Funding-round stories are TechCrunch’s bread and butter.
For early-stage companies, the fact that an investor has put thousands, millions (or billions) into an idea that will likely fail, and might never make money, is big news. That’s a story that we can tell every day.
From time to time, a debate pops up about the role of funding-round stories: Are financings the right metric to focus on? Should the trend be scratched and reinvented? After all, raising money is not indicative of making money. Let’s be real: news needs news to be published. There needs to be a tension, or a surprise, but most of all, a reason for the reader to keep reading.
It’s a healthy conversation, and one the Equity crew decided to discuss last Friday:
- Alex Wilhelm: Funding rounds are largely rose-tinted trade journalism, but they’re worth writing
- Danny Crichton: I hate funding announcements but write them anyway
- Natasha Mascarenhas: The stories are so much more than the dollar signs
Alex: Funding rounds are rose-tinted trade journalism, but they’re worth covering
It’s easy to mock funding-round coverage: There are far more rounds than hands to write them, so the coverage is inherently partial; they are a poor milestone to use as a benchmark for growth; and coverage of the startup in question nearly always has an overly positive tilt, given that the piece in question centers around something that is a win for the company.
Yet, I still think they are worth writing and try to get to a few each week.
There are good reasons for doing so that run counter to the obvious complaints. Sure, there are more rounds than we could ever cover, but in theory we’re filtering as best we can for the most interesting, the furthest outlying and the trend-elucidating rounds that we can use as a light to better illuminate how the broader startup and technology worlds are changing.
I think TechCrunch does a reasonable job of picking the right companies to cover and we spend a good amount of time aggregating discrete funding events into trends. It’s super-hard work, as covering a single round is time-consuming and ultimately not incredibly well-read.
And yes, funding rounds are not really milestones to celebrate. The startup isn’t suddenly destined to win. Capital just means that the venture class has increased its wager on the startup generating more wealth for themselves and their backers, whom are largely already rich.
But trying to lever any information from private companies is an exercise in sadistic dentistry, and startups tend to open up the most around funding rounds. So, if you want to chat with a CEO on the record for half an hour, the next time their startup raises is probably your best chance.
And there is signal in a venture round. Someone felt strongly enough about the company’s prospects to inject it with more capital, making a funding event a reasonable signal that something is going on at the company.
Then there’s the issue of bias. All publications have a bias. TechCrunch has many biases, the most important and salutary of which is that we think that startups are cool. We do! Quickly-growing, private companies are inherently interesting and I came back to this publication in part so that I could keep writing about them. I am never bored.
So, yes, funding-round coverage tends to be a bit more on the positive side of balanced than I would like, but I balance that by becoming increasingly orthodox as a startup scales. When a young company raises its first few million, the chat with the CEO is her telling me about her small team, first customers and fitful progress.
By the time she raises a $50 million Series C, we’re talking gross margin expansion, YoY ARR growth and diversity metrics. Before she takes her unicorn public, I’m asking pressing questions about GAAP results, the public markets and what sort of external offers are coming in for the whole concern.
Being slightly optimistic about startups when they’re young is, then, tempered by increasing scrutiny as the company grows. That seems like a fair balance for the company and our readers.
So I won’t stop covering funding rounds. Even if I didn’t have this job I probably still would for my personal blog. I always learn something from high-growth companies; they have a window into the market that is dynamic and far from ossified. And early-stage founders tend to not be overly media-trained, so they are still interesting.
And sometimes something you write winds up changing the direction of a startup. That’s always a very weird and disconcerting feeling. But as this impact is nearly always good for the company in question, you’ve only accidentally made the lives of others a bit better for a short while. It’s not so harsh a sentence.
Danny: I hate funding announcements but write them anyway
Covering startups is one of the hardest news beats out there (trust me, I’m unbiased — I cover startups for a living).
If you cover the Senate, you report regularly on 100 individuals, their staffs and interactions. If you cover banking, you watch a handful of banks since no one gives a flying rat’s tushy about the industry’s middle market. There’s generally a limited scope in political and general business reporting where you know the key players and the key newsmakers.
In startups, you cover … everything. There are a couple of hot sectors that everyone is talking about … and then there is every other sector that might be the next hot sector, but no one has ever heard of it. It’s probably not important. But it might just be. That startup you talked to this week sounds boring. Four years later, it sells for $20 billion. The startup world is constantly changing, and unless you blow up your whole worldview on a regular basis, you’ll never keep up.
What’s our goal with startup coverage? In my view, it’s simple: to identify “breakouts,” aka startups that were formerly just chugging along, but suddenly found product-market fit and are now growing like crazy.
The startup that struggled to hire and just now brought on two key execs who will propel the company forward. That company that a VC thought could monetize which suddenly signs its cash-upfront $1 million contract.
It’s hard to have that kind of precision and judgment about tens of thousands of companies per year. This is literally what VCs do for a living — find startups at inflection — and few firms and individual investors have found durable sources of competitive advantage when it comes to identifying these soon-to-be winners. In an ideal world, every startup would give their dashboard metrics to TechCrunch in real time and I’d have omniscience. Alas.
So our next best approach outside of sourcing, scooping and beat reporting is the venerable funding announcement. It’s a mark of progress — hey, someone liked this thing well enough to plow some actual dollars into it — and also a good checkpoint to see the metrics and the story and evaluate the picture a founder paints.
Take a look at ZenBusiness, which I have now covered three times over the past three years. “ZenBusiness raises $4.5m to help launch one million small businesses by 2023” (February 26, 2018), “ZenBusiness raises $10m to help founders launch and grow “worry-free”” (September 25, 2019) and “ZenBusiness snags $65M Series B for its business formation and growth platform for micro businesses” (November 19, 2020). There are details from each round, and a careful reading will give you a sense for how the startup has evolved as it has scaled.
Ideally, we could nail all of these startup stories a few weeks or months earlier. Sometimes we do, but again, did I mention there are now tens of thousands of VC fundraises and new startups formed every year?
I hate the funding announcement, but long live the funding announcement. Because otherwise, I’d either have to cover Delaware S-corp filings or try to get my hands on more raw payments data. With the funding announcement, at least I get to pluck the best startup stories out of my inbox and splash them across the interwebs.
Natasha: The stories are so much more than the dollar signs
Recently on Twitter I had a conversation with some investors and techies about the disappearance of funding-round stories. The argument one investor said is that most of his portfolio companies are actively choosing to not announce funding rounds because they don’t need market validation.
.@pitdesi is manifesting the death of the funding round story:https://t.co/E8m2Dsluz9 pic.twitter.com/p7ex3Z9dFl
— natasha mascarenhas (@nmasc_) November 13, 2020
As much as I cringed, it’s a fair point. As Alex noted, funding rounds, especially at the early stages, are a gift of sorts. A TechCrunch headline might help an early-stage founder prove to a venture capitalist that they’re a big deal or hire an unsure engineer who needs an extra shot of validation. However, if a founder views their relationship with the press solely as a marketing arm for their company, they will 100% learn they are wrong: we will cover your rise, and we will cover your fall.
Still, let’s play out what happens if the majority of founders decided to stop sharing funding rounds. Would the headlines be filled with stories of revenue or customer growth? Profitability? Pivots?
Probably not. Funding rounds exist because it has gotten harder and harder over time to get founders to talk to journalists before they have good news. The same people who slam the idea of the dollar sign being the highlight of a headline are the same people who refuse to share literally any other details about their company.
I don’t think funding rounds are groundbreaking, but they do give us a window into how a founder thinks. We get to tack on questions about the competition, poke holes in their assumptions and ask how it felt when the wire hit.
The entire ecosystem would feel more drab if we ceased writing and publishing about new rounds. We’re already seeing what happens when founders get (even) quieter with the press: I recently wrote about a startup that raised millions of dollars but wouldn’t tell me its name, and about another that has raised nearly the same amount of capital but wouldn’t share details about its product.
Early-stage founders, I get it. I really do. Most days at a startup do not warrant a 500-word story on TechCrunch, and when a newsworthy event occurs, few firms are satisfied with a 500-word recap. But I do think transparency, and sharing the ups and downs from the get-go, is important for the broader tech community.
The reason I love writing about tech and do the sometimes formulaic funding-round story is because I meet people who are crazy enough to bet their entire legacy on a napkin-stage idea. That’s the story, and the surprise and the tension. The dollar sign is just the first way in.
If funding-round stories were simply stories about funding, we would only need Twitter to be educated. TechCrunch is proof that the stories are so much more than the dollar signs.
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