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Salesforce's silly deal dies, Rubrik's IPO, and venture capital in space | TechCrunch

It’s going to be a big week! Tech earnings are coming up, the EV wars are on (and how!), and it feels like venture capital has its head in the clouds. All that adds up to one packed Equity episode!

Today, we dug into the latest markets news, including upcoming earnings, IPOs, and what impact — if any — the bitcoin halving has had on the value of the cryptocurrency.

We also had two new venture capital funds to discuss: A new vehicle from Seraphim focused on space, and TLcom Capital’s new Africa-focused fund. From there, it was time to chat EVs and what impact recent price cuts are having on the value of EV companies.

To close out, we dug into the emerging startup cluster in vector databases and search. In short, normal databases are hot garbage when it comes to the sort of queries we need for AI, but vector search is pretty good at it. Enter startups, venture capital and the biggest tech companies. May the startups win.

Equity is TechCrunch’s flagship podcast and posts every Monday, Wednesday and Friday, and you can subscribe to us on Apple Podcasts, Overcast, Spotify and all the casts.

You also can follow Equity on X and Threads, at @EquityPod.

For the full interview transcript, for those who prefer reading over listening, read on, or check out our full archive of episodes over at Simplecast.

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A $60M venture fund with a twist, and more startup-on-startup acquisitions | TechCrunch

Ah, spring has sprung here in the Northeast United States, and it’s not only flowers that are blooming. No, startup-on-startup deals are the crop this season!

Today on Equity’s startup-focused Wednesday show, we dug into the Multiverse-Searchlight deal, which reminded us of the Wonderschool-Early Day transaction that we covered on the show a few weeks ago.

We also talked about the latest Guesty round, which was both large and interesting; the Monad Labs transaction that led to us trying to explain the difference between L1 and L2 blockchains; and Cyera’s quick recent mega-round. Startup Land is feeling quite busy and high-dollar again, and that’s a lot of fun!

We wrapped up the show with a cool discussion of this new venture capital fund that’s targeting growth-rounds in Africa.

Equity will be back on Friday to review the week’s headlines, so stay tuned!

Equity is TechCrunch’s flagship podcast and posts every Monday, Wednesday and Friday, and you can subscribe to us on Apple Podcasts, Overcast, Spotify and all the casts.

You also can follow Equity on X and Threads, at @EquityPod.

For the full interview transcript, for those who prefer reading over listening, read on, or check out our full archive of episodes over at Simplecast.

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Screen Skinz raises $1.5 million seed to create custom screen protectors | TechCrunch

Clay Canning had an idea while in high school: smartphone screen protectors that featured logos, right on the screen.

He later connected with Rashaun Brown, who was working in sports and licensing at the time, and the idea for Screen Skinz was born.

“We both understood the opportunity and complemented each other’s weakness,” Brown, the company’s CEO, told TechCrunch. “In December 2022, I resigned from my job to pursue building Screen Skinz with Clay full time.”

Now, Screen Skinz can officially announce the closing of a $1.5 million seed round led by South Loop Ventures and Abo Ventures.

The company produces custom, patent-pending phone screen protectors that feature personalized logos or slogans that are visible when the phone screen is black and then disappear when the phone is in use. Customers can create their own designs or pick from the company’s existing catalog.

Phone accessories have always been a massive market, with the global screen protector market alone worth an estimated $51 billion as of 2023.

Screen Skinz already holds creative licenses with various big-name brands, working with organizations such as the NFL and NBA and entertainment brands like Marvel and the WWE.

Example of Screen Skinz screen protector. Image Credits: Screen Skinz

The latest fundraise allowed Screen Skinz to move manufacturing from Asia to the U.S., allowing it to more easily control its supply chain.

The company is looking to double down on the screen protection industry, and though it currently only focuses on smartphones, there is a plan to one day expand to making screen protectors for tablets. “With our IP, we can essentially develop screen protection for any mobile device that has use for a screen protector and features a backlit display,” Brown said.

Brown described Screen Skinz’s fundraising process as “different,” stating that it took the company about a year to close its seed round. Brown and Canning intentionally took their time, as they also sought to refine their supply chain and prepare inventory for a mass go-to-market. “We wanted to do the work of selling a realistic vision to investors,” Brown said.

Screen Skinz met its co-lead investor, Abo Ventures, through Brown’s network from when he worked at Texas A&M. They then met South Loop Ventures while participating in the DivInc Sports Tech Accelerator in Houston.

Michelle Micone, the former SVP of consumer products at NFL and Hasbro, said she liked that the team had a unique concept and also figured out the manufacturing and logistics of producing it. “Customers want a high level of personalization, but it’s really, really hard to deliver on time and at a reasonable price. Screen Skinz has that formula, and I wanted to be part of it,” she told TechCrunch.

Other investors in the round include Brent Montgomery, the CEO of Wheelhouse CEO, alongside Wayne Pfeffer and Brendan O’Donnel, former directors of worldwide mobile accessory products at Apple. Pfeffer, in particular, was also sold on the idea of making screen protectors more personalizable. “For years, personalizing your device was limited to the case,” he told TechCrunch. “When I saw the evolution to the front on a screen protector, I was sold!

Brown said the company could look to raise as early as next year again. Screen Skinz next has some partnerships lined up and is focused on customer acquisition and deepening licensing relationships.

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Avendus, KKR-backed top India venture advisor, in talks to raise $300 million for new fund | TechCrunch

Avendus, India’s leading investment bank for venture deals, is looking to raise about $300 million for its private equity unit, according to three sources familiar with the matter.

The Mumbai-based firm, backed by U.S. private equity giant KKR, has established itself as the top financial advisor in India, working with popular growth-stage startups including Zepto, Lenskart, Xpressbees, CaratLane and Atomberg on their funding rounds last year.

With its third private equity fund, Avendus plans to write larger checks more frequently, one of the sources said. The firm raised its second fund, amounting to around $185 million, in 2021. Its maiden fund was $50 million in size.

The sources requested anonymity to discuss private matters. An Avendus spokesperson declined to comment.

Avendus first gained prominence as India’s startup ecosystem first started to take shape, capitalizing on the fact that many of its well-known rivals — including Goldman Sachs, Morgan Stanley and JP Morgan — initially paid less attention to the Indian market. That was partly due to deal sizes in the early days: Typically they were less than $30 million, not substantial enough to generate significant fees, making it less attractive for many banner names to engage.

But as the Indian startup ecosystem flourished in the past decade, becoming the third-largest in the world, it has attracted global giants, including SoftBank, Tiger Global and General Atlantic, as well as sovereign wealth funds like Temasek, GIC, ADIA, Khazanah, PIB and Mubadala, which have collectively poured tens of billions of dollars into startups small and large in India.

Avendus employs more than 150 bankers and was the top financial advisor in India last year. It provided services in over 30 deals, including merger and acquisition transactions, according to Venture Intelligence, a private market insight platform.

In the past decade, similar to financial advisors in other regions, Avendus has diversified its offerings, venturing into wealth management, credit financing and private equity. Last year, the firm also expanded its financial advisory services to the Southeast Asian region.

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Evolution Equity Partners raises $1.1B for new cybersecurity and AI fund | TechCrunch

Cybersecurity has had a rough go of it lately, with investment in the sector dropping a precipitous 40% compared to the year prior. But there’s promising early — if preliminary — signs of a recovery.

The vast majority of chief information security officers reported higher budgets for 2024, according to the cybersecurity-focused VC firm NightDragon. And, despite lower overall investment in the cybersecurity industry in Q1 2024, the number of deals increased compared to Q1 2023, per recruitment outfit Pinpoint.

It’s against this backdrop that Evolution Equity Partners, a growth capital investment firm based in NYC, today launched a $1.1 billion cybersecurity and AI fund, the third such fund in Evolution’s history.

The fund — Evolution Technology Fund III — was oversubscribed, with participation from existing and new endowments, sovereign investors, insurance companies, foundations, fund of funds, family offices and angels. It’ll pursue investments ranging from $20 million to $150 million in cybersecurity firms and startups leveraging machine learning and AI to build “market-leading” platforms, Richard Seewald, managing partner at Evolution and one of the firm’s founders, told TechCrunch.

“The Evolution Technology Fund III has already backed fifteen leading cybersecurity companies, initiating its investment period over 12 months ago,” Seewald said. “We expect to invest in a portfolio of up to thirty companies in the present fund. We’ll work with management teams and founders, providing them with support and insight in areas including sales and marketing, product technology, human capital, M&A and business development, really enabling them to excel.”

With Evolution Technology Fund III, Evolution’s strategy will be to reserve ~75% of the $1.1 billion total for early-growth-stage companies, ~15% for later-growth-stage startups and ~10% for earlier-stage VC tranches, with investments to be made not only in North America but in Europe and Israel — a hotspot for security tech.

“Our strategy is to invest that fund in a diversified portfolio across the different stages of maturity,” Seewald said. “We believe that provides private markets investors with diversified exposure to cybersecurity opportunities.”

ESG will be another factor, according to Seewald.

“Evolution is committed to integrating material environmental, social and governance (ESG) criteria in its investment processes and ownership practices,” he said. “We actively engage with our portfolio companies creating diverse boards and leadership teams bringing varied perspectives to decision-making processes, reducing the risk of groupthink and enhancing accountability.”

We’ll hold them to it.

Evolution, which has offices in Palo Alto, London and Zurich in addition to New York, was founded in 2008 by Seewald and Dennis Smith, who met while working together at the cybersecurity giant AVG (now owned by Avast). J.R. Smith and Karel Obluk — the former CEO and chief scientist at AVG, respectively — joined Seewald and Smith to start Evolution after AVG went public.

Evolution’s 30-person teams manages around $2 billion in assets and has backed 60 companies to date; its previous fund was $400 million. Among some of the firm’s more successful bets are Arctic Wolf (which is planning for an IPO), Talon Cyber (which is reportedly in negotiations with Palo Alto Networks for an M&A deal), Snyk, Aqua Security, SecurityScorecard and Carbon Black.

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Sam Altman gives up control of OpenAI Startup Fund, resolving unusual corporate venture structure | TechCrunch

OpenAI CEO Sam Altman has transferred formal control of the eponymously firm’s named corporate venture fund to Ian Hathaway, OpenAI confirmed to TechCrunch. 

The OpenAI Startup Fund, launched in 2021, was initially set up with Altman as its named controller. The arrangement could have presented a major issue to the company if he had not been reinstated as OpenAI’s CEO following his brief ouster in November. The fund’s initial GP structure was intended as a temporary arrangement, and Altman made no personal investment, nor did he have any financial interest, a spokesperson explained. 

The news was earlier reported by Axios.

Hathaway joined OpenAI in 2021 and played a key role managing the Startup Fund, leading investments in Ambience Healthcare, Cursor, Harvey and Speak. He was previously an investor with Haystack, according to his LinkedIn profile.

Last year, the fund had $175 million in commitments, and now holds $325 million in gross net asset value, according to an SEC filing. Investors included Microsoft and other external backers. The unit invests in early-stage AI-driven companies in fields like healthcare, law and education.

The Startup Fund has backed at least 16 other startups, according to PitchBook data. They include Descript, a collaborative editing platform valued at $553 million last year, and Ghost Autonomy, which develops software for autonomous driving.

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SaaS entrepreneur Raisinghani's new AI venture nabs $5.5M to boost sales efficiency | TechCrunch

SiftHub, an AI startup founded by the former CTO and co-founder of LogiNext, Manisha Raisinghani, has raised $5.5 million in seed funding to build out its AI assistant, which is aimed at helping sales and presales teams focus more on building relationships and less on grunt work.

The company’s generative AI assistant is targeting the bulk of non-sales activity that sales personnel have to deal with, like entering data into CRM systems, filing requests for proposals (RFPs), researching customer info and building presentation decks. SiftHub integrates with sources of information like Google Drive, Slack, Zendesk, HubSpot and Salesforce, and sales and presales teams can simply talk to its AI assistant to complete infosec questionnaires, vendor assessment forms, and file RFPs and request for information (RFI) forms. The assistant is available through Slack and Microsoft Teams as a bot, as a Microsoft add-in, a Chrome plugin, and a web app, and has support for 10 languages, including Spanish and German.

“When salespeople are selling to businesses, they should be spending more time building relationships, which has a direct impact on the top line,” Raisinghani told TechCrunch. “When you don’t have to hire so many presales people to do the deep technical work for you, you’re saving time and that impacts your bottom line,” she told TechCrunch.

SiftHub’s AI assistant is built on open source large language models (LLMs) and is supported by retrieval augmented generation (RAG) technology, which uses additional data sources to fine-tune the quality of content generated by AI. Using RAG on top of LLMs helps SiftHub limit hallucinations — a common issue with generative AI, where the system generates incorrect or misleading results. The startup also uses cross-encoders to prevent its platform from picking the wrong information from a given knowledge base. Cross-encoders analyze two queries simultaneously, instead of looking at each separately, to deliver more accurate answers.

“We would rather not give an answer rather than give the wrong answer,” Raisinghani said. The founder added that SiftHub’s system might give 5% fewer answers, but she is confident that at least 75% of the AI’s responses will be correct.

SiftHub also uses a “smart search algorithm” that considers the recency of documents or knowledge sources to surface relevant recent information, Raisinghani said.

After spending over 10 years at LogiNext, Raisinghani saw the need for a solution like SiftHub when she was advising blockchain startup Polygon Labs in 2022 on its enterprise go-to-market strategy. She realized that finding information about Polygon was an arduous task because data was not available through a single channel, as it was stored across multiple platforms. Sales and presales people need a lot of info about their company and its business operations when they reach out to their potential customers. Finding that info through different sources, including the company’s Slack channels and other unorganized documentation, is a cumbersome task that can take a lot of time.

She then spoke with about 200 users to understand the problem statement better and categorize their responses into different use cases. All that eventually brought her focus to sales and presales teams.

“Sales teams have a shadow team — a presales team or solutions engineers — and they are usually the unsung heroes of the organization. They do a lot of the technical work, right from filing RFPs (request for proposals) to finding answers to customers’ questions,” she explained. “If you’re saving time for both sales and presales, salespeople will automatically be able to spend more time on relationship building.”

The market for AI startups focusing on sales and presales operations has gained traction in the past year since generative AI took off. Companies across the spectrum, from giants like Salesforce, Zoom and Google, to startups like Quilt,, and Darwin AI, have built GenAI-powered tools to let salespeople simplify a wide array of tasks like filing routine forms, generating drafts for emails, filling up CRMs with publicly available information on customers, generating copy, getting suggestions on which prospective customer is likely to buy or churn, and much more.

However, Raisinghani believes that SiftHub has a distinctive edge, as it sits deeper in customers’ business workflows and can solve the entire sales response problem — unlike a “wrapper around OpenAI or any other LLM.”

The startup is also banking on Raisinghani’s own experience in scaling startups and its team of 15, which includes some ex-entrepreneurs. “When you’re going to give at least 10 years of your life to something, you want to make sure that you are going to be excited and you truly believe in it for the next decade,” she said. The company is headquartered in the U.S. and has an R&D team in Mumbai, India.

The funding will be used to hire more people in product R&D, enhance the product, and help the company go to market. The seed round was co-led by Matrix Partners India and Blume Ventures, with participation from Neon Fund as well as executives and founders from Superhuman, Cloudflare, DevRev, Razorpay and SuperOps.

SiftHub is initially targeting B2B companies selling to mid-market and enterprise customers with revenues between $50 million and $500 million. The AI assistant is currently available to a small group of users for early feedback, and the startup is planning a “full-blown launch” later this year.

“Buyers have become smarter and engage sales later in the buying journey, with more advanced questions. As a result, the expectation from sales teams has changed — they need to know advanced product, technical, and legal information to get the win. Sales and presales teams lack the necessary tooling to handle this new selling environment. We are excited by SiftHub’s vision to use AI to manage product knowledge so that sales can focus on relationships,” said Pranay Desai, a partner at Matrix Partners India, in a prepared statement.

“SiftHub is Manisha’s second venture in the SaaS space. Armed with over a decade of entrepreneurial experience and an impressive track record, Manisha and her team are building a game-changing AI platform to transform the entire sales and presales process. We are excited to back the SiftHub team and be a part of their ambitious journey,” said Sanjay Nath, a partner at Blume Ventures.

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The UK threw a splashy event in New York this week to woo more American VCs TechCrunch |

A 3D hologram, dubbed the Ever-Changing Statue, will be on display at the Rise by Barclays workspace in New York until April 4.

Sipping wine and nibbling burrata, a group of government officials, reporters and founders gathered at its unveiling, watching as the hologram flickered a display that alternated through images of some of the U.K.’s top unicorn founders like Tessa Clarke, the co-founder of food waste startup Olio, and Alexander and Oliver Kent-Braham, founders of insurance startup Marshmallow.

The display celebrated the U.K. as the third $1 trillion tech economy, preceded only by the U.S. and China.

While Brexit has had its economic impacts, U.K. officials want American VCs to know that since 2020, its tech ecosystem has seen healthy development. Dealroom data shows that U.K. startups raised $31 billion in venture capital in 2022 and $41 billion in 2021. Last year, the U.K. raised $21 billion in venture capital — though that is a dip, with the market retraction in mind, it is still more than what France and Germany raised combined. It’s also still more than the $18 billion the U.K. raised in 2019 and the $12 billion raised in 2018.

It seems that even Black founders, a group historically struggling to secure funding, are seeing progress. Between 2009 and 2019, only 38 U.K. Black founders raised venture capital funding—that number now stands at 80, according to an updated report by Extend Ventures.

The U.K. says it’s home to more than 160 unicorns and 12 decacorns (companies worth more than $10 billion). Fintech is a particularly stand-out area, including Monzo, Revolut and Wise. With the rise of DeepMind and Benevolent AI, it’s also becoming the hub for artificial intelligence. And there was more than a little hushed pride from those at the event that it’s also the home of OnlyFans.

The hologram — and the British government officials — are selling potential as the main draw to the U.K., a sales pitch clearly designed to boost a sluggish economy.

The hologram featured some of the top founders and CEOs in the U.K. Image Credits: GREAT

Although talent from other European countries might have slowed in the U.K., there is still an influx of immigration from other countries, meaning an inrush of ideas, hires and, once again, potential. Other cities in the country have also flourished, such as Manchester and Cambridge.

Rodney Appiah, the co-founder of the U.K.-based venture firm Cornerstone Ventures, spoke to TechCrunch about some of the holes that are waiting to be filled in the U.K. He said there is room for more funds and accelerator programs, alongside a desire to have more senior talent that can help companies move from early stage to growth.

Paul Taylor, the CEO of Thought Machine and one of the people depicted on the hologram, echoed the need for more venture funds dedicated to the region, saying that U.K. companies typically have to obtain foreign investors when they grow.

“The U.K. tech ecosystem has made significant strides, but work remains to reach the scale and influence of Silicon Valley,” Taylor told TechCrunch.

At the same time, Appiah said the ecosystem is dealing with the rise of more emerging managers, micro funds and, finally, access to more risk capital. “We are also seeing more VC involvement from cash-rich [corporations] and institutional investors seeking to diversify.”

Having the hologram in New York is clearly an attempt to grab the attention of American startups and investors. A 2023 report by HSBC Innovation Banking — previously SVB — showed that U.S. investors were the largest source of funding for British startups last year. The Times reported that more American tech entrepreneurs are buying up real estate in London, while NEA, Bessemer and a16z have all opened offices there in the past few years.

On the other hand, not all investors have faired well with their attempts to invest out of London. Two high-profile investors, Omers and Coatue, recently significantly downgraded or shut down their European outpost operations based in London.

However, perhaps the biggest draw for Americans is that the British seem willing to work with investors and founders to shape the tech ecosystem. In fact, friendly regulation was one reason a16z opened its crypto office in London, as the U.S. was looking to impose regulations on the industry.

Prime Minister Rishi Sunak — who created the Unicorn Kingdom initiative — unveiled a plan last year to invest £370 million (around $468 million) to support the country’s tech ambitions. Last summer, the British government announced an agreement with the country’s nine largest pension funds to start investing assets in startups, a move the government predicted could unlock £50 billion in capital if the rest of the pension industry decided to invest in startups, too.

It’s no wonder, then, that the hologram, sparkling in red, white and blue, was sold as a sign of the future. “Creating a two-way road between the USA and U.K. is a win for both countries,” Clarke said.

The statue, created by the British company HYPERVSN, will be on display until April 4.

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Matter Venture Partners raises $300M first fund to invest in 'hard tech' | TechCrunch

Wen Hsieh and Haomiao Huang, both Kleiner Perkins investors, left the firm in 2023 to start their own venture capital fund called Matter Venture Partners. The firm had backing from Kleiner and Taiwanese chipmaker TSMC.

Hsieh was a longtime KPer, having been there for 17 years; Huang had been there four years. With a passion for what they call “hard tech,” Hsieh invested in companies like microLED display technology company LuxVue, acquired by Apple; Amprius, which makes high-energy density lithium-ion batteries; drone maker DJI; and 3D printing company Desktop Metal, which went public via SPAC in 2020. Huang and Hsieh co-led investments in companies like the robotics company Dexterity and the CT scanning company Lumafield.

On Thursday, they announced the closing of a $300 million inaugural fund. Hsieh told TechCrunch it’s considered one of the largest “first funds” raised in 2023. The median venture fund raised that year was around $37 million, according to a PitchBook-NVCA Venture Monitor report.

Matter Venture Partners was initially going for a $200 million fund, and Hsieh acknowledged that “it was a tough time for everybody” — startups and venture capitalists alike — to raise money in 2023.

“We had gone into it anticipating such difficulty and had very modest expectations,” Hsieh said. “But to our surprise, it went really well for us. We closed $300 million last year, in its entirety, and were significantly oversubscribed.”

Knowing when to say “when”

Figuring out the best amount to close the fund is a bit like being “Goldilocks,” Hsieh said. Matter Venture Partners invests at the large seed rounds, Series A and Series B.

Wen Hsieh, co-founder of Matter Venture Partners. Image Credits: Matter Venture Partners

If a fund is undercapitalized, it may not be able to be competitive in deals or won’t be able to support portfolio companies across several rounds, he explained. Overcapitalized and it may have too much money to deploy within a two- or three-year lifetime fund cycle. That could also lead to writing too many checks or sizes of checks that are too big for the appropriate fundraising.

He believes that Matter Venture Partners’ focus on hard tech was the reason for the oversubscription. “The world has realized that most if not many of the foundational technologies and trends of our society today are built on hard tech,” he said. “That really puts wind behind ourselves. We came out successful and unscathed in a very positive way, and we’re very lucky to have raised money at a tough time.”

In addition to Kleiner LP and TSMC, individuals, entrepreneurs and family offices also back the fund. Hsieh, Huang and operating partner Mel Tang are also LPs in the fund.

Leveraging operating partners

Matter Venture Partners provides a unique aspect of having operating partners, which Hsieh said is typically something only larger firms have. One is Mel Tang, former CFO of video doorbell company Ring, which was later acquired by Amazon.

Tang has experience in operations, supply chain management and manufacturing unit economics, and Hsieh believes having expertise like this early-on in the life of a hard tech startup is a good value-add.

In terms of how Matter Venture Partners works with founders, the partners say they pride themselves on being company builders, but not at the expense of getting in the way of founders, Hsieh said. They like to be coaches, partners and jump in, all where appropriate.

All about hard tech

Haomiao Huang, co-founder of Matter Venture Partners. Image Credits: Matter Venture Partners

They put “hard tech” into six buckets: semiconductors everywhere, robotization due to blue-collar labor shortage, generative AI, manufacturing on-shoring and friend-shoring, energy building blocks and life science automation.

“The common theme around these six areas is that we like to invest in the next ‘picks and shovels’ for all six of these trends,” Hsieh said. “There are many gold rushes ongoing, but we would like to provide the ‘picks and shovels’ in every case. We like to fund them and entrepreneurs that contribute to these new innovations.”

So far, Matter Venture Partners has invested in six companies not made public yet. It also doubled down on a few that came from the pair’s Kleiner Perkins days, including Ambiq Micro, a company Hsieh described as “a key player in edge AI,” which is a concept of more easily running AI workloads.

“It’s all about low power,” he said. “The big talk is about how much energy does it consume for inference, or how much energy for training? Ambiq is a world leader in making ultra-low-powered chips. They’ve dominated wearables, and now they’re parlaying that into edge AI applications. The product is having a huge impact, and we’re riding a new wave of energy-efficient AI awareness.”

Ultimately, Matter Venture Partners will invest in between 15 and 20 companies with the new fund, Hsieh said.

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Carta, the cap table management outfit, is accused of unethical tactics by a customer after it tries brokering a deal for the startup's shares without consent | TechCrunch

Carta, an ambitious 12-year-old Silicon Valley outfit, has gone through numerous iterations over time, originally inviting investors, startups, and employees to use its software to manage their cap tables and later aspiring to evolve into a “private stock market for companies,” as founder Henry Ward once told TechCrunch. As he explained back in 2019: “Now that you have this network of companies and investors all on one platform and the ability to transfer securities, you can build liquidity on top of it.”

The strategy boosted Carta’s valuation in recent years. But a prominent customer is now accusing Carta of misusing sensitive information that startups entrust to the company in pursuit of its own ambitions. The claim is raising wider questions about how Carta operates, even as Carta argues the incident was isolated.

On Friday, Finnish CEO Karri Saarinen posted on LinkedIn that he had received surprising news about Linear – the project management software company he co-founded four years ago and that raised $35 million in funding this fall. Linear is a Carta customer, and according to Saarinen, earlier on Friday, without his consent or knowledge, a representative from Carta reached out to an angel investor in Linear, telling the individual that Carta had a “firm buy order” from either an individual or an institution — the Carta representative didn’t say —  at a specific price, though this buyer might be willing to “flex higher,” said the Carta employee in an email.

As it turns out, that angel investor is related to Saarinen and immediately alerted him to the email outreach. Clearly feeling betrayed by Carta, Saarinen wrote on LinkedIn, “This might be the end of Carta as the trusted platform for startups. As a founder it feels kind shitty that Carta, who I trust to manage our cap table, is now doing cold outreach to our angel investors about selling Linear shares to their non disclosed buyers.” Continued Saarinen, “They never contacted us (their customer) about starting an order book for Linear shares. The investor they reached out to is a family member whose investment we never published anywhere. We and they never opted in to any kind of secondary sales. Yet Carta Liquidity found their email and knew that they owned Linear shares.”

The post took on a life of its own – thousands have “liked” it and it has drawn nearly 800 comments – before Ward waded into the conversation to apologize. Ward also said the email to the Linear investor was not something that Carta condoned.  Wrote Ward: “Hii Karri and everyone, I’m appalled that this happened. We are still investigating but it appears that Friday morning an employee violated our internal procedures and went out of bounds reaching out to customers they shouldn’t have. This impacted Karri’s company and two other companies. We have contacted the other two companies and are continuing to investigate. If you have any other information please reach out to me directly at [email protected] to let me know while we continue our investigation.”

TechCrunch reached out to Ward for more information yesterday; he has not responded.

Saarinen meanwhile continued to post on LinkedIn that the incident seemed anything but isolated. “So far I’ve heard from 4 of our investors who were approached with the same email. All of them were the early pre-seed investors. Also heard from 2 companies who had this happen to them. One of them a prominent AI company.”

He further posted on X that, “I’ve learned from multiple companies that this has been going on for months or even years where investors or employees of private companies are solicited by Carta employees to put their shares on sale. These people haven’t opted in to this and companies haven’t approved these sales.”

Asked for comment, Saarinen told TechCrunch via email last night that, “I’m retiring from this fight, this already has consumed too much of my time . . . My trust in Carta hasn’t recovered after talking to the CEO.” Added Saarinen, “I hope Carta takes action on these issues but likely we will be moving on to another service as we no longer have confidence in them.”

TechCrunch also reached out to numerous Carta board members to ask about the practice.

One of them, venture capitalist Matt Murphy of Menlo Ventures, echoed what Ward told Saarinen on Linkedin, writing to TechCrunch via email that: “Carta does not use customer cap table data. The cap table business and the CartaX (private stock liquidity) business are separate business units with separate teams and leadership. There was a breach of this protocol from an employee on the CartaX team that has been dealt with and which we learned from.”

Meanwhile, startup founders are following the conversation and comparing notes.

As another founder told TechCrunch this morning, “I am a customer of Carta. I just learned about all of the weird stuff going on with them going behind companies’ backs to offer secondaries. I haven’t been affected by it, but I would be furious if I learned they were peddling shares in my company without my knowledge. I am definitely considering switching platforms.”

Companies ultimately have to approve transactions relating to secondary sales, notes Murphy. In a market where few companies are getting acquired or going public, equity shareholders are more amenable than perhaps management teams would like to selling their shares. Writes Murphy, “Almost every board meeting I go to, some employee is selling stock and we have to allow, exercise our ROFR and sometimes block if we can.”

Still, he suggests, Carta’s process is fairly straightforward — and ethical. “With Carta, they have a tender product where they coordinate directly with the company to help a process they would run. Then in the case of CartaX marketplace, we verify a buyer and confirm their demand, and they we use public sources of data like Crunchbase and Pitchbook to find potential supply to match the buyer.”

For Carta, the unflattering attention it is receiving owing to its dealings with Linear is the latest in a stream of bad publicity. Last October, Ward even emailed customers, telling them that if they are concerned about “negative press” tied to the outfit, they should read a Medium post of his. The move appeared only to call more attention to the many reported problems plaguing the company.

Carta kicked off 2023 by suing its former CTO. But it has been embroiled in numerous other lawsuits over the years.  In 2020, the company’s former VP of marketing sued Carta, accusing the outfit of gender discrimination, retaliation, wrongful termination and of violating the California Equal Pay Act. (TechCrunch featured that case here.) Soon after, four employees spoke on the record with The New York Times, telling the outlet that when they voiced concerns about the way the company is run, they were sidelined, demoted or given pay cuts.

The company has also been accused of poor customer service. TechCrunch year interviewed numerous Carta customers who expressed dissatisfaction with the company and its representatives. One, a fund manager who is in the midst of transitioning off the platform currently, told TC that his team had “four different account managers in the less than a two-year engagement at Carta; it certainly didn’t help with continuity and understanding of our fund and needs.”

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