Technology

Online gaming platform Roblox, now home to 115 million largely Gen Z players per month, announced today it has raised $150 million in Series G funding, led by Andreessen HorowitzLate Stage Venture fund. The company will also open a tender offer for up to $350 million of common and preferred shares, it says.

The company has previously offered stakeholders and employees liquidity through periodic secondary offerings, as it believes in its long-term potential. Roblox is also cash-flow positive, according to its CFO Michael Guthrie.

Others participating in the Series G include new investors Temasek and Tencent Holdings Limited, as well as existing investors Altos Ventures, Meritech Capital, and Tiger Global Management.

The funding comes at a period of significant growth for the gaming platform. Just last summer, it was being visited by 100 million users, topping Minecraft, and its developer community of over 2 million actives earned $110 million in 2019 — up from around $70+ million in 2018 and $40+ million in 2017.

Since then, Roblox has further invested in its developer business, with the launch of new tools for building more realistic 3D experiences and a marketplace where creators can sell their own development assets and tools to others, among other things.

Roblox offers a platform for its developers to build upon, similar to the App Store. Many of its most popular games are free, instead monetizing as players spend on in-game items using virtual cash called Robux. Some of its largest games average over 10 million users monthly. Over 10 games have seen more than 1 billion visits.

Players on Roblox often do more than just focus on completing a goal or task — they go online to hang out with friends in a gaming environment. Half of weekly active users go to Roblox to play with friends. In addition, half of Roblox users update their avatar every month.

In recent months, Roblox has also been working to take its platform further outside the U.S. including most notably China. Last year, Roblox entered a strategic partnership with Tencent in an effort to bring its platform and coding curriculum to the region, including by adding support for Chinese languages and running coder camps. Today, Roblox has players and creators in over 200 countries, it says.

As of last year, Roblox was valued at $2.5 billion, with roughly half of U.S. children ages 9 through 12 playing on its platform, according to comScore. This remains true today. In addition, its user base overall skews younger, with over 40% 13 and up.

The company is now valued at $4 billion, The Wall Street Journal reported. (TechCrunch additionally understands this to be true. Roblox isn&t commenting.)

Today, Roblox says its user base is spending a collective 1.5 billion hours per month on its service. And because itaccessible across platforms, users often move from PC to smartphone to continue to play — a newer trend in online gaming, and one thatalso driving adoption of games like Fortnite, PUBG, and others.

&We are big believers in Robloxlong-term vision, and are confident in backing the team as they enter this next inflection point,& said David George, General Partner at Andreessen Horowitz, of the firminvestment. &Roblox is one of those rare platform companies with massive traction and an organic, high-growth business model that will advance the company, and push the industry forward for many years to come,& he added.

Roblox plans to leverage the new funds to continue its growth, including international; further build out its developer tools and ecosystem; and invest in engineering talent and infrastructure.

&We&ve stayed true to our vision of creating a safe and civil place where people come together to create, learn, and have fun, and itamazing to see what we&ve built together with our global creator community,& said David Baszucki, CEO and co-founder of Roblox, in a statement. &Looking ahead, we&re doubling down on our commitment to building the most advanced tools and technology to take our creators and players into the metaverse of the future.&

Updated, 2/26/20, 7:30 PM ET with more updated statistics.

On the heels of her conversation-driving Twitter thread on 2020venture fundraising climate, Hustle FundElizabeth Yin converted her thoughts into an op-ed for TechCrunch. In keeping with her expansive thread, we asked her to adapt her thread for a TechCrunch column and join us for an extended conversation.

What follows is an interview between Yin and myself that came after I read her piece (which you can find here), digging into venture capitalist fear, the ability of established founders to raise outsized rounds, her advice on growth and how some Series A and Series B-stage companies posting impressive revenue expansion might be nigh-unfundable in this, the new fundraising reality.

What follows is an edited, occasionally condensed transcript of our chat. Letgo!

TechCrunch: Okay, question one. You said, &VCs have gotten scared, almost to a fault.& Aside from the WeWork IPO implosion, what are the leading drivers of this recent increase in fear?

Elizabeth Yin: Taking a step back, I think we have to ask ourselves, what is even the place of venture capital in the first place? And when you think about the original venture capital industry, you know, decades ago, those VCs were taking big, big bets, like at those moments in time during the 90s, or even before that, for some of the chip companies or even Apple Computer, there were many bets happening there.

It seems like everyone wants student entrepreneurs. Entrepreneur First makes startups out of raw student material, for instance. Most countries want high-skilled students to stick around and make new companies. Only the U.K. likes to charge them a fortune for an education and then kick them out if they don&t earn enough. But I digress!

In its long march to gradually cover several aspects of the U.K.startup scene, Founders Factory has invested in Creator Fund, the student-led venture capital fund. It launches today in the U.K. but plans to spread abroad to unearth startup innovation within European universities. It will use a network of &student VCs& in university campuses to invest in new technology ventures and student founders.

The idea here is that students invest in their peers, offering an alternative route to growth for university-based startups.

So far it has people signed up in 14 U.K. universities and offers up to £30,000 investment per startup. Equity is determined on a &case-by-case& basis. Pretty paltry for the average startup, but a kingransom for the average student starting, I guess.

While Creator Fund thinks that &the best person to find and support the most promising student founders is their classmate next to them in the laboratory or classroom,& I have a feeling this might end up tying them in a few interesting knots that may end up in some conflicts of interest. We shall see.

The fund intends to make about seven investments over the next 12 months. The VC has already made an investment in Imperial College London-based, Refund Giant — a service that syncs with credit and debit cards to automatically issue fast, hands-free VAT refunds for travelers.

Jamie Macfarlane, founder and CEO, said in a statement: &In the US, many of the great tech companies were born on college campuses & Facebook, Google, Snapchat - Yahoo were all started by student founders. The UK has some of the worldbest universities and the same potential for students founders to be creating great businesses. For those high potential students to pursue this path, they need better access to three things & capital, business support and community. We, at Creator Fund, are delivering a new VC model specifically focussed on delivering this. We&re training students at top universities to find and invest in deals with their peers and give them the early-stage support they need. And creating a community where they look around and see other people taking this entrepreneurial path.&

Henry Lane Fox, co-founder and CEO of Founders Factory, added, &What Creator Fund is doing is very special. They are challenging the VC landscape and we are excited to be part of it. It is giving highly-educated students the skills to be the investors of the future and uncover the founders of tomorrow.&

Creator Fund launches with a mix of students from a wide range of backgrounds. Current members of the team include Richa Bajpai from India who has previously built a global CSR company that raised over £20 million and Toyosi Ogedengbe from Nigeria, who has built a platform to help investors deploy capital in West Africa.

At launch, Creator Fund has teams across 14 U.K. universities: Oxford, Cambridge, LSE, UCL, Kings, Imperial, LBS, Warwick, Newcastle, Nottingham, Edinburgh, Leeds, Aberdeen and St Andrews.

When I was a founder many years ago, I felt like I heard constantly conflicting advice and opinions on raising money for my startup.

Iteasy to raise. Ithard to raise. If iteasy to raise, you should raise a LOT of money. You should raise a little money. You should try to go for a high valuation. You should raise at a &normal valuation& so it doesn&t bite you later.

It was hard to understand what was going on and what I should actually do.

Many years later, now as a VC, it turned out that most of the things you hear people say about fundraising are generally true and generally good pieces of advice. All at the same time. Even when these ideas conflict. How is that possible?

Because, like anything else, different pieces of advice are apt for different types of companies and founders. Todayfundraising landscape is particularly an interesting time of bifurcation thatworth laying out in detail.

For some founders, itnever been an easier time to raise

In the San Francisco Bay Area, if you&re a founder who has a &well-branded& resume, ita fantastic time to raise money at the earliest stages. It almost doesn&t even matter what company you&re building. You will get funding. You could be leaving Pinterest to start a company. Maybe you went to MIT and then did a 10-year stint at Google. Or maybe you were a former YC founder who is taking a second crack at a company. Or maybe you sold your last business for $10 million. If you did any of these things, ita great time.

For these founders, I&m seeing massive party rounds here in San Francisco — $3 million & $5 million seed rounds. Sometimes $10 million rounds right out of the gates! My friend, a fantastic serial entrepreneur with an exit, raised $8 million recently at $30 million+ post-money valuation with only a very early version of a product. Investors literally threw money at her and her round was oversubscribed.

SaaS is hot

And then, even if you don&t fit this profile, you can still generate a lot of heat on your fundraise. In the last few months, VCs have become very concerned about profitability. Itnot enough to be working on a fast-growth startup anymore. In part, we&ve all seen big-name startups that were once the darlings of Silicon Valley flounder in the late-stage markets because of high burn rates and being nowhere close to profitability.

And VCs have gotten quite scared. Almost to a fault.

So, I&m seeing companies at the Series A and Series B stages with 30% MoM growth that were popular before now struggle to raise their next rounds because they are not profitable. The feedback they receive is to &come back when you&re profitable or really close to it.& This mentality change has had a huge impact on marketplaces and e-commerce companies — companies that don&t have predictable repeat customers or high margins.

On the flip side, SaaS companies have become the new darlings VCs have gone gaga for. SaaS businesses have repeat customers, strong lifetime values and upsell potentials. They are capital-efficient, high-margin businesses. And if you are growing well as a differentiated (differentiated being a key word) SaaS company, you probably have many VCs knocking on your door — at all stages early and late even if you are not on the coasts.

For most founders, itstill challenging (as always) to raise money

For everyone else, after reading news stories about such large fundraises, it can be confusing to understand why their own fundraise is so challenging. Why is it so hard for me to raise money?

It turns out that fundraising is still hard for everyone else. Even in the Bay Area, if you don&t fall into the categories above, ithard. People often erroneously think that just being in San Francisco will miraculously make fundraising easier. Thatfar from true. There are certainly many people who get funded there, but there are also just many more startups in San Francisco than elsewhere. Outside the SF Bay Area, iteven harder to raise. So we have a weird Goldilocks and the Three Bears situation. Some companies are really hot. Most are really cold.

The press mostly writes about the hot deals, like companies that raise $5 million seed rounds and went through YC. After all, no one wants to read about how someonefundraising process is going horribly — thatjust not a news story that sells. So now, everyone thinks Silicon Valley is littered with gold just by reading the news. The reality is that San Francisco mostly has poop on the ground and a small number of people will find a Benjamin once in a while.

Valuations are all over the board

I&m seeing valuations well above $10 million post — even $20 million post for hot seed-stage companies. And then for companies that are cold, the valuations are where they&ve always been — largely anchored based on geography. As low as $1 million post within U.S. and Canada. And it can even be lower elsewhere globally.

So when people ask me what a fair valuation is, ita really hard question. It depends on where you are, what you&re working on and what your background is. Many people think valuations are based on a companyprogress. Thatjust not how it works. Valuations are based on supply and demand. Supply of your fundraising round. And investor demand for your fundraising round. Valuations go up when more investors are interested in investing. Thereno such thing as a &typical& valuation.

Everyonemental model will be shifting

Friends outside of Silicon Valley often ask me if I think this time VCs will favor profitable companies over fast growth.

I think the answer is VCs would love to back profitable companies with fast growth.

(That, of course, begs the question in this day and age with other debt or revenue-based financing options why such a company would raise a lot of VC money, but thatbesides the point.)

That said, I do think that in this new era we are entering in 2020, companies that focus on profitability will separate the winners from the losers in the next few years. Thriftier founders will win.

Now, herethe irony. As we go into this new age where frugality is a strength, I think that the startup journey will actually be harder for the founders who are able to raise their large seed rounds so quickly at high valuations. From past experience, I&ve found that founders who can raise easily in a first raise really struggle later on subsequent raises because they don&t know just how hard a fundraise can be. Moreover, founders who can raise large amounts in the beginning tend to be less frugal and often burn through too much cash before their progress really kicks in. In contrast, overlooked founders who have often found it challenging to raise know that they need to be frugal by default, because itunclear how hard the next fundraise will be. These founders know they need to make the business work with or without investors.

The ironic twist is that investors throw money at founders with particular resumes because they believe those founders will be the most likely to succeed with big exits. A strength can quickly turn into a weakness in this market.

My hope for all founders in 2020

My hope for all founders is that they focus on staying thrifty, watch cashflow and chip away at getting to profitability so they can own their own destiny. By focusing on customers, instead of investors, you can sell more and sell quicker. Ultimately, the end goal for a company is to be able to serve customers sustainably and effect change in our larger society.

And thatwhat I wish all startups find in 2020, so they don&t have to care about the whims and fancies of investors as they change with the times.

Read our extended interview with Elizabeth Yin (Extra Crunch membership required).

Made Renovation, a new, San Francisco-based company, thinks it has found a profitable way to help homeowners get done something that busy general contractors in the Bay Area won&t otherwise make time for, which is bathroom remodels.

Why they typically pass on these: they have too many entire homes, or, at least, entire floors, to build for affluent regional homeowners who&ve kept the construction industry buzzing for years.

Ita problem that founders Roger Dickey, who previously co-founded Gigster, and Sagar Shah, who previously founded Quad, think they can solve through technology, naturally. Their big idea: create bathroom templates that customers can customize but whose scope and costs are generally understood, line up these customers, then hire general contractors who are willing to focus only on these bathrooms.

Itan idea thatpicking up traction with these GCs, says Dickey, who explains it this way: &General contractors generally see net margin of 3%& no matter the size of the job, owing to unforeseen hurdles, like pipes that suddenly need to be rebuilt, drains that need to be dug and materials that don&t ship on schedule.

In addition to timing issues, GCs are also often dealing with frustrated building owners who might underestimate a projectcosts, particularly in California, where construction bills often cause sticker shock.

Made Renovation sees an opportunity to make both the lives of GCs and homeowners easier. Through pre-negotiated pricing, volume and materials handling (it right now rents part of a warehouse where it receives goods), itpromising GCs a &reasonable margin& so they can not only pay their crews but live a higher quality of life themselves.

Meanwhile, per the plan, customers need only choose from the company&modern& collection, its more traditional &heritage&design or its &artisan& collection — all of which can be customized — then sit back while their long-neglected bathrooms are remade.

Whether Made Renovation can pull off its grand vision is a giant question mark. The construction industry is nothing if not messy, and in addition to convincing GCs of its merits, Made Renovation — like any marketplace company — has to strike the right balance between customer demand and supply as it gets off the ground.

In the meantime, investors clearly think it has promise. Led by Base10 Partners and with participation from Felicis Ventures, Founders Fund and some individual investors, the company has already raised $9 million in seed funding across two tranches.

Part of that capital is on display right now in San Francisco, where Made Renovation today opened its doors to customers who want to check out its design ideas and, if all goes as planned, will begin lining up their own home improvement projects. Customers simply pick a collection, Made Renovation then puts together a &mood board& of materials from that collection, sends out a 3D rendering of what to expect, then goes into build mode with its GC partners.

As for what happens when that build goes awry, Dickey says Made Renovation has it covered. Most notably, while it guarantees the work to its own customers, the GCs with whom it works guarantee their work to Made Renovation.

Dickey also notes that while the startup &may lose money on some projects,& he stresses there are caveats that customers agree to at the outset. Among these, he says, &We can&t X-ray their walls and see if they don&t have wiring up to code. We don&t cover dry rot in walls.& Technology, suggests Dickey, can only do so much.

If you&re in the Bay Area and want to check out its new storefront, iton Chestnut Street in SF, in the cityMarina district. The company hopes to perfect its model in the Bay Area, says Dickey, then expand into other regions. As for why Made Renovation decided to tackle one of the most challenging U.S. markets first, he suggests itthe best way to test its mettle. &I like the idea of starting a company here, because if we can make it work here, I think we can succeed anywhere.&

Last week, the Business of Fashion broke the news that co-founder and CEO Tyler Haney was stepping down from her role as CEO of the activewear label Outdoor Voices, citing slowing growth for the company and reporting that mismanagement was one reason for executive turnover at the top of the organization. The company soon after confirmed the news to us, saying that Haney would assume a new position as &founder& and remain on the companyboard of directors, even helping in its search for a new CEO.

None of this sat very well with Haney, apparently, who last week suggested in an email that the BoF report wasn&t entirely accurate, and now, according to the company, has &made a personal decision to resign from Outdoor Voices .& As it said in a statement sent to us yesterday, &We respect [Tyler&s] choice and wish her the best. As the founder of our company and a creative visionary, she brought Outdoor Voices to an important stage in our evolution.&

Yet it isn&t just Haney thatout the door. According to the same statement, to curb costs, the company has conducted layoffs — which we&ve learned involved around 15 corporate and field positions out of what we estimate to be roughly 300 people employed by Outdoor Voices.

Says the company: &Our focus remains on the future of Outdoor Voices and doing whatbest for our company and our team. To that end, after much consideration and exploration of numerous options, we have made the difficult decision to eliminate a small number of positions. We are grateful for the contributions of the individual team members who have been impacted. Our mission isn&t changing, but we believe that operating more dynamically in an evolving retail environment will position Outdoor Voices for long-term growth and success as we continue to build an incredible, positive community that is redefining how people think about recreation.&

Haney reportedly owns 10% of the brand, so even while shemoving on, she presumably wants to see it succeed. Indeed, according to a Slack message to staffers republished by BuzzFeed, she wrote to them: &You all know how much I value and I am incredibly proud of the brand community and team we have built together to get the world moving over the last six years,& she wrote in the message, according to BuzzFeed News. &This has been one of the most rewarding experiences of my life and I am so grateful to each and every one of you. THANK YOU. Sending all of my love. The future is bright and ityours for the taking.&

Outdoor Voices, founded in 2013, had raised $64 million in funding as of 2018, including from General Catalyst, Forerunner Ventures, GV and Drexler Ventures, the family office of Mickey Drexler, formerly of J.Crew fame.

Late last year, it raised additional funding from its investors, it confirmed to us last week, without disclosing the amount of funding. (According to that original BoF report, the company tried raising new funding late last year — presumably in part from new investors — but &had difficulty.&)

BoF also reported that the company was losing roughly $2 million monthly in 2019, with annual sales of around $40 million, numbers that Outdoor Voices has not disputed.

With Haney now completely out the door, itup to those who remain to turn things around. The big question is how.

According to a source close to the company, which began as a direct-to-consumer brand, it isn&t planning any store closures (yet). Outdoor Voices has 11 locations, including in Austin, New York and Nashville.

In the meantime, while Outdoor Voices searches for a new CEO, it has installed Cliff Moskowitz as the top boss on an interim basis. Moskowitz comes fromInterLuxe, a kind of private equity firm that works with fashion and luxury brands, where he has served as president for the last six years, according to his LinkedIn profile.

Pictured above, center: Tyler Haney, speaking at a 2018 Disrupt event.