TechCrunch+ Roundup: Midwest VC, CISO Advice, Facebook's Future

The Surge in Digital Health Investment

Approximately 18% of the United States’ Gross Domestic Product is allocated to healthcare expenditures. Consequently, the realm of digital health is currently experiencing unprecedented levels of investment.

This year alone, venture capital firms have directed $14.7 billion towards health technology startups. This figure slightly surpasses the $14.6 billion invested throughout the entirety of 2020.

The Intersection of Fintech and Health Tech

Considering the elevated expenses associated with healthcare within the U.S. when contrasted with other countries, the integration of fintech and health tech represents a strategically sound business approach.

Simon Wu, an investment director at Cathay Innovation, has identified specific areas of convergence that are receiving focused attention.

• The utilization of data and the ongoing shift towards value-based care models.
• Employing gamification techniques to promote consumer wellness and proactively prevent chronic diseases.
• Leveraging fintech solutions to enhance affordability and streamline processes.

Opportunities for startups within this sector are expanding due to increased funding for affordable healthcare. This expansion was spurred by the $1.9 trillion COVID-19 stimulus package enacted by the U.S. Congress earlier this year.

According to Wu, “We are still in the nascent stages of a healthcare revolution centered around digital-first approaches, but the synergy between health and fintech will serve as a crucial driver in tackling some of the most significant challenges confronting healthcare today.”

A contemporary and user-friendly financial experience has the potential to foster stronger relationships and build confidence among patients, healthcare providers, and insurance payers.

Walter Thompson

Senior Editor, TechCrunch+
@yourprotagonist

A Surge of Startups Originating in the U.S. Midwest

A significant increase in venture capital investment has fueled startup growth globally, and the American Midwest is now experiencing a notable share of this expansion.

Cities such as Denver and Chicago are demonstrating substantial growth in VC funding, surpassing their already impressive results from 2020.

These figures, as detailed in today’s edition of The Exchange by Anna Heim and Alex Wilhelm, are frequently matching or exceeding previous record levels.

The Midwest’s burgeoning startup scene is attracting increased attention from investors.

Regional Performance Highlights

Denver and Chicago are leading the charge in this Midwestern VC boom.

Their current venture capital totals are notably higher than those recorded in 2020.

This indicates a strong and sustained period of growth for startups in these regions.

• Denver: Experiencing a considerable influx of investment.
• Chicago: Demonstrating robust growth in venture capital funding.

The Exchange’s analysis provides further insight into the factors driving this trend.

OpenDoor Expands as Zillow Scales Back Home Buying Operations

The U.S. housing market experienced a significant surge in activity following the onset of the pandemic.

A competitive environment emerged, characterized by frequent overbidding and rapid transaction completions.

This trend was often supported by proptech firms, which provided sellers with a streamlined process for quickly converting their properties into capital for subsequent purchases.

However, Zillow’s stock price declined by 10% last week following an announcement that the company would suspend its home-buying activities for the remainder of the year.

In response, OpenDoor, a key competitor, asserted its continued growth trajectory, stating it “continues to scale and grow,” as detailed by Ryan Lawler.

Lawler conducted interviews with OpenDoor’s CTO, Ian Wong, and Chief Customer Officer, Megan Meyer Toolson, to gain insights into their expansion strategies amidst existing challenges in labor and supply chains.

Navigating a Dynamic Market

“The housing market has been exceptionally volatile over the past 18 months,” Wong explained. “Consequently, maintaining a competitive edge has been crucial, particularly given the substantial and rapid price increases observed.”

Price appreciation has been a key factor influencing OpenDoor’s strategies.

Achieving Alignment: How CISOs Can Secure C-Suite Support

Often, a successful security posture means a CISO goes unnoticed. However, a security incident immediately shifts all attention to the individual responsible for protection.

Maintaining robust security protocols and ensuring company-wide adoption of secure practices presents a significant challenge. This is frequently exacerbated by the exclusion of CISOs from critical executive-level discussions.

Sean McDermott, the founder and CEO of RedMonocle, suggests that CISOs should tailor their communication to resonate with executive priorities.

He emphasizes the need to articulate the business value of cybersecurity investments, framing them in terms that are relevant to each leader’s objectives.

Understanding the perspectives of other executives is paramount.

The Importance of Perspective

CISOs are inherently aware of the necessity of cybersecurity investments for their department’s success. It’s vital to translate this understanding to demonstrate the broader organizational benefits.

By adopting the viewpoints of other leaders, security professionals can effectively communicate the critical role cybersecurity plays in achieving overall business goals.

• Focus on risk mitigation and its impact on profitability.
• Highlight how security investments enable innovation and growth.
• Demonstrate alignment with regulatory compliance requirements.

Ultimately, securing C-suite buy-in requires a shift in communication strategy. CISOs must become effective advocates for security, speaking the language of business.

Lunchclub's Preemptive Term Sheet from Lightspeed Ventures

Lunchclub, a social networking platform designed to facilitate connections within particular professional sectors, experienced significant attention following the introduction of its fireside chats feature last year.

The level of interest was substantial enough that Lightspeed Ventures proactively offered a term sheet, despite the company’s founders not actively seeking funding at the time.

A recent episode of TechCrunch Live featured Lunchclub co-founder Vlad Novakovski and Lightspeed’s Nicole Quinn. They analyzed Lunchclub’s Series A pitch deck, Lightspeed’s investment strategy, and the importance of a robust investor network in securing successful funding.

The Importance of Customer Feedback

Customer feedback is paramount to our evaluation process, according to Quinn. It represents the single most crucial element I seek within a slide deck and during discussions.

The key question is whether customers genuinely embrace and value the product or service.

A Potentially Logical Progression for Facebook

The third-quarter earnings report from Snap Inc. recently triggered a decline in its stock value. However, Snap wasn't the only company affected; Apple’s implementation of iOS 15 privacy features caused disruptions to ad tracking and measurement for numerous social media and advertising platforms.

According to Alex Wilhelm, this possible instability in advertising income could be a contributing factor to Facebook’s increased attention on the metaverse.

Is Mark Zuckerberg strategically positioning the company to offset potential revenue declines through an investment in virtual reality?

Alex suggests that a new venture is needed to compensate for any shortfall. He posits that the company’s rebranding aligns well with this type of strategic initiative.

“A replacement will be required,” Alex explains. “The corporate rebrand is consistent with this kind of forward movement.”

Braze Poised to Boost New York’s Startup Ecosystem with Upcoming IPO

Braze, a New York City-based company specializing in customer engagement software, is preparing for an initial public offering. Despite not achieving unicorn status in its last funding round, the company is anticipated to surpass a $1 billion valuation upon entering the public market.

A preliminary analysis of Braze’s S-1 filing, conducted by Alex Wilhelm, indicates a solid business foundation. The company demonstrates consistent revenue growth, although expenses are currently increasing at a rate exceeding profit gains.

Customer retention is notably strong, particularly among larger enterprise clients. Braze also benefits from a robust and recurring subscription business model.

As Wilhelm succinctly puts it, “Braze exhibits healthy growth at scale, coupled with manageable net losses and transparent financial reporting, devoid of artificial profit metrics.”

The company’s financial disclosures reveal no reliance on misleading accounting practices to inflate profitability.

Key Observations from the S-1 Filing

• Braze is experiencing positive revenue trends.
• Operating costs are increasing, but are consistent with scaling a business.
• The focus on larger clients contributes to stable revenue streams.
• A subscription-based model provides predictable income.

These factors collectively suggest that Braze is well-positioned for a successful IPO and could significantly contribute to the vibrancy of New York’s startup scene.