If money is the ultimate commodity, how can fintechs — which sell money, move money or sell insurance against monetary loss — build products that remain differentiated and create lasting value over time?
And why are so many software companies — which already boast highly differentiated offerings and serve huge markets— moving to offer financial services embedded within their products?
A new and attractive hybrid category of company is emerging at the intersection of software and financial services, creating buzz in the investment and entrepreneurial communities, as we discussed at our “Fintech: The Endgame” virtual conference and accompanying report this week.
These specialized companies — in some cases, software companies that also process payments and hold funds on behalf of their customers, and in others, financial-first companies that integrate workflow and features more reminiscent of software companies — combine some of the best attributes of both categories.
From software, they design for strong user engagement linked to helpful, intuitive products that drive retention over the long term. From financials, they draw on the ability to earn revenues indexed to the growth of a customer’s business.
Fintech is poised to revolutionize financial services, both through reinventing existing products and driving new business models as financial services become more pervasive within other sectors.
The powerful combination of these two models is rapidly driving both public and private market value as investors grant these “super” companies premium valuations — in the public sphere, nearly twice the median multiple of pure software companies, according to a Battery analysis.
The near-perfect example of this phenomenon is Shopify, the company that made its name selling software to help business owners launch and manage online stores. Despite achieving notable scale with this original SaaS product, Shopify today makes twice as much revenue from payments as it does from software by enabling those business owners to accept credit card payments and acting as its own payment processor.
The combination of a software solution indexed to e-commerce growth, combined with a profitable payments stream growing even faster than its software revenues, has investors granting Shopify a 31x multiple on its forward revenues, according to CapIQ data as of May 26.
How should we value these fintech companies, anyway?
Before even talking about how investors should value these hybrid companies, it’s worth making the point that in both private and public markets, fintechs have been notoriously hard to value, fomenting controversy and debate in the investment community.
Tech companies in Silicon Valley, the geography, have had an incredible year. But one indicator points to longer-term changes. The internal rate of return (IRR) for companies in other startup hub cities has been even better. A big new analysis by AngelList showed aggregate IRR of 19.4% per year on syndicated deals elsewhere versus 17.5% locally. A separate measure, of total value of paid-in investment, revealed 1.67x returns for other hubs versus 1.60x in the main Silicon Valley and Bay Area tech cities.
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The data is based on a sample of 2,500 companies that have used AngelList to syndicate deals from 2013 through 2020. Which is just one snapshot, but a relevant one given how hard it can be to produce accurate early-stage startup market analysis at this scale. I believe we’ll see more and more data confirming the trends in the coming years, especially as more of the startup world acclimates to remote-first and distributed offices. You can increasingly do a startup from anywhere and make it a success. Not that Silicon Valley is lacking optimism, as you’ll see in a number of the other stories in the roundup below!
Managing Editor, Extra Crunch
(Subbing in for Walter today as he’s enjoying a well-deserved break and definitely not still checking the site.)
Optimism reigns at consumer trading services as fintech VC spikes and Robinhood IPO looms
With the Coinbase direct listing behind us and the Robinhood IPO ahead, it’s a heady time for consumer-focused trading apps.
Mix in the impending SPAC-led debut of eToro, general bullishness in the cryptocurrency space, record highs for some equities markets, and recent rounds from Public.com, M1 Finance and U.K.-based Freetrade, and you could be excused for expecting the boom in consumer asset trading to keep going up and to the right.
But will it? There are data in both directions.
After going public, once-hot startups are riding a valuation roller coaster
A short meditation on value, or, more precisely, how assets are valued in today’s markets.
Long story short: This is why I only buy index funds. No one knows what anything (interesting) is worth.
Should you give an anchor investor a stake in your fund’s management company?
Raising capital for a new fund is always hard.
But should you give preferential economics or other benefits to a seed anchor investor who makes a material commitment to the fund? Let’s break down the pros and cons.
2021 should be a banner year for biotech startups that make smart choices early
Last year was a record 12 months for venture-backed biotech and pharma companies, with deal activity rising to $ 28.5 billion from $ 17.8 billion in 2019.
As vaccines roll out, drug development pipelines return to normal, and next-generation therapies continue to hold investor interest, 2021 is on pace to be another blockbuster year.
But founder missteps early in the fundraising journey can result in severe consequences.
In this exciting moment, when younger founders will likely receive more attention, capital and control than ever, it’s crucial to avoid certain pitfalls.
Two investors weigh in: Is your SPAC just a PIPE dream?
The fundamental thing to remember about the SPAC process is that the result is a publicly traded company open to the regulatory environment of the SEC and the scrutiny of public shareholders.
In today’s fast-paced IPO world, going public can seem like simply a marker of success, a box to check.
But are you ready to be a public company?
There is no cybersecurity skills gap, but CISOs must think creatively
Those of us who read a lot of tech and business publications have heard for years about the cybersecurity skills gap. Studies often claim that millions of jobs are going unfilled because there aren’t enough qualified candidates available for hire.
Don’t buy it.
The basic laws of supply and demand mean there will always be people in the workforce willing to move into well-paid security jobs. The problem is not that these folks don’t exist. It’s that CIOs or CISOs typically look right past them if their resumes don’t have a very specific list of qualifications.
In many cases, hiring managers expect applicants to be fully trained on all the technologies their organization currently uses. That not only makes it harder to find qualified candidates, but it also reduces the diversity of experience within security teams — which, ultimately, may weaken the company’s security capabilities and its talent pool.
To be frank, we do not know how to value Honest Company
We do not know how to value Honest Company.
It’s outside our normal remit, but that the company is getting out the door at what appears to be a workable price gain to its final private round implies that investors earlier in its cap table are set to do just fine in its debut. Snowflake it is not, but at its current IPO price interval, it is hard to not call Honest a success of sorts — though we also anticipate that its investors had higher hopes.
Returning to our question, do we expect the company to reprice higher? No, but if it did, The Exchange crew would not fall over in shock.
How Brex more than doubled its valuation in a year
Brex, a fintech company that provides corporate cards and spend-management software to businesses, announced Monday that it closed a $ 425 million Series D round of capital at a valuation of around $ 7.4 billion.
The new capital came less than a year after Brex raised $ 150 million at a $ 2.9 billion pre-money valuation.
So, how did the company manage to so rapidly boost its valuation and raise its largest round to date?
TechCrunch spoke with Brex CEO Henrique Dubugras after his company’s news broke. We dug into the how and why of its new investment and riffed on what going remote-first has done for the company, as well as its ability to attract culture-aligned and more diverse talent.
Founders who don’t properly vet VCs set up both parties for failure
There’s a disconnect between reality and the added value investors are promising entrepreneurs. Three in five founders who were promised added value by their VCs felt duped by their negative experience.
While this feels like a letdown by investors, in reality, it shows fault on both sides. Due diligence isn’t a one-way street, and founders must do their homework to make sure they’re not jumping into deals with VCs who are only paying lip service to their value-add.
Looking into an investor’s past, reputation and connections isn’t about finding the perfect VC, it’s about knowing what shaking certain hands will entail — and either being ready for it or walking away.
Fifth Wall’s Brendan Wallace and Hippo’s Assaf Wand discuss proptech’s biggest opportunities
What is the biggest opportunity for proptech founders? How should they think about competition, strategic investment versus top-tier VC firms and how to build their board? What about navigating regulation?
We sat down with Brendan Wallace, co-founder and general manager of Fifth Wall, and Hippo CEO Assaf Wand for an episode of Extra Crunch Live to discuss all of the above.
SaaS subscriptions may be short-serving your customers
Software as a service (SaaS) has perhaps become a bit too interchangeable with subscription models.
Every software company now looks to sell by subscription ASAP, but the model itself might not fit all industries or, more importantly, align with customer needs, especially early on.
What can the OKR software sector tell us about startup growth more generally?
In the never-ending stream of venture capital funding rounds, from time to time, a group of startups working on the same problem will raise money nearly in unison. So it was with OKR-focused startups toward the start of 2020.
How were so many OKR-focused tech upstarts able to raise capital at the same time? And was there really space in the market for so many different startups building software to help other companies manage their goal-setting? OKRs, or “objectives and key results,” a corporate planning method, are no longer a niche concept. But surely, over time, there would be M&A in the group, right?
Internal rates of return in emerging US tech hubs are starting to overtake Silicon Valley
Tech innovation is becoming more widely distributed across the United States.
Among the five startups launched in 2020 that raised the most financing, four were based outside the Bay Area. The number of syndicated deals on AngelList in emerging markets from Austin to Seattle to Pittsburgh has increased 144% over the last five years.
And the number of startups in these emerging markets is growing fast — and increasingly getting a bigger piece of the VC pie.
Fund managers can leverage ESG-related data to generate insights
Almost two centuries ago, gold prospectors in California set off one of the greatest rushes for wealth in history. Proponents of socially conscious investing claim fund managers will start a similar stampede when they discover that environmental, social and governance (ESG) insights can yield treasure in the form of alternative data that promise big payoffs — if only they knew how to mine it.
ESG data is everywhere. Learning how to understand it promises big payoffs.
Dear Sophie: What’s the latest on DACA?
My company is looking to hire a very talented data infrastructure engineer who is undocumented. She has never applied for DACA before.
What is the latest on DACA? What can we do to support her?
—Multicultural in Milpitas
Zomato juice: Indian unicorn’s proposed IPO could drive regional startup liquidity
The IPO parade continued this week as India-based food-delivery unicorn Zomato filed to go public.
The Zomato IPO is incredibly important. As our own Manish Singh reported when the company’s numbers became public, a “successful listing [could be] poised to encourage nearly a dozen other unicorn Indian startups to accelerate their efforts to tap the public markets.”
So, Zomato’s debut is not only notable because its impending listing gives us a look into its economics, but because it could lead to a liquidity rush in the country if its flotation goes well.
Investment in construction automation is essential to rebuilding US infrastructure
With the United States moving all-in on massive infrastructure investment, much of the discussion has focused on jobs and building new green industries for the 21st century.
While the Biden administration’s plan will certainly expand the workforce, it also provides a massive opportunity for the adoption of automation technologies within the construction industry.
Despite the common narrative of automating away human jobs, the two are not nearly as much in conflict, especially with new investments creating space for new roles and work.
In fact, one of the greatest problems facing the construction industry remains a lack of labor, making automation a necessity for moving forward with these ambitious projects.
How to fundraise over Zoom more effectively
Even though in-person drinks and coffee walks are on the horizon, virtual fundraising isn’t going away.
Now, it’s imperative to ensure your virtual pitch is as effective as your IRL one.
Not only is it more efficient — no expensive trips to San Francisco or trouble fitting investor meetings into one day — virtual fundraising helps democratize access to venture capital.
Hacking my way into analytics: A creative’s journey to design with data
There’s a growing need for basic data literacy in the tech industry, and it’s only getting more taxing by the year.
Words like “data-driven,” “data-informed” and “data-powered” increasingly litter every tech organization’s product briefs. But where does this data come from?
Who has access to it? How might I start digging into it myself? How might I leverage this data in my day-to-day design once I get my hands on it?
Fintech startups set VC records as the 2021 fundraising market continues to impress
The first three months of the year were the most valuable period for fintech investing, ever.
Where did the fintech venture capital market push the most money in Q1, and why? Let’s dig in.
Healthcare is the next wave of data liberation
Why can we see all our bank, credit card and brokerage data on our phones instantaneously in one app, yet walk into a doctor’s office blind to our healthcare records, diagnoses and prescriptions?
Our health status should be as accessible as our checking account balance.
The liberation of healthcare data is beginning to happen, and it will have a profound impact on society — it will save and extend lives.
What private tech companies should consider before going public via a SPAC
The red-hot market for special purpose acquisition companies, or SPACs, has “screeched to a halt.”
As the SPAC market grew in the past six months, it seemed that everyone was getting into the game. But shareholder lawsuits, huge value fluctuations and warnings from the U.S. Securities and Exchange Commission have all thrown the brakes on the SPAC market, at least temporarily.
So what do privately held tech companies that are considering going public need to know about the SPAC process and market?
The era of the European insurtech IPO will soon be upon us
Once the uncool sibling of a flourishing fintech sector, insurtech is now one of the hottest areas of a buoyant venture market. Zego’s $ 150 million round at unicorn valuation in March, a rumored giant incoming round for WeFox, and a slew of IPOs and SPACs in the U.S. are all testament to this.
It’s not difficult to see why. The insurance market is enormous, but the sector has suffered from notoriously poor customer experience, and major incumbents have been slow to adapt. Fintech has set a precedent for the explosive growth that can be achieved with superior customer experience underpinned by modern technology. And the pandemic has cast the spotlight on high-potential categories, including health, mobility and cybersecurity.
This has begun to brew a perfect storm of conditions for big European insurtech exits.
The health data transparency movement is birthing a new generation of startups
The recent movement toward data transparency is bringing about a new era of innovation and startups.
Those who follow the space closely may have noticed that there are twin struggles taking place: a push for more transparency on provider and payer data, including anonymous patient data, and another for strict privacy protection for personal patient data.
What’s the main difference, and how can startups solve these problems?
Edtech is so widespread, we already need more consumer-friendly nomenclature to describe the products, services and tools it encompasses.
I know someone who reads stories to their grandchildren on two continents via Zoom each weekend. Is that “edtech?”
Similarly, many Netflix subscribers sought out online chess instructors after watching “The Queen’s Gambit,” but I doubt if they all ran searches for “remote learning” first.
Edtech needs to reach beyond underfunded public school systems to become more sustainable, which is why more investors and founders are focusing on lifelong learning.
Besides serving traditional students with field trips and art classes, a maturing sector is now branching out to offer software tutors, cooking classes and singing lessons.
For our latest investor survey, Natasha Mascarenhas polled 13 edtech VCs to learn more about how “employer-led up-skilling and a renewed interest in self-improvement” is expanding the sector’s TAM.
Here’s who she spoke to:
- Deborah Quazzo, managing partner, GSV Ventures
- Ashley Bittner, founding partner, Firework Ventures (a future of work fund with portfolio companies LearnIn and TransfrVR)
- Jomayra Herrera, principal, Cowboy Ventures (a generalist fund with portfolio companies Hone and Guild Education)
- John Danner, managing partner, Dunce Capital (an edtech and future of work fund with portfolio companies Lambda School and Outschool)
- Mercedes Bent and Bradley Twohig, partners, Lightspeed Venture Partners (a multistage generalist fund with investments including Forage, Clever and Outschool)
- Ian Chiu, managing director, Owl Ventures (a large edtech-focused fund backing highly valued companies including Byju’s, Newsela and Masterclass)
- Jan Lynn-Matern, founder and partner, Emerge Education (a leading edtech seed fund in Europe with portfolio companies like Aula, Unibuddy and BibliU)
- Benoit Wirz, partner, Brighteye Ventures (an active edtech-focused venture capital fund in Europe that backs YouSchool, Lightneer and Aula)
- Charles Birnbaum, partner, Bessemer Venture Partners (a generalist fund with portfolio companies including Guild Education and Brightwheel)
- Daniel Pianko, co-founder and managing director, University Ventures (a higher ed and future of work fund that is backing Imbellus and Admithub)
- Rebecca Kaden, managing partner, Union Square Ventures (a generalist fund with portfolio companies including TopHat, Quizlet, Duolingo)
- Andreata Muforo, partner, TLCom Capital (a generalist fund backing uLesson)
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In other news: Extra Crunch Live, a series of interviews with leading investors and entrepreneurs, returns next month with a full slate of guests. This year, we’re adding a new feature: Our guests will analyze pitch decks submitted by members of the audience to identify their strengths and weaknesses.
If you’d like an expert eye on your deck, please sign up for Extra Crunch and join the conversation.
Thanks very much for reading! I hope you have a fantastic weekend — we’ve all earned it.
Senior Editor, TechCrunch
13 investors say lifelong learning is taking edtech mainstream
Rising African venture investment powers fintech, clean tech bets in 2020
After falling into yesterday’s wild news cycle, Alex Wilhelm returned to The Exchange this morning with a close look at venture capital activity across Africa in 2020.
“Comparing aggregate 2020 figures to 2019 results, it appears that last year was a somewhat robust year for African startups, albeit one with fewer large rounds,” he found.
For more context, he interviewed Dario Giuliani, the director of research firm Briter Bridges, which focuses on emerging markets in Africa, Asia and Latin America.
Talent and capital are shifting cybersecurity investors’ focus away from Silicon Valley
New cybersecurity ecosystems are popping up in different parts of the world.
Some of of that growth has been fueled by an exodus from the Bay Area, but many early-stage security startups already have deep roots in East Coast cities like Boston and New York.
In the United Kingdom and Europe, government innovation programs have helped entrepreneurs close higher numbers of Series A and B rounds.
Investor interest and expertise is migrating out of Silicon Valley: This post will help you understand where it’s going.
Will Apple’s spectacular iPhone 12 sales figures boost the smartphone industry in 2021?
Today’s smartphones are unfathomably feature-rich and durable, so it’s logical that sales have slowed.
A phone purchased 18 months ago is probably “good enough” for many consumers, especially in times of economic uncertainty.
Then again, of the record $ 111.4 billion in revenue Apple earned last quarter, $ 65.68 billion came from phone sales, largely driven by the release of the iPhone 12.
Even though “Apple’s success this quarter was kind of a perfect storm,” writes Hardware Editor Brian Heater, “it’s safe to project a rebound for the industry at large in 2021.”
The 5 biggest mistakes I made as a first-time startup founder
Finmark co-founder and CEO Rami Essaid wrote a post for Extra Crunch that candidly describes the traps he laid for himself that made him a less-effective entrepreneur.
As someone who’s worked closely with founders at several startups, each of the points he raised resonated deeply with me.
In my experience, many founders have a hard time delegating, which can quickly create cultural and operational problems. Rami’s experience bears this out:
“I became a human GPS: People could follow my directions, but they struggled to find the way themselves. Independent thinking suffered.”
Dear Sophie: How can I sponsor my mom and stepdad for green cards?
I just got my U.S. citizenship! My husband and I want to bring my mom and her husband to the U.S. to help us take care of our preschooler and toddler.
My biological dad passed away several years ago when I was an adult and my mom has since remarried.
— Appreciative in Aptos
Check out the amazing speakers joining us on Extra Crunch Live in February
Next month, Extra Crunch Live returns with a lineup of guests who are extremely well-qualified to discuss early-stage startups.
Each Wednesday at noon PPST/3 p.m. EST, join a conversation with founders and the investors who backed their companies:
Gaurav Gupta (Lightspeed Venture Partners) + Raj Dutt (Grafana Labs)
Aydin Senkut (Felicis Ventures) + Kevin Busque (Guideline)
Steve Loughlin (Accel) + Jason Boehmig (Ironclad)
Matt Harris (Bain Capital) + Isaac Oates (Justworks)
Also, we’re adding a new feature to Extra Crunch Live — our guests will offer advice and feedback on pitch decks submitted by Extra Crunch members in the audience!
10 VCs say interactivity, regulation and independent creators will reshape digital media in 2021
Since the pandemic disrupted the social rhythms of work and school, many of us have compensated by changing our relationship to digital media.
For instance, I purchased a new sofa and thicker living room curtains several months ago when I realized we have no idea when movie theaters will reopen.
Last year, podcast sponsors spent almost $ 800 million to reach listeners, but ad revenue is estimated to surpass $ 1 billion this year. Clearly, I’m not the only person who used a discount code to buy a new product in 2020.
At this point, I can scarcely keep track of the multiple streaming platforms I’m subscribed to, but a new voice-activated remote control that comes with my basic cable plan makes it easier to browse my options.
Media reporter Anthony Ha spoke to10 VCs who invest in media startups to learn more about where they see digital media heading in the months ahead. For starters, how much longer can we expect traditional advertising models to persist?
And in a world with hundreds of channels, how are creators supposed to compete for our attention? What sort of discovery tools can we expect to help us navigate between a police procedural set in a Scandinavian village and a 90s sitcom reboot?
Here’s who Anthony interviewed:
- Daniel Gulati, founding partner, Forecast Fund
- Alex Gurevich, managing director, Javelin Venture Partners
- Matthew Hartman, partner, Betaworks Ventures
- Jerry Lu, senior associate, Maveron
- Jana Messerschmidt, partner, Lightspeed Venture Partners
- Michael Palank, general partner, MaC Venture Capital (with additional commentary from MaC’s Marlon Nichols)
- Pär-Jörgen Pärson, general partner, Northzone
- M.G. Siegler, general partner, GV
- Laurel Touby, managing director, Supernode Ventures
- Hans Tung, managing partner, GGV Capital
Normally, we list each investor’s responses separately, but for this survey, we grouped their responses by question. Some readers say they use our surveys to study up on an individual VC before pitching them, so let us know which format you prefer.
Does a $ 27 billion or $ 29 billion valuation make sense for Databricks?
Data analytics platform Databricks is reportedly raising new capital that could value the company between $ 27 billion and $ 29 billion.
By the end of Q3 2020, Databricks had surpassed a $ 350 million run rate — a $ 150 million YoY increase, reports Alex Wilhelm.
At the time, he described the company as “an obvious IPO candidate” with “broad private-market options.”
Which begs the question: “Can we come up with a set of numbers that help make sense of Databricks at $ 27 billion?”
End-to-end operators are the next generation of consumer business
Rapid shifts in the way we buy goods and services disrupted old-school marketplaces like local newspapers and the Yellow Pages.
Today, I can use my phone to summon a plumber, a week’s worth of groceries or a ride to a doctor’s office.
End-to-end operators like Netflix, Peloton and Lemonade take a lot of time and energy to reach scale, but “the additional capital required is often outweighed by the value captured from owning the entire experience.”
Unpacking Chamath Palihapitiya’s SPAC deals for Latch and Sunlight Financial
On January 25, Social Capital CEO Chamath Palihapitiya tweeted that he was making two blank-check deals.
Enterprise SaaS company Latch makes keyless entry systems; Sunlight Financial helps consumers finance residential solar power installations.
“There are nearly 300 SPACs in the market today looking for deals,” noted Alex Wilhelm, who unpacked both transactions.
“There’s no escaping SPACs for a bit, so if you are tired of watching blind pools rip private companies into the public markets, you are not going to have a very good next few months.”
Fintechs could see $ 100 billion of liquidity in 2021
On Monday, we published the Matrix Fintech Index, a three-part study that weighs liquidity, public markets and e-commerce trends to create a snapshot of an industry in perpetual flux.
For four years running, the S&P 500 and incumbent financial services companies have been outperformed by companies like Afterpay, Square and Bill.com.
In light of steady VC investment, increasing consumer adoption and a crowded IPO pipeline, “fintech represents one of the most exciting major innovation cycles of this decade.”
Drupal’s journey from dorm-room project to billion-dollar exit
On January 15, 2001, then-college student Dries Buytaert released Drupal 1.0.0, an open-source content-management platform. At the time, about 7% of the world’s population was online.
After raising more than $ 180 million, Buytaert exited to Vista Equity Partners for $ 1 billion in 2019.
Enterprise reporter Ron Miller interviewed Buytaert to learn more about his 18-year journey.
“His story is compelling, but it also offers lessons for startup founders who also want to build something big,” says Ron.
Welcome back to The TechCrunch Exchange, a weekly startups-and-markets newsletter for your weekend enjoyment. It’s broadly based on the weekday column that appears on Extra Crunch, but free. And it’s made just for you. You can sign up for the newsletter here.
With that out of the way, let’s talk money, upstart companies and the latest spicy IPO rumors.
(In time the top bit of the newsletter won’t get posted to the website, so do make sure to sign up if you want the whole thing!)
BigCommerce isn’t worried about its IPO pricing
One of the most interesting disconnects in the market today is how VC Twitter discusses successful IPOs and how the CEOs of those companies view their own public market debuts.
If you read Twitter on an IPO day, you’ll often see VCs stomping around, shouting that IPOs are a racket and that they must be taken down now. But if you dial up the CEO or CFO of the company that actually went public to strong market reception, they’ll spend five minutes telling you why all that chatter is flat wrong.
Case in point from this week: BigCommerce. Well-known VC Bill Gurley was incensed that shares of BigCommerce opened sharply higher after they started trading, compared to their IPO price. He has a point, with the Texas-based e-commerce company pricing at $ 24 per share (above a raised range, it should be said), but opened at $ 68 and is worth around $ 88 on Friday as I write to you.
So, when I got BigCommerce CEO Brent Bellm on Zoom after its debut, I had some questions.
First, some background. BigCommerce filed confidentially back in 2019, planned on going public in April, and wound up delaying its offering due to the pandemic, according to Bellm. Then in the wake of COVID-19, sales from existing customers went up, and new customers arrived. So, the IPO was back on.
BigCommerce, as a reminder, is seeing growth acceleration in recent quarters, making its somewhat modest growth rate more enticing than you’d otherwise imagine.
Anyhoo, the company was worth more than 10x its annual run-rate at its IPO price if I recall the math, so it wasn’t cheap even at $ 24 per share. And in response to my question about pricing Bellm said that he was content with his company’s final IPO price.
He had a few reasons, including that the IPO price sets the base point for future return calculations, that he measures success based on how well investors do in his stock over a ten-year horizon, and that the more long-term investors you successfully lock in during your roadshow, the smaller your first-day float becomes; the more investors that hold their shares after the debut, the more the supply/demand curve can skew, meaning that your stock opens higher than it otherwise might due to only scarce equity being up for purchase.
All that seems incredibly reasonable. Still, VCs are livid.
The Exchange spent a lot of time on the phone this week, leading to a host of notes for your consumption. And there was a deluge of interesting data. So, here’s a digest of what we heard and saw that you should know:
- Fintech mega-rounds are heating up, with 28 in the second quarter of 2020. Total fintech rounds dipped, but it appears that the sky is still pretty much afloat for financial technology startups.
- Tech stocks set new records this week, something that has become so common that the new all-time highs for the Nasdaq didn’t really create a ripple. Hell, it’s Nasdaq 11,000, where’s our gosh darn party?
- Axios’ Dan Primack noted this week that SPACs may be raising more money than private equity at the moment, and that there were “over $ 1 billion in new [SPAC] filings over past 24 hours” on Wednesday. I’ve given up keeping tabs on the number of SPACs taking place, frankly.
- But we did dig into two of the more out-there SPACs, in case you wanted a taste of today’s market.
- The Exchange also spoke with the chief solutions officer of Rackspace, Matt Stoyka, before its shares had started to trade. The chat stressed post-COVID-19 momentum, and the continuing cloud transition of lots of IT spend. Rackspace intends on lowering its debt load with a chunk of its IPO proceeds. It priced at $ 21, the lower-end of its range, so it didn’t get an extra debut check. And as the company’s shares are sharply under its IPO price today, there was no VC chatter about mispricing, notably. (That stuff only tends to crop up when the results bend in a particular direction.)
- I also chatted with Joshua Bixby, the CEO of Fastly this week. The cloud services company wound up giving back some of its recent gains after earnings, which goes to show how the market is perhaps overpricing some public tech shares. After all, Fastly beat on Q2 profit, Q2 revenue, and raised its full-year guidance — and its shares fell? That’s wild. Perhaps the income it generates from TikTok was concerning? Or perhaps after racing from a 52 week low of $ 10.63 to a 52 week high of over $ 117, the market realized that Fastly could only accelerate so much.
Whatever the case, during our chat Fastly CEO Joshua Bixby taught me something new: Usage-based software companies are like SaaS firms, but more so.
In the old days, you’d buy a piece of software, and then own it forever. Now, it’s common to buy one-year SaaS licenses. With usage-based pricing, you make the buying choice day-to-day, which is the next step in the evolution of buying, it feels. I asked if the model isn’t, you know, harder than SaaS? He said maybe, but that you wind up super aligned with your customers.
Various and Sundry
To wrap up, as always, here’s a final whack of data, news and other miscellania that are worth your time from the week:
- TechCrunch chatted with Intercom, which recently hired a CFO and is therefore prepping to go public. But then it said the debut is at least two years away, which was a bummer. The company wrapped its January 31, 2020 fiscal year with $ 150 million ARR. It’s now much larger. Go public!
- The Zenefits “mafia” raised a lot, and a little this week. “Mafia” is a terrible term, by the way. We should come up with a new one.
- Danny Crichton wrote about SaaS revenue securitization, which was cool.
- Natasha Mascarenhas wrote about learning pods, which aren’t super germane to The Exchange but struck me as incredibly topical to our current lives, so I am including the piece all the same.
- I spoke with the CEO of Wrike this week, noodling on his company’s size (over $ 100 million ARR), and his competitors Asana and Monday.com. The whole cohort is over $ 100 million ARR each, so I might turn them into a post next week entitled “Go public you cowards,” or something. But probably with a different title as I don’t want to argue with 17 internal and external PR teams about why I’m right.
- The Exchange also chatted with VC firms M13 (big on services, various domestic office locations, focus on consumer spend over time) and Coefficient Capital (D2C brand focused, super interesting thesis) this week. Our takeaway is that there is more juice, and focus on the more consumer-focused side of VC than you’d probably expect given recent data.
We’ve blown past our 1,000 word target, so, briefly: Stay tuned to TechCrunch for a super-cool funding round on Monday (it has the fastest growth I can recall hearing about), make sure to listen to the latest Equity ep, and parse through the latest TechCrunch List updates.
Hugs, fistbumps, and good vibes,
Hello and welcome back to our regular morning look at private companies, public markets and the gray space in between.
A few weeks back we dug into the boom that savings and investing apps and services were enjoying. Companies like Acorns, M1 Finance, Robinhood and others were seeing rapid growth in their assets under management (AUM) and downloads. New data out today underscores how well finance apps are faring in the new, chaotic COVID-19 era.
You can run a simple test on yourself in this case. Since, say, January of this year, have you paid more or less attention to your banking and investing related apps and, more broadly, your financial life? Perhaps you are trying to put a bit more away? Or make sure your 401k isn’t invested in something silly?
If so, you are far from alone. To detail just how much more activity this slice of the startup world is enjoying, this morning we’re taking another look at the growth that this slice of the fintech world is undergoing. We’ll lean on some new data from a mobile app analytics provider (AppAnnie) and a report from a brokerage-infra startup (DriveWealth) to get a clearer picture of where investing and savings apps are growing and just how well they are performing.
Investing in a downturn
London-based Cleo, a startup that’s developed an AI-powered chatbot to help you manage your finances, has picked up $ 700,000 in funding from an impressive list of angel investors, including Skype founder Niklas Zennström. Read More
Startups – TechCrunch
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