Earlybird Digital East Fund — a fund associated with Germany’s Earlybird VC, but operating separately — has launched a €200m ($242m) successor fund. The fund’s focus will remain the same as before: a Seed and Series-A fund focusing on what’s known as ‘Emerging Europe’, in other words, countries stretching from the Baltics to Central and Eastern Europe, and Turkey. The firm has also promoted Mehmet Atici, who’s been with the firm for eight years, to Partner. The new fund has made four investments so far: FintechOS, Payhawk, Picus, and Binalyze.
The back-story to DEF is a fascinating tale of what happened to Europe in the last 15 years, as tech took off and Europeans returned from Silicon Valley.
Following his exit from SelectMinds (where he was the Founder & CEO) in 2005, Cem Sertoglu moved back to Turkey. Although he says he “accidentally became the first angel investor” there, he was clearly the right man, in the right place, at the right time. He told me: “I was very lucky and ended up writing the first checks in some of the first large outcomes in Turkey.”
In 2013, Sertoglu partnered with Evren Ucok (the first angel in Peak Games and Trendyol), and Roland Manger (Earlybird). Dan Lupu, a Romanian investor who had covered the region for Intel Capital, joined them, and together they raised the ‘Earlybird Digital East Fund I’ set at $150m fund in 2014, focusing on CEE and Turkey. This was and is an area where there can be high-quality ventures to be found, but very little in the way of VC.
Thereafter, between 2014 and 2019, the fund invested in UiPath, Hazelcast, and Obilet. UiPath has become a global leader in the area known as ‘Robotic Process Automation (RPA). Hazelcast is a low latency data processing platform startup with Turkish roots. Obilet is a marketplace focused for the massive Turkish intercity bus travel market. DEF has also exited Vivense, Dolap, and EMbonds and in more recent times the fund has exited Vivense, the “Wayfair of Turkey” to Actera, the top local PE fund.
The team had spectacular early success. Peak Games, Trendyol, YemekSepeti and GittiGidiyor are the four largest Turkish tech exits to date. Digital East Fund was an investor in all of them. Peak games exited for $1.8 billion in cash to Zynga only last year.
As of Q4 2020, the fund’s metrics are:
Investment Multiple: 24.9x
Gross IRR: 104.4%
Net IRR: 84.1%
So in VC terms, they have done pretty well.
I interviewed Sertoglu to unpack the story of Earlybird Digital East Fund.
He told me DEF has achieved a 17 times investment multiple on a $150 million fund. He thinks “this might be the biggest European VC fund performance in history, and it’s not coming from Berlin, it’s not coming from London, but it’s coming from Eastern Europe. We have been told by some of our LPs that they think we’re the top 2014 vintage VC fund in the world, nobody’s seen stronger numbers than this.”
“Peak Games turned out to be a phenomenal story. When you look at how tough it’s been for Turkey, macroeconomically. The fact that a single company with 100 people essentially sold for $1.8 billion in cash, was just… it was staggering for the local market here.”
DEF’s emergence from Turkey, together with its relationship with a fund in Berlin, was not the most obvious path for the VC fund.
“One thing we realized early one was that we could invest with our own capital and syndicating to our friends, but for follow-on funding, we’d always have to go global. And that made us feel vulnerable. It made us feel we were always dependent on others’ comprehension of the opportunity that we were facing. So that’s when the first fund idea came out this was,” said Sertoglu.
“We felt that there was this unusual dislocation between opportunity and capital in Eastern Europe. Our first fund was $150 million funds – I mean, a very quaint size compared to Western markets. But we became the largest fund in the region, and decided to focus on this series A gap where we felt that there was this big opportunity, because of the way we think series A is still very much a local play.”
“Being a local player that understands the region would be an advantage, so this was proven to be true. We could essentially see pretty much everything in Eastern Europe for the last eight years. And we caught the biggest one, fortunately, which was UiPath. I think very few funds around the world can say that they see the majority if not all of the opportunities that fall into their mandate,” he said.
“We have this dual strategy of backing local champions as well as contenders for global markets as well. 20 years ago you had to be in Silicon Valley. Now, Transferwise comes out of Estonia, UiPath comes out of Romania. And that was even before the pandemic.”
Sertoglu concluded: “So we now have fresh capital, coming on the heels of a very successful first fund, which we’re keen to deploy. We’re calling all the opportunities, seeing very ambitious, strong teams coming out of the region. And we have 200 million euros to focus on these types of opportunities in the region.”
Perseverance lands safely on Mars and sends back its first images of the surface – TechCrunch
Mars rover Perseverance has landed on the surface of Mars after a white-knuckle descent involving picking a landing spot just moments before making a rocket-powered sky crane landing. The rover immediately sent back its first image of Jezero crater, which it will be exploring over the course of its mission.
A clearly tense but optimistic team watched as Perseverance made its final approach to Mars a few hours ago, confirming it was on track to hit the bullseye of Jezero Crater, the ancient delta where the rover will soon be roving.
Except for a few brief but expected communications blackouts caused by the superheated air around the craft as it entered the thin Martian atmosphere, the lander sent back a continuous stream of updates to the team on Earth — considerably delayed, of course, by the distance to the other planet.
The team, and charmingly the on-screen hosts at mission HQ audibly gasped, whispered “yes!” and made other signs of their excitement as news trickled in that atmosphere entry had occurred on time, that the craft hadn’t broken up during the ten-G braking maneuver, that the parachute had deployed, that a landing site was found by the ground-facing radar, that the powered descent and sky crane had commenced, and at last finally that the rover had safely touched down on the surface.
Cheering but, in accordance with COVID-19 precautions not (as they normally would) hugging each other, the team celebrated the landing and soon were treated to the first images sent back from the rover.
These initial pictures are low-quality ones sent just seconds after landing by the “hazard camera,” a fisheye used for navigation. As the dust settles (literally) and the rover initiates its more powerful devices and cameras, we’ll have new, color images — probably within an hour or two.
For a more complete look at the mission and its remarkable landing method, you can read yesterday’s profile of the Perseverance mission. The next few days will probably be less exciting than the terror-inducing landing, but soon the rover will be up and running around Jezero, looking for evidence of life on Mars and testing technology that could be used by human visitors in the future.
“We’re not ready to go there with astronauts yet, but the robots are ready,” said JPL director Michael Watkins on the broadcast. “We start by sending, you know, our eyes and arms there in the form of a robot. It is just fantastic to be able to do that, and to learn from each rover, learn from the science and the engineering, and make the next one better, and make more and more discoveries. Every time we do one of these missions, we make fabulous discoveries — and you know, each one is more exciting than the last.”
The exciting thing everyone is looking forward to, Mars helicopter Ingenuity, will hopefully take flight soon as well.
“We have a series of major milestones between now and the first flight. Tomorrow, we’ll turn on the helicopter, and the space station could confirm its health. The next major milestone will be when the rover deploys the helicopter on the surface, and that marks the first moment that Ingenuity operates on its own in a standalone manner, said MiMi Aung, project manager and engineering lead for Ingenuity. “Surviving that first cold frigid night of Mars will be a major milestone, then we’ll execute a series of checkouts, and then we will perform that very important first flight. And if the first flight is successful, we have up to four more flights in the thirty Martian days that we have set aside for our flight experiments.”
YC-backed Queenly launches a marketplace for formalwear – TechCrunch
Queenly, a marketplace for formalwear, launched into a world where its core product of dresses and gowns had a massive competitor, bigger and more elusive than Poshmark: quarantine.
The coronavirus pandemic has caused the fancy in-person events that one might attend, such as award shows, pageants, proms and weddings to be canceled to limit spread. But despite the fact that you might be rocking sweats over slacks, Queenly co-founders Trisha Bantigue and Kathy Zhou say that they had half a million in sales last year, and over 100,000 people visit their website everyday.
“So many women bought dresses to just dress up and feel normal at home, when everything else around the world was not,” Bantigue said. “It helped them feel grounded and stabilize themselves in this crazy chaotic pandemic environment.” The canceled events have also found new homes, such as Zoom weddings, Twitch pageants, socially distant proms and graduation car parades. The co-founder added that content creators on TikTok and YouTube have also bought Queenly dresses.
Pandemic growth added a surprising dimension to Queenly’s business, and the Bay Area startup is currently partaking in the Y Combinator winter cohort to navigate it. So far, it has raised $800,000 to date from investors including Mike Smith, former COO of Stitch Fix, Thuan Pham, former CTO of Uber, and Kelly Thompson, former COO of Samsclub.com and Walmart.com. The goal, the co-founders tell me, is to become the StockX for formalwear.
Queenly is a marketplace for buying and selling formal dresses, from wedding dresses to pageant gowns. The 50,000 dresses on the platform are either new or resale, and sellers get paid 80% of the price that the gowns go for.
Part of the company’s biggest sell, according to the co-founders, is its algorithm that matches buyers to dresses. Before Queenly, Zhou was a former software engineer at Pinterest who helped build content creation flows and the back end of the platform. She took the same focus that her and her Pinterest co-workers had on data-driven search and development and applied it to Queenly.
The search engine can go deeper than a normal dress search on Macy’s can, which might create options based on size, color and cut. In contrast, Queenly can help offer more diverse insights with a larger range of sizes, silhouette options and different shades of the same color.
Last week, a seller sold her wedding dress with a tag that says the dark mesh on the dress is for a darker skin tone. Queenly is beta-testing a feature that lets you search medium skin tone sheer options or dark skin tone sheer options. The team says that skin-tone filters are one of the important long-term goals of their search engine.
“These are just some things that we know because we’re women, and we know how to build this product for women,” Zhou said. “As opposed to if this was a male founder, they would not know that that would even be something that women would search for.”
Currently, there are over 50,000 dresses for sale on the Queenly platform, ranging from $70 to $4,000 and going up to size 32.
With these search insights, Queenly says that it is able to sell dresses within two weeks, claiming that some users say that their same dresses spent five months on the Poshmark platform.
The diversity of dresses, from a price and range perspective, is one of the ways that Queenly stays competitive with large retail brands like Nordstrom.
“Buying and carrying inventory is very capital intensive for any startup,” Bantigue said. “As female minority founders it was hard for us to raise in the beginning.” As a result, the startup doesn’t keep a physical inventory of dresses, but instead relies on users to help get dresses from owner to buyer. If a dress is under $200, Queenly sends a prepaid shipping label to the seller to mail directly to the end buyer. If a dress is over $200, Queenly gets the dress sent directly to the company, does light dry cleaning and authentication, and then sends it right to the user.
Bringing the users into the transaction process adds a layer of risk because it depends on people to do things for the startup to be successful. The incentive here is that sellers make 80% of their sale price, and Queenly pockets the other 20%.
The startup’s biggest cost is shipping. To limit these costs, Queenly currently doesn’t accept or honor any returns, unless the dress upon arrival is not what was described in the sales post.
While this is a sensical business decision, it could be a hurdle for the startups’ clientele. Sizes are complicated and inconsistent, so the inability to return a dress might stifle a customer’s appetite to buy in the first place.
“We were actually worried about this before, but for two years now we [have not] had a complaint about sizing,” Bantigue said.
The co-founders say that many buyers are comfortable tailoring a dress post-purchase, and sellers are required to post pictures so expectations are set pre-purchase. There have been no cases of counterfeit brands to date, Bantigue said.
Queenly’s next plan is to bring on boutique stores and dress designers for Queenly partners, a program started to help small boutique businesses digitize their inventory through the Queenly platform.
“For years, the formalwear industry has been mostly offline, with only big name players being available online,” Bantigue said. “We want to change this.”
TikTok parent ByteDance joins patent troll protection group LOT Network – TechCrunch
LOT Network, the non-profit that helps businesses of all sizes and across industries defend themselves against patent trolls by creating a shared pool of patents to immunize themselves against them, today announced that TikTik parent ByteDance is joining its group.
ByteDance has acquired its fair share of patents in recent years and is itself embroiled in a patent fight with its rival Triller. That’s not what joining the LOT Network is about, though. ByteDance is joining a group of companies here that includes the likes of IBM, the Coca-Cola Company, Cisco, Lyft, Microsoft, Oracle, Target, Tencent, Tesla, VW, Ford, Waymo, Xiaomi and Zelle. In total, the group now has over 1,300 members.
As LOT CEO Ken Seddon told me, the six-year-old group had a record year in 2020, with 574 companies joining it and bringing its set of immunized patents to over 3 million, including 14% of all patents issued in the U.S.
Among the core features of LOT, which only charges members who make more than $25 million in annual revenue, is that its members aren’t losing control over the patents they add to the pool. They can still buy and trade them as before, but if they decide to sell to what the industry calls a ‘patent assertion entity,’ (PAE) that is, a patent troll, they automatically provide a free licence to that patent to every other member of the group. This essentially turns LOT into what Seddon calls a ‘flu shot ‘ against patent trolls (and one that’s free for startups).
“The conclusion that people are waking up to is, is that we’re basically like a herd, we’re herd immunization, effectively,” Seddon said. “And every time a company joins, people realize that the community of non-members shrinks by one. It’s like those that don’t have the vaccination shrinks — and they are, ‘wait a minute, that makes me a higher risk of getting sued. I’m a bigger target.’ And they’re like, ‘wait a minute, I don’t want to be the target.’”
ByteDance, he argues, is a good example for a company that can profit from membership in LOT. While you may think of patents as purely a sign of a company’s innovativeness, for corporate lawyers, they are also highly effective defense tools (that can be used aggressively as well, if needed). But it can take a small company years to build up a patent portfolio. But a fast-growing, successful company also becomes an obvious target for patent trolls.
“When you are a successful company, you naturally become a target,” Seddon said. “People become jealous and they become threatened by you. And they covet your money and your revenue and your success. One of the ways that companies can defend themselves and protect their innovation is through patents. Some companies grow so fast, they become so successful, that their revenue grows faster than they can grow their patent portfolio organically.” He cited Instacart, which acquired 250 patents from IBM earlier this month, and Airbnb, which was sued by IBM over patent infringement in early 2020 (the companies settled in December), as examples.
ByteDance, thanks to the success of TikTok, now finds itself in a situation where it, too, is likely to become a target of patent trolls. The company has started acquiring patents itself to grow its portfolio faster and now it is joining LOT to strengthen its protection there.
“[ByteDance] is being a visionary and trying to get ahead of the wave,” Seddon noted. “They are a successful global company that needs to develop a global IP strategy. Historically, PAEs were just a US problem, but now ByteDance has to worry about PAEs being an issue in China and Europe as well. By joining LOT, they protect themselves and their investments from over 3 million patents should they ever fall into the hands of a PAE.”
Lynn Wu, Director and Chief IP Counsel, Global IP and Digital Licensing Strategy at ByteDance, agrees. “Innovation is core to the culture at ByteDance, and we believe it’s important to protect our diverse technical and creative community,” she said in today’s announcement. “As champions for the fair use of IP, we encourage other companies to help us make the industry safer by joining LOT Network. If we work together, we can protect the industry from exploitation and continue advancing innovation, which is key to the growth and success of the entire community.”
There’s another reason companies are so eager to join the group now, though, and that’s because these patent assertion entities, which had faded into the background a bit in the mid- to late-2010s, may be making a comeback. The core assumption here is a bit gloomy: many companies seem to assume we’re in for an economic downturn. If we hit a recession, a lot of patent holders will start looking at their patent portfolios and start selling off some their more valuable patents in order to stay afloat. Since beggars can’t be choosers, that often means they’ll sell to a patent troll if that troll is the highest bidder. Last year, a patent troll sued Uber using a patent sold by IBM, for example (and IBM gets a bit of a bad rap for this, but, hey, it’s business).
That’s what happened after the last recession — though it typically takes a few years for the effect to be felt. Nothing in the patent world moves quickly.
Now, when LOT members sell to a troll, that troll can’t sue other LOT members over it. Take IBM, for example, which joined LOT last year.
“People give IBM a lot of grief and criticism for selling to PAEs, but at least IBM is giving everybody a chance to get a free license,” Seddon told me. “IBM joined LOT last year and what IBM is effectively doing is saying to everybody, ‘look, I joined LOT.’ And they put all of their entire patent portfolio into LOT. And they’re saying to everybody, ‘look, I have the right to sell my patents to anybody I want, and I’m going to sell it to the highest bidder. And if I sell it to a patent troll and you don’t join LOT — and if you get sued by a troll, is that my fault or your fault? Because if you join LOT, you could have gotten a free license.’”
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