Technology

Made Renovation, a new, San Francisco-based company, thinks it has found a profitable way to help homeowners get done something that busy general contractors in the Bay Area won&t otherwise make time for, which is bathroom remodels.

Why they typically pass on these: they have too many entire homes, or, at least, entire floors, to build for affluent regional homeowners who&ve kept the construction industry buzzing for years.

Ita problem that founders Roger Dickey, who previously co-founded Gigster, and Sagar Shah, who previously founded Quad, think they can solve through technology, naturally. Their big idea: create bathroom templates that customers can customize but whose scope and costs are generally understood, line up these customers, then hire general contractors who are willing to focus only on these bathrooms.

Itan idea thatpicking up traction with these GCs, says Dickey, who explains it this way: &General contractors generally see net margin of 3%& no matter the size of the job, owing to unforeseen hurdles, like pipes that suddenly need to be rebuilt, drains that need to be dug and materials that don&t ship on schedule.

In addition to timing issues, GCs are also often dealing with frustrated building owners who might underestimate a projectcosts, particularly in California, where construction bills often cause sticker shock.

Made Renovation sees an opportunity to make both the lives of GCs and homeowners easier. Through pre-negotiated pricing, volume and materials handling (it right now rents part of a warehouse where it receives goods), itpromising GCs a &reasonable margin& so they can not only pay their crews but live a higher quality of life themselves.

Meanwhile, per the plan, customers need only choose from the company&modern& collection, its more traditional &heritage&design or its &artisan& collection — all of which can be customized — then sit back while their long-neglected bathrooms are remade.

Whether Made Renovation can pull off its grand vision is a giant question mark. The construction industry is nothing if not messy, and in addition to convincing GCs of its merits, Made Renovation — like any marketplace company — has to strike the right balance between customer demand and supply as it gets off the ground.

In the meantime, investors clearly think it has promise. Led by Base10 Partners and with participation from Felicis Ventures, Founders Fund and some individual investors, the company has already raised $9 million in seed funding across two tranches.

Part of that capital is on display right now in San Francisco, where Made Renovation today opened its doors to customers who want to check out its design ideas and, if all goes as planned, will begin lining up their own home improvement projects. Customers simply pick a collection, Made Renovation then puts together a &mood board& of materials from that collection, sends out a 3D rendering of what to expect, then goes into build mode with its GC partners.

As for what happens when that build goes awry, Dickey says Made Renovation has it covered. Most notably, while it guarantees the work to its own customers, the GCs with whom it works guarantee their work to Made Renovation.

Dickey also notes that while the startup &may lose money on some projects,& he stresses there are caveats that customers agree to at the outset. Among these, he says, &We can&t X-ray their walls and see if they don&t have wiring up to code. We don&t cover dry rot in walls.& Technology, suggests Dickey, can only do so much.

If you&re in the Bay Area and want to check out its new storefront, iton Chestnut Street in SF, in the cityMarina district. The company hopes to perfect its model in the Bay Area, says Dickey, then expand into other regions. As for why Made Renovation decided to tackle one of the most challenging U.S. markets first, he suggests itthe best way to test its mettle. &I like the idea of starting a company here, because if we can make it work here, I think we can succeed anywhere.&

Last week, the Business of Fashion broke the news that co-founder and CEO Tyler Haney was stepping down from her role as CEO of the activewear label Outdoor Voices, citing slowing growth for the company and reporting that mismanagement was one reason for executive turnover at the top of the organization. The company soon after confirmed the news to us, saying that Haney would assume a new position as &founder& and remain on the companyboard of directors, even helping in its search for a new CEO.

None of this sat very well with Haney, apparently, who last week suggested in an email that the BoF report wasn&t entirely accurate, and now, according to the company, has &made a personal decision to resign from Outdoor Voices .& As it said in a statement sent to us yesterday, &We respect [Tyler&s] choice and wish her the best. As the founder of our company and a creative visionary, she brought Outdoor Voices to an important stage in our evolution.&

Yet it isn&t just Haney thatout the door. According to the same statement, to curb costs, the company has conducted layoffs — which we&ve learned involved around 15 corporate and field positions out of what we estimate to be roughly 300 people employed by Outdoor Voices.

Says the company: &Our focus remains on the future of Outdoor Voices and doing whatbest for our company and our team. To that end, after much consideration and exploration of numerous options, we have made the difficult decision to eliminate a small number of positions. We are grateful for the contributions of the individual team members who have been impacted. Our mission isn&t changing, but we believe that operating more dynamically in an evolving retail environment will position Outdoor Voices for long-term growth and success as we continue to build an incredible, positive community that is redefining how people think about recreation.&

Haney reportedly owns 10% of the brand, so even while shemoving on, she presumably wants to see it succeed. Indeed, according to a Slack message to staffers republished by BuzzFeed, she wrote to them: &You all know how much I value and I am incredibly proud of the brand community and team we have built together to get the world moving over the last six years,& she wrote in the message, according to BuzzFeed News. &This has been one of the most rewarding experiences of my life and I am so grateful to each and every one of you. THANK YOU. Sending all of my love. The future is bright and ityours for the taking.&

Outdoor Voices, founded in 2013, had raised $64 million in funding as of 2018, including from General Catalyst, Forerunner Ventures, GV and Drexler Ventures, the family office of Mickey Drexler, formerly of J.Crew fame.

Late last year, it raised additional funding from its investors, it confirmed to us last week, without disclosing the amount of funding. (According to that original BoF report, the company tried raising new funding late last year — presumably in part from new investors — but &had difficulty.&)

BoF also reported that the company was losing roughly $2 million monthly in 2019, with annual sales of around $40 million, numbers that Outdoor Voices has not disputed.

With Haney now completely out the door, itup to those who remain to turn things around. The big question is how.

According to a source close to the company, which began as a direct-to-consumer brand, it isn&t planning any store closures (yet). Outdoor Voices has 11 locations, including in Austin, New York and Nashville.

In the meantime, while Outdoor Voices searches for a new CEO, it has installed Cliff Moskowitz as the top boss on an interim basis. Moskowitz comes fromInterLuxe, a kind of private equity firm that works with fashion and luxury brands, where he has served as president for the last six years, according to his LinkedIn profile.

Pictured above, center: Tyler Haney, speaking at a 2018 Disrupt event.

On the heels of her conversation-driving Twitter thread on 2020venture fundraising climate, Hustle FundElizabeth Yin converted her thoughts into an op-ed for TechCrunch. In keeping with her expansive thread, we asked her to adapt her thread for a TechCrunch column and join us for an extended conversation.

What follows is an interview between Yin and myself that came after I read her piece (which you can find here), digging into venture capitalist fear, the ability of established founders to raise outsized rounds, her advice on growth and how some Series A and Series B-stage companies posting impressive revenue expansion might be nigh-unfundable in this, the new fundraising reality.

What follows is an edited, occasionally condensed transcript of our chat. Letgo!

TechCrunch: Okay, question one. You said, &VCs have gotten scared, almost to a fault.& Aside from the WeWork IPO implosion, what are the leading drivers of this recent increase in fear?

Elizabeth Yin: Taking a step back, I think we have to ask ourselves, what is even the place of venture capital in the first place? And when you think about the original venture capital industry, you know, decades ago, those VCs were taking big, big bets, like at those moments in time during the 90s, or even before that, for some of the chip companies or even Apple Computer, there were many bets happening there.

For a decade, Apple has solely relied on third-party sellers, stores and marketplaces to sell its products in India. That will begin to change this year.

At the companyannual shareholder meeting Wednesday, chief executive Tim Cook told investors that Apple will open its online store in India, the worldsecond largest smartphone market, at some point this year, and set up its first flagship brick-and-mortar store next year.

&I&m a huge believer in the opportunity in India,& said Cook. &Ita country with a vibrancy and demographics that are just unparalleled.&

TechCrunch reported last month that Apple was planning to open its online store in Q3 this year and was unlikely to be able to have its brick-and-mortar store ready in the country this year.

India, perhaps the last great growth market for American technology giants, has been a conundrum for Apple and several firms that sell premium items.

Ita big market that continues to report growth, but most people in the country can&t afford Appleproducts. In fact, the vast majority of smartphones that ship in India carry a price tag of $150 or lower, according to research firm Counterpoint.

For Apple, the other challenge has been the heavy import duty that New Delhi levies on electronic items. This has made iPhone even more expensive for people in India, as the company passes the additional cost to customers.

Apple has attempted to broaden its appeal in India by looking to reduce prices of its handsets. For years, it urged the government to provide it with some tax benefits. When those talks did not materialize, Apple moved to do something that all the Chinese phone makers have done in India: assemble smartphones locally.

New Delhi provides several incentives to companies that assemble electronic items locally. Two years into the process, Apple contractors Foxconn and Wistron are assembling a range of iPhone models in India, and that has lowered the prices for a number of models (except those in the current-generation lineup.)

These moves have already proven useful for the company. Apple shipped close to 925,000 iPhone units in India in the quarter that ended in December, research firm Canalys estimated. That figure, up 200% year-over-year, was the iPhone-makerbest year in the country to date, the research firm added.

Madhumita Chaudhary, an analyst with Canalys, said Appledecision to become more aggressive with pricing — partnering with banks to offer more incentives to customers — helped the company improve its position in a market with 99% Android smartphones.

Apple has also held discussions with content studios to bulk up its movie and TV show offerings for the Indian audience. Three years ago, for instance, it was in late stages of talks to acquire the Indian business of Eros Now for $300 million — something which has not been previously reported — with an option to expand its stake in the publicly listed global company, sources with direct knowledge of the matter told TechCrunch a few months ago.

But the deal did not materialize.

TechCrunch also reported last month that Cook may plan an India visit for the opening of the online store. Apple did not comment on that story.

Indiaeased sourcing norms for single-brand retailers last year, which paved the way for companies like Apple to open online stores before they establish a presence in the brick-and-mortar market.

When I was a founder many years ago, I felt like I heard constantly conflicting advice and opinions on raising money for my startup.

Iteasy to raise. Ithard to raise. If iteasy to raise, you should raise a LOT of money. You should raise a little money. You should try to go for a high valuation. You should raise at a &normal valuation& so it doesn&t bite you later.

It was hard to understand what was going on and what I should actually do.

Many years later, now as a VC, it turned out that most of the things you hear people say about fundraising are generally true and generally good pieces of advice. All at the same time. Even when these ideas conflict. How is that possible?

Because, like anything else, different pieces of advice are apt for different types of companies and founders. Todayfundraising landscape is particularly an interesting time of bifurcation thatworth laying out in detail.

For some founders, itnever been an easier time to raise

In the San Francisco Bay Area, if you&re a founder who has a &well-branded& resume, ita fantastic time to raise money at the earliest stages. It almost doesn&t even matter what company you&re building. You will get funding. You could be leaving Pinterest to start a company. Maybe you went to MIT and then did a 10-year stint at Google. Or maybe you were a former YC founder who is taking a second crack at a company. Or maybe you sold your last business for $10 million. If you did any of these things, ita great time.

For these founders, I&m seeing massive party rounds here in San Francisco — $3 million & $5 million seed rounds. Sometimes $10 million rounds right out of the gates! My friend, a fantastic serial entrepreneur with an exit, raised $8 million recently at $30 million+ post-money valuation with only a very early version of a product. Investors literally threw money at her and her round was oversubscribed.

SaaS is hot

And then, even if you don&t fit this profile, you can still generate a lot of heat on your fundraise. In the last few months, VCs have become very concerned about profitability. Itnot enough to be working on a fast-growth startup anymore. In part, we&ve all seen big-name startups that were once the darlings of Silicon Valley flounder in the late-stage markets because of high burn rates and being nowhere close to profitability.

And VCs have gotten quite scared. Almost to a fault.

So, I&m seeing companies at the Series A and Series B stages with 30% MoM growth that were popular before now struggle to raise their next rounds because they are not profitable. The feedback they receive is to &come back when you&re profitable or really close to it.& This mentality change has had a huge impact on marketplaces and e-commerce companies — companies that don&t have predictable repeat customers or high margins.

On the flip side, SaaS companies have become the new darlings VCs have gone gaga for. SaaS businesses have repeat customers, strong lifetime values and upsell potentials. They are capital-efficient, high-margin businesses. And if you are growing well as a differentiated (differentiated being a key word) SaaS company, you probably have many VCs knocking on your door — at all stages early and late even if you are not on the coasts.

For most founders, itstill challenging (as always) to raise money

For everyone else, after reading news stories about such large fundraises, it can be confusing to understand why their own fundraise is so challenging. Why is it so hard for me to raise money?

It turns out that fundraising is still hard for everyone else. Even in the Bay Area, if you don&t fall into the categories above, ithard. People often erroneously think that just being in San Francisco will miraculously make fundraising easier. Thatfar from true. There are certainly many people who get funded there, but there are also just many more startups in San Francisco than elsewhere. Outside the SF Bay Area, iteven harder to raise. So we have a weird Goldilocks and the Three Bears situation. Some companies are really hot. Most are really cold.

The press mostly writes about the hot deals, like companies that raise $5 million seed rounds and went through YC. After all, no one wants to read about how someonefundraising process is going horribly — thatjust not a news story that sells. So now, everyone thinks Silicon Valley is littered with gold just by reading the news. The reality is that San Francisco mostly has poop on the ground and a small number of people will find a Benjamin once in a while.

Valuations are all over the board

I&m seeing valuations well above $10 million post — even $20 million post for hot seed-stage companies. And then for companies that are cold, the valuations are where they&ve always been — largely anchored based on geography. As low as $1 million post within U.S. and Canada. And it can even be lower elsewhere globally.

So when people ask me what a fair valuation is, ita really hard question. It depends on where you are, what you&re working on and what your background is. Many people think valuations are based on a companyprogress. Thatjust not how it works. Valuations are based on supply and demand. Supply of your fundraising round. And investor demand for your fundraising round. Valuations go up when more investors are interested in investing. Thereno such thing as a &typical& valuation.

Everyonemental model will be shifting

Friends outside of Silicon Valley often ask me if I think this time VCs will favor profitable companies over fast growth.

I think the answer is VCs would love to back profitable companies with fast growth.

(That, of course, begs the question in this day and age with other debt or revenue-based financing options why such a company would raise a lot of VC money, but thatbesides the point.)

That said, I do think that in this new era we are entering in 2020, companies that focus on profitability will separate the winners from the losers in the next few years. Thriftier founders will win.

Now, herethe irony. As we go into this new age where frugality is a strength, I think that the startup journey will actually be harder for the founders who are able to raise their large seed rounds so quickly at high valuations. From past experience, I&ve found that founders who can raise easily in a first raise really struggle later on subsequent raises because they don&t know just how hard a fundraise can be. Moreover, founders who can raise large amounts in the beginning tend to be less frugal and often burn through too much cash before their progress really kicks in. In contrast, overlooked founders who have often found it challenging to raise know that they need to be frugal by default, because itunclear how hard the next fundraise will be. These founders know they need to make the business work with or without investors.

The ironic twist is that investors throw money at founders with particular resumes because they believe those founders will be the most likely to succeed with big exits. A strength can quickly turn into a weakness in this market.

My hope for all founders in 2020

My hope for all founders is that they focus on staying thrifty, watch cashflow and chip away at getting to profitability so they can own their own destiny. By focusing on customers, instead of investors, you can sell more and sell quicker. Ultimately, the end goal for a company is to be able to serve customers sustainably and effect change in our larger society.

And thatwhat I wish all startups find in 2020, so they don&t have to care about the whims and fancies of investors as they change with the times.

Read our extended interview with Elizabeth Yin (Extra Crunch membership required).

When Keith Block joined Salesforce from Oracle in 2013, the CRM giant was already a successful SaaS vendor on a billion-dollar quarterly revenue cadence. When the co-CEO announced he was stepping down yesterday, the company reported revenue of $4.9 billion for the quarter.

During his tenure, the companyrevenue more than quadrupled, earning an impressive $17.1 billion last year, and, as Block announced at the earnings call, the company he was leaving was forecasting revenue of $21 billion for FY2021.

Consider that it was not that long ago (in May 2017) that we wrote about the company reaching the $10 billion mark. Itperilously easy to get lost in these numbers, to take them for granted and think they don&t mean as much as they do. Ithard work to build a billion-dollar SaaS business, never mind $10 billion or $20 billion.

Yet Salesforce is embarking on unchartered territory for a SaaS company. Itapproaching $20 billion in revenue for a single year.

Growth through acquisition

Granted, the company keeps growing revenue by making big deals like buying MuleSoft for $6.5 billion in 2018 or Tableau for $15.7 billion in 2019, or just this week buying Vlocity for a mere $1.33 billion. That means the company spent more than $25 billion over a couple of years to buy substantial companies that will help them build their business.

Block took a moment to brag a bit about his accomplishments, including how some of those purchases performed, during his swan song call with Salesforce, calling it a capstone of his time at Salesforce:

In Q4, we grew 32% in the Americas, 28% in APAC and 47% in EMEA in constant currency. Now that includes our recent acquisitions. And at the close of FY 2020, the number of Salesforce customers spending $20 million annually grew 34%.

Think about that last number for just a minute. This a SaaS vendor with the number of customers spending $20 million growing by 34%. Block helped orchestrate that growth and worked with the executive team to help determine which companies it should be targeting.

At a press conference in 2016 at Dreamforce, he discussed Salesforceacquisition strategy. At the time, it had bought 10 of 12 companies it would end up acquiring that year. It would buy only one in 2017, before revving up again in 2018. Herewhat he said about what they look for in a company, as we reported in an article at the time:

We look at culture. Will it be a good cultural fit? Is it a good product fit? Is there talent? Is there financial value? What are the risks of assimilating the company into our company?

Whatnext for Block?

There is no word on what Block will do next beyond acting as an advisor to his former co-CEO Marc Benioff, who took time in the earnings call to thank his colleague for his time at Salesforce. As well he should.

As Ray Wang, founder and principal analyst at Constellation Research point outs, Block leaves a big hole as he steps away. &If there is no equivalent replacement, you will see a significant impact in sales. Keith brought industries and sales discipline,& Wang told TechCrunch

It will be interesting to watch what he does next, and who, if anyone, will benefit from his vast experience helping to build the most successful pure SaaS company on the planet.