Hello and welcome back to Equity, a podcast about the business of startups, where we unpack the numbers and nuance behind the headlines. Every Monday, Grace and Alex scour the news and record notes on what’s going on to kick off the week.

This week was big-tech heavy, as the startup market had a slow start to the week. Sign of the times or one day fluke? We’ll see in time, I suppose.

Here’s what we got into on the show today:

• Stocks are down today, and cryptos are doing even worse in recent days.
• Elon Musk’s flirtation with becoming a Twitter board member is over, the company said. Precisely why Musk backed out is not entirely clear, though the social media company’s statement might hold some clues.
• Shopify is splitting its stock, and changing up its corporate governance structure; crypto volumes are tanking in India following a legal change — and Coinbase is struggling in the country; SailPoint is selling to private equity for $6.9 billion.
• Turning the clock back, the Ellevest round is very cool.
• And to close things out, NIO’s production is on hold in China due to COVID issues. Such much for supply chain recovery.

This week is TechCrunch: Early Stage, which is going to be good fun. See you there!

Perforce Software has been building developer tools since 1995, a long time in the tech world. The company was acquired by Clearlake Capital in 2018, and over the last several years has been modernizing and expanding its reach through acquisition. Today, the company announced it intends to acquire Puppet, the infrastructure automation company.

The companies did not disclose the terms of the deal.

Tim Russell, CPO at Perforce says that the acquisition adds an element to the company’s toolkit that it had been missing. “So Perforce is an industry leader in DevOps, but focused more on the planning through verification phases of DevOps, so planning creation and testing. And so we see this acquisition actually fitting really well as it now gives us entry into operations,” he said.

He added that the company has a long history of serving a similar set of customers to Puppet and that was one of the reasons they went after it. Puppet CEO Yvonne Wassenaar says that she was originally looking for funding to fuel some inorganic growth through acquisitions when Perforce came knocking.

“Fundamentally, the market is moving so fast and despite the fact that I’m very proud of the organic development side with [our products], I didn’t feel that we were moving fast enough organically to really keep up with what our customers needed,” she said.

“I set out actually to go raise money to help facilitate Puppet doing inorganic acquisition on our own. And what happened is in that process, I met the team at Perforce…and the more we got talking, the clearer it became that I could achieve all those things that I wanted in terms of having access to capital to actually grow the Puppet portfolio itself [by joining forces with them].”

She said she didn’t have to sell, but she felt she could do so much more as part of a well-capitalized company like Perforce, which has two private equity firms in Clearlake Capital and Francisco Partners backing it.

The hope is that the company’s success with open source and commercial customers will continue under the Perforce umbrella, while being able to expand that base with some strategic acquisitions of its own. Perforce will continue to let Puppet do what it’s been doing all these years, while finding ways to integrate it into Perforce’s broader platform where it makes sense.

Puppet has raised almost $190 million since its founding in 2009. The last raise was a $40 million debt round from Black Rock in 2020.

The deal is subject to standard regulatory approval, but is expected to close in May.

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Technology news was entertaining this week, if nothing else. The fact that we started the week learning that Elon Musk had bought a material percentage of Twitter’s stock, spent the mid-week period learning that he had joined the board, and by the end of Friday were busy reading about how employees were digesting the matter, it’s been busy.

But better busy than not, and the saga has given us a lot to think about. I want to touch on the matter one more time today through the lens of voting rights.

Something that we have seen the last few years are multi-class shares at startups. In simple terms, multi-class shares exist when investors and founders create a class of equity that affords them more votes per unit of stock than what is provided by other, lesser types of company stock. This does a few things, including concentrating power in fewer hands. In extreme cases, multi-class share setups can ensure that a founder has complete control of a company, forever.

Facebook is one such company. Twitter is not.

The difference between the two companies isn’t idle. Facebook is struggling to reinvent itself under the guidance of the same leader that brought it to early success while, in contrast, Twitter is now run by a non-founder, and just added a controversial power-user to its board. These are very different results for publicly traded social networks.

This brings us to what is making me laugh. By my understanding of today’s technology tribalism, the folks most enthralled with Elon Musk and his own brand of capitalism are also those most in favor of using multi-class shares to control companies. Or more simply, the folks who see little issue with Facebook’s CEO holding all the cards, are also the ones excited about what Musk can do at Twitter.

It’s an example, I think, of intellectual dissonance, and one that forces me to folks who share my view — that creating corporate governance that looks like monarchy is a poor choice over a long time horizon — to ask a question: Given that a very wealthy shitposter just arrogated himself onto Twitter’s board through creative use of their checkbook, does it change how we think about corporate governance, and the importance of shareholder voting rights being more than mirages?

Nope. Not really. Elon is doing activist shareholder things, which is fine, even if some folks find him distasteful as much as some consider him a hybrid of visionary and role model.

What will Musk bring to Twitter? Who knows. But at least it will be entertaining.

Empowering non-developers

My friend and colleague Ron Miller wrote about a project at Salesforce this week that will let folks write code by having a conversation with a computer. I recommend that you read it. It reminded me heavily of what GitHub built recently, namely a method to suggest code to developers as they type. Tools are coming for boring development work, it appears.

Neat tech from Salesforce and Microsoft — GitHub’s parent company — will not supplant developers. The tricky work that they do will remain in demand. Instead, consider code-writing tools from the perspective of folks who don’t write code daily, but need to at times to do their job. For them, the market appears to be clearing obstacles from their path.

Between the rise of no-code and low-code services, and the above work regarding more automated code-generation, we are slowly moving toward a future where development work will be far more in the grasp of the beginner, and even more for the dabbler. This could unlock a lot of human potential. And perhaps even lessen the developer shortage on a modest basis.

All told I am excited by this part of tech work. Let’s give more people more power. It will be good for humanity as a whole.

The first quarter of 2022 brought a historically huge sum of investment for global startups, with the three-month period outclassing any quarter in 2018, 2019, and 2020, according to CB Insights data.

But despite the fact that Q1 2022 posted historically elevated results, venture capital investment decelerated from Q4 2021 levels. And it may be that late-stage startups are those under the most fundraising pressure, data indicates.

Through the lens of the pace of unicorn creation, how frequently we’re seeing nine-figure rounds, and late-stage deal sizing more generally, we can see that the most mature startups — or at least the startups priced as if they were among the most mature technology upstarts — are seeing the market shifting underfoot.

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This is not a forecast of doom, mind. There isn’t anything that we can see in market data that indicates that the startup fundraising market is collapsing; indeed, there’s plenty of strength to be found in select markets and regions, something that TechCrunch+ will explore next week.

But for the huge cohort of startups worth $1 billion or more, new market conditions could force hard decisions in the quarters ahead. And if Q1 trends continue, we could see the pressure on late-stage startups ratchet higher. What is today a headache could become a migraine in short order. Let’s explore the data.

How rapidly is the late-stage startup fundraising market cooling?

To understand how the late-stage market is slowing, let’s observe trends in data that we tracked during the 2021 venture capital bonanza. From the Q1 2022 CB Insights global venture capital data download, the following stood out as key metrics in flux:

Proton, the Geneva, Switzerland-based startup behind the eponymous E2E encrypted webmail service ProtonMail, has acquired French startup SimpleLogin, which offers a freemium, open source service for creating email aliases to let people shield their actual email address when they sign up for digital services.

Paris-based SimpleLogin was founded back in 2019 and works as a browser extension, web app and mobile app — also offering users with a dashboard where they can disable aliases (such as if one starts getting spammed); and manage multiple real email addresses (i.e. if they have a number of email accounts which they want to be able to send aliased emails from).

The startup has grown to more than 100k users, with more than 2M email aliases created to date. We’re also told its monthly growth rate is in the double digits.

There is a fair amount of service overlap already between SimpleLogin and Proton with around a quarter of SimpleLogin users also being ProtonMail users, according to a Proton spokesman, who talks up “strong synergies between us”.

Commenting on being acquired in a statement, Son Nguyen Kim, founder and CEO of SimpleLogin, added: “SimpleLogin’s mission is to protect your online identity… We like Proton’s mission, its transparency, open-source nature, and user-first culture. It’s exciting to know what we can do with Proton experience and resources.”

Financial terms of the acquisition are not being disclosed.

In a blog post announcing the acquisition, Proton’s founder and CEO Andy Yen also flags the overlap, writing: “We have been following SimpleLogin closely for a long time as many ProtonMail users utilize it to prevent their ProtonMail addresses from being leaked to spammers.”

“SimpleLogin is a complementary service to ProtonMail,” he adds. “ProtonMail protects your data privacy with encryption, while SimpleLogin prevents malicious actors from discovering your actual email address by hiding your email.“

Proton’s plan is to more deeply integrate SimpleLogin functionality into ProtonMail — meaning its wider user-base will be able to hide their email addresses using SimpleLogin without having to sign up separately for the latter service.

Proton will also be maintaining SimpleLogin as a separate service, per Yen.

“If you already use SimpleLogin with ProtonMail, things will continue to work the same as before,” he says. “SimpleLogin will continue working as a separate service, and the SimpleLogin team will continue building new features and adding functionality but now with the benefit of Proton’s infrastructure and security engineering capabilities.”

SimpleLogin’s team will continue to operate out of Paris where Yen says Proton will now be actively seeking to recruit from as it continues to expand the business, adding that its hope is to create “dozens” of jobs in the coming years.

The acquisition marks a further expansion of Proton’s suite of services — which as well as E2E web mail for individuals and business users includes an own brand VPN, a calendar product and cloud storage (aka Proton Drive).

Sustaining a privacy-focused business model which does not rely on data mining users to generate revenue encourages expansion into additional, aligned service areas to maximize cross-selling opportunities. Hence we’ve also seen the non-tracking browser, DuckDuckGo, bolting on a number of additional services in recent years as competition hots up for privacy-centric services.

Most pertinently, DuckDuckGo launched an email protection service last summer which offers a fairly similar email shielding feature as SimpleLogin — providing users with a free @duck.com personal email address (albeit merely to forward email to the user’s regular inbox; DuckDuckGo claims it doesn’t save your emails and isn’t (as yet) offering a like-for-like webmail service).

It’s clear that increasing competition in the privacy space is leading to previously once very distinct services to range further and start to overlap territorially. For users the upshot is more fully featured privacy products that promise to shield more of their online activity from prying eyes.

Companies producing software are becoming ever more reliant on open source databases to build their programs, but it’s complex working with all these different products. Instaclustr, a California startup, wanted to change that by offering popular open source databases delivered as a service.

Today, NetApp bought the company for an undisclosed amount. Instaclustr gives NetApp customers a way to install popular open source databases without worrying about the headaches of dealing with the raw open source. Among their supported projects are PostgresSQL, Apache Kafka, OpenSearch, ElasticSearch and Apache Cassandra,

This the latest in a series of small acquisitions for the company, which traditionally has delivered data and storage management services. In a blog post announcing the deal, NetApp executive vice president and general manager Anthony Lye said the acquisition was ultimately about improving customer experience by making it easier to install this software.

“The acquisition of Instaclustr is a strategic next step for NetApp; to do more for the customer, simplify the experience, continuously optimize and secure the platform so customers don’t have to do it themselves,” he wrote.

When combined with other acquisitions the company has made recently, there is a pattern here as the company tries to shift from legacy storage vendor to something that is more relevant for customers today looking to manage workloads in the cloud.

“We’ve made a series of strategic acquisitions including Spot, CloudCheckr and Fylamynt to deliver FinOps. And with Cloud Hawk, Cloud Secure and CloudCheckr, we now deliver SecOps. We deliver solutions for our customers’ most pressing cloud needs—scale, performance, speed, efficiency, security and cost,” Lyn wrote.

Ben Bromhead, CTO and co-founder at Instaclustr sees the two companies producing a a logical combination for customers. “From a technology and product perspective, NetApp’s powerful infrastructure solutions pair perfectly with Instaclustr’s data-layer-as-a-service solutions and services,” he said in a statement.

Instaclustr was founded in 2013 and raised around $22 million, according Crunchbase data. NetApp was founded in 1992 and went public in 1995. The stock is up slightly this afternoon. The deal is subject to regulatory approval and is expected to close in the first quarter of FY2023.

The venture capital market could be seeing a shift in power dynamics away from founders and more toward investors, data indicates.

The information, collected by DocSend, a service that founders often use to send information about their startups to investors, indicates that after a hot start in the year, investor interest is declining, leading to what could be the start of a sea change in private-market dynamics.

For most of the last decade, the venture capital market has been more founder-friendly than not, a trend that seemed to peak in 2021 when a confluence of private capital and a hot public market made for a rich fundraising landscape for startups. Founders were able to raise successive rounds quickly, often at attractive terms, and at times with slim due diligence.

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Fear of missing out on hot deals weighed more heavily on the minds of some capital allocators than concerns about valuations, governance rights, and other investment terms. It was a frantic period, leading to some companies raising capital at price levels that are now causing some headaches among unicorns and other late-stage startups.

A material change in how founder-friendly the venture capital community is would upend the startup fundraising game, moving the balance of power away from those building more toward those investing. For those familiar with venture investment during recessions that last more than a few weeks, such a correction would merely be another swing of the power pendulum that Silicon Valley has long endured between VCs and startups.

For founders only accustomed to having in-market clout above historical norms, such a shift could be a shock.

Let’s examine Q1 data from DocSend (which Dropobox bought back in 2021), and see what we can glean about how startups and the venture industry are changing.

Roshni Mahtani Cheung, group CEO and founder of The Parentinc

The Parentinc, a Singapore-based startup that runs a parenting community and direct-to-consumer product line, announced today it has raised $22 million.

The round was led by East Ventures with undisclosed investors and included participation from Central Retail Corporation, a new backer, and returning investor WHG Holdings. Part of the round was venture debt financing from DBS.

The Parentinc, formerly called Tickled Media, is best known for theAsianparent, its parenting community, and also runs Mama’s Choice, which manufactures and sells halal pregnancy, nursing and baby care products. TechCrunch last covered the company in 2019 when it raised its Series C.

Along with its headquarters in Singapore, the company also has offices in Bangkok, Jakarta, Kuala Lumpur, Manila, Ho Chi Minh City and Mumbai. The company originated as a blog by founder and CEO Roshni Mahtani Cheung.

“It all started because there wasn’t ample parenting information that Asian parents can relate to. Questions like, ‘Is it safe to feed a three year old durian?’ just weren’t covered in books and websites,” Mahtani Cheung told TechCrunch.

The funding news comes a few weeks after The Parentinc said that it had added LINE Southeast Asia as a shareholder. Other strategic investors in the company include JD.com and SCB 10X, which has helped build Mama’s Choice presence in Indonesia and Thailand.

The new capital will be used to expand theAsianparent and Mama’s Choice into three new markets before the end of 2022, including Vietnam and a U.S. launch by the end of this year.

In a prepared statement, East Ventures co-founder and managing partner Willson Cuaca said, “We are impressed by The Parentinc’s incredible growth and successful transition from blog to becoming the unparalleled market leader across Southeast Asia in the parenting content, community and commerce space.”

Prepared, a startup building technology to better connect citizens to the U.S. emergency calling system, announced today that it has raised a $9.8 million round, led by First Round. Other investors in the round included M13, 8VC, and Modern Venture Partners, among others.

The company has now raised more than $11 million.

Prepared was born 3.5 years ago when co-founder and CEO Michael Chime started building software targeting public safety while at Yale. Their early work included a safety app for universities.

At the time, schools asked the team how data from students reporting issues could reach 911 services. It turned out that 911 call centers are technologically dated and generally unable to accept information other than calls. Given that modern smartphones can collect pictures and videos, restricting inbound 911 data to voice is pretty darn antiquated.

Prepared, the startup formed from the founders’ early work, wants to close that gap. The company has moved away from an app, as most citizens don’t think about the need to contact emergency services ahead of time. So, today, Prepared’s service allows 911 dispatchers to send callers a text that connects them to a web app, where they can upload rich media about the situation they have encountered.

After raising a pre-seed round on their idea, Prepared launched its service 10 months ago. Today, 30 cities have signed up, representing what Chime said was around 2 million citizens.

The company has short-circuited the often long cycle of government procurement by offering its service for free. Per Chime, the company’s software spreads from one center to the next by word of mouth, giving the company a growing in-market footprint, if not rising revenues.

That’s what the venture capital is for — external capital is a way to avoid normal business gravity for a period of time.

Naturally, Prepared has plans to eventually monetize. Chime was a bit coy on revenue plans, but did mention that there could be a freemium element to the service in time and that Prepared could help federate data from 911 centers to other groups, perhaps allowing them to charge for the connection.

Putting off monetization in the SaaS era might seem a little bit old school. But Chime and the Prepared staff are looking at the 911 market as an aggregate, with the co-founder arguing that without external effort, its potential customer base wouldn’t get its tech for a decade or more. So, it has raised money to go collect that market now and make money a little bit later. Prepared will likely see some revenue this year, Chime said, adding that any early top-line might be its eventual chief revenue source.

I like it when tech does something that impacts a lot of folks. And given how important 911-style services are, what Prepared is building could help a good number of people. We’ll circle back when the company turns on the revenue taps to see what it has in mind, and how far it has expanded its in-market footprint by that time.

The first quarter of 2022 was a great period for startups to raise venture capital compared to any time other than the bonkers 2021 private-capital cycle. Although there was still ample capital in the market and deal-making appeared strong at the start of this year, we’re seeing stress cracks appear across the startup sector.

What gives?

It appears that many startups raised money last year beyond the limit of defensible pricing, leaving them in an effectively zero-margin situation. Any startup that raised at a two- or three-figure revenue multiple in 2021 now faces an environment of declining values for technology companies and high-profile investor groups retreating from deal-making. This could lead to down-rounds (or worse).

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What makes the situation ironic is that we’re starting to see the startup layoffs, implosions, and valuation cuts that appear when venture capital is frozen. New data from PitchBook that The Exchange reviewed this morning paints a picture of a still-warm U.S. VC market. And yesterday, when we explored the global venture market with data from Crunchbase News, we saw a similar picture. (More information drops tomorrow, so expect more detail regarding sectors and geographies as the week continues.)

Things just aren’t that bad in the startup market, at least according to investment totals that we tallied in the first quarter. And yet you can’t fire up Twitter without running into startup doom and gloom these past few weeks. So what’s happening?

Unicorn fragility

Early PitchBook data shows that there were likely 4,822 venture capital rounds in the United States during Q1. Those deals were worth $70.7 billion, the data company said. If the Q1 pace is maintained for the rest of the calendar year, those work out to 19,288 deals and $282.8 billion.

Compared to 2021 totals from the same source, U.S. VC activity in 2022 is on pace to surpass last year’s deal volume (17,105) while falling short of its dollar volume ($342.2 billion). That’s hardly a collapse, frankly, even if all startups would like to see more capital disbursed each year than the last.

The irony of today’s situation is that if 2021 had been less exuberant, fewer startups would be facing valuation and cash issues this year.

Fast, a startup that provided online checkout products, announced this afternoon that it will shut down. The company’s future has been in doubt for days now, after reporting indicated that its 2021 revenue growth was modest, its cash burn high, and its fundraising options limited.

The Information first reported the company’s conclusion. In a statement, the company said that in the wake of “making great strides on our mission of making buying and selling frictionless for everyone, we have made the difficult decision to close our doors.”

The company, founded by Domm Holland and Allison Barr Allen, went on to describe itself as a “trailblazer,” saying that not all such parties make it to “the mountain top,” claiming that while it failed, the startup managed to “forever” change the world online commerce. How much credit the short-lived company can actually claim for work in the one-click checkout market is far from clear, but at least Fast is going out as it lived: giving itself more props than perhaps its business results warranted.

Fast posted a paltry six-figure revenue total in 2021, despite raising a $102 million Series B led by Stripe. The company’s burn rate was said to be as high as $10 million per month, or a simply massive multiple of its revenue, let alone gross profit.

A company imploding a year after raising nine figures won’t be a common story this year, but startup failures come in degrees; this is a more high-profile crash. Others will be slower-motion and less violent in their halt. 

PitchBook data indicates that Fast was last valued at around $580 million, measured on a post-money basis. For the employees holding options that are now worth nothing, the company’s shuttering is a shock. Whether the company’s founders were able to sell some shares in the company’s huge Series B is not clear, but if they did, let’s hope they distribute the cash to their former staff.

The company has raised $124.5 million since its 2019 inception, according to Crunchbase.

Community resources are already cropping up — including a list of former workers. A quick scan of social media indicates that a number of companies are looking to snap up Fast staff. The talent market for startup workers is still hot, so perhaps the impact on those laid off today will prove short-lived.

Fast’s conclusion comes after some other richly-valued startups have begun to pull-back. Layoffs are ticking back up more broadly in startup-land, and one very well-known unicorn cut its valuation to better incent its workers. 2022 is shaping up to look at a lot different from 2021.

Tinybird has raised a $37 million Series A round led by CRV and Singular Ventures. Your company may have stored a ton of data in a warehouse — everything is in there. But what do you do with it now? Sure, you can generate monthly reports and see how your business is doing. But Tinybird helps companies take advantage of this data in realtime.

In addition to the two VC firms leading the new funding round, existing investor Crane Ventures is participating once again. Datadog’s Chief Product Officer Amit Agarwal is also putting some of his money in the startup.

Tinybird is the sort of product that is easy to understand if you’ve been looking for something like this specifically. Essentially, the company ingests data from wherever you store your data, transforms it using SQL and makes it accessible as a JSON-based application programming interface (API).

And the company manages the infrastructure for you, meaning that you don’t have to spin up more servers as your data sets get larger. You get charged depending on the number of GBs of data you store and process through Tinybird.

When it comes to data ingestion, Tinybird has connectors for various popular data sources, such as databases (PostgreSQL, MySQL…), CSV files hosted in a storage bucket on a public cloud, data warehouses and data streams, from Amazon Redshift to Google BigQuery, Snowflake and Apache Kafka.

After that, Tinybird promises that it can ingest millions of rows per second. Depending on what you want to do with the product, you may want to filter your data, sort it in one way or another and more. Developers can execute SQL queries on ingested data to transform it accordingly.

Finally, customers create API endpoints based on those queries. Instead of reacting to data-driven analytics, you build products that act in realtime. This way, you can integrate Tinybird’s APIs in your application logic.

For instance, you can create realtime analytical dashboards for your customers. Or you can adjust your product pricing depending on realtime usage to avoid bottlenecks. Or you can detect anomalies in your company’s workflow in just a few seconds.

There are some obvious clients, such as companies in the travel industry. They want to know if there’s a seat or a hotel room available as quickly as possible. Logistics and omnichannel retailers could also benefit from a product like Tinybird. And more technical companies, such as cryptocurrency market makers, can build their entire buy and sell strategies based on realtime APIs.

“Analytics has traditionally been used to gain insights about what happened with your business in the past. But being able to analyze and exploit realtime data can fundamentally change how you operate your business: from automating your operations and reacting much faster to opportunities and problems, to providing a realtime and customized user experience for your users,” co-founder and CEO Jorge Gomez Sancha said in a statement.

And it scales well. "Several of our customers are reading over 1.5 trillion rows on average per day via Tinybird and ingesting around 5 billion rows per day, others are making an average of 250 requests per second to our APIs querying several billion row datasets," Jorge Gomez Sancha told me in an interview last year.

The startup recently moved its headquarter from Madrid to New York City. With today’s funding round, the company plans to expand its team in the U.S. and ramp up its product and sales teams.