SpotOn raises $125M in a16z-led Series D, triples valuation to $1.875B

Certain industries were hit harder by the COVID-19 pandemic than others, especially in its early days.

Small businesses, including retailers and restaurants, were negatively impacted by lockdowns and the resulting closures. They had to adapt quickly to survive. If they didn’t use much technology before, they were suddenly being forced to, as so many things shifted to digital last year in response to the COVID-19 pandemic. For companies like SpotOn, it was a pivotal moment. 

The startup, which provides software and payments for restaurants and SMBs, had to step up to help the businesses it serves. Not only for their sake, but its own.

“We really took a hard look at what was happening to our clients. And we realized we needed to pivot, just to be able to support them,” co-CEO and co-founder Matt Hyman recalls. “We had to make a decision because our revenues also were taking a big hit, just like our clients were. Rather than lay off staff or require salary deductions, we stayed true to our core values and just kept plugging away.”

All that “plugging away” has paid off. Today, SpotOn announced it has achieved unicorn status with a $125 million Series D funding round led by Andreessen Horowitz (a16z).

Existing backers DST Global, 01 Advisors, Dragoneer Investment Group and Franklin Templeton also participated in the financing, in addition to new investor Mubadala Investment Company. 

Notably, the round triples the company’s valuation to $1.875 billion compared to its $625 million valuation at the time of its Series C raise last September. It also marks San Francisco-based SpotOn’s third funding event since March 2020, and brings the startup’s total funding to $328 million since its 2017 inception.

Its efforts have also led to impressive growth for the company, which has seen its revenue triple since February 2020, according to Hyman.

Put simply, SpotOn is taking on the likes of Square in the payments space. But the company says its offering extends beyond traditional payment processing and point-of-sale (POS) software. Its platform aims to give SMBs the ability to run their businesses “from building a brand to taking payments and everything in-between.” SpotOn’s goal is to be a “one-stop shop” by incorporating tools that include things such as custom website development, scheduling software, marketing, appointment scheduling, review management, analytics and digital loyalty.

When the pandemic hit, SpotOn ramped up and rolled out 400 “new product innovations,” Hyman said. It also did things like waive $1.5 million in fees (it’s a SaaS business, so for several months it waived its monthly fee, for example, for its integrated restaurant management system). It also acquired a company, SeatNinja, so that it could expand its offering.

“Because a lot of these businesses had to go digital literally overnight, we built a free website for them all,” Hyman said. SpotOn also did things like offer commission-free online ordering for restaurants and helped retail merchants update their websites for e-commerce. “Obviously these businesses were resilient,” Hyman said. “But such efforts also created a lot of loyalty.” 

Today, more than 30,000 businesses use SpotOn’s platform, according to Hyman, with nearly 8,000 of those signing on this year. The company expects that number to triple by year’s end.

Currently, its customers are split about 60% retail and 40% restaurants, but the restaurant side of its business is growing rapidly, according to Hyman.

The reason for that, the company believes, is while restaurants initially rushed to add online ordering for delivery or curbside pickup, they soon realized they “wanted a more affordable and more integrated solution.”

Image Credits: SpotOn co-founders Zach Hyman, Doron Friedman and Matt Hyman / SpotOn

What makes SpotOn so appealing to its customers, Hyman said, is the fact that it offers an integrated platform so that businesses that use it can save “thousands of dollars” in payments and software fees to multiple, “à la carte” vendors. But it also can integrate with other platforms if needed.

In addition to growing its customer base and revenue, SpotOn has also boosted its headcount to about 1,250 employees (from 850 in March of 2020). Those employees are spread across its offices in San Francisco, Chicago, Detroit, Denver, Mexico City, Mexico and Krakow, Poland.

SpotOn is not currently profitable, which Hyman says is “by choice.”

“We could be cash flow positive technically whenever we choose to be. Right now we’re just so focused on product innovation and talent to exceed the needs of our clients,” he said. “We chose the capital plan so that we could really just double down on what’s working so well.”

The new capital will go toward further accelerating product development and expanding its market presence.

“We’re doubling down on our single integrated restaurant management system,” Hyman said. 

The raise marks the first time that a16z has put money in the startup, although General Partner David George told TechCrunch he was familiar with co-founders Matt Hyman and Zach Hyman through mutual friends.

George estimates that about 80% of restaurants and SMBs use legacy solutions “that are clunky and outdated, and not very customer friendly.” The COVID-19 pandemic has led to more of these businesses seeking digital options.

“We think we’re in the very early days in the transition [to digital], and the opportunity is massive,” he told TechCrunch. “We believe we’re at the tipping point of a big tech replacement cycle for restaurant and small business software, and at the very early stages of this transition to modern cloud-native solutions.”

George was also effusive in his praise for how SpotOn has executed over the past 14 months.

“There are companies that build great products, and companies that can build great sales teams. And there are companies that offer really great customer service,” he said. “It’s rare that you find two of those and extremely rare to find all three of those as we have in SpotOn.”

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Telegram raises $150M from Mubadala and Abu Dhabi CP via pre-IPO convertible bonds

Messaging platform Telegram, which recently passed 500 million monthly active users but still isn’t monetizing all the digital chatter it hosts — has taken in a little more funding to keep its engines ticking over.

Mubadala Investment Company, the Abu Dhabi-based sovereign investor, is throwing in $75M in exchange for 5-year pre-IPO convertible bonds of Telegram — with Abu Dhabi Catalyst Partners investing a further $75M, the pair said today in a press release.

The investment is touted as a strategic partnership, with Mubadala anticipating benefits for Abu Dhabi’s startup ecosystem by having a local Telegram presence drawing in skills and talent to the capital.

Per Reuters Telegram will be opening an office in Abu Dhabi following the investment — building out its regional presence from a Dubai, UAE base.

Commenting in a statement, Pavel Durov, Telegram founder and CEO, said: “We are honoured by the $150M investment into Telegram from Mubadala and Abu Dubai Catalyst Partners. We look forward to developing this strategic partnership to continue our growth in the MENA region and globally.”

To date, Telegram has been bankrolled over a seven+ year lifespan by Durov, who made ~$300M from selling his stake in the vk social network he also founded — aka Russia’s ‘Facebook’ — back in 2015.

But sustaining a messaging platform with half a billion users can’t be done through billionaire bootstrapping alone.

Some additional investment did come in via Telegram’s recent attempt to launch a blockchain platform. However the effort was derailed by US regulators last year — forcing it to refund most (but not all) of the money it had booked for the failed TON platform — so speculation over how Telegram will monetize its platform goes on.

In recent weeks Durov has responded to this chatter via his public Telegram channel to confirm he’s considering introducing ads for “large one-to-many channels” — but pledging he won’t do so in chats.

He has also rejected the notion of using user data to target ads — a move that would undermine the loud privacy promises Telegram repeatedly makes to users to put clear blue water between its platform and the (Facebook-owned) data-mining competition.

“Users will be able to opt out of ads, but I do think that privacy-conscious ads are a good way for channel owners to monetize their efforts — as an alternative to donations or subscriptions, which we are also working to offer them,” Durov wrote last month.

Telegram’s usage has, meanwhile, continued to swell this year — boosted by users switching from Facebook-owned WhatsApp over privacy concerns. So there’s limited room for copycat monetization, unless Durov is willing to trash his personal ‘pro-privacy, pro-user’ brand. To say that’s highly unlikely is an understatement.

Nonetheless, he has further limited his options by rejecting a series of investment offers in recent months.

A report in Russian press earlier this year said he’d rejected an investment offer for a 5%-10% stake in the company that had valued it at $30BN. We’ve also been told he rejected a higher offer that had valued Telegram at $35BN — and another of $4BN at a $40BN pre-money valuation.

“Durov is afraid of investors of any kind,” one source told us on why he refused to give up any equity.

Debt financing seems to be Telegram’s preferred route at this stage. Back in January The Information reported that it was discussing raising up to $1BN in debt financing from with banks and investors — which would convert to shares in an eventual public offering.

That debt route — via pre-IPO convertible bonds — is now taking shape with today’s investment news out of Abu Dhabi. Although $150M is a lot less than the rumoured $1BN so this may be just an initial tranche. (And may in fact be needed to pay back TON investors’ whose refunds are falling due.)

But with a couple of debt backers sticking their necks out to take a punt on Durov’s anti-establishment alternative — and on the chance of an Telegram IPO by 2026 — the company is in a better position to get buy in from other debt funders, including in the region as it deepens its geographical commitment to the Middle East.

One key attraction for Telegram backers is likely to be its agile product dev. There Durov has repeatedly shown he can deliver — growing usage of his platform with the help of a steady pipeline of user-focused features.

Efforts on the product side at this stage look geared towards pivoting into a Patreon-style platform for content creators to build communities of followers willing to pay for their content (which would thereby enable Telegram to monetize by taking a cut as commission).

“Our end goal is to establish a new class of content creators — one that is financially sustainable and free to choose the strategy that is best for their subscribers,” wrote Durov last month. “Traditional social networks have exploited users and publishers for far too long with excessive data collection and manipulative algorithms. It’s time to change this.”

Just over a month later his channel lit up again with more product news — this time capitalizing on the buzz around social audio with the announcement of the launch of a Clubhouse-clone on Telegram channels dubbed “voice chats 2.0”.

He also announced feature that lets admins of channels and public groups host voice chats for millions of live listeners — taking the cap off the earlier feature. “No matter how popular your talk gets, new people will be able to tune in. It’s like public radio reinvented fo the 21st century,” Telegram’s blog post enthused.

Durov had more developments to tease: One-to-many video broadcasts that will see the platform let users host their own ‘TV stations’ which he said will be coming this “spring”. So Telegram continues to evolve as the social app landscape shifts.

Commenting on the debt financing in a statement, James Munce, CFO and COO of Abu Dhabi Catalyst Partners (ADCP), lauded Telegram’s management team’s “unshakeable dedication to building a platform centred around privacy and user experience”.

“We believe this creates a strong value proposition and will be a focal point for social media platforms and a new era of messaging,” he added.


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Silverlake adds a $2 billion “longterm” hedge fund backed by Abu Dhabi to its tech finance toolkit

Silver Lake Partners, the multi-billion dollar tech-focused investment firm, is adding a longterm hedge fund backed by Abu Dhabi’s sovereign wealth fund, Mubadala, to its array of investment vehicles to finance technology companies.

The move into multi-strategy investing represents the diversification of financing vehicles that companies have at their disposal and gives the private equity firm the tools it needs to compete in a world awash with capital and new ways for companies to access public market financing.

It’s probably not a coincidence that the public-private, long-only, investment structure is happening as more tech companies are eschewing later stage financing to find cash on public markets through things like special purpose acquisition companies (SPACS).

According to a statement from the firm, the new strategy has a 25-year deployment life cycle and can be invested across structures, geographies and industries. The agreement makes the two financial entities a couple that will really span time together.

In addition to the new strategy, Silver Lake’s partnership has a new minority shareholder in the Abu Dhabi-backed sovereign wealth fund. Mubadala took a minority stake in the firm by buying up half of the 10% chunk of the firm that Silver Lake’s partners sold to Dyal Capital Partners, a subsidiary of Neuberger Berman.

“Silver Lake is a top performer for Dyal, having innovated, evolved and expanded to prudently grow its assets under management from $23 billion when we first acquired our stake to more than $60 billion today,” said Michael Rees, Managing Director and Head of Dyal Capital Partners, in a statement. “This transaction with Mubadala and their commitment to Silver Lake’s new long-term capital vehicle is a strong endorsement of Silver Lake’s differentiated, global capabilities and underscores our conviction in the ability to generate compelling returns by owning stakes in the world’s leading private investment firms.”

It’s not the first time that the two firms have hooked up. Mubadala is a co-investor alongside Silver Lake in the talent agency and entertainment giant, Endeavor; the autonomous vehicle technology developer, Waymo; and the India-based Jio Platforms.

The firm’s co-chief executives Egon Durban and Greg Mondre said in a joint statement that the new deal would allow the firm to capitalize on a wide range of investment opportunities, including ones outside of the mandates of existing funds.

“As an institution that has long seen the potential of investing in the technology sector, we are excited to partner with Silver Lake, one of the world’s most respected technology investors, to capitalize on major opportunities within and beyond the industry,” said Khaldoon Al Mubarak, Managing Director and Chief Executive Officer of Mubadala, in a statement.  “Technology is the bedrock of the global economy, and fundamental to all other sectors that are being significantly digitalized.  Our goal is to be well positioned to take advantage of this accelerated digital transformation and its potential, and we believe Silver Lake is the right partner and that this is an optimal structure for us.”

Mubadala’s tech portfolio investments kicked off in 2007 with an investment in the chip manufacturer AMD and then through the creation of the semiconductor manufacturing company GlobalFoundries. It’s also backed the medtech company PCI Pharma Services, and a number of ridesharing and e-commerce companies in Abu Dhabi and Silicon Valley, the company said.

The deal with Silver Lake could also be seen as a slap in the face for Softbank — a long time partner for Mubadala, which was an investor in the Japanese investment firm’s $100 billion Vision Fund and a $400 million European-focused investment vehicle which launched in February of last year.

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India’s Reliance Jio Platforms to sell $750 million stake to Abu Dhabi Investment Authority

Mukesh Ambani has courted the seventh major investor for his telecommunications business in just as many weeks.

On Sunday, Reliance Jio Platforms said it will sell a stake of 1.16% for $750 million to Abu Dhabi Investment Authority (ADIA), continuing its eye-catching run of investments at the height of a global pandemic.

The three-and-a-half-year-old digital unit of oil-to-retail giant Reliance Industries, the most valuable firm in India, has now secured nearly $13 billion from seven investors including Facebook, and U.S. private equity firms Silver Lake, General Atlantic by selling close to 20% stake.

Abu Dhabi Investment Authority’s announcement is the third deal Reliance Jio Platforms, which is India’s largest telecom operator with over 388 million subscribers, has secured just this week. Jio Platforms is selling $1.2 billion stake to Abu Dhabi-based sovereign firm Mubadala, it said earlier this week. The company also announced that U.S private equity firm Silver Lake was pumping an additional $600 million to increase its stake in Jio to 2.1%.

The deal further captures the appeal of Jio Platforms to foreign investors looking for a slice of the world’s second-largest internet market. Jio, which launched its commercial operations in the second half of 2016, upended the market by offering mobile data and voice calls at cut-rate prices.

“The incumbent players (Airtel, Vodafone, Idea, BSNL) in India did the opposite of what companies in their position do elsewhere in the world when a new player emerges in the market. The existing players expect the newcomer to compete aggressively on price. They often lower their prices – some times steeply — to reduce the latter’s attractiveness. Newcomers often complain to the regulators about anti-competitive practices of incumbents,” said Mahesh Uppal, director of communications consultancy firm Com First.

“In India, the opposite happened. It was the existing players who ran to regulators with complaints. So we saw a major miscalculation from incumbent players that had already missed out on taking any major step before the launch of Jio,” he said.

India has emerged as one of the biggest global battlegrounds for Silicon Valley and Chinese firms that are looking to win the nation’s 1.3 billion people, most of whom remain without a smartphone and internet connection.

Media reports have claimed in recent weeks that Amazon is considering buying stakes worth at least $2 billion in Bharti Airtel, India’s third largest telecom operator, while Google has held talks for a similar deal in Vodafone Idea, the second largest telecom operator.

Hamad Shahwan Aldhaheri, who oversees private equity deals at ADIA, said Jio Platforms is poised to benefit from major socio-economic developments and “transformative effects of technology on the way people live and work. The rapid growth of the business, which has established itself as a market leader in just four years, has been built on a strong track record of strategic execution. Our investment in Jio is a further demonstration of ADIA’s ability to draw on deep regional and sector expertise to invest globally in market leading companies and alongside proven partners.”

The new capital should help Ambani, India’s richest man, further solidify his commitment to investors when he pledged to cut Reliance’s net debt of about $21 billion to zero by early 2021 — in part because of the investments it has made to build Jio Platforms, said Uppal.

Its core business — oil refining and petrochemicals — has been hard hit by the coronavirus outbreak. Its net profit in the quarter that ended on March 31 fell by 37%.

“I am delighted that ADIA, with its track record of more than four decades of successful long-term value investing across the world, is partnering with Jio Platforms in its mission to take India to digital leadership and generate inclusive growth opportunities. This investment is a strong endorsement of our strategy and India’s potential,” said Ambani.

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