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We'd like to kick off this week by offering our congratulations to Jeff Morris and the team at Chapter One on the official launch of their second fund, Chapter Two. Crossover is proud to support Jeff on this journey into backing the founders making Web3 more accessible, and we welcome Chapter One to the Crossover portfolio alongside an amazing group of companies and other funds. (more here).

Also, this will also be our last issue of 2021 as we unplug and take some time off before heading into the New Year. We want to thank all of you for being part of the Crossover community and we wish you and yours a happy, healthy, and safe holiday season.

--
Welcome to the 2-Minute Drill -- a curated selection of the week's hottest stories from the world of tech, all in 2 minutes.


As a reminder, join us on Tuesday mornings at 8am PT / 11am ET in the Crossover Club on Clubhouse where we talk through the week's stories in more detail and with a rotating panel of special guests from the worlds of pro sports, entertainment and technology. 

As always, shoot me a note to learn more or if you just want to say 👋.

-Noah  


✉️ noah@crossovervc.com
📱 650.468.9543
📸 @crossovervc 
👋 @ndl / the Crossover Club


On my whistle...
FIRST DOWN


 

Twitch Founder Launches Fractal for NFT Gaming Marketplace
One of the biggest startup successes over the past decade was live-streaming platform Twitch, which was founded as Justin.tv back in 2011 and then quickly emerged to become the go-to destination for the rapidly-growing gaming and esports video streaming communities before being acquired by Amazon for nearly a billion dollars in cash in 2014.

Now, Twitch co-founder Justin Kan is back, and leveraging his entrepreneurial and gaming chops to build Fractal-- a marketplace for gaming NFTs built on the Solana blockchain. Fractal is being incubated by Goat Capital, the venture fund cofounded by Kan and Robin Chan, and in addition to Kan and Chan, will count industry veterans Mike Angell and David Wurtz as cofounders. 

When I caught up with Justin (in LA) and Robin (in Miami) over the past couple of weeks, I was immediately captivated by this idea. Digital goods are a massive business, with Fortnite alone generating $9 billion in revenue over two years, primarily from selling non-functional skins (essential the outfits your avatar wears). In today's gaming world, revenues are generated from in-app purchases more than initial sales of the game itself. Yet today, even if you "own" a digital good in a game, you don't really own it. You can't take a skin from Fortnite or a tool from Roblox and get any use from it on another platform. As game publishers embrace NFTs and increasingly put their digital assets on the blockchain, it will unlock an entirely new ecosystem where users can now extract their digital goods from one game, and then sell or swap with others for digital goods that can be used in an entirely different game.

In many way's Fractal can do for digital goods in the gaming ecosystem what traditional currency exchanges did for fiat or what Uniswap, SushiSwap and others are doing for decentralized finance (DeFi).

One of the biggest reasons why an exchange like this has not yet existed is that the cost of transactions has simply been too high (the dreaded "gas fees") on the Ethereum blockchain. For this reason, Fractal will be built on the Solana chain, which was designed to support faster and lower-cost transactions -- exactly what is needed if Fractal becomes the exchange platform for digital gaming goods.

The company is in its pre-launch stage, but we are excited to see what Justin, Robin and co are cooking up and look forward to giving the platform a test drive.

(more here)
SECOND DOWN


 

Found Weighs in With a Healthy $100M for Weight Loss
Just in time for those weight loss New Years Resolutions, this week San Francisco-based weight loss platform Found announced a svelte $100 million in Series B funding at a $600 million valuation as it looks to leverage technology to help people shed pounds. This brings the nearly three-year-old startup's reported total funding to $132 million.

When we last checked in with Found back in October, the startup had just come out of stealth and announced $32 million in venture funding. As a refresher, Found takes a holistic approach to weight management care. With more than a third of the US population categorized as obese, the disease has reached a crisis level. And with 50% of Americans reportedly on a diet, and only 5% actually losing weight, clearly the existing approaches aren't working. Here is where Found steps in. Found is the latest digital health company to focus on leveraging technology to deliver a more personalized and holistic approach to treatment. At its core, Found believes that obesity can't simply be treated by eating less. It requires a personalized and integrated approach.

Here's how it works. Customers take a quiz and then are paired with a dedicated medical provider who studies their health, history, and goals, and works with them on a realistic weight plan that may include prescribing medication. They then work with a personal health coach on mindful and healthy eating, exercise, sleep, stress management and more -- and making the coaching both personal and accountable. Lastly, Found offers a passionate and engaged digital community that provides support and celebrates victories along the way. It's a mix of mind, body, soul, and science.

The company reports that its approach is working--and clearly investors think so as well. The startup reports on average its members have lost 10% of their weight within 6 months, and more than 300,000 collective pounds have been shed by customers since launching in 2019.

The Money Quote: “At Found, our mission is to dismantle the diet culture and help people find lasting weight loss through the best of modern medicine and personalized support.” -- Found CEO, Sarah Jones Simmer 

(more here)
THIRD DOWN


 

Wisdom Looks to Stake a Claim for Mentorship in Social Audio
This week, UK-based social audio app for mentorship Wisdom announced a $2 million seed round of funding led by First Round Capital. This marks the first reported round of funding for the young app who aims to connect listeners with experts looking to monetize their expertise, grow their personal brands, and help those who need it most. 

Social audio has emerged in the past year as one of the hottest new mediums in the battle for attention in the social media landscape. Clubhouse paved the way, and was then quickly followed by dozens of startups and bolt-ons from other social media platforms (eg Twitter Spaces) alike. Wisdom is looking to stake its own claim in the social audio landscape by offering what feels like a cross between MasterClass and its celeb-driven curated content, and Clubhouse's more free-flowing format-agnostic platform.

The Wisdom app is centered around one-to-one conversations that feel more like advice and mentorship--but with an audience that can listen in live or tune in to a recording later. The idea is that by creating more structure, users will come to Wisdom for a more purposeful and intentional use case than can be found on other platforms. And for creators, Wisdom is positioning itself as a better alternative to the heavy lift of professional podcasts, and a way to connect and monetize directly from more targeted followings.

The company is still in its infancy, but reports that 15,000 users have joined the platform to-date, with hundreds more joining daily. It also reports that more than 600,000 minutes of insight and guidance have been shared by creators on the platform in the 8 weeks since launch.

While there are a lot of opinions about what's in store for the future social audio, our position is that audio is a durable medium and that historically "pure play" platforms tend to win out over those that try to tack on wide-ranging features -- YouTube for video, Instagram for photos, Twitter for micro-messaging, TikTok for short-form video, etc. Wisdom is still in its earliest days, and we'll see if its approach to targeting this vertical within social audio pays dividends.

(more here)
FOURTH DOWN


 

Buzz Off: A Double Dose of Funding for Drone Security Startups
What's that buzzing sound you hear? It may be one of the 3.5 million drones currently in use--of which just 900,000 are registered. The global market for commercial drones is projected to hit $58.4 billion in 2026, but what about security? More than 2,500 unidentified drone incidents were reported by the FAA last year, and one of the most notable incidents involving drones was the 2018 Gatwick airport incident in the UK in which more than 1,000 flights were cancelled and 140,000 passengers were impacted while security experts required 48 hours to identify a potential threat--which proved to be a drone hobbyist. And as use of drones--both commercial and for fun--grows, the need for better security systems grows as well.

That's where today's double dose of startups comes in.

First up is San Diego-based SkySafe, which this week announced a fresh $30 million in Series B funding to help scale drone defense and airspace security. This brings the six-year-old startup's total funding to $45 million. SkySafe has developed an airspace awareness technology platform that uses a blend of radio technology, reverse engineering, and advanced threat detection to help businesses and governments detect drones and asses threats and permissions. Clients include military, municipal governments and law enforcement, and in addition to detection and assessment, the company touts the latest technology to jam drone control signals without impacting permitted signals in the same area.

Next up is San Francisco-based Dedrone, which this week announced a buzzy $30.5 million in Series C funding for its own spin on drone security and protection. This brings the seven-year-old startup's total funding to $67.4 million. Dedrone's particular solution leverages advanced AI/ML technology to combine data across multiple sets of sensors to help customers detect, identify, and track drones. They position their product as Airspace Security-as-a-Service (ASaaS), and count four G-7 nations, nine U.S. federal agencies, 20 airports, 50 correctional facilities, and 10 Fortune 500 companies as clients. This year, the company sold more than 1,000 of its sensors and has expanded its capabilities to detect more than 200 different types of drones.

Whether it be through the use of drones to deliver parcels by Amazon, increased use by hobbyists, or the growing threat posed by terrorists or other bad actors who can now acquire drone technology more easily and cheaply than ever before, as the market for drone usage grows, so too does the need for technologies to help manage and secure drone operations.

The Money Quote: "As our airspace gets more crowded with drones, it becomes increasingly difficult to ensure those flying over our airports, stadiums, borders and other public spaces are authorized to be there." -- SkySafe Founder and CEO, Grant Jordan.  

(more here and here)
EXTRA POINT



Talent in Tech: Heir
Anytime the GOAT (aka His Airness, aka Jumpman, aka Michael Jordan) puts his name on a project, the public tends to take notice. Add to that a sprinkle of "web3" and "crypto" and the sirens start wailing! Such is the case with this week's announcement that Jordan is attaching his name to a new startup cofounded by his son Jeffrey called Heir, that is aiming to leverage blockchain technology to connect loyal fans with popular athletes. This week the startup announced a $10.6 million seed round of funding led by Thrive Capital. (note the play on words with "Heir" and "Air" for MJ's nickname, "Air Jordan").

The Holy Grail for athletes and celebrities has always been to find more effective ways to connect directly with their most passionate fans, and to capture as much value as possible from those relationships. Today, athletes primarily engage with their fans by way of social networks like Instagram and Twitter, where the platforms monetize the content through ads, and the athletes themselves don't see any of revenues their content generates (thought to be fair, these platforms help amplify their personal brands, which helps them monetize more from traditional endorsements and other opportunities). One of the promises of blockchain technology is to enable individuals--be it a creator making music, an artist, or in this case an athlete--to truly own their content and monetize direct from their fans.

With Heir, the vision is for fans to be able to purchase one-time digital assets that allow them to join a "huddle" of their favorite athlete, which then unlocks access to exclusive merch drops, digital goods, immersive experiences, and more. It's essentially a digital VIP pass to this relationship with the athlete. In many ways, it's the same idea as how owning a Bored Ape NFT can grant you access to IRL events and opportunities for derivative projects. Heir will create scarcity by limiting the number of participants in a huddle, thus ensuring there is a balance of supply and demand, and also taking a page out of early projects like BitClout, where if you purchase the token of the next LeBron James before they are a superstar, the value of that token may increase over time and you can then resell it for a tidy profit. And for the athletes themselves, they will get a share of all future transactional earnings--much like how the artist behind an NFT gets a percentage of every resale in perpetuity.

Like the Fractal project noted in First Down above, Heir plans to build on the Solana blockchain, with a goal of launching in early 2022. No word yet on which athletes will be participating. As for monetization, Heir plans to generate revenues by taking a cut of the customer transactions--reportedly 20% of the primary token sales of an athlete's NFT for their "huddle" and then a 50/50 split on resale transactions. 

As we've written about in the past, we love the idea around using blockchain technology to enable creators (and talent) to directly engage with and monetize their audiences. Startups are always a challenge for a multitude of reasons, but one thing we will be eager to see is to what extent athletes that sign up for the platform will stay engaged, and take the time to create unique content and/or experiences that fans see value in and want to purchase tokens for. This is where the technology-enabled tools and operational processes Heir builds will play a key role, and we wish them success as they roll this out.

Athletes + Entertainers involved include: NBA legend Michael Jordan and NBA guard Lonzo Ball.

(more here)
 

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Disclaimer: The content in this newsletter is for informational purposes only and should NOT be taken as legal, business, tax, or investment advice. It also does NOT constitute an offer or solicitation to purchase any investment or a recommendation to buy or sell a security.



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