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TechCrunch 2:46 pm on September 21, 2021
Tags: affirm ( 35 ), Amazon ( 778 ), bnpl ( 22 ), Deliveroo ( 36 ), EC Newsletter, Fundings & Exits ( 2,233 ), Klarna ( 41 ), PayPal ( 107 ), Peloton ( 39 ), Sebastian Siemiatkowski ( 4 ), Square ( 23 ), Startups ( 5,133 ), The Exchange ( 343 )   

Really, this market isn’t good enough?

It’s the first day of Disrupt, so things are a bit busy here at TechCrunch. In honor of that fact, entries from The Exchange concerning NFT volume viz recent marketplace valuations and how an accelerating pace of change helps startups by exposing more market voids will have to wait.

But we do have time this morning for a little incredulity, so let’s indulge.


The Exchange explores startups, markets and money.

Read it every morning on Extra Crunch or get The Exchange newsletter every Saturday.


CNBC reported today that Klarna CEO Sebastian Siemiatkowski is not enthused about present-day market conditions, and thus isn’t in a hurry to take his company public.

There’s some merit to the idea; after all, Klarna has shown a strong ability to raise huge sums of capital while private.

Why not just keep at it? In short, because the company has to either go public or sell itself to a larger company at some point. Given that we’ve already seen PayPal and Square cut checks to buy BNPL volume, the list of potential acquirers for Klarna is not as long as you might think. The company, flush with billions in private-market funding, will need to go public. It’s a simple question of when. 

Which makes the following all the more surprising. Via CNBC:

“The volatility in the market right now makes me nervous to IPO to be honest,” Siemiatkowski told CNBC’s Karen Tso at the London Tech Week conference on Monday. “I think it would be nice to IPO when it’s a little bit more sound. And right now it doesn’t feel really sound out there.”

Huh. Color us confused.

The public market for BNPL companies actually feels pretty damn strong at the moment.

Affirm, for example, is a BNPL company publicly listed in the United States. In Q2 2021 (Q4 fiscal 2021 for the company), Affirm reported gross merchandise volume of $2.5 billion, and revenues of $261.8 million. Those figures were up 106% and 71%, respectively. Affirm also posted a net loss of $128.2 million in the quarter, and $430.9 million in red ink during its most recent fiscal year (the 12 months ending June 30, 2021).

#affirm, #amazon, #bnpl, #deliveroo, #ec-newsletter, #fundings-exits, #klarna, #paypal, #peloton, #sebastian-siemiatkowski, #square, #startups, #the-exchange

  • Reply
    TechCrunch 3:38 pm on September 20, 2021
    Tags: EC Newsletter, Fundings & Exits ( 2,233 ), GitHub ( 88 ), gitlab ( 18 ), Goldman Sachs ( 56 ), iconiq capital ( 8 ), Khosla Ventures ( 39 ), Startups ( 5,133 ), TC ( 10,178 ), The Exchange ( 343 ), venture capital ( 2,101 )   

    Which VCs are set to make a killing in GitLab’s IPO

    Picking up where we left off Friday, let’s spend some more time in the GitLab IPO filing.

    It’s going to be an IPO week, mind; Toast and Freshworks are set to price Tuesday after the close of trading and begin to float on Wednesday. Expect final notes on the value of each and reports on how they trade when they do. The Exchange will also try to get on calls with the CEOs. But because it is Disrupt week, things are going to be a little chaotic.


    The Exchange explores startups, markets and money.

    Read it every morning on Extra Crunch or get The Exchange newsletter every Saturday.


    But that’s tomorrow. This morning, we’re digging back into developer toolkit GitLab and its impending IPO. Let’s start with a dive into the venture capital players that are going to make out in its public offering. And for the sake of having fun on a Monday, we’ll look back at the GitHub-Microsoft deal. The former CTO of GitHub dropped some interesting data on the company’s historical results that we can use to back into what the deal would be worth today if it happened.

    From there, we have some extrapolation to do. And we’ll close with an examination of GitLab’s quarterly data to see if a more narrow view of the company’s operating results tells us anything useful. Let’s have some fun!

    GitLab’s rich list

    As a private company, GitLab raised huge sums of capital — more than $400 million, per Crunchbase data. The capital came in increasingly large chunks from the company’s seed rounds back in 2015 through its late 2019 Series E.

    Khosla Ventures led the company’s early rounds before GV, Goldman Sachs and ICONIQ Capital took the baton.

    Unsurprisingly, those names are the ones we can spy on in the company’s major shareholder list. From the GitLab S-1 filing, what follows are share counts and percentage ownership stakes for the company’s investors that own more than 5% of its stock:

    • August Capital: 14,931,200 Class B shares, or 11.1% of that equity class
    • GV: 8,888,776 Class B shares, or 6.6% of that equity class
    • ICONIQ: 15,472,204 Class B shares, or 11.6% of that equity class
    • ICONIQ: 1,150,784 Class A shares, or 100% of that equity class (to be diluted in IPO)
    • Khosla: 19,028,320 Class B shares, or 14.1% of that equity class

    Given that GitLab was valued at $6 billion earlier this year in a secondary transaction, the percentages above convert to huge sums. August Capital, for example, at that price point, is set to reap north of $600 million. That’s bigger than the entire fund from which it snagged ownership, the firm’s $450 million Fund VII.

    #ec-newsletter, #fundings-exits, #github, #gitlab, #goldman-sachs, #iconiq-capital, #khosla-ventures, #startups, #tc, #the-exchange, #venture-capital

    • Reply
      TechCrunch 1:56 pm on September 17, 2021
      Tags: Cloud ( 713 ), cloud computing ( 240 ), corporate finance ( 111 ), EC Newsletter, Fundings & Exits ( 2,233 ), Private Equity ( 393 ), SaaS ( 557 ), Software ( 630 ), software as a service ( 55 ), software valuations, Startup company ( 260 ), Startups ( 5,133 ), TC ( 10,178 ), tech startups ( 3 ), The Exchange ( 343 ), valuation ( 23 ), venture capital ( 2,101 )   

      The value of software revenue may have finally stopped rising

      Startups are raising record sums around the world, thanks to several contributing factors. As The Exchange explored yesterday, historically low interest rates have helped venture capitalists raise more capital than ever, to pick an example.

      Low rates have helped startups in another manner: As yields fell for certain assets, investors chased returns by betting on growth. And in recent years, the investing classes turned their attention to public software companies, bidding up the value of their revenue to record highs.

      This raised the worth of startups in general terms, and private tech companies’ comps enjoyed a steady, upward climb in the value of their revenues. If the value of a dollar of SaaS revenue was worth $1 one year and $2 the next, the repricing was good for private companies even if we were tracking the metrics from the perspective of public companies.

      The free ride could be ending.


      The Exchange explores startups, markets and money.

      Read it every morning on Extra Crunch or get The Exchange newsletter every Saturday.


      I’ve held back from covering the value of software (SaaS, largely) revenues for a few months after spending a bit too much time on it in preceding quarters — when VCs begin to point out that you could just swap out numbers quarter to quarter and write the same post, it’s time for a break. But the value of software revenues posted a simply incredible run, and I can’t say “no” to a chart.

      The pace at which software revenues were repriced upwards in the last few years is simply astounding. Per the Bessemer Cloud Index, back in 2016, the median revenue multiple for public SaaS companies was around 5x. When 2018 began, median SaaS multiples had expanded to around 7x.

      That’s a 40% climb in pricing, but it proved to be just a foretaste of the feast to come.

      By the end of 2019, the median figure had appreciated to around the 9x mark. And today it has shot to just under 18x. That is why software companies have been able to raise so much money, earlier, and in larger chunks. Every dollar of recurring revenue they sold was worth $5 in market cap in mid-2016. At the end of 2019, that same dollar of revenue was worth $9. And today, for the median public software company, it’s valued at around $18.

      There are nuances to the data, but we care less about exacting definitions than the directional change it describes: The median value of SaaS revenues more than tripled from 2016 to 2021. That’s an insane amount of growth.

      #cloud, #cloud-computing, #corporate-finance, #ec-newsletter, #fundings-exits, #private-equity, #saas, #software, #software-as-a-service, #software-valuations, #startup-company, #startups, #tc, #tech-startups, #the-exchange, #valuation, #venture-capital

      • Reply
        TechCrunch 2:14 pm on September 16, 2021
        Tags: Atlantico ( 2 ), China ( 2,271 ), corporate finance ( 111 ), EC Newsletter, economy ( 295 ), Europe ( 2,520 ), finance ( 1,064 ), Fundings & Exits ( 2,233 ), Private Equity ( 393 ), software sales, Startup company ( 260 ), Startups ( 5,133 ), taiwan ( 221 ), The Exchange ( 343 ), unicorn ( 107 ), United States ( 3,949 ), venture capital ( 2,101 ), venture capital funds ( 8 )   

        What could stop the startup boom?

        We’ve spent so long staring at record venture capital results around the world from Q2 that it’s nearly Q3.

        We’ve seen record results from cities, countries, and regions. There’s so much money sloshing around the venture capital and startup worlds that it’s hard to recall what they were like in leaner times. We’ve been in a bull market for tech upstarts for so long that it feels like the only possible state of affairs.

        It’s not.

        Digging back through our notes from the last few months from data sources, investors, and founders, it’s clear that there are macroeconomic factors bolstering the startup economy. And there are changes to the economy that are providing additional lift. Secular tailwinds, if you will.


        The Exchange explores startups, markets and money.

        Read it every morning on Extra Crunch or get The Exchange newsletter every Saturday.


        But as the market giveth, it can also taketh away.

        What might slow the startup boom? Similar to how certain macroeconomic conditions have provided a long-term boost, a reversal of those conditions could do the opposite. The secular trends powering startups — often on the demand side due to more-rapid digitalization of global business — may be unconnected to the larger economy, a view underscored by software’s outsized performance during COVID-19 induced economic mess of mid-2020.

        This morning, let’s talk about what’s fueling startups and their backers, and what could change. Because no bull market lasts forever.

        Driving forces

        Prominent among the macroeconomic conditions that have helped startups’ fundraising totals rise are globally low interest rates. Money is cheap around the world at the moment.

        It doesn’t cost much to borrow money today, compared to historical norms. The result of that dynamic is that lending money doesn’t earn as much either. Bank yields are negative in real terms, and bond yields aren’t impressive.

        Money always skates towards yield, so the low interest rate environment has led to lots of capital moving towards more lucrative investing options. This dynamic is partially responsible for the seemingly ever-rising stock market, for example. It’s also a partial explanation of why there is so much capital flowing into venture capital funds and other vehicles that push money into high-growth private companies. The money is looking for yield.

        #atlantico, #china, #corporate-finance, #ec-newsletter, #economy, #europe, #finance, #fundings-exits, #private-equity, #software-sales, #startup-company, #startups, #taiwan, #the-exchange, #unicorn, #united-states, #venture-capital, #venture-capital-funds

        • Reply
          TechCrunch 2:42 pm on September 15, 2021
          Tags: EC Newsletter, Forge ( 5 ), Fundings & Exits ( 2,233 ), sharespost ( 4 ), SPAC ( 142 ), Startups ( 5,133 ), The Exchange ( 343 ), unicorn ( 107 )   

          Forge’s SPAC deal is a bet on unicorn illiquidity

          As Warby Parker, Freshworks, Amplitude and Toast look to list in the coming weeks, we shouldn’t forget the SPAC boom. This week, for example, Forge Global (Forge), a technology startup that operates a market for secondary transactions in private companies, announced that it would go public via a blank-check combination.

          And while we’re not unpacking every single SPAC combination that crosses our radar, the Forge deal is a good one to spend time parsing.


          The Exchange explores startups, markets and money.

          Read it every morning on Extra Crunch or get The Exchange newsletter every Saturday.


          Why? Several reasons. First, we’re curious about how the company generates revenue and how diversified its revenue is. We’re also interested in how big the market may prove to be for trading secondary shares in unicorns — late-stage tech startup equity is popular on secondary exchanges. Additionally, we want to know whether the deal feels expensive, because that may help us get a heat-check on the SPAC market more broadly.

          First, some details concerning the transaction. Then we get to have fun. To work!

          The Forge SPAC

          Forge is merging with Motive Capital, a blank-check company that raised $360 million in December 2020.

          Per the company’s calculations, the combined entity will sport a roughly $2 billion valuation on a “fully diluted equity value on a pro forma basis.” The company’s anticipated enterprise value is a smaller $1.60 billion thanks to an expected $435 million in cash after the deal’s completion, though that number will change some before it trades.

          Skipping the nuances of the transaction — there’s a PIPE, 90% equity rollover from existing shareholders and more, in case you wanted to get into it — what matters is that Forge will be worth around $2 billion in equity terms and have hundreds of millions of dollars in the bank after the deal.

          The resulting valuation is notable not only for making Forge a unicorn, but also for representing a dramatic upward movement in the worth of the company. PitchBook and Crunchbase data agree that Forge was last valued at $700 million (post-money) when raising $150 million earlier this year. So, the company appears set to provide a solid return to more than just its early backers; even the private investors who put capital into the company rather recently should do well in the deal.

          That brings us to the company’s business, and business model. Forge helps pre-IPO companies trade before they float. It’s somewhat ironic that price discovery is something that the company claims its platform can help companies with before they debut, while the company is set to see its private valuation quickly beaten by a public debut.

          Regardless, let’s talk unicorns.

          A solution to the unicorn traffic jam?

          One of my favorite long-term issues with the late-stage startup market is that it is far better at creating value than it is at finding an exit point for that accreted value. More simply, the startup market is excellent at creating unicorns but somewhat poor at taking them public.

          That antitrust regulatory concerns have made it harder for wealthy tech companies to snap up promising startups that could challenge them is only part of the matter. There just aren’t enough IPOs, even this year, to counterbalance the growth in the number of global unicorns.

          That pressure is a good bit of why Forge is an interesting firm. The more unexited unicorns there are in the world, the more demand, presumably, there is for marketplaces like the one it operates, which allows existing shareholders in valuable private companies to drive liquidity for themselves ahead of eventual public-market debuts.

          #ec-newsletter, #forge, #fundings-exits, #sharespost, #spac, #startups, #the-exchange, #unicorn

          • Reply
            TechCrunch 4:47 pm on September 14, 2021
            Tags: Atlanta ( 40 ), atlanta ventures, blh venture partners ( 2 ), calendly ( 10 ), EC Newsletter, Fundings & Exits ( 2,233 ), Greenlight ( 7 ), knoll, Mailchimp ( 13 ), reframe ( 3 ), salesloft ( 2 ), SingleOps ( 2 ), Startups ( 5,133 ), Tech Square Ventures ( 3 ), The Exchange ( 343 ), venture capital data ( 8 )   

            Atlanta’s sundry startups join in global VC funding boom

            Mailchimp is selling itself to Intuit in a transaction valued at $12 billion. The deal is a coup not only for companies that eschew venture capital backing — Mailchimp is famous for its bootstrapping history — but also for the city of its founding, Atlanta.

            Mailchimp’s mega-exit comes in the same year that fellow Atlanta-based startup Calendly raised a massive $350 million round that valued the technology company north of $3 billion, per Crunchbase data.

            The two companies underscore how possible it is to build large startups in markets outside of the traditional collection of cities most associated with technology entrepreneurship in the United States, like Boston, New York City and San Francisco, to name a few.


            The Exchange explores startups, markets and money.

            Read it every morning on Extra Crunch or get The Exchange newsletter every Saturday.


            Investors are taking note. CB Insights data through Q2 2021 indicates that startups in Atlanta are on a fundraising tear, already surpassing total capital raised in 2020 in just the first half of this year. The city’s venture acceleration is similar to fundraising gains we’ve seen in markets like Chicago.

            The Exchange wanted to better understand the Atlanta market, especially regarding how bullish its local inventors are that its current pace of fundraising can continue, and what sort of external interest its startups are enjoying. So, we ran questions by Sean McCormick, the CEO of Atlanta-based SingleOps, a software startup that raised capital earlier this year; Atlanta Ventures’ A.T. Gimbel; and BLH Venture Partners’ Ashish Mistry. We also heard from Paul Noble, CEO of Verusen, a supply chain intelligence startup that raised an $8 million Series A round in January.

            The picture that forms is one of a city enjoying a rising tide of venture activity, boosted by some local dynamics that may have helped some of its earlier-stage companies scale more cheaply than they might have in other markets. And there’s plenty of optimism to be found concerning the near future. Let’s explore.

            A funding boom

            It’s cliche at this point to note that a particular geography is experiencing record venture capital results; many cities, regions and countries are seeing startup capital inflows accelerate. But there are markets where the gains still stand out despite the generally warm climate for private capital investments into private companies.

            Atlanta is one such market. Per CB Insights data, the U.S. city saw $2.17 billion in total investment during 2020. In the first quarter of 2021, Atlanta nearly matched its 2020 tally, with its startups collecting some $2.07 billion in total capital. Another $953 million was invested in the second quarter of the year; keep in mind that venture capital data is laggy, and thus what may appear to be a sharp decline may be ameliorated by later disclosures.

            But with around $3 billion invested in the first half of 2021, already around a 50% gain on 2020’s full-year figures, it’s clear the city is seeing an unprecedented wave of venture investment.

            Dollar volume is half the venture capital activity matrix, of course. The other key data line for the investment type is deal volume. There Atlanta’s activity is less superlative; Q1 2021 saw Atlanta startups attract 57 total deals, the second-best results that we have data for, narrowly losing to Q3 2017’s 59 deals.

            But Q2 2021 saw Atlanta’s known venture deal volume fall to 42, a figure that is a slight miss from 2020’s average deal volume, measured on a quarterly basis. The same caveat regarding delayed data applies here, but perhaps not enough to completely close the gap between what we might have expected from Atlanta startups in terms of Q2 deal volume in the wake of the city’s super-active Q1.

            Despite the somewhat slack Q2 2021 deal count in Atlanta, per current data, it’s clear that the city is enjoying record venture capital attention. What’s driving the uptick? Let’s find out.

            #atlanta, #atlanta-ventures, #blh-venture-partners, #calendly, #ec-newsletter, #fundings-exits, #greenlight, #knoll, #mailchimp, #reframe, #salesloft, #singleops, #startups, #tech-square-ventures, #the-exchange, #venture-capital-data

            • Reply
              TechCrunch 1:04 pm on September 14, 2021
              Tags: AfterPay ( 14 ), Amazon ( 778 ), bnpl ( 22 ), EC Newsletter, Fundings & Exits ( 2,233 ), Klarna ( 41 ), Paidy ( 2 ), PayPal ( 107 ), Square ( 23 ), Startups ( 5,133 ), TC ( 10,178 ), The Exchange ( 343 )   

              Here’s what your BNPL startup could be worth

              It’s a two-Exchange Tuesday, everyone. First up, we’re talking fintech valuations. Next up, we’re digging into Atlanta.

              Last week’s news that PayPal intends to buy Japanese startup Paidy marked the second major acquisition of a buy now, pay later (BNPL) company this year. PayPal’s news followed an even larger deal by Square for the Australian BNPL company Afterpay.

              The multibillion-dollar exits provided hard market proof that what BNPL startups are building has value beyond simple operating results; major fintech platforms are willing to shell out large sums for their revenues and possible strategic value.


              The Exchange explores startups, markets and money.

              Read it every morning on Extra Crunch or get The Exchange newsletter every Saturday.


              Because both deals happened in 2021, they provide two data points for the value of BNPL companies operating at scale. And because both Square and PayPal provided some information to their investors concerning their transactions, we have a little bit of comparative work to do.

              Let’s do a little math and figure out how much PayPal and Square investors are paying for transaction volume across both platforms. Then, we’ll peek at what Affirm is worth along similar lines. We’ll wrap with a look at Klarna’s numbers to see if there’s anything we can dig up there.

              Our goal is to find out what sort of price floor or ceiling the Paidy and Afterpay deals imply, if other players in their space are matching that figure, and why. This will be fun!

              What would you pay for $1 of BNPL GMV?

              Square’s Afterpay deal is worth some $29 billion, a huge sum. It isn’t hard to see why the U.S. consumer- and business-focused fintech is willing to write so large a check — Afterpay does volume.

              #afterpay, #amazon, #bnpl, #ec-newsletter, #fundings-exits, #klarna, #paidy, #paypal, #square, #startups, #tc, #the-exchange

              • Reply
                TechCrunch 2:31 pm on September 2, 2021
                Tags: Climate ( 320 ), cloud kitchens ( 4 ), crypto ( 57 ), delivery ( 32 ), EC Newsletter, Fintech ( 653 ), Fundings & Exits ( 2,233 ), InsurTech ( 115 ), no code ( 61 ), Space ( 1,147 ), Startups ( 5,133 ), The Exchange ( 343 ), Y Combinator ( 309 ), Y Combinator Demo Day ( 8 ), YC S21 ( 3 )   

                Tracking startup focus in the latest Y Combinator cohort

                First, some housekeeping: Thanks to our new corporate parents, TechCrunch has the day off tomorrow, so consider this the last chapter of The Exchange for this week. (The newsletter will go out Saturday as always.) Also, Alex is off next week. Anna is taking on next week’s newsletter and may have a column or two on deck as well.

                But before we slow down for a few days, let’s chat about the most recent Y Combinator Demo Day in thematic detail.

                If you caught the last few Equity episodes, some of this will be familiar, but we wanted to put a flag in the ground for later reference as we cover startups for the rest of the year.


                The Exchange explores startups, markets and money.

                Read it every morning on Extra Crunch or get The Exchange newsletter every Saturday.


                What follows is a roundup of trends among Y Combinator startups and how they squared with our expectations.

                A big thanks to the TechCrunch crew who covered the startup deluge live, and Natasha and Christine for helping build out our notes during our last few Twitter Spaces. Let’s talk trends!

                More than expected

                In a group of nearly 400 startups, you might think it’d be hard to find a category that felt overrepresented, but we’ve managed.

                To start, we were surprised by the sheer number of startups in the cohort that were pursuing software models that incorporated no-code and low-code techniques. We expected some, surely, but not the nearly 20 that we compiled this morning.

                Startups in the YC batch are building no-code and low-code tools to help developers build faster internal workflows (Tantl), build branded real estate portals (Noloco), sync data between other no-code tools (Whalesync), automate HR (Zazos), and more. Also in the mix were BrightReps, Beau, Alchemy, Hyperseed, Enso, HitPay, Whaly, Muse, Abstra, Lago, Inai and Breadcrumbs.io.

                At least 18 companies in the group name-dropped no- and low-code in their pitches. They are taking on a host of industries, from finance and real estate to sales and HR. In short, no- and low-code tools are cropping up in what feels like every sector. It appears that the startup world has decided that helping non-developers build their own tools, workflows and apps is a trend here to stay.

                #climate, #cloud-kitchens, #crypto, #delivery, #ec-newsletter, #fintech, #fundings-exits, #insurtech, #no-code, #space, #startups, #the-exchange, #y-combinator, #y-combinator-demo-day, #yc-s21

                • Reply
                  TechCrunch 3:05 pm on September 1, 2021
                  Tags: amplitude ( 2 ), EC Newsletter, freshworks ( 14 ), Fundings & Exits ( 2,233 ), IPO ( 156 ), Startups ( 5,133 ), TC ( 10,178 ), The Exchange ( 343 ), toast ( 19 )   

                  What Amplitude’s choice to direct list says about its products, growth and value

                  Amplitude is going public in a direct listing that will see its shares trade on the Nasdaq under the ticker symbol “AMPL.” The company first announced its intention to direct list in July and filed its S-1 document in August.

                  The San Francisco-based startup lists major shareholders Battery, Benchmark, IVP, Sequoia and Jasmine Ventures in its S-1 filing. Each of those investors owns at least 5% of the company.


                  The Exchange explores startups, markets and money.

                  Read it every morning on Extra Crunch or get The Exchange newsletter every Saturday.


                  Following our digs through recent IPO filings from Freshworks and Toast, this morning we’re taking a spade to Amplitude’s document.

                  We’re curious why the company is direct listing instead of raising capital in its debut. We also want to understand how the company sees the future, because its product thesis is essentially a roadmap to its long-term growth; how investors value the company will in part hinge on whether Wall Street agrees with where Amplitude sees technology heading.

                  And we’ll do our usual work to understand the company’s revenue mix and quality, wrapping with some noodling on what it may be worth. Sound fun? Good. Let’s get into it.

                  Amplitude’s core product thesis

                  Most S-1 filings are full of corporate babble that I don’t drag you through. After all, we don’t really need to chat about how a particular vertical SaaS company thinks that its chosen niche is a great market. You already know what the debuting concern thinks. But with Amplitude, I want to do a bit more.

                  Amplitude sells what it calls “digital optimization” software. In practice, that means its software helps other companies design better software.

                  The company thinks that the way that digital products are built has changed. Gone are the days, in its view, of trusting intuition when it comes to digital design choices. Instead, Amplitude expects that companies with digital products will instead lean on data-driven decision-making. Or as it phrased it in its filing, digital product design is leaving the “Mad Men” phase for a more “Moneyball” era.

                  Data is at the core of how Amplitude sees companies designing future products. But in its view, many companies currently rely on a collection of disparate software tools to collect data on their digital footprint. Amplitude thinks it has a better method of collecting digital user data — and learning from it.

                  #amplitude, #ec-newsletter, #freshworks, #fundings-exits, #ipo, #startups, #tc, #the-exchange, #toast

                  • Reply
                    TechCrunch 3:16 pm on August 31, 2021
                    Tags: EC Newsletter, freshworks ( 14 ), Fundings & Exits ( 2,233 ), IPO ( 156 ), Startups ( 5,133 ), The Exchange ( 343 )   

                    Inside Freshworks’ IPO filing

                    Freshworks, a customer engagement software company with roots in both California in the United States and Tamil Nadu in India, is going public. Its S-1 filing paints the picture of a company scaling rapidly, with improving profitability as it matures. However, to understand the company’s numbers, we’ll have to peel away certain costs for a clear picture.

                    The Exchange spoke with Freshworks CEO Girish Mathrubootham a few weeks ago about the future of his company, a conversation that in hindsight we timed rather well. We’ll lean on notes from the call as we parse Mathrubootham’s IPO filing.


                    The Exchange explores startups, markets and money.

                    Read it every morning on Extra Crunch or get The Exchange newsletter every Saturday.


                    Quite a lot of venture capital is riding on Freshworks’ IPO going well. The company raised hundreds of millions of dollars while private, per Crunchbase data, including a $150 million Series H round of capital in late 2019 that valued the company at around $3.5 billion. Its investor list includes Accel, Tiger, Sequoia and Capital G.

                    This morning, let’s dig into the company’s historical growth, track Freshworks’ changing profitability profile and check to see if its revenue quality is improving over time.

                    Quick notes on product

                    Before we dive into the numbers, let’s discuss Freshworks’ historical product work.

                    The company started life with a single piece of software called Freshdesk. Freshdesk was born after the company’s CEO struggled with poor customer service when trying to return a broken television.

                    Per Mathrubootham, he felt like there were more avenues than ever for customers to reach companies, and that the business market was evolving in a way that gave customers more clout in how brands were perceived. So, Freshdesk brought together a host of customer contact methods, including social media, which at the time was a more nascent market category.

                    Freshworks later noticed that some of its customers were using its customer service software to offer IT support to their own employees. From that observation, the company built Freshservice, a version of its original product, but tuned for internal use. The company later built out sales tools and, more recently, a unified database for customer data. The latter allows companies using Freshworks software to have a single record for each customer across marketing and sales interactions, which it intends to extend to support communications as well.

                    All that’s to say that Freshworks has a product that it can sell to small companies that may need a single piece of its larger product mix, and lots more software that it can upsell to those customers. And that it has a product suite it can sell to larger companies as well.

                    So how has the company performed in the market? Let’s find out.

                    #ec-newsletter, #freshworks, #fundings-exits, #ipo, #startups, #the-exchange

                    • Reply
                      TechCrunch 4:22 pm on August 30, 2021
                      Tags: EC Fintech ( 80 ), EC Newsletter, financial technology ( 104 ), Fundings & Exits ( 2,233 ), olo ( 9 ), Startups ( 5,133 ), The Exchange ( 343 ), toast ( 19 )   

                      5 takeaways from Toast’s S-1 filing

                      Welcome back to IPO season.

                      No, we won’t call it hot liquidity summer, but after an August lull, the public-offering cycle is back upon us. Last week we saw filings from Warby Parker, Toast and Freshworks. We’ve dug into Warby already. This week, we’re tackling the details of the latter two debuts, starting with Toast.


                      The Exchange explores startups, markets and money.

                      Read it every morning on Extra Crunch or get The Exchange newsletter every Saturday.


                      Why do we care about Toast? It’s a technology startup. It’s a unicorn. And it raised more than $900 million while private, per Crunchbase data. And the company is a leading constituent of the Boston startup scene.

                      Even more, the software-and-payments company combines subscription incomes, transaction fees, hardware revenues and lending earnings. Its business is complex — in a good way — and may help us better understand what happens to software companies when they build more financial capabilities into their original applications.

                      It’s an interesting company, one that was initially impacted heavily by the COVID-19 pandemic. Let’s go over the company’s overall financial performance, dig into how COVID affected the company’s business, consider how its revenue mix is changing over time, discuss how important fintech incomes are for the company and what it might be worth. This will be good fun. Let’s go!

                      Toast’s growth is accelerating

                      We’ll carve more deeply into how the company generates revenues shortly. For now, just keep in mind that the company has a number of revenue streams, each of which has a different gross-margin profile. So, we’re not only discussing high-margin software revenues in the following.

                      Here’s Toast’s topline performance for 2019, 2020, and the first half of both 2020 and 2021, taken from its S-1 filing:

                      Image Credits: Toast S-1

                      We can quickly see that the company grew from 2019 to 2020, albeit at a moderate clip. More recently, observing the two columns on the far right, we can see much more rapid growth from the company. In year-on-year comparative terms, Toast grew 24% in 2020 and 105% in the first half of 2021.

                      Thinking about how COVID-19 hit the food business, observing modest growth at the company in 2020 feels somewhat strong; despite huge market chop, Toast still grew nicely. And the company’s H1 2021 results indicate that the product work that Toast engaged in during the global pandemic has worked well, allowing it to accelerate growth by a factor of four in the last two quarters when compared to 2020’s overall pace of revenue expansion.

                      The above data also helps us better understand why Toast is going public now. After pushing through 2020, the company’s current portrait is one of accelerating growth leading to massive top-line accretion. Toast looks more than strong. And there’s no better time to go public than when you have numbers to brag about.

                      #ec-fintech, #ec-newsletter, #financial-technology, #fundings-exits, #olo, #startups, #the-exchange, #toast

                      • Reply
                        TechCrunch 3:38 pm on August 27, 2021
                        Tags: corporate venture capital ( 16 ), CVC ( 7 ), EC Newsletter, entrepreneurship ( 528 ), finance ( 1,064 ), Funding ( 1,793 ), Sony Innovation Fund ( 6 ), Startup company ( 260 ), TC ( 10,178 ), The Exchange ( 343 ), venture capital ( 2,101 ), WIND ventures ( 2 )   

                        Corporate venture capital follows the same trend as other VC markets: Up

                        As the global market for startup investing presses to new heights in terms of dollars invested this year, and deal volume ticks up in several regions, corporations are diving into the action.

                        Data from CB Insights and Stryber indicate that corporate investors are taking part in deals worth more than ever, even if corporate venture capital (CVC) deal activity is not up uniformly around the world.


                        The Exchange explores startups, markets and money.

                        Read it every morning on Extra Crunch or get The Exchange newsletter every Saturday.


                        In a sense, it’s not surprising that CVCs are seeing the deals that they participate in rising in size — the global venture capital market has trended toward larger deals and more dollars for some time now. But questions lie inside the eye-popping figures: How are corporate investors adapting to a more rapid-fire and expensive venture capital market? We also wanted to know if CVCs are shaking up their deal sourcing, and whether the classic corporate venture tension between strategic investing and deploying capital for financial return is seeing a focus mix shift.

                        To help us understand the data we have at our fingertips, The Exchange reached out to M12’s Matt Goldstein, Sony Innovation Fund’s Gen Tsuchikawa and WIND Ventures’ Brian Walsh. (TechCrunch last covered CVC outfit WIND Ventures here.)

                        Let’s talk data and then dig into the nuance behind the numbers.

                        A boom in deal value

                        Precisely measuring CVC activity is interestingly difficult. When we discuss the value of venture capital deals, for example, what counts and what doesn’t is a matter of taste. For example, how to treat the SoftBank Vision Fund. Do deals that it leads that include venture capital participation count toward larger VC activity for a given period of time? What about investments led by crossover funds?

                        No matter what you choose, aggregate venture capital data will always include dollars invested by non-venture entities. So you do the best you can. CVC has the same problem, amplified. Because CVCs are often participatory to deals, instead of leading them, especially in the later stages of startup investing today, tallying concrete corporate venture investment is difficult. So we proceed in the same manner as we do with aggregate venture data counting, including deals that a particular investor type participated in.

                        Perfect, no. But it’s consistent, which is what we likely care about more. All that’s to say that when we observe the following deal and dollar data, CB Insights notes plainly that for its purposes, “‘CVC-backed funding’ and ‘CVC-backed deals’ refer to corporate venture capital participation in these funding rounds.”

                        Fair enough. Per CB Insights’ H1 2021 CVC report, CVCs participated in $78.7 billion in funding activity in the first half of 2021, a record for a half-year period. That dollar figure was derived from some 2,099 deals around the world. Precisely how strong those figures are is not clear from their absolute scale.

                        #corporate-venture-capital, #cvc, #ec-newsletter, #entrepreneurship, #finance, #funding, #sony-innovation-fund, #startup-company, #tc, #the-exchange, #venture-capital, #wind-ventures

                        • Reply
                          TechCrunch 1:22 pm on August 27, 2021
                          Tags: Buzzfeed ( 23 ), EC Newsletter, Forbes ( 11 ), Fundings & Exits ( 2,233 ), Magazines ( 101 ), Media ( 773 ), SPAC ( 142 ), special-purpose acquisition company ( 39 ), Startups ( 5,133 ), TC ( 10,178 ), The Exchange ( 343 ), verizon ( 84 )   

                          Forbes jumps into hot media liquidity summer with a SPAC combo

                          What a busy week in the world of media liquidity.

                          That’s a sentence you don’t get to write often. Regardless, news broke this week that Axel Springer is buying U.S. political journalism outfit POLITICO. The transaction was expected, but the eye-popping roughly $1 billion price tag still has tongues wagging. We even got on the podcast to chat about it.

                          And Forbes announced that it is going public via a SPAC. The business publication’s news follows BuzzFeed’s journey to the public markets through a blank-check company. Hot media liquidity summer? Something like that.


                          The Exchange explores startups, markets and money.

                          Read it every morning on Extra Crunch or get The Exchange newsletter every Saturday.


                          That TechCrunch is in the process of being sold to private equity, of course, is not something that we should forget. Shoutout to the Verizon bankers who found a way to get rid of us while also deleveraging Verizon’s debt profile. Ten points.

                          I want to take a quick tour of the Forbes SPAC deck this morning. Our notes on BuzzFeed’s are here, in case you want to run comparisons. This will be easy and fun. Perfect Friday morning fare. Into the data!

                          What’s it worth?

                          In corporate-speak, Forbes Global Media Holdings is merging with blank-check company Magnum Opus Acquisition Limited. The transaction will close either Q4 2021 or Q1 2022, Forbes estimates.

                          The deal itself is somewhat modest in scale compared with other SPAC deals we’ve recently looked into. Forbes reports that it will sport “an implied pro forma enterprise value of $630 million, net of tax benefits,” after its completion. Some $600 million in gross proceeds will be derived from Magnum Opus funds “and $400 million of additional capital through a private placement of ordinary shares of the combined company,” Forbes writes.

                          The company will sport an equity valuation of $830 million after the deal closes, per its own calculations. That number will change some depending on redemptions ahead of the combination. The gap between the large dollars going into the deal and the modest final valuation of the public Forbes entity is due to some $440 million in secondary transactions for existing Forbes shareholders.

                          In case you’d prefer all of that in table form, here’s the Forbes investor deck:

                          Image Credits: Forbes SPAC deck

                          Is $830 million a fair price? Let’s dig into Forbes’ results.

                          #buzzfeed, #ec-newsletter, #forbes, #fundings-exits, #magazines, #media, #spac, #special-purpose-acquisition-company, #startups, #tc, #the-exchange, #verizon

                          • Reply
                            TechCrunch 5:58 pm on August 24, 2021
                            Tags: boston ( 66 ), EC Newsletter, finance ( 1,064 ), Fundings & Exits ( 2,233 ), jamie goldstein ( 2 ), lily lyman ( 3 ), nextview ( 2 ), pillar vc ( 5 ), Private Equity ( 393 ), rob go ( 3 ), Startups ( 5,133 ), The Exchange ( 343 ), venture capital ( 2,101 ), venture capital data ( 8 )   

                            Boston’s startup market is more than setting records in scorching start to year

                            The global startup community is currently enjoying a period of fundraising success that may be unprecedented in the history of technology and venture capital. While this is happening around the world, few startup hubs in the world are reveling in a greater boost to their ability to attract capital than Boston.

                            The well-known U.S. city is a traditional venture capital hub, but one that seemed to fall behind its domestic rivals Silicon Valley and New York City in recent years. However, data indicates that Boston’s startup activity in fundraising terms has reached a new, higher plateau, funneling record sums into the city’s upstart technology companies this year.

                            And, according to local investors, there could be room for further acceleration in capital disbursement.


                            The Exchange explores startups, markets and money.

                            Read it every morning on Extra Crunch or get The Exchange newsletter every Saturday.


                            The Exchange wanted to better understand what’s driving Boston’s rapid-fire results, and discover if there is any particular need for caution or concern. Is the market overheated? According to local investors Rob Go from NextView, Jamie Goldstein from Pillar VC, Lily Lyman from Underscore, and Sanjiv Kalevar from OpenView, things may be more than warm, but Boston’s accelerating venture capital totals in 2021 are not based on FOMO or other potentially ephemeral trends.

                            Instead, Boston is benefiting from larger structural changes to at least the U.S. venture capital market, helping close historical gaps in its startup funding market and access funds that previously might have skipped the region. And local university density isn’t hurting the city’s cause, either, boosting its ability to form new companies during a period of rich investment access.

                            Let’s talk data, and then hear from the investing crew about just what is going on over in Beantown.

                            A record year in the making

                            When discussing venture capital data, we often note that it is somewhat laggy, with rounds announced long after they are closed. In practice, this means that more recent data can undersell how a particular quarter has performed. With Boston’s 2021 thus far, all that we can say is that if this data includes normal venture capital lag, it will simply be all the more incredible.

                            #boston, #ec-newsletter, #finance, #fundings-exits, #jamie-goldstein, #lily-lyman, #nextview, #pillar-vc, #private-equity, #rob-go, #startups, #the-exchange, #venture-capital, #venture-capital-data

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                              TechCrunch 2:10 pm on August 20, 2021
                              Tags: Airbnb ( 159 ), bird ( 41 ), EC Mobility Hardware ( 23 ), EC Newsletter, finance ( 1,064 ), food delivery ( 73 ), Fundings & Exits ( 2,233 ), lime ( 45 ), Lyft ( 123 ), M&A ( 297 ), Private Equity ( 393 ), profit ( 2 ), Scooters ( 24 ), SPAC ( 142 ), Startups ( 5,133 ), Switchback II Corporation, TC ( 10,178 ), The Exchange ( 343 ), Transportation ( 1,041 ), Uber ( 353 )   

                              Bird shows improving scooter economics, long march to profitability

                              Newly reported financial data from Bird, an American scooter sharing service, shows a company with an improving economic model, and a multi-year path to profitability. However, that path is fraught unless a number of scenarios all work out, in concert and without a glitch.

                              Bird, well-known for its early battles with domestic rival Lime, is pursuing a SPAC-led deal that will see it go public and raise fresh capital. The former startup is merging with Switchback II Corporation in a deal that values it at around $2.3 billion, including a $160 million PIPE (private investment in public equity) component. (Note: The group purchasing TechCrunch’s parent company from its own parent company, is part of the Bird PIPE.)


                              The Exchange explores startups, markets and money.

                              Read it every morning on Extra Crunch or get The Exchange newsletter every Saturday.


                              COVID-19 hasn’t been kind to Bird and similar companies around the world. As many around the world stayed home, usage of shared-asset services and ride-hail applications fell sharply. Bird saw rides decline. Airbnb took a temporary hit. Uber and Lyft saw ride demand fall.

                              Responses to the crisis were varied. Airbnb cut costs, and raised external capital. Lyft cut expenses and focused on its core model, while Uber grew its food delivery business, which saw transaction volume soar as demand fell for its traditional business.

                              Meanwhile, Bird flipped its entire business model. That decision has helped the scooter outfit improve its economics markedly, giving it a shot at generating profit in the future — provided its forecasts prove achievable.

                              This morning, let’s talk about how Bird has changed its business, their impacts on its operating results, and how long the company thinks its climb to profitability is.

                              Fleet management → Fleet managers

                              In their initial forms, Bird and Lime bought and deployed large fleets of electric scooters. Not only was this capital intensive, the companies also wound up with costs that were more than sticky — charging wasn’t simple or cheap, moving scooters around to balance demand took both human capital and vehicles, and the list went on.

                              Throw in vehicle depreciation — the pace at which scooters in the wild degraded from use or abuse — and the businesses proved excellent vehicles for raising capital and throwing that money at more scooters, costs, and, as it turned out, losses.

                              Results improved somewhat over time, though. As scooter-share companies increasingly built their own hardware, their economics improved. Sturdier scooters meant lower depreciation, and better battery tech could allow for more rides per charge. That sort of thing.

                              But the model wasn’t incredibly lucrative even before COVID-19 hit. Costs were high, and the model did not break even even on a gross margin basis, let alone when considering all corporate expenses. You can see the financial mess from that period of operations in historical Bird results.

                              #airbnb, #bird, #ec-mobility-hardware, #ec-newsletter, #finance, #food-delivery, #fundings-exits, #lime, #lyft, #ma, #private-equity, #profit, #scooters, #spac, #startups, #switchback-ii-corporation, #tc, #the-exchange, #transportation, #uber

                              • Reply
                                TechCrunch 4:04 pm on August 19, 2021
                                Tags: chicago ( 49 ), EC Newsletter, Fundings & Exits ( 2,233 ), Liza Benson ( 2 ), M1 Finance ( 12 ), m25, Midwest ( 5 ), Midwest startups ( 2 ), Moderne Ventures ( 2 ), Startups ( 5,133 ), The Exchange ( 343 ), venture capital data ( 8 )   

                                When VCs turned to Zoom, Chicago startups were ready for their close-up

                                Chicago’s startup scene is finally getting the attention it long felt it deserved.

                                By now it’s common knowledge that 2021 is shaping up to be a breakout year for the startup and venture capital worlds, surpassing years of strong results in a long-term bull market for tech-focused business upstarts. But no boom is equally distributed.

                                Different markets are seeing differing amounts of activity, driven in part by their startup ecosystem’s maturity and the ease with which external capital can be deployed. African startups will set fresh venture capital records this year, for example. But markets closer to the leading hubs of venture capital are seeing even stronger results, as Latin America demonstrates. China’s venture capital market, meanwhile, is easing as others accelerate.


                                The Exchange explores startups, markets and money.

                                Read it every morning on Extra Crunch or get The Exchange newsletter every Saturday.


                                Even inside the United States, there is divergence in how individual markets are performing. Chicago is an outlying benefactor from accelerating venture capital activity and the rise of remote investing. Data collected by CB Insights, for example, indicates that Chicago’s ability to attract venture funds has risen to new heights in the first half of the year.

                                While we anticipated Chicago might do well in a generally warm environment for startup investment, its results were better than we expected. To more fully understand just what is going on in the Windy City, The Exchange corresponded with M25, a Midwest-focused venture capital fund; Moderne Ventures’ partner Liza Benson (fresh off her firm raising $200 million for its second fund); Scott Kitun, of the Technori community and investing platform that has roots in the city; and Brian Barnes, CEO of M1 Finance, a local unicorn in the fintech space that TechCrunch has covered extensively.

                                The picture that emerges from their comments is one of a city long underfed in capital terms leaning into a changing investing market. And the investors don’t expect that the back half of the year will be too different from the first. That means Chicago-based startups are in the middle of their best year of raising capital ever. Let’s talk about how that came to be.

                                A venture capital run for the ages

                                The pace at which Chicago-area startups have raised capital reached a new, high plateau starting in the second half of 2020. In historical terms, data indicates that Chicago was a beneficiary of an accelerated pace of venture investment that took hold globally once investors, concerned that startup growth could slow, shrugged off initial COVID shocks. 

                                In short, startups were not affected as many feared, with many young tech companies actually accelerating during the pandemic’s first quarter of lockdowns, as many traditional businesses had to lean into software solutions and other services that startups sold.

                                The early boost to Chicago’s venture totals in the final two quarters of 2020 was easily bested in the first quarter of 2021. And then the second quarter of this year crushed that record.

                                #chicago, #ec-newsletter, #fundings-exits, #liza-benson, #m1-finance, #m25, #midwest, #midwest-startups, #moderne-ventures, #startups, #the-exchange, #venture-capital-data

                                • Reply
                                  TechCrunch 2:52 pm on August 18, 2021
                                  Tags: Bitcoin ( 144 ), Bitpanda ( 12 ), blockchain ( 196 ), Circle ( 9 ), coinbase ( 136 ), crypto ( 57 ), cryptocurrencies ( 106 ), EC Newsletter, ethereum ( 67 ), Fundings & Exits ( 2,233 ), stablecoin ( 11 ), Startups ( 5,133 ), TC ( 10,178 ), The Exchange ( 343 ), USD Coin ( 4 )   

                                  Crypto world shows signs of being rather bullish

                                  Welcome back to The Exchange. Today we’re doing something fun with crypto.

                                  Sure, we could write more about how insurtech valuations are under fresh pressure after Hippo’s Q2 earnings report — we spoke to the company’s president yesterday; more to come — or the latest stock market movements in China. There are big rounds worth considering as well. Roblox reported earnings this week. And Monday.com’s earnings pushed its shares sharply higher yesterday. There’s lots of interesting news to chew on.

                                  But instead of all that, we’re digging back into crypto. Why? Because there are some rather bullish trends that indicate the world of blockchain is maturing and creating a raft of winning players


                                  The Exchange explores startups, markets and money.

                                  Read it every morning on Extra Crunch or get The Exchange newsletter every Saturday.


                                  Writing about crypto is always a little risky. Cybersecurity folks will complain that we’re abusing the phrase crypto, despite the fact that language always evolves. And Bitcoin maximalists aren’t going to find much below that underscores their core thesis that every coin not mentioned in Satoshi’s whitepaper is, in fact, a scam. Save your tweets, please.

                                  But if you care more generally about the larger global cryptoeconomy, it’s time to imbibe some good news. Our goal is to highlight a few recent trends and then talk a little about what we might see coming from startups.

                                  Sound good? Let’s get busy.

                                  Encouraging news from your local distributed ledger

                                  The Exchange finds rising NFT volumes bullish, and we have a new thesis for what the value proposition is for such digital assets. The rising tide of mega-rounds for crypto exchanges belies not only the worldwide demand for access to crypto, but also sets the stage for a global cohort of stable, well-funded and trustworthy on-ramps to the crypto world — and, of course, more exchanges imply lower fees over time.

                                  Non-exchange crypto fees are also bullish. And then there’s a wrinkle to the stablecoin game and what sort of economics things like USDC may command in time. We have notes from an interview with Circle to help us there.

                                  NFTs and the concept of joy

                                  I don’t think anyone actually understands what the metaverse is. But the possibility that, in time, unique assets on particular chains — NFTs — will have a part to play in larger digital worlds seems like a reasonable conjecture. One can easily imagine life, as we all become Increasingly Online, leaning on human desires for scarcity as a method of showing status. NFTs will help meet that demand in certain digital ecosystems. Games, probably, though what we consider a game will also evolve as VR becomes more mainstream.

                                  But that future is not here yet. So, what value are NFTs providing today that makes them potentially worthwhile? Joy.

                                  #bitcoin, #bitpanda, #blockchain, #circle, #coinbase, #crypto, #cryptocurrencies, #ec-newsletter, #ethereum, #fundings-exits, #stablecoin, #startups, #tc, #the-exchange, #usd-coin

                                  • Reply
                                    TechCrunch 4:17 pm on August 17, 2021
                                    Tags: Brazil ( 365 ), EC Brazil ( 7 ), EC Newsletter, Fundings & Exits ( 2,233 ), initial public offering ( 43 ), nubank ( 34 ), Nuvemshop ( 5 ), Renata Quintini ( 4 ), sao paulo ( 28 ), Softbank ( 147 ), Startups ( 5,133 ), technology startups ( 2 ), The Exchange ( 343 ), unicorn ( 107 ), venture capital ( 2,101 )   

                                    As its startup market accelerates, Brazil could be in for an IPO bonanza

                                    Brazil’s startup market is reaching new heights, and its domestic stock market could benefit from the boom.

                                    According to data from KPMG, Brazilian startups raised the most capital in a single quarter in Q1 2021, when some $1.4 billion flowed into domestic technology upstarts. That record stood until the second quarter of 2021 saw $2.7 billion raised by Brazilian startups.


                                    The Exchange explores startups, markets and money.

                                    Read it every morning on Extra Crunch or get The Exchange newsletter every Saturday.


                                    Inflows are only half of the startup equation, however. Brazil has seen notable acquisitions in recent years, including Twilio buying Teravoz in January 2020, and Etsy buying Elo7 in June for more than $200 million. Magazine Luiza spent $528 million to buy Kabum, a Brazilian e-commerce player, earlier this year.

                                    Acquisitions are merely one path to liquidity, however. IPOs are another. The good news for Brazil and its startup ecosystem is that despite a historical dearth of technology public offerings on domestic exchanges, the IPO market for Brazilian tech startups could be gearing up for more volume.

                                    GetNinjas, a platform for hiring local labor for household needs like plumbing and painting, went public earlier this year on the B3 exchange, located in São Paulo. And it’s not alone.

                                    The IPO market in Brazil is changing, data indicates. TechCrunch noted last year that in the decade leading up to 2020, just two of the 56 IPOs in Brazil were technology companies. More recently, the number of technology companies listed in the country has swelled to at least 16, up from just four in 2019.

                                    Will the trend of domestic IPOs continue for Brazilian technology companies? Or will U.S. IPOs play a preeminent role for the country’s leading tech startups?

                                    The question is not idle, with São Paulo-based fintech giant Nubank heading toward an eventual public offering and more capital than ever wagered on the country’s current generation of startups, all of which must aspire to the most famous of exit paths. Brazil is also minting new unicorns, with at least four graduating to the valuation threshold this year alone.

                                    But even that data point is outdated: Just this morning, Nuvemshop, a Brazilian e-commerce company, announced a new $500 million round valuing it at more than $3 billion.

                                    To better understand the recently expanding number of domestically listed Brazilian technology offerings, and what could be ahead for the country’s startups, The Exchange spoke to GetNinjas CEO Eduardo L’Hotellier about its IPO and Renata Quintini from Renegade Partners, a venture capital firm, about what’s happening in the country. We’ll lean on data as we go. Let’s explore Brazil!

                                    What’s driving rising technology IPO volume in Brazil?

                                    The number of public companies, overall depressed compared to historical highs in the Brazilian market, is impacted by both sector-specific and more macro trends. When we consider what is driving more technology offerings in Brazil, we’ll want to think about larger macroeconomic factors along with what’s happening in technology more specifically.

                                    #brazil, #ec-brazil, #ec-newsletter, #fundings-exits, #initial-public-offering, #nubank, #nuvemshop, #renata-quintini, #sao-paulo, #softbank, #startups, #technology-startups, #the-exchange, #unicorn, #venture-capital

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                                      TechCrunch 2:46 pm on August 16, 2021
                                      Tags: Carta ( 14 ), Chime ( 21 ), discord ( 40 ), EC Fintech ( 80 ), EC Newsletter, finance ( 1,064 ), Fundings & Exits ( 2,233 ), Startup company ( 260 ), TC ( 10,178 ), The Exchange ( 343 ), unicorn ( 107 ), valuation ( 23 ), venture capital ( 2,101 )   

                                      The hyperactive late-stage market should keep the startup investing game afoot

                                      As last week came to a close, funding news involving three major U.S. technology startups lit up on Twitter.

                                      Carta closed a $500 million Series G at a $7.4 billion price tag. Chime put together a $750 million round at a $25 billion valuation. And Discord was reported to be hunting up new cash that would value it at around $15 billion.


                                      The Exchange explores startups, markets and money.

                                      Read it every morning on Extra Crunch or get The Exchange newsletter every Saturday.


                                      Each funding round has something special about it that we need to discuss. Why? Because while it’s well-known that the unicorn market is crowded — reaching a $1 billion valuation in today’s capital-flush markets is no longer particularly rare for startups — the number of startups worth a multiple of that valuation threshold is growing rapidly. And understanding why investors are so willing to buy minute stakes in dozens of private companies worth billions of dollars is key to grokking the crush of investment we see among younger technology startups.

                                      To make the point, CB Insights’ unicorn leaderboard lists 55 companies with valuations of $7.5 billion or more. That’s nearly five dozen companies worth more than Carta after its most recent round. According to the list, 38 of today’s unicorns are worth $10 billion or more.

                                      The 55 startups valued at $7.5 billion and more are worth more than $1 trillion in aggregate, while the 38 decacorns are worth more than $900 billion when counted as a group.

                                      We’ve become too accustomed to simply reading the latest nine-figure round invested at an 11-figure price and shrugging. So, this morning, let’s talk about Carta and Chime and Discord and why each of them may have managed their latest, or anticipated, valuation gain.

                                      When we talk about unicorns, we’re simply discussing a generally growth-oriented cohort of technology upstarts. But once a startup reaches closer to the $10 billion valuation threshold, we’re really talking about ducks increasingly too big for their pond. They are the next set of IPOs both domestically and abroad.

                                      #carta, #chime, #discord, #ec-fintech, #ec-newsletter, #finance, #fundings-exits, #startup-company, #tc, #the-exchange, #unicorn, #valuation, #venture-capital

                                      • Reply
                                        TechCrunch 3:26 pm on August 13, 2021
                                        Tags: auto insurance ( 10 ), car insurance ( 7 ), Carvana ( 3 ), Earnings ( 149 ), EC Newsletter, Hippo ( 17 ), insurance ( 127 ), insurance underwriting ( 2 ), lemonade ( 28 ), machine learning ( 458 ), marshmallow ( 3 ), MetroMile ( 18 ), Next Insurance ( 3 ), ROOT ( 12 ), TC ( 10,178 ), The Exchange ( 343 ), zego ( 2 )   

                                        What happens when Wall Street falls out of love with your sector?

                                        It’s been an awful week for public neoinsurance companies. A subsector of the larger insurtech world, neoinsurance providers tackled a number of insurance categories using a blend of modern app design and machine learning in hopes of creating more user-friendly and profitable insurance products.

                                        The idea proved attractive to venture capitalists, who invested in a host of companies working on the problem space. And it went so well that in the last year or so we saw a number of U.S. neoinsurance companies go public.


                                        The Exchange explores startups, markets and money.

                                        Read it every morning on Extra Crunch or get The Exchange newsletter every Saturday.


                                        That’s the extent of the good news. Since the IPOs and SPAC combinations that took MetroMile, Hippo, Lemonade and Root public, the group has seen their values either decline sharply below their initial trading prices or far under their recent highs.

                                        We’ve covered some of these declines in recent weeks and wondered if we should be worried about neoinsurance valuations and how they may impact startups. This morning, we’re examining what happened to neoinsurance companies this week, why, and which startups could be impacted.

                                        Grounding our work is an interview that The Exchange held with Root CEO Alex Timm in the wake of his company’s earnings report. It’s a pretty illustrative example of where the sector finds itself today: Flush, busy and somewhat unloved.

                                        Recent declines

                                        Measuring from last Friday’s closing price to yesterday’s, here’s a digest of where the market is for public neoinsurance companies:

                                        • Hippo: -20%
                                        • MetroMile: -30%
                                        • Root: -23%
                                        • Lemonade: -6%

                                        Declines from recent highs are more extreme for several of the now-public neoinsurance companies, something that we discussed last Friday. The point we made then has only become more acute. We could add names to this list, like Oscar Health, but health insurance feels sufficiently distinct from the above companies that I don’t want to muddy the waters.

                                        What’s new in all of this is that the value of some of these companies is getting close to their cash balance. Or more simply, they are trending toward basement-level enterprise values. Here’s the data:

                                        #auto-insurance, #car-insurance, #carvana, #earnings, #ec-newsletter, #hippo, #insurance, #insurance-underwriting, #lemonade, #machine-learning, #marshmallow, #metromile, #next-insurance, #root, #tc, #the-exchange, #zego

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                                          TechCrunch 3:18 pm on August 12, 2021
                                          Tags: EC Newsletter, Enterprise ( 1,252 ), Fundings & Exits ( 2,233 ), Jonathan Lehr ( 2 ), New York ( 191 ), New York City ( 2,847 ), New York Enterprise ( 3 ), nyc ( 6 ), Startups ( 5,133 ), TC ( 10,178 ), The Exchange ( 343 ), unicorn ( 107 ), venture capital ( 2,101 ), Work-Bench ( 7 )   

                                          New York City’s enterprise tech startups could be heading for a super-heated exit wave

                                          We lied when we said that The Exchange was done covering 2021 venture capital performance. Yesterday, we dug into preliminary Q3 data for the Chinese startup market. This morning, we’re looking back at just what startups in New York City managed in the first half of the year.

                                          Some startups, at least. We paged through a report from New York City-based Work-Bench, a venture capital group focused on enterprise technology. The firm ran the numbers on Q1 and Q2 venture performance in their target market. What emerged from the data is a startup market busy accelerating its ability to raise capital, mint unicorns and, increasingly, generate outsized exits.


                                          The Exchange explores startups, markets and money.

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                                          Gone are the days when the New York startup ecosystem, perennially in Silicon Valley’s shadow, was more hype than substance. (In recent news, Work-Bench recently raised a new $100 million fund.)

                                          There’s a lot to chat through, so we got Work-Bench partner Jonathan Lehr — one half of a founding pair that includes Jessica Lin — to answer our questions. Let’s explore just how large the New York City venture capital market has grown, where the funds are flowing in enterprise-startup terms, and discuss the pace at which the city is minting new unicorns — can it find enough exits for so many $1 billion startups?

                                          That final question is one that we have about essentially every startup hub in the world. Perhaps New York City will provide a blueprint for how to think about an ever-larger unicorn stable that seems to have a wider entrance than exit.

                                          A venture bonanza

                                          At a state level, New York had a huge start to 2021. As with many startup ecosystems, there was far more venture capital activity in the state during the first half of 2021 than in the same period of 2020.

                                          CB Insights data paints a clear picture: In the first half of 2020, New York-based startups raised $7.6 billion across 667 rounds. In the first half of 2021, however, those numbers swelled to $22.4 billion from 847 deals.

                                          Enterprise venture funding saw similar gains. Per the Work-Bench report, enterprise startups in New York City raised $6.7 billion in the first and second quarters of this year, up 146% from the first half of 2020, when $2.7 billion was raised. Even more notable, Work-Bench reports that venture funding of enterprise startups in its city was up 12x in H1 2021 compared to a full-year 2014 tally.

                                          In a nutshell, the figures detail the rise of New York’s key startup market in the last decade.

                                          #ec-newsletter, #enterprise, #fundings-exits, #jonathan-lehr, #new-york, #new-york-city, #new-york-enterprise, #nyc, #startups, #tc, #the-exchange, #unicorn, #venture-capital, #work-bench

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                                            TechCrunch 1:36 pm on August 11, 2021
                                            Tags: alibaba ( 89 ), ant group ( 27 ), Asia ( 1,250 ), Baidu ( 22 ), ccp ( 4 ), China ( 2,271 ), ec china ( 6 ), EC Newsletter, Fundings & Exits ( 2,233 ), Masayoshi Son ( 11 ), Softbank ( 147 ), Startups ( 5,133 ), Tencent ( 111 ), The Exchange ( 343 ), venture capital ( 2,101 ), venture capital data ( 8 ), Vision Fund ( 26 )   

                                            VCs unfazed by Chinese regulatory shakeups (so far)

                                            China’s technology scene has been in the news for all the wrong reasons in recent months. In the wake of the scuttling of Ant Group’s IPO, the Chinese government has gone on a regulatory offensive against a host of technology companies. Edtech got hit. On-demand companies took incoming fire. Ride-hailing? Check. Gaming? You bet.

                                            The result of the government fusillade against some of the best-known companies in China was falling share prices. The damage topped $1 trillion among just public Chinese companies listed abroad.


                                            The Exchange explores startups, markets and money.

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                                            What about startups in sectors that were reformed overnight? If their public comps are any indication, even more wealth was deleted in the recent wave of crackdowns.

                                            The Exchange was curious about the impact of the Chinese government’s actions on the venture capital market. The Chinese startup economy has produced a number of world-leading companies. Tencent and Alibaba, yes, and even Baidu have become well-known for a reason. Could regulatory changes shake up the venture model that helped grow the country’s largest tech concerns?

                                            After we checked in on the same question this Monday, SoftBank provided a partial answer, noting yesterday that it is pausing investments in China. The Japanese teleco, conglomerate and investing powerhouse has been deploying capital at a rapid pace in recent weeks. That will slow, at least in China. Here’s the WSJ:

                                            The regulatory initiative in China has become so unpredictable and widespread that SoftBank and its funds are planning to hold off on investing much more there until the risks become clearer, [SoftBank CEO Masayoshi Son] said at an earnings press conference in Tokyo.

                                            Is SoftBank early to its decision to shake up its investing strategy, missing Chinese deals for some time? Or is it late? We secured data from PitchBook and Traxcn that paints a somewhat surprising picture of venture capital activity at least thus far in Q3 2021.

                                            But first, a reminder of how well China’s venture capital market was performing as 2020 eased its way into 2021.

                                            Before the shakeup

                                            China had a reasonably good Q2 2021 despite the turmoil.

                                            Sure, funding flowing into Chinese startups was down 18% compared to Q4 2020, per CB Insights, but that quarter had recorded an all-time high of $27.7 billion. With $22.8 billion raised, Q2 2021 still did better than every other quarter since Q2 2016 with the exception of Q2 2018, Q4 2020 and Q1 2021. Indeed, the ecosystem had started to cool down in late 2018 before picking up pace again at the end of 2020.

                                            However, that’s only one way to look at the numbers. If you compare recent Chinese venture results with other regions, it underperformed. During Q2 2021, U.S. funding reached a new high of $70.4 billion, with places like Latin America, Canada and India also establishing new records.

                                            This also means that China lost ground as to its share of global startup dealmaking, and the same goes for unicorn creation. According to Tech Buzz China’s summary of CB Insights data, the U.S. accounted for 132 unicorn births between January 1 and June 16, 2021, compared with just three in China.

                                            Slightly falling quarterly venture capital totals and a notable decline in unicorn formation does not a startup winter make. So let’s look at what’s happened more recently.

                                            So, what about Q3?

                                            The thesis that there would be an instantly obvious slowdown in Chinese venture capital activity is not supported by the data we secured.

                                            #alibaba, #ant-group, #asia, #baidu, #ccp, #china, #ec-china, #ec-newsletter, #fundings-exits, #masayoshi-son, #softbank, #startups, #tencent, #the-exchange, #venture-capital, #venture-capital-data, #vision-fund

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                                              TechCrunch 1:44 pm on August 10, 2021
                                              Tags: Bitcoin ( 144 ), coinbase ( 136 ), cryptocurrency exchange ( 4 ), EC Fintech ( 80 ), EC Newsletter, falconx ( 2 ), finance ( 1,064 ), FTX ( 5 ), Fundings & Exits ( 2,233 ), Startups ( 5,133 ), TC ( 10,178 ), The Exchange ( 343 )   

                                              Everyone wants to fund the next Coinbase

                                              In celebration of Coinbase’s earnings report today, investors poured a mountain of cash into one of the company’s global competitors.

                                              I’m kidding, of course, but today really is Coinbase’s earnings day, and private investors really did just push $210 million into another exchange.

                                              The company, FalconX, is now worth $3.75 billion. As Bloomberg notes, that’s a 5x valuation jump in less than half a year. FalconX raised a smaller $50 million round in March, notably in part from Coinbase Ventures.

                                              The FalconX news should not surprise. Indian crypto exchange CoinDCX just raised $90 million, reaching a $1 billion valuation in the process. This past weekend, Indonesian cryptocurrency exchange Pintu raised $35 million. And earlier this year, Hong Kong-based crypto exchange FTX raised $900 million at an $18 billion valuation. There are other examples.


                                              The Exchange explores startups, markets and money.

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                                              It’s a lot of capital in a global race to fund the next Coinbase, I reckon.

                                              And you can’t fault investors in their hunt. After all, Coinbase has proven to be an incredibly powerful business when crypto interest is high; trading revenues at the U.S. crypto exchange rose to $1.80 billion in the first quarter of 2021, per its most recent 10-Q filing. Coinbase managed to juice its revenue haul for $771.5 million in net income. In per-share terms, Coinbase earned $3.05 per diluted piece of equity.

                                              It was an impressive result. Today, investors are expecting Coinbase to report $1.77 billion to $1.83 billion in revenue, depending on which analyst summary you prefer, and earnings per share of around $2.57. You can somewhat easily puzzle out what sort of net income that EPS figure represents, given the company’s Q1 results.

                                              I’d normally argue that Coinbase’s results today would help set the tone for venture investment in the private sector and valuations for other crypto exchanges. But given the sheer amount of money that has recently flowed into a coterie of startups around the globe hoping to build the Coinbase of their market, the concept seems somewhat moot.

                                              Instead, Coinbase’s earnings and comments about the market will simply help us understand the playground in which other crypto exchanges are currently playing, admittedly from a decidedly U.S.-centric perspective. Coinbase’s last quarter saw it generate some 81% of its revenues from its domestic market, as a data point.

                                              But that doesn’t mean that there’s no fun to be had. We can do some math regarding trading volumes and valuations. Since we have Coinbase’s trading volume data, we can parse other exchanges for their own shared data and see which seem expensive — or cheap. So, let’s do just that. Into the numbers!

                                              Trading volume as revenue proxy

                                              Per its 10-Q filing concerning the quarter ended March 31, 2021, Coinbase reported that it saw trading volume of $334.74 billion, up 1,022% from its Q1 2020 number of $29.83 billion. The company also reported that its transaction — trading — revenues for the period were $1.54 billion. So, Coinbase generated around $0.0046 per dollar of traded crypto on its platform in the period.

                                              It goes without saying, but we’re wandering into the realm of speculative math, which means that everything we’re doing today is directional rather than absolute. Our goal of seeing how other exchanges are valued based on their trading volumes will be useful, but not definitive. We’ll have to wait for more S-1s and similar filings to get to full confidence.

                                              #bitcoin, #coinbase, #cryptocurrency-exchange, #ec-fintech, #ec-newsletter, #falconx, #finance, #ftx, #fundings-exits, #startups, #tc, #the-exchange

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                                                TechCrunch 2:40 pm on August 9, 2021
                                                Tags: Asia ( 1,250 ), ccp ( 4 ), China ( 2,271 ), EC Edtech ( 24 ), EC Fintech ( 80 ), ec gaming ( 6 ), EC Newsletter, edtech ( 237 ), Fintech ( 653 ), Fundings & Exits ( 2,233 ), Gaming ( 379 ), Startups ( 5,133 ), Tencent ( 111 ), The Exchange ( 343 ), WeChat ( 41 )   

                                                The China tech crackdown continues

                                                The Chinese government’s crackdown on its domestic technology industry continues, with Tencent under fresh pressure despite the company’s efforts to follow changing regulatory expectations.

                                                News broke over the weekend that Beijing filed a civil suit against Tencent “over claims its messaging-app WeChat’s Youth Mode does not comply with laws protecting minors,” per the BBC. And NetEase, a major Chinese technology company, will delay the IPO of its music arm in Hong Kong. Why? Uncertain regulations, per Reuters.


                                                The Exchange explores startups, markets and money.

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                                                The latest spate of bad news for China’s technology industry follows a raft of regulatory changes and actions by the nation’s government that have deleted an enormous quantity of equity value. After a period of relatively light-touch regulatory oversight, domestic Chinese technology companies have found themselves on defense after the Chinese Communist Party (CCP) came after their market power in antitrust terms — and some of their business operations from other perspectives. Sectors hit the hardest include fintech and edtech.

                                                Gaming is also in the CCP crosshairs.

                                                After state media criticized the gaming industry as providing the digital equivalent of drugs to the nation’s youth last week, shares of companies like Tencent and NetEase fell. Tencent owns Riot Games, makers of the popular “League of Legends” title. And NetEase generated $2.3 billion in gaming revenue out of total revenues of $3.1 billion in its most recent quarter.

                                                NetEase stock traded around $110 per share in late July. It’s now worth around $90 per share after expectations shifted in light of the gaming news, indicating that investors are concerned about its future performance. Tencent’s Hong Kong-listed stock has also fallen, from HK$775.50 to HK$461.60 this morning.

                                                Tencent tried to head off regulatory pressure, announcing changes to how it controls access to its games after the government’s shot across the bow. The effort doesn’t appear to have worked. That Tencent is being sued by the government despite its publicly announced changes implies that its proposed curbs to youth gaming were either insufficient or perhaps moot from the beginning.

                                                #asia, #ccp, #china, #ec-edtech, #ec-fintech, #ec-gaming, #ec-newsletter, #edtech, #fintech, #fundings-exits, #gaming, #startups, #tencent, #the-exchange, #wechat

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                                                  TechCrunch 2:50 pm on August 6, 2021
                                                  Tags: assaf wand ( 5 ), EC Newsletter, Fundings & Exits ( 2,233 ), Hippo ( 17 ), lemonade ( 28 ), MetroMile ( 18 ), neoinsurance ( 2 ), ROOT ( 12 ), special-purpose acquisition company ( 39 ), Startups ( 5,133 ), TC ( 10,178 ), The Exchange ( 343 )   

                                                  A lot of cash and little love: An insurtech story

                                                  Hippo began to trade earlier this week after completing its SPAC combination. The home-focused U.S. neoinsurance provider initially stuck close to its $10 per-share pre-combination price before plummeting yesterday during regular trading.

                                                  But Hippo’s declines don’t appear to be of its own doing. Lemonade, another U.S. neoinsurance player — albeit one more focused on rental coverage — posted slightly better-than-expected Q2 results earlier in the week. After its report, Lemonade’s value dropped sharply, and it appears it dragged Hippo down with it.


                                                  The Exchange explores startups, markets and money.

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                                                  The trading volatility is interesting on its own, but what matters more is that the drop in the value of several neoinsurance companies is part of a larger trend. This week’s declines are not incredibly surprising — the market has negatively repriced tech-enabled insurance providers in recent quarters, which can be an uncomfortable situation for a category that previously basked in warm attention from public investors.

                                                  At this juncture, we’d typically riff on the new values of public neoinsurance companies and use that data to work our way into a guess concerning what the price declines might mean for related startups. Taking public-market data and using it to better understand private markets is pretty much the national pastime of this column.

                                                  Not today. Instead, we’re going to look into an interesting dynamic among neoinsurance companies that may matter a bit more for our comprehension of the private markets. Namely that the players in the space that we can name and track are generally cash-rich and market-sentiment poor.

                                                  Public markets are cutting the value of neoinsurance stocks, but the companies behind the valuation declines are rather wealthy. This makes their enterprise values smaller than you might guess from a quick glance at their market cap figures. But do Lemonade or Hippo really care if the stock market decides from one quarter to the next that their businesses are worth plus or minus 10%? Do they have enough cash to pursue their long-term visions, regardless?

                                                  Let’s unpack all the numbers, discuss an interview The Exchange held with Hippo CEO Assaf Wand earlier in the week and consider what Lemonade had to say during its earnings call.

                                                  #assaf-wand, #ec-newsletter, #fundings-exits, #hippo, #lemonade, #metromile, #neoinsurance, #root, #special-purpose-acquisition-company, #startups, #tc, #the-exchange

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                                                    TechCrunch 4:16 pm on August 5, 2021
                                                    Tags: Deliveroo ( 36 ), EC Ecommerce and D2C ( 53 ), EC Newsletter, Europe ( 2,520 ), Floodgate ( 6 ), Fundings & Exits ( 2,233 ), GGV ( 17 ), hans tung ( 14 ), Logistics ( 139 ), Startups ( 5,133 ), TC ( 10,178 ), The Exchange ( 343 )   

                                                    Do bronze medals ever make sense for unicorns?

                                                    Last week, Deliveroo made news when it announced it was preparing to leave the Spanish market. The recently-listed Deliveroo couched its explanation in market terms, noting its market position in Spanish on-demand delivery wasn’t sufficient to warrant continued investment. Left unmentioned: a Spanish legal change requiring companies that previously depended on freelance couriers to hire their delivery staff.

                                                    Race Capital’s Edith Yeung helped explain the Deliveroo choice to The Exchange, saying the Spanish market doesn’t have a very large population, which may mean that the “potential upside for being #1 in Spain has [a] ceiling.”

                                                    While she noted that she doesn’t have access to Deliveroo data, her statement jibes with the company’s own comment that Spain made up less than 2% of its aggregate gross transaction value (GTV) in the first half of 2021.


                                                    The Exchange explores startups, markets and money.

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                                                    One company exiting a market is not a big deal, but we were curious about Deliveroo’s comments regarding the need for market leadership — or something close to it — to warrant continued investment. Is this the common reality for startups battling for market position, no matter if those markets are cities or countries?

                                                    Some startup markets have trended towards monopolies or duopolies. The Uber-Didi battle in China led to the companies agreeing to stop competing. Uber also recently sold its Uber Eats business in India to Zomato. In the United States, Uber and Lyft’s smaller competitors have long been forgotten and both the American ride-hailing giants continue to battle for dominance.

                                                    There are other familiar examples of this trend of consolidation. The food delivery game is concentrated amongst leading players. Postmates failed to survive as an independent company, winding up as part of Uber’s operations. Perhaps GoPuff will manage to claw out a spot in the market, but DoorDash and Uber Eats together accounted for 83% of the U.S. food delivery business in June this year, per SecondMeasure data.

                                                    It’s no surprise that some startup markets lean towards monopolies or duopolies. Many countries protect intellectual property via patents that can constrain new innovation to one or two players for an extended period of time. Monopolies can also arise when a new technology or method of business is invented — Google’s Internet parsing search tech led to a nigh-monopoly in many markets, for example.

                                                    In businesses where efficiencies of scale have a large effect, monopolies can form when leading players consolidate smaller competitors until just one or two companies remain. Standard Oil is the canonical example of this process.

                                                    What’s interesting about the on-demand delivery market is that it is both incredibly expensive but isn’t very technologically difficult to get into, which has meant that many companies have jumped into the sector around the world. This means on-demand delivery is the opposite of other patent-protected markets from which we might expect monopolies to form or competition to be extinguished past the top two players.

                                                    Yet, it’s also an industry where economies of scale can play a key role in profit generation, and increased competition can lead to price wars and advertising tussles. It’s a ripe market, then, for consolidation, even if it lacks an exploitable IP base.

                                                    #deliveroo, #ec-ecommerce-and-d2c, #ec-newsletter, #europe, #floodgate, #fundings-exits, #ggv, #hans-tung, #logistics, #startups, #tc, #the-exchange

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                                                      TechCrunch 3:25 pm on August 4, 2021
                                                      Tags: Chime ( 21 ), EC Fintech ( 80 ), EC Newsletter, finance ( 1,064 ), Fundings & Exits ( 2,233 ), monzo ( 24 ), neobanks ( 5 ), profits ( 2 ), Starling ( 5 ), Startups ( 5,133 ), TC ( 10,178 ), The Exchange ( 343 )   

                                                      Neobanks’ moves toward profitability could be the path to public markets

                                                      The global venture capital bet on neobanks is massive. London-based Starling Bank has raised more than $900 million, per Crunchbase. The same data source indicates that Chime has raised $1.5 billion. Monzo has raised nearly $650 million. And the list goes on: E-commerce-focused neobank Juni raised $21.5 million last month. Novo, an SMB-focused neobank, raised $41 million in June. Nubank has raised $2.3 billion. And FairMoney has locked down more than $50 million.

                                                      On and on and on.


                                                      The Exchange explores startups, markets and money.

                                                      Read it every morning on Extra Crunch or get The Exchange newsletter every Saturday.


                                                      But despite our general inclination to lump banking-focused fintech providers that serve consumers, business customers or both into a single bucket, there’s wide divergence in how the various neobank players are performing in the market.

                                                      Back in August 2020, The Exchange noted that many neobanks were racking up steep losses. Our read at the time was that the capital being poured into the fintech category was being invested aggressively in the name of growth. Based on recent results, that view is holding up.

                                                      But not all neobanks are the unprofitable enterprises that they once were. Chime indicated in September 2020 that it generates positive, unadjusted EBITDA. That’s a stricter profit metric than the one that Lyft used recently to claim its ascendance into the realm of profitable companies; Lyft posted positive adjusted EBITDA in its most recent quarter, but burned cash to fund its operations and posted a wide net loss in the period.

                                                      And Starling Bank reached what it describes as profitable territory in October 2020. Things have changed since our first look into neobank results.

                                                      The trend of positive neobank news continued this June, when Revolut reported its recent financial performance. The company did post rather negative aggregate results for the 2020 period. But when we drilled down into its quarterly results, we saw the picture of a fintech company scaling its gross margins and revenues while nearly reaching adjusted net income neutrality by Q4 2020. We were impressed.

                                                      This morning, let’s add to our running dig into neobank results by parsing recently released data from Starling Bank and Monzo. As we’ll see, although some neobanks are managing to clean up their ledgers and work toward profits — or reach profitability — not all are in the black.

                                                      #chime, #ec-fintech, #ec-newsletter, #finance, #fundings-exits, #monzo, #neobanks, #profits, #starling, #startups, #tc, #the-exchange

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                                                        TechCrunch 3:29 pm on August 2, 2021
                                                        Tags: affirm ( 35 ), AfterPay ( 14 ), Apple ( 1,397 ), bnpl ( 22 ), EC Fintech ( 80 ), EC Newsletter, financial technology ( 104 ), Fundings & Exits ( 2,233 ), Klarna ( 41 ), online payments ( 46 ), online purchases ( 5 ), PayPal ( 107 ), Square ( 23 ), Startups ( 5,133 ), TC ( 10,178 ), The Exchange ( 343 ), United States ( 3,949 )   

                                                        Why Square is shelling out $29B to snag BNPL player Afterpay

                                                        Shares of Square are up this morning after the company announced its second-quarter earnings and that it will buy Afterpay, an Australian buy now, pay later (BNPL) player in a $29 billion deal. As TechCrunch reported this morning, Afterpay shareholders will receive 0.375 shares of Square in exchange for their existing equity.

                                                        Shares of Afterpay are sharply higher after the deal was announced thanks to its implied premium, while shares of Square are up 7% in early-morning trading.


                                                        The Exchange explores startups, markets and money.

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                                                        Over the past year, we’ve written extensively about the BNPL market, usually from the perspective of earnings from companies in the space. Afterpay has been a key data source, along with the yet-private Klarna and U.S. public BNPL outfit Affirm. Recall that each company has posted strong growth in recent periods, with the United States arising as a prime competitive market.

                                                        Most recently, consumer hardware and services giant Apple is reportedly preparing a move into the BNPL space. Our read at the time was that any such movement by Cupertino would impact mass-market BNPL players more than niche-focused companies. Apple has a fintech base and broad IRL payment acceptance, making it a potentially strong competitor for BNPL services aimed at consumers; BNPL services targeted at particular industries or niches would likely see less competition from Apple.

                                                        From that landscape, let’s explore the Square-Afterpay deal. We want to know what Afterpay brings to Square in terms of revenue, growth and reach. We also want to do some math on the price Square is willing to pay for the company — and what that might tell us about the value of BNPL and fintech revenues more broadly. Then we’ll eyeball the numbers and try to decide if Square is overpaying for Afterpay.

                                                        What Afterpay brings to Square

                                                        As with most major deals these days, Square and Afterpay released an investor presentation detailing their argument in favor of their combination. Let’s dig through it.

                                                        Square is a two-part company. It has a large consumer business via Cash App, and it has a large business division that offers payments tech and other fintech services to corporate customers. Recall that Square is also building out banking services for its business customers and that Cash App also serves some banking and investing functionality for consumers.

                                                        #affirm, #afterpay, #apple, #bnpl, #ec-fintech, #ec-newsletter, #financial-technology, #fundings-exits, #klarna, #online-payments, #online-purchases, #paypal, #square, #startups, #tc, #the-exchange, #united-states

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                                                          TechCrunch 3:45 pm on July 30, 2021
                                                          Tags: coinbase ( 136 ), EC Fintech ( 80 ), EC Newsletter, EC United States ( 8 ), Fundings & Exits ( 2,233 ), IPO ( 156 ), Jason Warnick ( 2 ), Robinhood ( 101 ), Startups ( 5,133 ), stock market ( 29 ), TC ( 10,178 ), The Exchange ( 343 )   

                                                          Robinhood’s CFO says it was ready to go public

                                                          Robinhood priced at $38 per share this week, opened flat and closed its first day’s trading yesterday worth $34.82 per share, or a bit more than 8% underwater. The company posted a mixed picture today, falling early before recovering to breakeven in late-morning trading.

                                                          It wasn’t the debut that some expected Robinhood to have.


                                                          The Exchange explores startups, markets and money.

                                                          Read it every morning on Extra Crunch or get The Exchange newsletter every Saturday.


                                                          To close out the week, we’re not going to noodle on banned Chinese IPOs or do a full-week mega-round discussion. Instead, let’s parse some notes from a chat The Exchange had with Robinhood’s CFO about his company’s IPO and go over a few reasonable guesses as to why we’re not wondering how much money Robinhood left on the table by pricing its public offering lower than it closed on its first day.

                                                          Let’s not be dicks about it. The time for Twitter jokes was yesterday. We’ll put our thinking caps on this morning.

                                                          Why Robinhood went public when it did

                                                          Chatting with Robinhood CFO Jason Warnick earlier this week, we wanted to know why this was the right time for Robinhood to go public.

                                                          Now, no public company CEO or CFO will come out and directly say that they are going public because they think that they can defend — or extend — their most recent private valuation thanks to current market conditions.

                                                          Instead, execs on IPO day tend to deflect the question, pivoting to a well-oiled bon mot about how their public offering is a mere milestone on their company’s long-term trajectory. For some reason in our capitalist society, during an arch-capitalist event, by a for-profit company, leaders find it critical to downplay their IPO’s importance.1

                                                          With that in mind, Warnick did not say Robinhood went public because the IPO market has recently rewarded big-brand consumer tech companies like Airbnb and DoorDash with strong debuts. And he didn’t say that with tech shares near all-time highs and a taste for high-growth concerns, the company was likely set to enter a market that would be willing to price it at a valuation that it found attractive.

                                                          #coinbase, #ec-fintech, #ec-newsletter, #ec-united-states, #fundings-exits, #ipo, #jason-warnick, #robinhood, #startups, #stock-market, #tc, #the-exchange

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                                                            TechCrunch 6:36 pm on July 29, 2021
                                                            Tags: EC Latin America and Caribbean ( 8 ), EC Newsletter, entrepreneurship ( 528 ), Fundings & Exits ( 2,233 ), investment ( 77 ), latin america ( 220 ), Private Equity ( 393 ), Startup company ( 260 ), Startups ( 5,133 ), The Exchange ( 343 ), venture capital ( 2,101 ), venture capital data ( 8 )   

                                                            Why Latin American venture capital is breaking records this year

                                                            Today we’re wrapping our multi-week exploration of the global venture capital market’s second-quarter performance. We’ve gone around the world, working to better understand the geyser of cash flowing into today’s startups. But we’ve saved the best for last: Latin America.

                                                            At a glance, the Latin American venture capital and startup market appears similar to what we’ve seen from other growing ecosystems. Like the U.S., Canadian, European, Indian and African startup hubs, Latin America is seeing venture capital activity set records.


                                                            The Exchange explores startups, markets and money.

                                                            Read it every morning on Extra Crunch or get The Exchange newsletter every Saturday.


                                                            But inside the big numbers is a surprising picture of a startup market in the process of maturing while outside money hunts for breakout opportunities.

                                                            To help us in our exploration of Latin America’s epic second quarter, we collected notes and observations from NXTP’s Gonzalo Costa, Magma Partners’ Nathan Lustig and ALLVP’s Federico Antoni. We also have data from Dealroom, CB Insights, the Global Private Capital Association (GPCA) and ALLVP.

                                                            Today we’re digging into the data, yes, but also the human potential behind the startup rush. According to Antoni, the Latin American startup market of today “is a story about talent, not about capital.” Echoing the point in a recent piece about “the Latin American startup opportunity,” U.S. venture capital firm Sequoia wrote that it has “been blown away by the quality of founders in the current wave.” So we’ll have to do more than just read charts.

                                                            The union of talent and money is what startup markets need to thrive. But there are other reasons why Latin American startups are so frequently in the news today, including structural factors, such as strong digital penetration and quick e-commerce growth.

                                                            Those trends could have long lives. NXTP’s Costa made a bullish argument: The portion of “market capitalization from technology companies in Latin America is only 2.5% today compared to 40%+ in the U.S,” and his firm expects the two numbers to “converge in the long-term.” Our read of that set of data points is that there are a host of future Latin American public tech companies being founded — and funded — today.

                                                            Let’s talk about Latin American venture capital data, dig into which countries are rising stars in the region, learn how quickly Latin American startups have to go cross-border, and explore how quickly capital is recycling in the ecosystem – always a key test for startup-market longevity.

                                                            A venture capital wave

                                                            Latin America is on pace for all-time records in venture capital dollars raised and venture capital rounds in 2021. According to CB Insights data, startups in the region have already raised $9.3 billion in 2021’s first six months from 414 deals. The same data set indicates that in all of 2020, startups in the region raised $5.3 billion across 526 deals. And in case you’re worried that we’re comparing to an unfairly COVID-impacted year, in 2019 the numbers were $5.3 billion (again) from 614 individual deals.

                                                            This year is different, and the second quarter of 2021 was simply an outlier event. With some $7.2 billion invested in Latin American startups, Q2 2021’s closest rival in terms of quarterly venture totals was the second quarter of 2017, when $2.6 billion was invested.

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