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Don’t Drive Off the Cliff: Use Your Cash to Your Advantage
Spencer Rascoff
andSpencer Rascoff serves as executive chairman of dot.LA. He is an entrepreneur and company leader who co-founded Zillow, Hotwire, dot.LA, Pacaso and Supernova, and who served as Zillow's CEO for a decade. During Spencer's time as CEO, Zillow won dozens of "best places to work" awards as it grew to over 4,500 employees, $3 billion in revenue, and $10 billion in market capitalization. Prior to Zillow, Spencer co-founded and was VP Corporate Development of Hotwire, which was sold to Expedia for $685 million in 2003. Through his startup studio and venture capital firm, 75 & Sunny, Spencer is an active angel investor in over 100 companies and is incubating several more.
Wil Chockley
WIl Chockley is a partner at 75 & Sunny, where he evaluates potential investment opportunities across sectors and works with founders to build their strategy and execute on their vision.
What’s the best way to land a plane on a short runway? Maintain control of your descent. The same logic holds for early- to mid-stage startups that are facing harsh financial conditions in 2023. Research from the end of last year found that 81% of early stage start-ups have less than 12 months of runway left. Yikes. Pair that with the current post-SVB venture investment freeze, and it paints a stark picture of what’s ahead.
A huge number of companies are going to be scrambling to find the emergency exit this year, as macro conditions make growth more challenging, and a dearth of venture capital means you need to move more quickly than ever.
If you’ve been grinding on your startup for years and haven’t found product/market fit, you have a critical decision to make now that capital is hard to come by.
You can keep doing what you’ve been doing, pivoting and hoping to find product/market fit. Eventually you’ll need a new source of capital to keep the lights on or a strategic acquirer when you’re at the end of your runway. You could also shut down the company and return cash to your shareholders. There is another option, though. You can flip your mindset and think like an investor to give yourself a more graceful landing.
Imagine, for example, a Series B stage startup with $20 million of cash, but burning $2 million a month. The company has 10 months of runway, is not likely to be able to raise a Series C, and does not yet have a path to profitability with its current business model. Instead of continuing with the current path and driving off the cliff when the 10 months are up, the company might consider cutting burn to almost zero, and sitting with its $20 million of cash.
In this hypothetical scenario, the startup could then try to find another company to merge with, providing its intellectual property, its user base, whatever team members remain, and most importantly its cash, as consideration (and leverage) in the merger. The $20 million of cash is something other companies want desperately in today’s market. Rather than driving off a cliff into a complete winddown or a small acquihire, this company could end up owning 25% of some other company, providing a clear path forward and a real chance at redefined success.
If you find resonance in this cautionary tale, remember: there are a lot of great potential acquirers out there who have found product/market fit and are scaling rapidly, but still can’t raise a venture round in today’s economic climate. These companies are looking for cash wherever they can find it. Said another way, they might have product/market fit but not enough cash, and you have cash but no product/market fit. Seems like a decent marriage, right?
If you’re a founder with cash on your balance sheet but no path forward, you have a unique opportunity to think of yourself as a venture capitalist and “invest” your company’s cash and equity into a new business.
So how do you do this? The key is to move fast and preserve your cash.
- Bring in the board. Have a frank discussion with your board and lead investors to decide if it’s time to call it quits. Most investors have seen a number of companies wind down or go through M&A exits, so they can be a great sounding board as you chart a path forward. They can also be great leads for potential acquirers and facilitate introductions.
- Slim down. In order to preserve your greatest asset—your cash—you unfortunately need to reduce burn everywhere you can including marketing, software spend, and headcount. Ideally, your ongoing costs should be minimal.
- Make a list. Think of all the companies in your space who could see acquiring your company as a good strategic move. Who do you respect most in your industry? Are they in a position to grow, and could this move turbocharge that growth? Who might benefit from the expertise on your team?
- Start the conversation. Once you’ve brainstormed, mine your contacts for warm intros and begin talking about your collective options. The M&A process can take a long time, so the sooner you get moving, the better.
- Negotiate terms and make your decision. Once you nail down the options, it’s up to you to decide whether or not a deal is the right move. Hopefully you can work with your acquirer and your investor base to find a good outcome for everyone involved.
If your startup is one of the many with cash in the bank but without a clear path to a next financing round, don’t panic. Now could be the chance to reimagine your best case scenario—invest your cash to find a new home for your company.
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Spencer Rascoff
Spencer Rascoff serves as executive chairman of dot.LA. He is an entrepreneur and company leader who co-founded Zillow, Hotwire, dot.LA, Pacaso and Supernova, and who served as Zillow's CEO for a decade. During Spencer's time as CEO, Zillow won dozens of "best places to work" awards as it grew to over 4,500 employees, $3 billion in revenue, and $10 billion in market capitalization. Prior to Zillow, Spencer co-founded and was VP Corporate Development of Hotwire, which was sold to Expedia for $685 million in 2003. Through his startup studio and venture capital firm, 75 & Sunny, Spencer is an active angel investor in over 100 companies and is incubating several more.
Wil Chockley
WIl Chockley is a partner at 75 & Sunny, where he evaluates potential investment opportunities across sectors and works with founders to build their strategy and execute on their vision.
https://twitter.com/spencerrascoff
https://www.linkedin.com/in/spencerrascoff/
admin@dot.la
E-Bike Manufacturers Are Rethinking Los Angeles. Here's What They See
07:19 AM | March 22, 2021
In January 2020, just before the pandemic hit, Irvine-based electric bike manufacturer Super73 had just launched its newest bike models — the S2, R, and RX — and business was surging.
Then the pandemic hit.
"There was a day in March when [Gov. Gavin Newsom] declared a state of emergency, everything shut down, and we saw our sales drop quite a bit. We were like, 'uhhh, buckle up, what's coming?'" said co-founder and Chief Marketing Officer Michael Cannavo.
The prospect of customers sheltering at home and avoiding the outdoors and other people seemed like a death knell. In April, Lime laid off 13% of its staff, saying it had been forced to shut down 99% of its markets to support cities' social distancing measures.
"Then, the rest of the year, every single day was a record-breaking day," Cannavo said. "The biggest issue of 2020 was just trying to keep up with the demand."
As Los Angeles and the world emerges from the worst days of the pandemic, interest in electric bikes is surging, with several Southern California e-bike startups recently announcing new funding and expansions. The surge derives from several trends that emerged during the pandemic, including a rise in the popularity of bikes, a move toward clean transportation technology and the boom in ecommerce and deliveries.
Image courtesy of Super73
E-Bikes' Rebirth
Earlier this month, Lime revealed it would spend $50 million on a large e-bike expansion, upgrading and quadrupling its LimeBike fleet, and adding service to 25 new cities in 2021.
The company raised $170 million in an investment round led by Uber in May, and has acquired Uber's bike-share system, Jump.
Lime, which launched as LimeBike in 2017, initially only offered e-bikes, but changed its name and pivoted to focus on electric scooters shortly thereafter.
Its bikes and scooters are considered last-mile solutions, giving people a convenient option for short, local trips, or an easy way to get from a train or bus station to their final destination. Lime's newest e-bike, slated to debut this summer, will come with a 350-watt motor and a swappable battery that works interchangeably with its electric scooters.
Electric bikes differ from traditional bikes in that they use a rechargeable battery to power a motor. While cyclists can still pedal an e-bike, the motor can help with difficult hills, long trips or, in some cases, heavy cargo.
Laws pertaining to e-bikes vary from city to city, but most are classified as bicycles and can use the same infrastructure, including lanes and bike racks, as their non-motorized counterparts. A 2019 study found that e-bikes offered an affordable alternative to owning a car, while still providing the exercise and recreational benefits of a traditional bike. Additionally, the widespread use of e-bikes could reduce C02 emissions, urban noise, air pollution and inner-city traffic.
According to Lime demand for e-bikes surged globally during the pandemic as people began to favor single-rider outdoor choices to public transit or rideshare services.
"Shared micromobility is playing an essential role in getting cities moving again safely so we see this as a critical moment to double down on e-bikes as an open-air, socially-distanced transportation option," Lime CEO Wayne Ting said in a statement.
Super73's Cannavo said he saw a similar surge in interest, coupled with a newfound sense of freedom and community.
"We had become a tool for people who were trapped in their houses," he said. They were buying our bikes as a source of joy and pleasure in a really uncertain time."
When Super73 went looking for funding in Silicon Valley in 2017, they didn't catch much interest. Investors were more interested in backing an app — such as Bird or Lime — than a new bike product. But now, Cannavo said it's clear that their bike's value "isn't a last-mile option as much as it's a lifestyle option."
The e-bikes retail for between $1,260 and $3,245 and are highly customizable, from their color schemes and handlebars to seating and battery placement.
Super73 owners have built a community around their bikes, regularly attending group rides and meetups in cities around the world. Cannavo said a typical event draws around 90 riders. About a third of U.S. Super73 owners and about half in Europe have completely ditched their car for the bike. This is common in urban areas and small towns, but even more so in cities like Paris or Amsterdam, where gas-powered vehicles are being phased out.
"It gives people who can't afford a car or want another option for transportation, or who just want something fun to get around on the weekends," Cannavo said. "You still get the thrills [of riding a bike], you're interacting with your city, and it really connects you more to your community which is why I think our group rides are so successful. Suddenly you're going down streets you've never gone before because your car could never take you there and you're finding the hidden gems within the city and that's because you got out of your car."
The company announced last month it had raised an additional $20 million from investors including Volition Capital, which it plans to use to develop new anti-theft technology as well as to grow its operations and diversify its supply chains. Cannavo said he also hopes to open more international showrooms on top of those in Irvine and Amsterdam.
Courtesy of Super73
Re-Imagining Delivery
Pasadena-based URB-E sees itself on the forefront of two recent trends. One is the push to transition to electric vehicles amid climate concerns. The other is the dramatic surge in demand for delivery services, something that was already on the rise before COVID-19 and which CEO Charles Jolley predicts won't slow down after the pandemic.
The company pivoted in 2019 from manufacturing foldable scooters into a delivery network powered by e-bikes. It also recently raised a $5 million Series A round and named Jolley, an Apple and Facebook veteran, its new CEO.
Consumers have become used to the convenience of delivery, Jolley said, and they aren't likely to let that go.
"Where a company like URB-E comes into play is that we think the next stage is to transition to where you're doing much higher density kinds of deliveries like groceries or parcels or food deliveries out of ghost kitchens. For all of those, you need much more efficiency than what you get out of a bike with a small package on it."
E-bikes, not cars or trucks, he said, offer the fastest, easiest way to transition to doing more deliveries in a way that's mindful of the climate.
"Replacing a five-ton truck with a five-ton electric truck that's just three tons of battery isn't feasible. We don't have enough lithium iron in the world to do that, so we have to come up with smarter solutions if we're going to make that transition," he said.
URB-E bikes are engineered by Chief Technical Officer Sven Etzelsberger, previously a lead engineer at Porsche, to be high-performance machines. They attach to a container that can carry up to 800 pounds of cargo, which riders can move through cities at 12 mph thanks to the bike's high torque.
"Our first application is mostly same-day delivery, but we're also doing parcel delivery with some companies," Jolley said. "So a big company might bring a truck to the edge of a neighborhood like Santa Monica, and inside the truck would be containers they could pull out to waiting bikes, who'd do the last-mile delivery."
URB-E will deploy this exact concept in Santa Monica and Downtown Los Angeles this year, and will also update the e-scooters it uses in Pasadena with e-bikes.
The startup doesn't compete with existing delivery providers but works with them. So, for example, a business could provide its own drivers to use URB-E's system, or a delivery provider that already works with a grocery store or retailer could rent URB-E's fleet and technology platform on an hourly basis. Those delivery companies would then save on equipment, maintenance and storage costs.
"It's really trying to make all of the infrastructure, technology, software and equipment just completely turnkey," Jolley said.
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Juliet Bennett Rylah
Juliet Bennett Rylah is a Los Angeles-based writer whose work has appeared in numerous local and national outlets. She's passionate about public transit, affordable housing and horror movies. You can find her on Twitter @jbrylah.
Here's How To Get a Digital License Plate In California
03:49 PM | October 14, 2022
Photo by Clayton Cardinalli on Unsplash
Thanks to a new bill passed on October 5, California drivers now have the choice to chuck their traditional metal license plates and replace them with digital ones.
The plates are referred to as “Rplate” and were developed by Sacramento-based Reviver. A news release on Reviver’s website that accompanied the bill’s passage states that there are “two device options enabling vehicle owners to connect their vehicle with a suite of services including in-app registration renewal, visual personalization, vehicle location services and security features such as easily reporting a vehicle as stolen.”
Reviver Auto Current and Future CapabilitiesFrom Youtube
There are wired (connected to and powered by a vehicle’s electrical system) and battery-powered options, and drivers can choose to pay for their plates monthly or annually. Four-year agreements for battery-powered plates begin at $19.95 a month or $215.40 yearly. Commercial vehicles will pay $275.40 each year for wired plates. A two-year agreement for wired plates costs $24.95 per month. Drivers can choose to install their plates, but on its website, Reviver offers professional installation for $150.
A pilot digital plate program was launched in 2018, and according to the Los Angeles Times, there were 175,000 participants. The new bill ensures all 27 million California drivers can elect to get a digital plate of their own.
California is the third state after Arizona and Michigan to offer digital plates to all drivers, while Texas currently only provides the digital option for commercial vehicles. In July 2022, Deseret News reported that Colorado might also offer the option. They have several advantages over the classic metal plates as well—as the L.A. Times notes, digital plates will streamline registration renewals and reduce time spent at the DMV. They also have light and dark modes, according to Reviver’s website. Thanks to an accompanying app, they act as additional vehicle security, alerting drivers to unexpected vehicle movements and providing a method to report stolen vehicles.
As part of the new digital plate program, Reviver touts its products’ connectivity, stating that in addition to Bluetooth capabilities, digital plates have “national 5G network connectivity and stability.” But don’t worry—the same plates purportedly protect owner privacy with cloud support and encrypted software updates.
5 Reasons to avoid the digital license plate | Ride TechFrom Youtube
After the Rplate pilot program was announced four years ago, some raised questions about just how good an idea digital plates might be. Reviver and others who support switching to digital emphasize personalization, efficient DMV operations and connectivity. However, a 2018 post published by Sophos’s Naked Security blog pointed out that “the plates could be as susceptible to hacking as other wireless and IoT technologies,” noting that everyday “objects – things like kettles, TVs, and baby monitors – are getting connected to the internet with elementary security flaws still in place.”
To that end, a May 2018 syndicated New York Times news service article about digital plates quoted the Electronic Frontier Foundation (EFF), which warned that such a device could be a “‘honeypot of data,’ recording the drivers’ trips to the grocery store, or to a protest, or to an abortion clinic.”
For now, Rplates are another option in addition to old-fashioned metal, and many are likely to opt out due to cost alone. If you decide to go the digital route, however, it helps if you know what you could be getting yourself into.
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Steve Huff
Steve Huff is an Editor and Reporter at dot.LA. Steve was previously managing editor for The Metaverse Post and before that deputy digital editor for Maxim magazine. He has written for Inside Hook, Observer and New York Mag. Steve is the author of two official tie-ins books for AMC’s hit “Breaking Bad” prequel, “Better Call Saul.” He’s also a classically-trained tenor and has performed with opera companies and orchestras all over the Eastern U.S. He lives in the greater Boston metro area with his wife, educator Dr. Dana Huff.
steve@dot.la
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