Doppler Labs has announced its first mass-market product, called Here One, which combines Doppler’s sound-morphing technology with wireless bluetooth earbuds.

Last summer, Doppler Labs made noise in the tech world by introducing earbuds that didn’t play music, but instead customized the sounds that were coming from the world around you. The pitch was that “Here” earbuds would let you turn the bass up during a concert, or tune out the screeching of cars on the street.

Doppler racked up a 100,000-person waitlist, a resoundingly successful Kickstarter campaign, and $17 million in venture capital money. The company then followed up with a product that actually delivered on the bulk of its promises, especially the music functionality (though the automatic filters were still a bit raw).

But there was still one main problem: the buds felt more like a cool gadget you would use occasionally rather than something you’d put on every day. Though music lovers were the people initially blown away by the product, the top things people actually used the Here buds for were the following, according to CEO Noah Kraft:

1. Dealing with an open office.
2. Commuting.
3. Amplifying hearing.

These everyday uses weren’t the buds’ strength when I tested them out, and Doppler seems to have recognized this. Now the company is aiming at the everyday with its Here One buds, which will cost $299 when they are released in November. 

The idea is to create a “1-stop” product, Kraft tells Business Insider. Doppler wants you to be able to listen to music, make calls, and so on, all while being able to take in the sounds you want from the outside world.

Kraft touts a few key features Here One will have that sets it apart from Doppler’s first product and traditional bluetooth headphones.

The first is “adaptive filtering,” meaning in plain English, the filters will be a lot better and more specific, Kraft promises. They will be able to target particular sounds “such as human speech, sirens, a crying baby, a jet engine,” and so on, the company says. I haven’t yet got a chance to test that element myself.

The second is “layered listening,” which will let you blend whatever you are listening to with the outside world. The example Kraft gives is being at a baseball game and having commentary layered over the sounds of the ball game. The ability to combine the adaptive filters with the sound blending is actually the prospect I’m most excited about. Imagine walking around the city with filters set to zap out the sounds of cars and clanging, while your earbuds blend some pleasant music with the other sounds of the city. That would be a sublime experience if Doppler can indeed deliver it.

While the bluetooth earbuds aspect is the biggest new feature for Doppler, Kraft says the focus of Here One will still be on Doppler’s sound-changing technology.

“Headphones are such a piece of commodity tech,” Kraft says, though he adds that Doppler will not skimp on the quality. They aren’t trying to reinvent the bluetooth earbud, but rather, create an entirely new type of device. Think of it more like Amazon’s Echo rather than a bluetooth speaker.

That said, Doppler will still have to deliver on the music quality, especially given the type of early backers the company has attracted. And other companies have had problems with wireless bluetooth earbuds. One common issue is battery life. Kraft says the Here Ones will get five hours (three to four when streaming audio), along with two additional full charges in the carrying case. Again, we’ll have to test them to confirm that.

If you’ve tried Doppler’s first buds, the form factor of the Here Ones will not significantly change, and will add just one millimeter to its size. Doppler purposefully left extra room in the initial product, Kraft says.

We’ll have to hold off judgment until we get our hands on the prototype, but as of now, it seems that Doppler is working to address many of our practical concerns with its first product, while retaining the technology that allowed the original Here buds to capture the imagination of music lovers, including big-time backers like Hans Zimmer and Tiesto.

You can preorder Here Ones here.

SEE ALSO: I tried earbuds that completely changed how New York City sounded around me

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You don't want to think about how your favorite leather jacket, shoes or watch strap were made.

But the process — from the time it takes to farm an animal, ship it to a slaughter facility, prepare and then tan the hide — can take years.

In Brooklyn, a team of 35 people have found a way to create real leather in about two weeks. And their process doesn't harm any animals.

Modern Meadow is a startup that has over a dozen patents and grows leather in a lab from skin cells that produce collagen, a protein found in the connective tissues of animals. That collagen turns into leather that's free of blemishes, hair and fat.

For the past four years, Modern Meadow has been focused on research and development. Now, it's raised $40 million from Nest founder Tony Fadell, Li Ka-shing's Horizon Ventures, the "Zuck and friends' billionaire fund" Iconiq Capital, Breakout Ventures, Artis Ventures, and Singapore's Temasek to bring its material to the masses.

"We are making real, fully biological leather here," Modern Meadow co-founder and CEO Andras Forgacs told Tech Insider. That's unlike most synthetic leather which is made from plastic and chemicals.

"[Making leather] is this really long process with a lot of inefficiencies," Forgacs said. "You’re working subtractively, removing the hair, flesh and the fat [from the hide] ... Instead we work additively. We just create collagen to make the material and that’s it."

How to grow leather in a lab

Modern Meadow uses a process called "biofabrication" to grow pieces that look and feel just like animal leather. Forgacs describes biofabrication as biotechnology meeting material science and design. His team works off of skin cells that have been programmed to produce collagen identical to that of a cow or another desired animal. 

"We start with what leather is in its end state," he explained. "We can produce cow collagen, alligator collagen — any kind of collagen using the tool kit of biotechnology. We’ve developed a way to organize this collagen to get it to recapitulate into the full biological structure of that collagen in hide that we then treat to become leather."

After the collagen is grown into leather, it's sent off to a tannery where it's treated and turned into products you're used to wearing, from purses to watch straps to shoes, belts and more. The company can control all sorts of things, from the thickness of the leather it grows to the elasticity and aesthetic.

The first time Modern Meadow grew leather successfully in a lab was four years ago, in late 2012. Then, it took about 2 months to create the material. 

Modern Meadow's leather isn't ready for consumers to try yet. But the startup is planning to partner with some fashion companies and tanneries, and hopes the fresh $40 million will enable it to scale its process and make its leather goods available for purchase within a few years.

Growing meat without animals

Leather is a $100 billion industry, according to Forgacs. So his team is focused on tackling that for now. But they've tried growing other animal products in the lab, including meat. 

Prior to starting Modern Meadow, Forgacs cofounded a publicly-traded 3D bioprinting company called Organovo. At Organovo, his team was able to make skin models of things like fully-functioning livers and kidneys. Other companies approached him then about creating related materials, such as leather or meat.

"We were initially dismissive of those inquiries," Forgacs recalled. But while he was living in China, Forgacs gave more thought to the consumer possibilities and reconsidered.

"I started thinking these ideas were not so crazy, if you can think of different ways of producing these animal products," he said.

So, when will you be eating a Modern Meadow burger?

Not for a while, Forgacs says — although maybe someday.

"Leather being a $100 billion global market is large enough to keep us busy for quite a while," he told Tech Insider. "I wouldn't say [meat] is on the back burner, but it's a longer-term opportunity."

Here's a Ted Talk Forgacs gave in 2013 about how his biotechnology works. The process to make a strip of leather then took a few months. Now it takes Forgac's team a few weeks. 

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Lyft had a record May, completing 12.7 million rides in the month, according to a leaked investor update viewed by Business Insider.  

Despite having a record May, Lyft cautioned its investors that its ride volume would stay flat or possibly dip lower thanks to the "headwinds" of college students going home for the summer and its retreat from Austin. Even with the slow down, the company said that it plans to be on track to beat its projected growth by 35%.

At that pace, the ride-hailing company said the net value of its rides — that's the ride value minus tips and tolls — is on track for a nearly $1.9 billion run rate, or a total net value of its rides over 12 months.

Here are some of its latest numbers from its May update: 

• Q2 ride volume: Expected to beat by approximately 35% 
• Loss: Lyft remains on track to not lose morethan $600 million per year
• Monthly ride volume: Rides increased by nearly 1.3 million month-over-month to 12.7 million, a new record for the company. At that pace, Lyft predicts its will complete around 152 million rides this year
• Net ride value: ~ $1.9 billion run rate (new record in May)
• Fully paid (non-discounted) rides: The number of Lyft rides taken without a coupon or other discount increased 5% from April. 2016 so far has already exceeded all of 2015 for paid rides
• 14 markets are doing more than 300,000 rides in May, compared to only two cities last year
• Lyft had 2.8 million unique passengers in May (another record) and added 320,000 from April
• Rides per active passenger increased by nearly 25% year-over-year

On Monday, Lyft was reported to be working with Frank Quattrone's Qatalyst Partners, a banking firm known for selling tech companies. According to the Wall Street Journal, Lyft's involvement with the firm could mean that it's either looking to sell or to raise money from new investors. While Lyft has been growing rapidly, it still needs to find a way to sustain its momentum in light of its well-funded opponent. Its competition, Uber, recently raised $3.5 billion  from Saudia Arabia's sovereign wealth fund.

SEE ALSO: Uber’s hundreds of freewheeling outposts fueled its crazy growth ... and caused some headaches

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Airbnb is seeking to raise a new round of funding that would put the value of the company around $30 billion, according to a new report from The New York Times' Leslie Picker and Mike Isaac.

A source close to the company confirmed that Airbnb is raising the new round to support new investments and growth opportunities for the home-rental company.

The new valuation would be triple that of Airbnb's valuation two years ago, according to The Times, making it the second most valuable privately held tech startup after Uber.

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There's a project gaining popularity on GitHub, the website where programmers share their projects with each other, called "Startup Incorporation Checklist."

The checklist was created by Leo Hochberg, founder of startups Stampnik and Let's Maybe. 

"Other than building a product people want, incorporating a new business is essential to raising money, opening a bank account, and creating a legal entity for contracts and other liabilities. For technical folks like me, it's the 'necessary evil,' of founding a company," Hochberg writes on GitHub.

One funny thing stuck out. Among the couple of notes at the top (the process takes several weeks, you should consult a lawyer, etc.) he warned: "Many steps require the use of snail mail or a fax machine."

No doubt, there are people founding a company these days who have never operated a fax machine.

So Hochberg offered some advice. He found an app, HelloFax, which sends faxes without a fax machine. It's still possible to buy a fax machine, of course. Or to run by Kinkos and use one. But developers would, naturally, prefer an app.

HelloFax is the sister service to HelloSign and when the checklist went viral on Hacker News, the co-founder couldn't help but jump in with a comment and a plug for his document services to which Hochberg responded, "Thanks for building a great service and down with the fax machines."

SEE ALSO: A programmer wrote scripts to secretly automate a lot of his job — and email his wife and make a latte

SEE ALSO: A rare tour of Google's 'The Garage' lab where employees can build anything

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Our goal has always been to give you rare, unprecedented access to the people shaping the tech industry— specifically, the advice that they've gained through experience, or used to get where they are today.

So when we sat down earlier this year to double down on this mission, we wondered who these exceptional people — including leaders at companies like Airbnb, Slack, Warby Parker and the like — idolize and draw their wisdom from. Who do they turn to when they have tough questions or encounter new challenges? And how can we share this bigger, broader store of knowledge with our audience?

As it turns out, tech pioneers tend to be voracious readers, and they like to apply what they read. So, on the precipice of summer vacations for many, we thought it only made sense to share the reads that have inspired the people we look to for the best tactics and solutions.

What follows are top book recommendations sent to us by some of the sharpest folks we've written about and work with to give First Round startups an edge. Bonus: We not only asked them for their top business book from the past year, but the recent bests across genre, and their favorite of all time — leading to a fascinating, counterintuitive web of “people who liked this also liked...” suggestions. (Like most of the advice we feature, we tried to give top billing to the unusual and original. People love Zero to One, but you already knew that.)

We hope you enjoy! Happy summer and happy reading!

Your friendly Review editors,
Camille Ricketts& Shaun Young

Michael Lopp, VP of Engineering at Slack

Michael Lopp's summer got off to an interesting start with him being named VP of Engineering at Slack.

Having led engineering at Pinterest and people ops at Palantir before that, the well-known blogger says the best book he's read in the last year is Boyd: The Fighter Pilot Who Changed the Art of War by Robert Coram — a biography of John Boyd, who many believe to be the best fighter pilot in U.S. history and second only to Sun Tzu when it comes to military theory.

"It's a stunning exploration of how humans can more effectively make decisions," says Lopp.

His other recs:The Great Bridge— "a fascinating read about when bridges were still in beta." And his all time favorite, Hyperion, a modern retelling of the Canterbury Tales known for its incredible attention to world-building detail.

Brian O'Kelley, CEO of AppNexus

Brian O'Kelley, founder and CEO of online advertising platform AppNexus also values good decision making. His top pick this year: Product Strategy for High Technology Companies by Michael McGrath, one of the most detailed guides to product strategy ever written, drawing on over 250 stories from formative years at Apple, IBM and more.

"It's just brilliant, structured thinking on how to make strategy decisions," O'Kelley says. 

His other recs: Wolf Hall, immersive and insight historical nonfiction dissecting the fraught politics in the court of King Henry VIII, and his best of all time, Cloud Atlas, a weave of interlocking stories and mysteries told over the span of thousands of years.

Julie Zhuo, VP of Product Design at Facebook

Julie Zhuo, VP Product Design at Facebook, has also achieved fame for her insightful missives on Medium about design and management. Her top pick for the year is High Output Management by Andy Grove, in which the former Chairman and CEO of Intel shares his perspective on building high-productivity teams and motivating talented people.

"I picked up the book after Grove passed away this year and I found it so succinct, so clear, and so packed with easy-to-understand analogies," says Zhuo. "It really gets to the heart of what good management is."

Her other recs:Mindset by Carol Dweck, a close look at how humans can learn and grow throughout their lives if they take the right approach.

"So much of being happy and productive is not about what's happening externally, but what's going on in our own heads. I loved this book for so clearly illustrating that," she said.

Then there's her long-time No. 1, The Phantom Tollbooth.

"To this day, I can think of no better book that captures the imagination, wonder and adventure of life that children so intuitively grasp," she said.

Cleveland Cavaliers owner Dan Gilbert doesn’t really wear sneakers, but he loves them as an economic idea.

In fact, he loves the idea so much he’s actually cofounded a “stock market for sneakers” in Detroit called StockX.

Before StockX, Gilbert had been toying with the idea of building a stock market for consumer goods for awhile, StockX cofounder and CEO Josh Luber tells Business Insider. But Gilbert didn’t know what to start with until he saw his teenage son selling sneakers on eBay, and realized sneakers would be a perfect test for a stock market for tangible things.

Sneakers had everything he was looking for, including a passionate fanbase and a $1+ billion resale market.

At the time Luber, a former IBM consultant, a sneakerhead since age eight, and founder of sneaker-pricing startup Campless, had already been working on the concept. So Gilbert’s people flew Luber out for a Cavs game, where the pair talked about their respective visions for what a sneaker stock market could become, and then decided to go into business together.

Luber moved to Detroit and StockX launched earlier this year, built around the premise that stock-market style pricing could improve the marketplace for sneakers. StockX connects buyers and sellers, and serves as an intermediary between them that guarantees the legitimacy of the product.

There are two ways to buy a sneaker on StockX. The first is to click the “Buy” button on shoe's product page, which purchases the sneaker at the lowest "Ask" (seller listing price). The second is to place a "Bid," which makes an offer that a seller can choose to accept — presumably lower than the "Ask." Like in the stock market, sellers and buyers can update their "Asks" and "Bids" based on supply and demand.

As a buyer on StockX, you don’t know who is selling you the sneakers, but you know two basic things: the price, which is dynamic, and that the sneakers are authentic. StockX holds the money you pay for sneakers in escrow until it validates that the sneakers are both new and real, then it ships them to you and gives the money to the seller.

The authentication feature has made StockX valuable to sneaker collectors from the get-go, Luber explains. Sneaker sales online, even on places with reviews systems like eBay, can be complicated to navigate because of fakes floating around. StockX takes the same 10% commission as eBay, but does the certifying work itself.

Portfolio management

Besides authentication, StockX pushes toward its "stock market" branding by helping sneakerheads manage their shoe collections like they would a stock portfolio. On StockX, you can track a digital representation of your collection (portfolio), as well as follow the fluctuations in the market for particular pairs of shoes. Basically the type of tools you get with an online brokerage like Schwab, Luber says.

Though StockX bills itself as a “stock market for sneakers” it isn’t an SEC-regulated exchange. As long as StockX is selling physical products, they won’t need to worry about regulation, Luber says. If they start selling sneaker futures, however, that would be a different story.

Watches, toys and other goods

So then why call it a "stock market?"

"The efficiency, credibility and liquidity of the financial markets have been foundational to the largest economy in the world,” Gilbert told TechCrunch. “We believe this is the right time to extend this fundamental concept to appropriate sectors of the online consumer marketplace." StockX wants to put those three big elements of the stock market into physical goods.

And Luber says it won’t stop at sneakers. He lists off watches, handbags, and collectible toys as areas StockX could grow into in the near term.

But right now, Luber is focused on opening up StockX to international buyers, which is slated to happen on July 7, if all goes according to plan.

Check out StockX for yourself.

SEE ALSO: Russia thinks the US government is using Netflix to get into its people's heads

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JPMorgan is taking a new approach to working with tech startups.

The firm is expected to launch a residency program for financial technology, or fintech, companies on Thursday in an effort to tackle strategic and security-related challenges.

The in-residence startups will be tasked with finding innovative solutions to specific challenges — which will be listed on JPMorgan's website — using technologies like distributed ledger, big data, or machine learning.

The program is the latest step by a Wall Street bank to improve its technology. Many firms are choosing to work with fintech startups rather than risk getting disrupted by them.

Some, like Barclays and Deutsche Bank, have launched startup accelerators. Others are making strategic investments in the tech companies.

But JPMorgan's residence program is a little different: The corporate and investment bank will house the fintech companies for six months in its offices around the world, and they will work alongside the bank's own businesses.

JPMorgan has been proactive about incorporating fintech into its operations. It launched a trial project earlier this year with the blockchain startup Digital Asset Holdings. Blythe Masters, its CEO, is a former JPMorgan executive. 

The firm is also developing new technologies in-house and employs about 40,000 technologists across the firm, with a $9 billion technology budget.

"Fintech and new capabilities, they are crucial for everything that we do," Daniel Pinto, the head of the corporate investment bank, said at JPMorgan's Investor Day in February.

He announced at the time that the firm would be creating the residency program and said that, despite JPMorgan building most of the technology it uses, the firm was not afraid to partner with startups to codevelop certain applications.

The "business of technology," Pinto said, is no longer a back-office concern, but rather "totally integrated" into the firm's businesses.

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Zoox, the super-stealth self-driving-car startup, has closed a $200 million round of funding, according to a source familiar with its fundraising plans.

In an SEC filing on June 6, the startup said that it had raised over $100 million in equity. Business Insider has learned that the rest of the round has now closed. The Wall Street Journal first reported in Maythat an unspecified amount of funding gave it a $1 billion valuation.

Zoox has been working in secret on a fully autonomous car for years. In 2013, the company debuted some splashy renderings of the car, nicknamed "Boz," before reverting back into stealth mode. According to IEEE, the car is designed to not have windshields or a steering wheel or break pedal. Instead, it can drive in any direction while passengers sit inside, facing each other.

In March 2016, Zoox secured its permit to begin testing its self-driving car in California.

Zoox was founded by Tim Kentley-Klay, an Australian designer, and Jesse Levinson, a Stanford engineer who worked on self-driving cars with the co-creator of Google's self-driving car. 

SEE ALSO: This unmarked van looks like it could be an Apple self-driving car or mapping vehicle

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DueDil, a fast-growing London tech startup, is going to focus on growing its business outside the UK following the decision to leave the European Union, according to Bloomberg.

The UK voted for Brexit on June 23, shocking the UK tech community, which relies on EU membership for hiring talent from across the continent and accessing EU funding.  

"We’ll be distributing our team, opening up new offices in Europe rather than focusing on the UK," DueDil CEO Damian Kimmelman told Bloomberg. "This is a miserable outcome for the economy."

Founded in 2011, DueDil employs around 100 people at an office near Old Street's Silicon Roundabout. The startup, which is exactly the kind of company that government ministers have been championing for growing the UK economy, provides data-analytics tools to study private companies. 

Several other companies have come out this week and said how they expect Brexit to impact their businesses.

Google has no immediate plans to reduce the size of its UK operations as a result of Brexit, according to Eric Schmidt, executive chairman of Google parent company Alphabet, while firms like Vodafone and easyJet are evaluating whether some jobs may have to be relocated.

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The mythical "unicorn" startup valued at $1 billion is no longer a rarity. In a competition of egos, too many startups went after that $1 billion mark without businesses to back it up.

However, the investors who used to fund these excessive growth rounds for fear of missing out have started "sobering up" to realize they've invested in some bad business models at some huge prices, Social Capital's Chamath Palihapitiya told Business Insider.

Things like terrible unit economics or high customer-acquisition costs were ignored because of some vanity metric that justified more money at a huge valuation, he said.

"But all those investors are now having to deal with the impending reality that there is no greater fool to then mark up the deal after them, that they may have in fact been the greatest fool," he said.

That means startups that fall into the gushing-money category are now faced with two options: find a bid at lower prices and do a downround, or reprice their last fund-raise at a lower price so there's a future "upround" again.

"However you want to put the lipstick on the pig, that's what's happening now," Palihapitiya said.

The falling valuations puts those venture capitalists who once thought they got a great deal in a bind. Venture capitalists are now having to revalue their portfolios to adjust for what Palihapitiya calls a "negative, protracted down cycle."

"Now that deal that looked amazing looks barely break even or is now underwater," he said.

Those sobering realizations will set off a chain reaction, rippling from the venture community through to the limited partners, or LPs, that are the ones who fund them — everybody's going to see these bad returns and suddenly be a lot more averse to risks.

Palihapitiya estimates it will take four to six more quarters of poor returns before the investors in the big growth funds also "sober up to the fact that all the paper profits that they thought they had aren't really there."

That's when, he thinks, these investors will start putting more of their money into early-stage funds like the ones run by Social Capital (naturally) and Benchmark:

"Because what they're going to see is that they invested in a growth fund thinking that they were buying high quality business models, high quality revenue, predictable outcomes, 18 to 24 months of liquidity. Instead what they really did was make a series A investment but with $100 million instead of $10 million. That's a really bad risk management."

At the end of the day, Palihapitiya thinks that, going forward, the tech industry will be seeing investors behaving differently now that there has been a reset of expectations on both sides of the table.

"They got really cute, they learned a lesson, they're probably not going to be held accountable for that lesson, but they're probably not going to repeat the same behavior again," he said.

SEE ALSO: To the early Google employee who invested $250 million in Uber, seeing Uber's growth is like 'looking in a mirror'

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Fintech (financial technology) has arguably become the poster child for the UK technology sector over the last couple of years but the spectacular collapse of Powa Technologies did nothing for the sector's reputation.

When asked whether Powa cast a shadow on the UK's thriving fintech industry, Tom Hulme, a partner at Google Ventures in London, said: "It would break my heart if Powa Technologies corrupted the fintech marketplace."

Powa raised at least $175 million (£122 million) but it had only $250,000 (£175,200) in the bank at the start of February and debts of $16.4 million (£11.5 million). Here's how it spent all of its investor's money.

Hulme was quick to add that Powa was not the type of company that Google Ventures would look at. He did, however, admit that he's keen to invest some of Google's millions into a fintech company at some point, adding that Google Ventures has looked at most of the peer-to-peer lenders and most of the crowdfunding platforms.

Fintech companies like TransferWise and Funding Circle has been valued at over $1 billion after raising hundreds of millions of dollars between them.

"We will [invest in fintech]," said Hulme during a lunch with Business Insider, The BBC and The Financial Times. "I think there’s an argument that prices are already coming off a bit, particularly at later stage, so I’d be very bullish about it. Particularly London."

Avid Larizadeh Duggan, the only other Google Ventures partner in Europe, added: "There’s so much still to happen [in fintech] from partnerships to small acquisitions. There’s still a lot of time for Tom to invest."

Hulme said he is also on the hunt for artificial intelligence companies that are developing general self-learning algorithms that can be applied to a wide range of scenarios in the same way that Google DeepMind's can.

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Amongst the most often asked questions I get from founders is, “How much money should I raise?

Reflexively founders want to raise as much money as they can because they figure it will give them more resources, better chances of competing and a longer runways before they have to do the often painful job of asking, yet again, for money. Every time you ask for money you’re faced with the possible of feeling literally and figuratively like a failure.

I understand this instinct for more capital and I have two very different personal experiences: In my first company we raised an A-round of $16.5 million and in my second company we raised only $500,000 by choice.

I have this “How much should I raise?” conversation literally every week with startups. While there is no science to it, here is how I think through the issues with founders:

1. You will spend what you raise in the same timeframes whether you raise $1.5 million or $4 million.

It is a truism that with more capital you will hire people more quickly and spend more liberally whether it’s on external contractors, PR firms, attending events, doing legal work (trademarks, patents) or whatever. You will build out features or expend to platforms — often before you have enough market feedback to warrant it.

I was reminded of this yesterday watching my friend Justin Kan on Snapchat with this 10-second reminder, “No matter how much you raise at your company you’ll end up spending it in 12–24 months”

I would probably amend it to say 12–18 months. People do what people do. You have money, you spend it. And there are consequences for spending too much money.

I was always fond of saying about fund raising, “When the hor d’oeuvres tray is passed take two and put one in your pocket for later. Just don’t take the whole tray.” My analogy was that there are markets where it’s relatively easier to raise capital and therefore you should take a little bit more but you should create a budget where you only spend 70% of what you raise on a pace of 18 months.

But people never do. Justin is right.

2. How much you raise determines valuation

I know it sounds crazy but at the earliest stages of a company your valuation often is determined by how much money you raise. There is a general guideline of how much investors want to own in order to invest in your company and the norm is 15–30% with the most common range 20–25% per early stage round.

So the temptation would be to ask for $5 million because that implies a $20 million pre-money valuation if you’re able to only give away 20% or a $15 million pre-money valuation of investors require 25%.

A $15–20 million valuation sounds better than an $8 million valuation, doesn’t it? It seems almost silly to argue that it’s better to have an $8 million valuation. But it’s actually not that silly.

For starters if you raise at an $8 million pre-money valuation you’re much more likely to raise $2–3 million and not $5 million. It’s infinitely easier to raise $2–3m than $5m so you have a higher hit-rate.

3. The larger the round, the higher the price, the harder the next hurdle is to hit

But the bigger point I want to make is what happens when the coffers are depleted and you need more money? That is where over-raising can be corrosive. What felt great when you raised it $5 million on $20 million now feels like a noose around your neck because raising at an up-round of $8–10 million at a $40–50 million pre-money valuation is stratospherically harder than raising at a $20 million valuation.

Why?

Because investors need to imagine making a minimum of 10x their invested capital and early-stage investors are shooting for even higher multiples. The data suggests that the investors have a much easier time hitting a $100–200 million outcome than a $400–500 million outcome so it’s easier to commit at lower prices.

And if you raise the “5 on 20” and don’t grow into your next-round valuation you’re stuck because venture investors HATE doing down rounds. They’re corrosive in your relationship with the early VCs, the management teams will take them if they must but they end up feeling demotivated and in a venture world where great new deals are always coming around — why commit to somebody else’s problem child?

4. Constraints can spark creativity

Of course it never feels this way when you’re the founder, but constraints can actually force creativity. Each person is the company has to personally do more vs. lead others doing work. Each person in the company has very short timeframes for making progress because you know proof-points are critical in fund raising.

And importantly — having limited resources forces you to make hard choices about what you’re build and what you won’t. It forces harder decisions about whom you’ll hire and whom you’ll delay. It forces you to negotiate harder on your office lease and take more frugal space. It forces you to keep salaries reasonable in a market where wage inflation has been the norm for years.

I like talking about it as “holding one’s feet to the fire” because it’s an idiomatic way of reminding yourself of the obligation to constantly show progress.

The two biggest measures for me of early-stage company capabilities are:

1. The ability to hire insanely talented people relatively quickly and without overpaying
2. The ability to ship product early and often (in enterprise even shipping internal code or beta code matters)

Mo’ money, less fire.

5. Some people can skip first base

My partner Greg Bettinelli has a sports metaphor that I’ve become fond of which is “skipping first base.” Internally at Upfront it’s an entrepreneur who has enough of a proven track record that they can raise a $5–10 million A-round based on their prior experiences.

I like the skip first base metaphor because for some entrepreneurs they really deserve to start on second base.

Maybe they worked much of their career running a startup in a sector and years later they want to go after that market again and they know from day 1 what they want to build, why and why it would work or fail.

Second-base entrepreneurs often know a large number of talented technology professionals and other executives who would gladly come back and work for him or her so team assembly is both quick and impactful.

Second-base entrepreneurs often have the credibility to raise follow-on capital due to their historic track records and/or their venture relationships so clearing the valuation bar on a subsequent round becomes easier.

When we think about second-base entrepreneurs we think in terms of being able to get to market without having to pitch 20 VCs and thus have all of your plans in the public market because we all know that word travels fast and we think in terms of being able to pull in a relatively senior team quickly.

Often second-time entrepreneurs don’t want to leave the option of a safe exit at a smallish valuation on the table. They’ve made a bit of money, they’ve had a bit of success and they really want to go big or die trying.

Out of 30–35 investments per fund we like to fund 5–6 second-base entrepreneurs but mostly we believe in capital constraints as a positive force for both investor and founder.

6. Choose wisely

The obvious consideration for you when you think about how much money to raise is also from whom you will raise the money.

Some funds are geared towards a wide aperture of first checks but aren’t big on following on to deals that don’t attract follow-ons. These funds have a view that “the market will speak” and if they don’t support you then something must be wrong. There are some great funds that operate this way and I see some merits.

Other funds have the view that they can form conviction of whether this still represents a great investment or now irrespective of what the market says. These types of firms may see your follow-on financing as a chance to “buy up ownership.”

Most firms are somewhere in the middle. Knowing the style of the partnership will tell you something about what to expect if your cash starts to deplete and you’re not yet ready for the next round. Importantly, within each firm different partners also have different styles and different levels of street cred in their respective firms to get deals done where the external market isn’t yet ready to validate things.

Knowing the style and reputation of the firm and of the partner may guide you towards the right number. If a firm is known for being supportive of initiatives that take longer, you may be willing to raise a little bit less up front.

The “feet to the fire” mentality still holds even if the partnership is supportive. You’re always better off if you can take the next round to market because it will create price pressure that helps you get a fair valuation internally if that’s the route you take. If you don’t have external interest you may still get an internal round done but probably at a lower price than you otherwise may have. So there’s a healthy balance between investor needs and founder needs if you keep the pressure on yourself as though you don’t have a supportive internal investor.

Summary

There’s no right answer, only trade offs. Most people opt for the “more money equals faster progress and less time fund raising” mentality. Often this is a mistake and one that isn’t realized for 18 months until you next need to be in market.

Fund raising isn’t fun. But it’s an important process. It’s truly a marketplace where the validity of your idea is challenged and where your progress since your last time in market is measured. Marketplaces often provide the right incentives for people to perform. Having one’s feet to the fire can be painful, it also can provide inspiration and creativity.

And while having more money makes today easier, having a lower valuation makes tomorrow easier. So just consider the trade-offs as you plot your journey.

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There's been a lot of talk around the cooling VC funding environment in recent months, but Adaptive Insights founder Rob Hull's advice to his fellow startup founders has remained the same: tune out the noise and just stay focused on your business.

If anyone knows what he's talking about, it would be Hull. He was rejected 70 times by venture capitalists in the company's early years, and weathered the 2008 financial crisis on his way to building a $1 billion financial software company that's raised over $170 million so far.

"We were met with a host of concerns from investors early on," Hull tells Business Insider. "We had people telling us why we would fail."

Hull has proven a lot of those investors wrong. Since its founding in 2003, Adaptive Insights has established itself as one of the leaders in the financial planning software space, commonly known as corporate performance management (CPM). It now has over 3,000 customers across 85 countries, and was even named as the only all-cloud-based software in the Gartner Magic Quadrant survey this year.

"The investment market always goes through cycles. So you’re better off focusing on what you can control well, and that’s building your business," Hull says.

No salary for a while

Hull's success didn't come easy.

Investors were skeptical of his vision that CFOs and financial departments would eventually store their data in the cloud. They didn't think it would survive competition from the big guys like Oracle and Microsoft. It wasn't clear how Adaptive Insights would turn profitable by focusing on mid-size businesses that tend to start with smaller contracts.

Especially in the early to mid-2000s, when Adaptive Insights raised its first two rounds of funding, investor sentiment was rock-bottom. The industry was just coming off the dot-com bust and everyone was wary of startups not making money.

In fact, at one point Hull even had to suspend his salary and consider the sale of the company as it couldn't find a Series B investor. It was only after he connected with Monitor Ventures' Jerry Engel, a former CFO, that he was able to raise $7 million and keep the company going.

"It's important to find investors who can really personally identify with the business problems you’re trying to solve," Hull says.

Hull also used the 2008 financial crisis to his advantage. His sales pitch was how Adaptive Insights' software could help companies manage their finances better and control costs more effectively. That message eventually caught on by 2012, and the company's been able to raise over $130 million since then. 

Be frugal and stay focused

Hull is no longer the company's CEO, deferring most of the day-to-day operations work to current CEO Tom Bogan. Still, he remains the company's chairman and helps spread the word for his company.

Hull acknowledges the current funding environment resembles what it looked like back in 2003 when he raised seed investment. That could make life tough for some of the startup founders today, but Hull tells them to stick to their guts and not give up.

"Make sure that you’re really solving a problem that people are willing to pay you for and trust your intuition," Hull says.

He also offered the following advice to any startup founder that may be struggling with their business:

• Trust your conviction: It could get very lonely when everyone says you're going to fail. You just got to trust the power of your own conviction. "You really got to dig deep to figure out what you truly believe in, what you truly are passionate about, and really stick to that," he says.
• Be practical: Be frugal and practical with your spend. And really understand your business and cost structure, and how you could eventually turn profitable. "Make sure you’re very focused on your cash flow so that you’re in control of your own destiny," he says.
  
• Stay focused: Know what you're trying to solve and stay focused. For Adaptive Insights, it first started with SMB financial planning software, but has now expanded to analytics and enterprise services. "Don’t get distracted by trying to solve too big a problem until you’ve proven you’ve done one thing really well," he says.

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Healthcare startup Network Locum has raised a £5.3 million funding round, showing that it's still possible for young UK technology companies to raise significant sums of money post-Brexit.

Network Locum's workplace management software aims to help NHS practices and hospitals find self-employed locum doctors when they need them. The software gives practices and hospitals access to a bank of up to 40,000 doctors that are looking for work and removes the need for potentially expensive recruitment agencies.

English NHS providers spent an estimated £3.7 billion on locum doctors and nurses in 2015-16. Health Secretary Jeremy Hunt has criticised "rip-off staffing agencies" for charging extortionate rates.

The latest funding round for the Shoreditch-based company came from venture capital firm BGF Ventures, bringing total investment in Network Locum up to £8.5 million.

Melissa Morris, cofounder and CEO of Network Locum, told Business Insider: "We had more than one offer but I was terrified we would be affected by Brexit."

The former NHS worker added: "We got more than we wanted and more than doubled our valuation from our A round, which was only eight months ago."

Morris, who employs 45 people, said she plans to use the funding to drive sales and marketing, as well as to accelerate Network Locum's product roadmap. "We just hired the head of UK sales from Just Eat, David Warburton," she added.

Simon Calver, founding partner of BGF Ventures, said in a statement: "The fact that BGF Ventures was confident enough to make this significant investment just a week after the unexpected vote to leave the EU underlines the fact that the UK has a network of tech investors who are still ready and willing to commit to the best ideas and entrepreneurs in the UK’s tech scene.

"Leaving the EU raises lots of challenges for the tech community but it does not distract us from our primary purpose of investing in the most promising companies and individuals with global ambitions that we can find."

Several other UK tech companies have also raised funding since the UK voted to leave the European Union on June 23 but this is one of the largest deals that we've come across.

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Josh March, CEO of customer service software provider Conversocial, is contemplating a move from London to somewhere else in Europe following Britain's decision to leave the EU.

March is concerned that Brexit will make it harder for him to hire engineers from across the continent at his company, which has raised $22 million (£16 million) since it was founded in 2009.

"There is a huge demand for high-quality engineers and any advantage a company has in accessing talent is a huge factor," he told Business Insider. "Easy access to European engineering talent was a powerful engine for growth that may now be removed."

Access to European funding and access to European markets will also influence March's decision, he said.

Potential new office locations for Conversocial include Ireland and Germany but the company won't be making any hasty decisions. "We're monitoring what impact this has on our engineering hiring over the next 1-2 quarters. If we see a big drop in European candidates then we will consider options to expand our engineering team into other locations.

He added: "It doesn't change our current commitment to London, but could change our growth plans significantly."

Several other tech startups are weighing up whether to stay in the UK, with Claire Cockerton, CEO and chairwoman of ENTIQ, a company that aims to help businesses to innovate, saying: "Leaving Europe changes my perspective on working so hard to build my business here."

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Melissa Morris, the CEO of Network Locum — a healthcare startup that helps hospitals and GP practices to find cheap on-demand doctors — was introduced to venture capital firm Beringea by boyfriend George Marangos-Gilks, who is the cofounder of student media publication The Tab.

The introduction has helped Morris, who founded Network Locum in August 2010 after a stint in the NHS, to raise around £1 million from Beringea, which has funds of around $650 million (£489 million).

Beringea investment director Rob Hodgkinson explained the encounter to Business Insider:

"George, who runs The Tab, was looking to raise money about 18 months ago. I can’t remember where I met him. I think I read an article about the Tab and just got in touch with him. So we were looking at The Tab [and realised] it’s a bit too early for what we do. But he said you should speak to my girlfriend, who runs Network Locum.

"She already had £2 million but we managed to persuade her, that because we’ve got this US angle, because we’ve got quite a lot of healthcare expertise, that actually, we would be useful. So she made space for us [in the funding round]."

Morris added: "It's brilliant going out with your best friend who also completely understands exactly what you are going through. We help each other out 24/7. "

Network Locum has raised a total of £8.5 million, with the most recent round of £5.3 million announced on Sunday.

The startup is one of the first young technology companies to announce a significant investment round following the UK's decision to leave the European Union — a move that has startup founders worried that they'll struggle to raise the capital they require.

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Venture capital funding for European technology startups is down $1.5 billion (£1.1 billion), according to research firm Pitchbook.

The research shows that funding fell from $4.3 billion (£3.2 billion) in the second quarter of 2015 to $2.8 billion (£2.1 billion) in the three months that ended last week.

Despite the EU referendum, UK startups received by far the most funding in Europe in the most recent quarter, taking $994 million (£748 million) of the overall $2.8 billion (£2.1 billion).

London Startups like fashion website Thread and children's book producer Lost My Name raised £4 million and €4 million (£3.4 million) respectively during the most recent quarter, while many other companies raised similar sums.

However, the UK's decision to leave the EU may have contributed to the decline in investment across the continent, according to Malcolm Moss, founding partner at UK and US based venture capital firm Beringea.

"The uncertainty triggered by Brexit has certainly inhibited investment," said Moss in a statement. "However, there is still a massive amount of capital looking for a home. In some ways it is a good time to invest as valuations are coming down and we can source good deal flow."

Christian Miele, vice president of venture capital firm e.ventures, added: "The slowdown in venture funding in Q2 of this year demonstrates the direction that European VC will be taking throughout 2016. Clearly VCs were keen to only back the startups they perceived as being the most robust and filled with the most potential, an about-turn from the free-flowing investment seen in 2015."

Worldwide, venture capitalists invested a total of $40 billion (£30 billion) during the last quarter, up 20% on the same quarter last year. However, this is skewed by a number of exceptionally large rounds including Uber's $3.5 billion (£2.6 billion) investment from Saudi Arabia's sovereign wealth fund.

The number of companies receiving VC funding worldwide fell 47% as investors start focusing larger investments on a select few companies.

Funding for later stage technology companies fell from $2.8 billion (£2.1 billion) in the second quarter of 2015 to $1.2 billion (£903 million) in the quarter just ended but funding for early stage tech companies increased slightly from $351 million (£264 million) to $398 million (£299 million) over the same time period.

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In modern society we’re all overworked and overloaded with information and tasks and to-dos and obligations. Nowhere is this more apparent than working in a startup where you are definitionally under-resourced and trying to make big accomplishments in compressed periods of time.

That’s why focus is critical. Saying “no” often to people who want to divert you from your mission becomes obligatory if you want to make progress. Modern-society is also littered with over-networkers and over-introducers and professional conference attendees. These people are like the friend in college who always tempted you by telling you about the latest party when you were at the library studying.

I find the over-introducers especially corrosive around first-time founders who often struggle with the balance of their time between tasks like building product versus tasks like speaking at conferences or meeting with potential business development partners.

Focus is almost always the right answer. Meeting new people is critical to business success yet you must be judicious with your time.

It’s human nature to try and be helpful to others. In many instances this help is genuine, well-meaning and productive. Most of us like to help create connections between people for whom an introduction, we believe, would be mutually beneficial.

For the respectful person we usually try to assess whether the recipient of the introduction would truly find it useful and we try to filter out unnecessary connections because we know that connecting people creates a time obligation. Many of us go one step further and almost always ask the recipient if it’s ok to do an introduction before we do it. It’s often called the “double opt in” as in you make sure both sides are ok with an introduction before creating it.

Draped under the guise of “being helpful” many super-connectors create flurries of meetings for first-time founders. I try to steer entrepreneurs away from over-introducers and I often find myself wanting to be careful about them becoming an investor in companies I back.

It starts seemingly innocent enough. A person at a board meeting starts listing all the people they know at companies a, b and c. Or an angel investor starts emailing the CEO of a company with all the people they want him or her to meet.

Newer founders are often flattered to make the connections, are not experienced enough to know which people are valuable to meet or are simply too polite to say “no.” It’s hard enough building a valuable product or service in competitive global markets without spending time on unproductive tasks.

I find over-introducers are often motivated by their own self currency. Showing founders they know important people makes them feel more self important. They assume that helping senior executives meet interesting startup people will show the introduced party that they are tapped in and relevant.

Over introducers use this currency liberally because in the absence of any real operating knowledge or without actually taking the time to diagnose what the important issues are at a company and how to truly be helpful, over-introducers fall back on the easiest and often least-productive form of help.

I know some will read this as an indictment of all introductions and of course it’s not that. I introduce people constantly and it’s an important part of my job. Each time I carefully consider whether the connection would be helpful to each party and I almost always ask both sides whether it’s ok.

Mostly I just wanted to write this as a reminder to founders to be suspicious of people who constantly introduce you around. And maybe also a reminder that the library, while infinitely less exciting than the party, is where real breakthroughs occur.

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In the most recent tech boom, the conventional Silicon Valley wisdom has been to ignore profits when starting a venture-backed company.

All that matters is growth — if you have product-market fit, you'll get users. Initially, investors are looking for a usage curve that goes steeply up and to the right. Eventually, you'll figure out how to earn revenue from those users, either by charging them or through a third-party who wants access to those users (like an advertiser or another company who will pay referral), so the revenue curve will follow the user curve.

And at some point after that, you'll reach a magic point where your costs are spread across enough users that you'll start to turn a profit.

This has led to all kinds of weird accounting. Privately held startups almost never talk about real, GAAP profitability. They talk about positive unit economics. (That's nice — they're not losing money on each sale!) They talk about being cash-flow positive. (That's better — they're taking in more money from operations than they're spending!) They talk about being profitable if you ignore that pesky stock-based compensation. (Which means they really might be on to something!)

This is how companies like Twitter, Box, and Square are able to go public at valuations worth billions without ever having turned an annual profit in their history. All of those companies are over five years old. Twitter is ten years old.

But one Silicon Valley VC, Chamath Palihapitiya, thinks this conventional wisdom is all wrong. 

Palihapitiya was an early Facebook executive, and he saw how that company was able to become profitable in "six years," and was able to go public a couple years later.

As he told Business Insider's Biz Carson in an interview:

"I feel like a lot of entrepreneurs hear all this talk about profitability and realize they need to lower their burn. So, they just start chopping off perks and people. If you’re trying to get to profitability by lowering costs as a startup then you are in a very precarious and difficult position.

"You need to grow through profitability. Startups should be, if you graph their financial performance, it should be what’s called a J curve. You start out at zero, you’re not making any money, you’re not losing any money.

"As you start the company, you start spending spending spending ahead of revenue. But then you come out of it and very quickly you should become a company that spends less than it makes. And what I mean by very quickly, is that window of time should be in that 6 to 8 year time frame, 5 to 8 years. And the reason is because if you build your business model correctly it’s almost unavoidable."

To get there, startups should dispense with the other momentum metrics and report profitability:

"Why should I not report on GAAP? Like the young entrepreneur right now that is starting a company, she should be telling herself “alright you know what f--- all the nonsense, I’m reporting GAAP from day one.” Immediately clarifying. You can’t hide the cheese. And then you have to set a goal, I’m going to spend less than I make.

"I swear to God if you say that people will scratch their heads. Now, you don’t have to do that day one, but you have to have a goal of getting there, right?"

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