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What should startup founders know before negotiating with corporate VCs?

Corporate venture capitalists (CVCs) are booming in the startup space as large companies look to take advantage of the fast-paced innovation and original thinking that entrepreneurs offer.

For startups, taking funding from CVCs can come with many benefits, including new opportunities for marketing, partnerships and sales channels. Still, no founder should consider a corporate investor “just another VC.” CVCs come with their own set of priorities, strategic objectives and rules.

When it comes to choosing a CVC with which to enter negotiations, the most important step is doing your own diligence beforehand. An entrepreneur’s goal is to find the perfect match to partner with and guide you as you grow your business. So before you start discussing terms, you’ll want to understand what’s driving the CVC’s interest in venture investing.

While traditional VCs are purely financially driven, CVCs can be in the venture game for a variety of reasons, including finding new technology that might generate marketplace demand for their products. An example is Amazon’s Alexa fund, which invested into emerging companies that drive use and adoption of Alexa. Alternatively, a CVC’s parent company may be looking to invest in tech that will help them operate their own products more efficiently, such as Comcast Ventures investing in DocuSign.

As a rule of thumb, the bigger CVC funds like GV and Comcast tend to be financially driven, meaning they’ll be approaching negotiations through a financial lens. As such, the negotiating process more closely resembles an institutional fund. You as a founder have to do the work to figure out what’s driving your CVC — is this a customer acquisition or distribution opportunity? Or are they seeking to find a source of knowledge transfer and/or bring new tech into their parent company?

“Before negotiating, always look at a CVC’s existing portfolio,” says Rick Prostko, managing director at Comcast Ventures. “Have they made a lot of investments, at what stage, and with whom? From this information you’ll see the strategic thinking of the CVC, and you can determine how best to position yourself when you begin negotiations.”

Modsy confirms layoffs, 10 months after announcing its $37M Series C

Modsy, an e-commerce company that creates 3D renderings of customized rooms, has confirmed to TechCrunch that it laid off a number of staff. In addition, several of its executives, including CEO Shanna Tellerman, will take a 25% pay cut. TechCrunch first heard about the layoffs from a source. The company’s confirmation of cuts comes amid a wave of layoffs in the technology and startup communities

In a statement from the CEO Shanna Tellerman to TechCrunch, Modsy said that “[i]n an effort to maintain a sustainable business during these unprecedented circumstances, we made a round of necessary layoffs and ended a number of designer contracts this week.” The company reaffirmed belief in its “long-term growth plans” in the same statement.

Modsy did not immediately respond when asked about how many individuals were impacted by this layoff. Update: The company declined to share the number of employees impacted.

The startup is backed by investors including TCV, Comcast Ventures, Norwest Venture Partners, GV, BBG Ventures, according to Crunchbase data. It has raised $70.8 million in known capital to date. 

Modsy bets on individuals looking to glam up their homes by better visualizing the new furniture they want to buy. Users can enter the measurements of their living room and add budget and style preferences, and Modsy will help them with custom designs and finding furniture that fits — literally.

The layoffs show that customer appetite might be changing. Last week, home improvement platform Houzz confirmed that it has scratched plans to create in-house furniture for sale. It also laid off 10 people across three locations: the U.K., Germany and China. Houzz is comparatively larger than Modsy, with a roughly $4 billion valuation. But scratching its in-house plan that would have likely brought in more capital is yet another data point in how e-commerce companies are struggling right now to get consumers to spend on items other than beans, booze and bread starters.

In retrospect there were rumblings that the company was cutting staff. A number of recent reviews from its Glassdoor page note layoffs, with one review from March 25, 2020 calling them “mass” in nature; our original source on the company’s recent cuts also noted their breadth.

You can find other social media posts concerning the company’s layoffs, some noting more than one wave. TechCrunch has not confirmed if the recent layoffs are the first of two, or merely the first set of cuts. 

A little over 10 months ago the company was in a very different mood. Back in May of 2019, flush with new capital, Modsy’s CEO said that the “home design space, the inspiration category is thriving.” 

Pinterest just IPO’d, and it seems as if every TV channel is entering the home design category,” she said. “Meanwhile, e-commerce sites have barely changed since the introduction of the Internet.”

Where top VCs are investing in manufacturing and warehouse robotics

Robotics and automation tools are now foundational parts of warehouses and manufacturing facilities around the world. Unlike many other robotics and AI use cases, the technology has moved well beyond the theoretical into practice and is used by small suppliers and large companies like Amazon and Walmart.

There’s no doubt that automation will transform every step of the supply chain, from manufacturing to fulfillment to shipping and logistics. The only question is how long such a revolution will take.

There’s still plenty of market left to transform and lots of room for new players to redefine different verticals, even with many of the existing leaders having already staked their claim. Naturally, VCs are plenty eager to invest millions in the technology. In 2019 alone, manufacturing, machinery and automation saw roughly 800-900 venture-backed fundraising rounds, according to data from Pitchbook and Crunchbase, close to two-thirds of which were still early-stage (pre-seed to Series B) investments.

With our 2020 Robotics+AI sessions event less than two weeks away, we’ve decided to perform temperature checks across some of the hottest robotics sub-verticals to see which trends are coming down the pipe and where checks are actually being written. Just as we did with construction robotics last week, this time, we asked six leading VCs who actively invest in manufacturing automation robotics to share what’s exciting them most and where they see opportunities in the sector:

Rohit Sharma, True Ventures

Which trends are you most excited about in manufacturing/warehouse automation robotics from an investing perspective?