for this cohort barely moves, even as more and more capital floods the markets.

Tye Calloway, the founder of the fintech Cooler, told TechCrunch that it’s embarrassing as a Black founder to always be associated with negative statistics, especially as one trying to fundraise.

Black founders still raised just 1% of all VC funds in 2022 by Dominic-Madori Davis originally published on TechCrunch

Doorstead, a property management startup which offers “guaranteed” rental payments to homeowners, has raised $21.5 million in a Series B round of funding.

Ryan Waliany and Jennifer Bronzo started Doorstead in 2019, initially testing out its model for setting prices for rental properties on Craigslist. Over time, the company built out a pricing model through data science and machine learning that the pair says gives it the ability to better predict how much rent a given property can command.

That’s not to say that it operates without risk. The duo acknowledge that it is indeed a risky endeavor to guarantee rent to landlords considering Doorstead has to cough up the difference if it can’t get the amount it promised.

However, they claim their prediction model works so well, that it still comes out ahead. Doorstead makes its money strictly by charging an 8% management fee, so it is not incentivized to list properties at rents that might be higher than is realistic or fair. So, if the company is able to get a higher rent than guaranteed, it doesn’t pocket the difference. Instead, that extra cash goes to the property owner.

“Other companies might take that upside but we believe then that incentives are misaligned,” CEO Waliany told TechCrunch. “What we offer is a risk-adjusted guarantee based on the market.”

To request a guaranteed offer, property owners enter basic information about their property on Doorstead’s website. If the property is eligible, the company tells the owner the minimum amount they will receive each month and when they will start receiving their payments.

Says COO Bronzo: “We cover the difference if we rent out the property for less [than the minimum] or if it takes longer to find a tenant. So, the owner still gets the rent, and we pay the difference out of pocket, or it cuts into our 8%.”

Doorstead targets “getting above the baseline listing price 75% of the time,” according to Waliany.

“…It works out financially very well for us, and we’re helping eliminate unnecessary vacancies. Without a guarantee, sometimes property managers drag their feet,” he said.

The model does seem to be working considering the startup says it saw 270% property growth in 2022 and that its revenue “outpaced” property growth with “healthy unit economics.” Doorstead says it has served “thousands” of owners over the years, generated over 30,000 guaranteed rental offers and currently has north of $1 billion worth of properties under management. The startup operates in seven markets in California, Washington and Massachusetts with plans to “double or triple” its footprint this year.

Doorstead only works with individual landlords of single-family homes, condos or townhomes, not institutional landlords.

Waliany formerly worked in product at Uber and Bronzo has experience in property management. The pair believes their combined backgrounds have given them a good perspective on how to run a tech-enabled, “full-service” property management business, and then some.

“When we started, we thought that, ‘we’re just going to make a tech enabled property management company. We’re going to build like Uber Eats for property management.’ But when we started talking to customers, we realized that we were wrong,” Waliany told TechCrunch. “We realized that there was a bigger problem that was unaddressed in the market, and that was that property owners were getting overpromised rents. Their properties could sit vacant for three or six months and in some cases, it cost them their home. So we thought, ‘what if we can give them a guarantee upfront before we find a tenant?’ ”’

Avanta Ventures led the round, which included participation from MetaProp, M13 and Madron. Avanta is the venture arm of CSAA Insurance Group (also known as Triple A, or the American Automobile Association, AAA). Eric Wu and Tom Willerer (former CEO/CPO of Opendoor, respectively) are also backers. Doorstead has raised $37 million since inception.

Presently, the San Francisco-based startup has about 150 full-time distributed employees, with about 80 in the United States. Besides a geographical expansion, Doorstead wants to focus on capital efficiency and “improving unit economics” with an eye towards profitability.

“We’re shooting for growth, but profitable growth,” Waliany said.

Steve Bernardez, partner at Avanta Ventures, told TechCrunch via email that he was drawn to back Doorstead in part because he believes that “the rental property management space is a large and growing market historically underserved by legacy providers.”

“Despite a huge market opportunity, the rental property management space suffers from poor solutions that misalign incentives, fail to address financial risks, and can be painfully inefficient for all parties involved,” he continued. “…Using data-driven analytics trained on constantly refreshed local real estate data, Doorstead’s guarantee offers property owners confidence that they will get a minimum rental income stream at a guaranteed start date despite any volatile market conditions. Doorstead then helps the property owner prep the property for listing, secures a tenant, and manages ongoing repairs and maintenance, all within an efficient user interface that today’s property owners expect.”

In conjunction with the raise, Doorstead also announced it has acquired the Boston assets of another venture-backed investment property-focused startup, Knox Financial, which wound down operations at the end of last year.

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Got a news tip or inside information about a topic we covered? We’d love to hear from you. You can reach me at maryann@techcrunch.com. Or you can drop us a note at tips@techcrunch.com. If you prefer to remain anonymous, click here to contact us, which includes SecureDrop (instructions here) and various encrypted messaging apps.)

Doorstead closes on $21.5M to make sure you always have a tenant for your rental property by Mary Ann Azevedo originally published on TechCrunch

Victims of the MegaCortex ransomware can now recover their encrypted files for free, thanks to the release of a new file decryptor.

The free decryptor was built by cybersecurity firm Bitdefender and the EU’s No More Ransom initiative in cooperation with the Zürich Cantonal Police, the Zürich Public Prosecutor’s Office and Europol, which in September announced that 12 individuals had been arrested in connection with the Dharma, LockerGoga and MegaCortex ransomware families.

At the time, a statement from Zürich’s prosecutor revealed that the arrests allowed investigators to recover multiple private keys used by the ransomware gang that could allow victims to recover data that was previously encrypted with the LockerGaga or MegaCortex malware. BitDefender released a decryptor for LockerGoga last year.

Now, the cybersecurity company announced this week that a free MegaCortex decryptor is now available.

The tool, which should work to unlock files encrypted by all variants of MegaCortex ransomware, is available to download from Bitdefender and via No More Ransom’s decryption tools portal, which is home to 136 free tools for 165 ransomware variants, including Babuk, DarkSide, Gandcrab and REvil.

Bitdefender told TechCrunch that MegaCortex is estimated to have infected in excess of 1,800 companies around the world, including a number of “high-profile” targets, though the figure is likely to be far higher. The cybersecurity company said its Sodinokibi decryptor, which it released in September 2021, helped victims save over $800 million in unpaid ransoms, and it expects similar from the MegaCortex tool.

MegaCortex was first seen in May 2019 when it began targeting networks that have already been infected with malware, such as Emotet and Qakbot, which is often used to steal data but also deliver ransomware payloads.

Later that year, MegaCortex operators became among the first to engage in double extortion tactics, where they exfiltrate a victim’s sensitive data and encrypt it. The ransomware actors then threaten to release the stolen data unless a ransom demand was paid, which are said to have ranged from approximately $20,000 to as much as $5.8 million.

MegaCortex ransomware victims can now recover stolen files for free by Carly Page originally published on TechCrunch

Hello and welcome back toEquity, a podcast about the business of startups, where we unpack the numbers and nuance behind the headlines. To start off the year, we are welcoming on Rebecca Szkutak as a returning host who will be joining us while Alex is out on paternity leave. We’re lucky to have her for a few months, so give her a warm welcome!

With that, Natasha, Mary Ann and Becca returned to the mic to unpack the latest and greatest on this first week back. 2022 was a dreary, relentless storm at times, but it also surprised us with how much innovation continues to brighten up this downturn. The start of 2023 has been no different.

Here’s what we got into:

Some early standouts from CES, the annual consumer electronics show that is taking over Las Vegas right now. Yep, we’re talking comfort pillows that are even more comfortable than you think, a smarter smart laundry machine and a security dash-cam for ride-sharing drivers.
Then we jumped into deals of the week, which included Doorstead and USV’s $200 million climate fund.
Our first theme got into the latest development in the FTX and SBF saga. If you’re like us, there’s been so much happening that it’s hard to keep track of all the twists and turns. But it’s also evermore important to, as Becca gives us a Real Housewives angle to consider.
We end with a conversation about layoffs, which rolled in this week to impact employees at Stitch Fix, Amazon, Salesforce and others. We dug into Natasha’s latest feature story, in which she explores how laid off talent is rethinking risk for their next jobs.

As always, we’ll be back to chat with you on Monday! In the meantime, you can follow us on Twitter @EquityPod.

Equity drops at 10:00 a.m. PT every Monday and at 7:00 a.m. PT on Wednesdays and 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!

CES, NYE, SBF and FTX. Lol. by Natasha Mascarenhas originally published on TechCrunch

Investors and entrepreneurs began 2022 bright-eyed and optimistic as startups raised nearly $13 billion in the first quarter, making it the fifth-highest quarter for funding on record.

However, talk of a pullback in global venture capital has become louder and more widespread of late. It’s clear that the cash is not flowing as freely as it once was, and that has changed the landscape for ambitious startups looking to build and scale their propositions.

However, a challenging economic climate doesn’t necessarily mean that startups should accept the first offer that comes along, settle for lower valuations or bring on investors that have different values and ambitions for the business. It is now more important than ever for every party to approach the negotiating table with clear questions and expectations.

Here are three firm but fair questions that founders should consider asking their potential investors:

What value can you provide besides money?

Most investors worth their salt will demonstrate that they come with more than just deep pockets — value such as sector expertise, business experience or a global network. Founders should feel confident about proactively asking about what an investor can provide, particularly the networks and introductions potential investors can facilitate.

There is a significant difference between an introduction that was facilitated via an email and a clear handoff to someone whose relationship with the investor is deep and based on many levels of trust. Many investors pride themselves on having a robust and lucrative contact list, but not all introductions are the same — a LinkedIn profile rarely demonstrates the depth and quality of an investor’s network or knowledge.

My advice is to be clear about your commercial goals and push potential investors to offer names of individuals or organizations that will deliver the impact you’re looking for. For example, we recently introduced one of our portfolio companies to an $80 billion infrastructure firm with which we had developed deep relationships in order to set up pilots in a number of regions.

Introductions should not just forge connections; they should deliver tangible commercial impact.

How secure is your cash?

It always surprises me how many founders believe VCs are sitting on piles of cash that they are ready to distribute at any moment.

It is important to remember that VCs don’t have an endless pot of money — they are at the mercy of their LPs’ liquidity. It is therefore sensible (and necessary) to have answers to three key questions:

3 questions founders should be asking investors in Q1 2023 by Ram Iyer originally published on TechCrunch

Indian fintech KreditBee has raised an additional $100 million in a funding round, it said, as the lender looks to scale its business in the South Asian market.

The new cash infusion is part of the larger Series D funding, which KreditBee said has now closed at $200 million. The new funding, led by Advent International, values the Bengaluru-headquartered startup at about $680 million, according to a source familiar with the matter.

KreditBee, which also counts Mirae Asset Venture Investments, Premiji Invest and Mitsubishi UFJ Financial Group among its backers, offers instant micro loans starting at as low as $12 to new-to-credit customers and credit of over $3,500 to salaried professionals.

India’s credit bureau data book is thin, making most individuals in the South Asian market unworthy of credit. Fintechs use modern-age underwriting systems to lend to customers and a maze of regulatory arbitrage — increasingly getting closed— to operate.

KreditBee works with 10 banks and non-banking financial companies (NBFCs) to finance the loans, it said.

“We are delighted to welcome a long-term financial and strategic partner in Advent. This reinforces the confidence in our profitable business model and the long-term sustainability of it. The latest round will help us to achieve our vision of serving over 400 million middle income population in the country,” said Madhusudan Ekambaram, co-founder and chief executive of KreditBee, in a statement.

The startup said it is on track to bulk its asset under management to over $1 billion in the next six to nine months.

Its new funding comes at a time when the dealflow activity has slowed down dramatically in India as investors grow cautious of writing new checks and evaluate their underwriting models after valuations of publicly listed firms take a tumble.

“KreditBee has witnessed several credit cycles and has come out stronger each time reflecting adaptability and resilience of its business model. With this investment, we are strengthening our commitment to back KreditBee’s vision,” said Ashish Dave, chief executive of Mirae Asset Venture Investments in India, in a statement.

Indian fintech KreditBee nears $700 million valuation in new funding by Manish Singh originally published on TechCrunch