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Steve Case and Clara Sieg on how the COVID-19 crisis differs from the dot-com bust

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Steve Case and Clara Sieg of Revolution recently spoke on TechCrunch’s new series, Extra Crunch Live. Throughout the hour-long chat, we touched on numerous subjects, including how diverse founders can take advantage during this downturn and how remote work may lead to growth outside Silicon Valley. The pair have a unique vantage point, with Steve Case, co-founder and former CEO of AOL turned VC, and Clara Sieg, a Stanford-educated VC heading up Revolution’s Silicon Valley office.

Together, Case and Sieg laid out how the current crisis is different from the dot-com bust of the late nineties. Because of the differences, their outlook is bullish on the tech sector’s ability to pull through.

And for everyone who couldn’t join us live, the full video replay is embedded below. (You can get access here if you need it.)

Case said that during the run-up to the dot-com bust, it was a different environment.

“When we got started at AOL, which was back in 1985, the Internet didn’t exist yet,” Case said. “I think 3% of people were online or online an hour a week. And it took us a decade to get going. By the year 2000, which is sort of the peak of AOL’s success, we had about half of all the U.S. internet traffic, and the market value soared. That’s when suddenly, when any company with a dot-com name was getting funded. Many were going public without even having much in the way of revenues. That’s not we’re dealing with now.”

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The accelerating digital transformation, redux

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Earlier this week, TechCrunch covered a grip of earnings reports showing that some companies helping other businesses move to modern software solutions are seeing accelerated growth. Inside the Software as a Service (SaaS) world, this is known as the digital transformation. Based on how many software companies are talking about it, the pace of change is only picking up.

But since we published that first entry, a number of SaaS companies that have posted financial results seemed to disappoint investors. Seeing some companies in the high-flying sector struggle made us sit back and think. What was going on?

Today we’re going to explore how the digital transformation’s acceleration seems real enough, but how it’s not landing equally. We’ll start by going over a short run of earnings results, talk to Yext CEO Howard Lerman about what his B2B SaaS company is seeing, and wrap with notes on what could be coming next from software shops.

A quick word on digital transformation

We all hear about digital transformation, but it’s hard to define. Generally, it’s a broad area that includes digitization of manual processes, modern software development practices like continuous delivery and containerization and a general way of moving faster via technology — especially in the cloud.

Speaking last month on Extra Crunch Live, Box CEO Aaron Levie defined the term as he sees it. “The way that we think about digital transformation is that much of the world has a whole bunch of processes and ways of working — ways of communicating and ways of collaborating where if those business processes or that way we worked were able to be done in digital forms or in the cloud, you’d actually be more productive, more secure and you’d be able to serve your customers better. You’d be able to automate more business processes.” he said.

What we’re seeing now is that the pandemic has accelerated the rate of change much faster than many had anticipated. Efforts to slow the spread of COVID-19 and its related workplace disruptions have accelerated what would have been a normal timetable. But on its own, that doesn’t mean the market is seeing equal results across every company and industry that might be part of that trend.

Earnings results

Lots of SaaS companies reported earnings this week, but two sets of returns stuck out as we reviewed the results, those from Slack and Smartsheet.

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TaxProper raises $2M to automate getting your property taxes lowered

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If you own your home, how much do you pay for property taxes? Too much? Sounds about right.

If you disagree with how much you’re paying in property taxes, you can appeal the assessment. Most people don’t, though — perhaps because they are unaware they can, or because they just don’t have the time to deal with the lawyers and paperwork.

TaxProper, a company out of Y Combinator’s Summer 2019 batch, has raised $2 million to simplify the process. The round was led by Khosla Ventures, backed by Global Founders Capital, Clocktower Ventures and a handful of angel investors.

Once you’ve punched in your address, TaxProper’s algorithm looks at the assessments of similar homes in your surrounding area, looking at things like size, number of rooms, construction materials, etc.

If the algorithm determines that you’re paying more than your share, they generate the required paperwork and send it off to the county. The company estimates that their part of the process takes 3-5 minutes (after which you’re waiting on the county’s response, which they say takes 6-8 weeks).

They’re offering up two different pricing models, charging either a $149 up-front fee or 30% of total first-year tax savings. If their algorithm says your taxes can’t be lowered, you don’t pay — nor do you pay if the appeal gets denied. The company tells me they’re currently seeing an average per customer savings of around $700.

TaxProper’s two co-founders have a good bit of experience in the space of taxes and government. Geoff Segal was previously an actuarial statistician and research analyst for State Farm, while Thomas Dowling was a municipal finance advisor for Chicago Mayor Lori Lightfoot. 

One thing to note: TaxProper is only up and running in select areas right now, as the company tests different strategies and makes sure they’re doing everything right region-by-region. It’s currently available in Chicago and the surrounding Cook County area, with plans to roll out “in the coming months” in New York and Texas.

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Portobel turns food producers into direct-to-consumer businesses

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A startup called Portobel is working to help food producers shift their businesses so they can support direct-to-consumer deliveries.

Portobel is backed by Heroic Ventures and led by Ranjith Kumaran, founder or co-founder of file-sharing company Hightail (acquired by OpenText) and loyalty startup PunchTab (acquired by Walmart Labs).

Kumaran told me that he and his co-founders Ted Everson and Itai Maron started out with the goal of improving the delivery process by using low-cost, internet-connected devices to track each order. As they began testing this out — primarily with dairy companies and other producers of perishable goods — customers started to ask them, “Hey, you can monitor these things, can you actually deliver these things, too?”

So last year, the company started making deliveries of its own, which involved managing its own warehouses and hiring its own drivers. Kumaran said the resulting process is “a machine that turns wholesale pallets into direct-to-consumer deliveries.”

He also emphasized that the company is taking safety precautions during the pandemic, ensuring that all of its warehouse workers and drivers have masks and other protective equipment, and that the drivers use hand sanitizer between deliveries.

Portobel warehouse

Image Credits: Portobel

Portobel currently operates in the San Francisco Bay Area and Los Angeles/Orange County. Kumaran said the COVID-19 pandemic has only accelerated the demand for the startup’s services, with the number of households it serves tripling since April.

That might sound a little surprising, since supermarkets were basically the one store that customers are still visiting regularly. Plus, there are a range of grocery delivery options.

However, Kumaran suggested that the D2C model is better for both producers and consumers. Producers get recurring orders for larger packages of food. And for consumers, “If you buy straight from the wholesale producer … everything’s in stock.”

As for delivery, he said that when you buy your groceries online, things are being packed and dispatched at your local store.”

“All those things about selection and availability, put those aside — the modern grocery store is not set up for efficient e-commerce delivery,” he added. “They need to block the aisles to pick up product, there’s no dedicated place to dispatch deliveries. That’s kind of why, if you’ve tried [grocery delivery], there are unpredictable delivery windows. It’s a challenge for these guys to scale online.”

Portobel’s customers include San Francisco-based grocery company Moo Cow Market. In a statement, Moo Cow founder Alexandra Mysoor said, “The pandemic has propelled retail as we knew it into a new wave, blending and merging all past and current forms of commerce. That’s where companies like Moo Cow Market enter and can scale and grow thanks to services like Portobel.”

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