Joby Aviation makes its public trading debut on the NYSE

Joby Aviation is now public, twelve years after JoeBen Benvirt founded the company at his ranch in the Santa Cruz mountains. The air taxi developer began trading on the New York Stock Exchange on Wednesday under the ticker symbol “JOBY,” after completing a merger with special purpose acquisition company Reinvent Technology Partners.

As of 10:00 AM ET, the price per share was at $11.01, up 9.8% from its prior-day closing amount.

Joby’s post-transaction valuation now stands at $4.5 billion, the largest in the industry. It also now has the highest cash balance. All told, Joby has around $1.6 billion in total capital to take its air taxi operations to commercialization in 2024. That includes $835 million of private-investment-in-public-equity as well as more than $500 million of capital on the balance sheet.

RTP reported to the Securities and Exchange Commission that around 63% of the 69 million ordinary shares were redeemed prior to the public trading debut, giving Joby access to $255 million out of the $690 million of cash held in trust from the blank-check firm.

It’s a sizable amount, but creating an entirely new form of transportation is a capital-intensive business. Joby’s executive chairman Paul Sciarra told TechCrunch he thinks $1.6 billion will be enough to prepare the company for launch.

“We think that’s enough to execute on the things that matter over the next few years, and those are […] one, ensuring that we execute on the certification program; two, showing we can demonstrate our ability to repeatedly manufacturing these aircraft in a certifiable way; and then third and finally, the opportunity to lay the groundwork for commercial launch,” Sciarra said.

Joby is developing a five-seat electric vertical take-off and landing aircraft, which it unveiled to much anticipation in February. The company, which has backing from Toyota and JetBlue, has released a slew of announcements in recent months as it geared up for the public listing.

“A lot of people talk about us as a secretive company,” Benvirt said in an interview with TechCrunch. “We’re not actually a secretive company, we just choose to do the work and then show our work, rather than talking about it and then doing it.”

From $RTP to $JOBY

Joby’s merger with blank-check firm Reinvent, headed by LinkedIn co-founder Reid Hoffman, was announced in February. The transaction includes a few provisions to ensure longer-term collaboration, including a lock-up on founder shares for up to five years, as well as vesting provision with earnout not realized until the price per share reaches $50 – a $30 billion market cap.

SPACs are not a new instrument for going public, but they have gained a widespread presence in the transportation space, particularly amongst eVTOL startups looking to secure amounts of capital. Archer Aviation was the first developer to announce it would merge with a blank-check firm, followed by Joby, Lilium and Vertical Aerospace. But there are signs that the investment bubble may be starting to deflate: late last month, Archer cut its valuation by $1 billion in a “strategic reset” of the transaction terms with Atlas Crest Investment Corp.

Such turbulence is not uncommon in markets populated by pre-revenue companies. But despite now being a public company – and having shareholders to answer to – Sciarra said Joby’s task remains unchanged. “We can’t control the markets,” he said. “[Joby] is a company that’s been executing quietly for a very long time on things that matter. I think it’s going to be incumbent upon us to do the same as we make this transition to a public company: tell folks what we’re going to do, and then go out and do them. That, quarter by quarter, is what builds credibility, what combats skepticism, and what gives investors and frankly, the broader public, confidence that this is a company that means what it says.”

One way to frame the fate of air taxis is whether they will be more like autonomous vehicles or electric vehicles. The AV space circa five years ago was filled with companies setting ambitious expectations about when true self-driving cars would be on the roads, only to have multiple companies collapse or sell under the weight of overshot expectations.

But Sciarra suggested that a better analogy to the eVTOL industry as it currently stands is the early days of electric vehicles. He pointed out that Joby’s aircraft is designed to conform to existing safety and certification standards, with a trained pilot onboard, similar to how helicopters and planes operate today. “We didn’t want to compound the technical risk of developing a new aircraft with the technical and regulatory risk of developing full autonomy from day one.”

“We think about our approach as a little bit more Tesla versus, say, Waymo,” he added.

#air-taxis, #evtols, #joby-aviation, #joeben-bevirt, #reid-hoffman, #reinvent-technology-partners, #spac, #spacs, #transportation, #urban-air-mobility

Lucid Motors kicks off market debut with EV factory expansion plans

Lucid Group (formerly Lucid Motors) will be expanding its factory in Casa Grande, Arizona, by 2.7 million square feet, CEO Pete Rawlinson said Monday just hours after the company officially went public with a $4.5 billion injection of capital.

The company also said it has 11,000 paid reservations for its flagship luxury electric sedan, the Lucid Air.

Part of the expansion will be used to accommodate the manufacturing of Project Gravity, the mysterious title given to the automaker’s forthcoming luxury electric SUV, a Lucid spokesman told TechCrunch. Not much is known about Gravity at this point, other than that it’s scheduled to be available from 2023 and that it will use the same battery platform as the Air. Patent drawings submitted to the European Union Intellectual Property Office, first noticed by a member of the Lucid Forum, reveal little more than the renderings on Lucid’s website.

The company is also planning on bringing more of the component production in-house, including major pieces such as the body panel stampings, the spokesman added. These parts were being handled by an external supplier.

The Casa Grande City Council approved the plans to expand the nearly 1 million-square-foot space in March. The first phase of the factory, which cost around $700 million to construct, went up in a record 12 months after breaking ground. Lucid has said that it wants to expand production capacity from around 30,000 vehicles per year to up to 400,000.

Lucid has had a long, sometimes tenuous road to the public market. The company first set its sights on bringing an electric sedan to production as early as 2018, but it quickly hit funding challenges that pushed this timeline further and further back. Lucid received major funding in 2018 with a $1 billion investment from Saudi Arabia’s sovereign wealth fund, which continued to be its largest shareholder throughout Lucid’s merger with special purpose acquisition company Churchill Capital IV Corp.

That merger hit a bit of a hiccup last week when the company failed to garner a sufficient number of votes on a key proposal — likely due to the rise of retail traders and malfunctioning spam filters, executives said in an investor call.

Lucid, which will now operate under the name Lucid Group, is listed under the ticker symbol LCID.

#automotive, #churchill-capital-iv-corp, #electric-vehicles, #lucid-motors, #spacs, #transportation

Lucid Motors’ SPAC merger approved after executives issue plea to shareholders to vote

Shareholders approved Friday EV startup Lucid Motors’ merger with special purpose acquisition company Churchill Capital IV, after the companies extended the deadline by one day because not enough retail investors showed up to cast their vote.

The issue is an unusual but could become more common as more companies eschew the traditional IPO path to public markets and instead merge with SPACs. 

The issue came on Thursday, when shareholders voted to approve all but one of the proposals as part of the merger — proposal two, which would revise the company’s charter so that Lucid could receive key financing. That proposal requires a higher number of votes than the others – and it must be approved for the merger to take place – so a lack of votes ended up halting the entire process.

The lack of shareholders was blamed on retail investors’ unfamiliarity with the SPAC process and, unbelievably spam.

Churchill chairman Michael Klein raised the possibility that some of the emails sent to shareholders were accidentally sent to voters’ spam folders. While it may seem incredible that something as low-tech as a Gmail spam filter might interrupt a multi-billion dollar business merger, it seems that may have occurred in this case.

“We simply need more votes,” Klein said on an investor call Thursday. Lucid Motors CEO Peter Rawlinson was also direct: “I need you to vote for proposal two.”

“We recognize that for many of you, this voting process may be new or not standard,” Klein continued. He later thanked the many individual shareholders but urged those “participating from the new platforms, the new apps,” to vote. “They may not necessarily the directing you clearly to the voting service.”

The number of amateur or so-called “retail traders” has exploded since the start of the pandemic, largely thanks to apps like Robinhood, which leverages gamification strategies to encourage users to buy and sell stocks from anywhere. The pinnacle of this phenomenon will likely be remembered by history in the explosive rise in prices of stocks for failing companies like GameStop and AMC entertainment, engineered by an army of retail traders on the subreddit r/wallstreetbets. Retail investors account for around 10% of the U.S. equity trading volume, according to a report from Morgan Stanley, down from a high of 15% last September.

But if the rise in the price of meme stocks shows us anything, it’s that retail traders are a powerful force. The Morgan Stanley report notes that “retail investors tend to prefer companies in sectors they are likely to be familiar with as consumers, such as Consumer Discretionary, Communication Services, and Technology.” This could be why the Churchill SPAC was high on many retail investors’ radars.

In a highly-awarded post on the subreddit r/SPACs, a Reddit user urgers new retail shareholders to participate in voting: “This is not normal. SPACs have never had to beg shareholders to act in their own best interest before.

You MUST vote. A non-vote does NOT count as a YES. A non-vote is just a non-vote.”

While Lucid’s merger hold-up is a very different scenario than that of meme stock trading, it’s yet another reminder that retail investors are continuing to shape markets.

#automotive, #electric-vehicles, #lucid-motors, #private-equity, #robinhood, #spac-merger, #spacs, #transportation

ServiceMax promises accelerating growth as key to $1.4B SPAC deal

ServiceMax, a company that builds software for the field-service industry, announced yesterday that it will go public via a special purpose acquisition company, or SPAC in a deal valued at $1.4 billion. The transaction comes after ServiceMax was sold to GE for $915 million in 2016, before being spun out in late 2018. The company most recently raised $80 million from Salesforce Ventures, a key partner.

ServiceMax competes in the growing field service industry primarily with ServiceNow, and interestingly enough given Salesforce Ventures’ recent investment, Salesforce Service Cloud. Other large enterprise vendors like Microsoft, SAP and Oracle also have similar products. The market looks at helping digitize traditional field service, but also touches on in-house service like IT and HR giving it a broader market in which to play.

GE originally bought the company as part of a growing industrial Internet of Things (IoT) strategy at the time, hoping to have a software service that could work hand-in-glove with the automated machine maintenance it was looking to implement. When that strategy failed to materialize, the company spun out ServiceMax and until now it remained part of Silver Lake Partners thanks to a deal deal that was finalized in 2019.

TechCrunch was curious why that was the case, so we dug into the company’s investor presentation for more hints about its financial performance. Broadly, ServiceMax’s business has a history of modest growth and cash consumption. It promises a big change to that storyline, though. Here’s how.

A look at the data

The company’s pitch to investors is that with new capital it can accelerate its growth rate and begin to generate free cash flow. To get there, the company will pursue organic (in-house) and inorganic (acquisition-based) growth. The company’s blank-check combination will provide what the company described as “$335 million of gross proceeds,” a hefty sum for the company compared to its most recent funding round.

#cloud, #enterprise, #field-service, #fundings-exits, #servicemax, #silver-lake, #spacs

SPAC charts are exercises in the limits of hype

Having read more SPAC investor decks in the last twelve months than I’d like to admit to, I thought I was over being irked by their bullishness. Call me conservative, but public companies shouldn’t be full of shit, and companies going public should probably aim for a similar target.

That’s why S-1 filings for traditional IPOs are great. When it comes to numbers, they are honest. The filings don’t include forecasts for the next year, let alone the next half decade. Sure, companies will make a pitch for their model and methods, but S-1 filings are pretty good from an honesty perspective. Mostly.

SPAC investor decks are the opposite. I mean, look at this chart:

Historical revenue? Who needs it! Look at the growth that could maybe, possibly, theoretically happen! 201% CAGR!

Here’s another favorite:

Sure, Bob.

Here’s a super-grainy image from the Local Bounti SPAC investor deck. It’s the least-blurry version I could find. Enjoy the charts!

I’m going to change the numbers on these, label them “Alex’s future blogging output” and turn them in before my next performance review.

Here’s another great one, this time from Pear Therapeutics:

And one more, this time from the recent Embark deal that TechCrunch covered here:

What about historical revenues? Or expectations from 2021, 2022 or 2023? Who knows!

Given what we’ve learned about the accuracy of SPAC performance predictions, I think we need a Godzilla-sized Salt Bae to make all of this palatable.

 

#spac, #spacs, #tc

Industrial automation startup Bright Machines hauls in $435M by going public via SPAC

Bright Machines is going public via a SPAC-led combination, it announced this morning. The transaction will see the 3-year-old company merge with SCVX, raising gross cash proceeds of $435 million in the process.

After the transaction is consummated, the startup will sport an anticipated equity valuation of $1.6 billion.

The Bright Machines news indicates that the great SPAC chill was not a deep freeze. And the transaction itself, in conjunction with the previously announced Desktop Metal blank-check deal, implies that there is space in the market for hardware startup liquidity via SPACs. Perhaps that will unlock more late-stage capital for hardware-focused upstarts.

Today we’re first looking at what Bright Machines does, and then the financial details that it shared as part of its news.

What’s Bright Machines?

Bright Machines is trying to solve a hard problem related to industrial automation by creating microfactories. This involves a complex mix of hardware, software and artificial intelligence. While robotics has been around in one form or another since the 1970s, for the most part, it has lacked real intelligence. Bright Machines wants to change that.

The company emerged in 2018 with a $179 million Series A, a hefty amount of cash for a young startup, but the company has a bold vision and such a vision takes extensive funding. What it’s trying to do is completely transform manufacturing using machine learning.

At the time of that funding, the company brought in former Autodesk co-CEO Amar Hanspal as CEO and former Autodesk founder and CEO Carl Bass to sit on the company board of directors. AutoDesk itself has been trying to transform design and manufacturing in recent years, so it was logical to bring these two experienced leaders into the fold.

The startup’s thesis is that instead of having what are essentially “unintelligent” robots, it wants to add computer vision and a heavy dose of sensors to bring a data-driven automation approach to the factory floor.

#artificial-intelligence, #bright-machines, #ec-hardware, #exit, #finance, #industrial-automation, #robotics, #spacs, #startups, #tc

Beyond the fanfare and SEC warnings, SPACs are here to stay

The number of SPACs in the deep tech sector was skyrocketing, but a combination of increased SEC scrutiny and market forces over the past few weeks has slowed the pace of new SPAC transactions. The correction is an inevitable step on the path to mainstreaming SPACs as an alternative to IPOs, but it won’t cause them to go away. Instead, blank-check vehicles will evolve and will occupy a small and specialized — but important — part of the startup financing landscape.

The tsunami of SPAC financings sparked commentary from all corners of the capital markets community, from equity analysts and securities lawyers to VCs and fund managers — and even central bankers. That’s understandable, as more than $60 billion of SPAC deals have been announced since the beginning of 2020, plus $55 billion in PIPE capital, according to investment bank PJT Partners.

The views debated by finance experts often relate to the reasonableness of SPAC pricing and transaction structures, the alignment of incentives for stakeholders, and post-merger financial and stock price performance. But I’m not going to add another voice to the debate on the risk-reward calculus.

As the co-founder of a quantum computing software startup who worked in financial markets for two decades, I’d like to offer my perspective on two issues that I think my peers care more about: Can SPACs still solve the funding problem for capital-intensive, deep tech startups? And will they become a permanent financing option?

Keeping the lights on at deep tech startups

I believe that SPAC financings can solve a major problem for all capital-intensive technology startups: the need for faster — and potentially cheaper — access to large amounts of capital to fund product development over multiple years.

SPACs have created a limitless well of capital that deep tech startups are diving into. That’s because they are proving to be more attractive than other sources of financing, such as taking investment from later-stage VC funds or growth equity funds with finite fund sizes and specific investment themes.

The supply of growth capital from these vehicles has been astounding. In 2020, SPACs alone raised more than $83 billion via 248 IPOs, which is equal to a third of the total $300 billion raised by the entire global VC community. If the present rate of financings had continued, the annual amount of SPAC financings would have been on par with the total R&D expenditure of the U.S. government —  roughly $130 billion to $150 billion.

This new supply of capital can let startups keep the lights on, helping them address a practical need while they develop products that may take a decade to field. Before SPACs, any startup that wanted to remain independent had to lurch from one round of VC financing to the next. That, as well as the intense IPO process, is a major time sink for management teams and distracts them from focusing on product development.

#column, #ec-column, #finance, #fundings-exits, #ipo, #private-equity, #quantum-computing, #spacs, #special-purpose-acquisition-company, #startups, #venture-capital

The SPAC boom isn’t just here to stay, it’s changing consumer tech

Consumer technology is an inherently risky investment sector: even the best idea can fall flat if the story of the product is not sold properly to the end user. The stats can only take you so far, and, eventually, customers want to believe in the product.

Traditionally, companies that have successfully told their story and become market leaders have taken the initial public offering route — pitching their story to institutional investors on banker-led roadshows rather than to the people that buy their products.

But the last 18 months have seen a new door open for companies seeking to skip the bankers, partner with good managers, and gain a more direct route to public capital: merging with a Special Purpose Acquisition Company, or SPAC.

For the right consumer technology companies — for which the story is often just as, if not more, important than the financial figures — a SPAC deal offers a more direct access to public capital. Instead of walking institutional investors through the P&L, these companies can spend more time telling investors, including the retail investors using the products, what the company can be long-term.

There is no denying the growing popularity of this avenue to public exchanges: more than 200 companies went public via a SPAC deal in 2020. But as with any asset that grows hot, there will be parties out there expecting it to blow up.

Lessons have been learned and we probably have more coming, but those who treat SPACs as a sign of the end-days of economic recovery are wrong. These vehicles offer a legitimate route to the public markets while stripping out traditional gatekeepers and allowing individual investors to decide if they want to buy — or sell — a company’s story.

The SPAC bubble claim

First, it is important to address the naysayers’ concerns. Given the meteoric rise in SPAC activity, analysts speculate that the trend is overblown; they argue that companies are listing too early and that money losers are getting access to public capital before they deserve it.

But when is it “too early” to enter the public market? DraftKings, one of the most successful SPAC stories of 2020, went public about eight years after it was founded, and Facebook was private for a similar length of time before its IPO. Meanwhile, Apple, the most profitable company in the world, listed less than four years after its founding. Tenure may be a factor in investors’ minds, but lack thereof has never stopped a company from listing on the public markets.

Profitability has also rarely been a requirement for an IPO. Uber, Tesla, and Amazon are all prime examples of unprofitable businesses that listed while reporting losses.

In all these examples, clear, coherent visions, strong leadership teams, and patience from investors to see leaders execute on their vision overcame the traditional financial barometers of success.

The market knows how to value a story

The public markets are obsessed with quarterly results. A company can miss analysts’ expectations for earnings per share by just a cent and its stock will be sent tumbling. However, not all companies are assessed this way: Many companies are valued on their vision for the future and their progress towards their goals. SPACs are an effective way to invest in a strong team or vision even when there’s not enough financial data to back a traditional investment.

Biotech firms are an excellent and timely example of the way investors are looking at the market, especially post-pandemic. Biotechs usually describe a treatment they are developing and the patients it could help; they provide estimates of the addressable market, the price they could charge, and the timeline they could expect to get through clinical trials. However, an early-phase biotech could be years away from selling any drugs, let alone turning a profit. The FDA estimates the time to complete Phase II and Phase III trials, the final phases before applying for approval, can total up to six years.

Yet, investors pour money into these companies. Analysts estimate the likelihood of a drug advancing in its trials after detailed scrutiny, but these companies can see their stocks rise for years while losing money. The markets will expect high returns for taking these risks, but they can arrive at a price nonetheless.

The storytellers of consumer tech

The SPAC route is a match made in heaven for consumer tech companies: SPACs put more of a focus on the management team and the vision than traditional IPOs, which is a boon for the sector, as this industry has always been dominated by visionaries.

Looking ahead, the savviest investors in SPACs will be paying close attention to direct-to-consumer technology, but not in the traditional, limited sense of D2C.

Consumers are looking for goods and services that they can access more quickly and reliably than ever before. Conveniently, the companies that tend to succeed in ramping up these options through technology are natural storytellers that know how to bring their product directly to the end-user. Inevitably, these firms are going to be on the radar of SPAC investors.

For example, fintech, in many ways, has become direct-to-consumer because it offers customers banking features directly on their phones. In just the last year, innovation in telemedicine has brought most health appointments from the waiting room to the living room, and forced outdated healthcare administration practices to embrace digital systems.

Products you could only buy at physical stores, like mattresses, can now be delivered straight to your door with companies like Casper and Purple. Certain auto companies will allow you to even design and buy a car as easily as ordering a pizza.

The COVID-19 pandemic has only accelerated this trend by exposing the need for faster, tech-driven access to services, and our “return to normal” means this trend is only going upwards. SPACs will be around to bring these ideas to market faster and provide the capital these companies need to meet the demand.

The road ahead

Despite the speculation, naysaying and “bubble” talk, SPACs have been around for decades and aren’t going to disappear in a flash. Indeed, the pace of SPAC deals might cool down and carry a higher risk premium as the trend continues, but just like the changes in consumer technology, SPACs themselves will evolve to best serve their consumers.

In many ways, the SPAC model is very similar to the way consumer technology has developed: It encourages disruption of established constructs. What’s more, investors in pre-acquisition SPACs get access to venture-like opportunities without the capital traditionally required for such investments.

In the end, a company’s success will depend on it meeting or exceeding targets, or if something pulls demand forward. The rules have not changed, and neither has the risk or the reward.

#column, #ecommerce, #fundings-exits, #ma, #private-equity, #retail-investors, #spac, #spacs, #special-purpose-acquisition-company, #venture-capital

Attack of the robotic SPACs

That thing I said the other week about robotics SPACs being relatively few and far between is becoming less and less true. It’s like someone walked down to the local robotics club, explained the admittedly somewhat convoluted methods around robotics mergers and the rest of the industry decided that they, too, wanted to get in on this action.

Joining the list that already includes warehouse automation firm Berkshire-Gray and exoskeleton company Sarcos is Vicarious Surgical. The surgical category is definitely one to keep an eye on going forward for these deals. Not only is it a massive industry with intricate and expensive procedures, it’s one that’s been proven out for several decades now, thanks in no small part to players like Intuitive, which received FDA approval more than 20 years ago for its da Vinci system.

Vicarious has been kicking around since 2015 and has raised $43.2 million to date. The company’s got some big names in its corner, including Bill Gates via the Gates Frontier Fund, as well as backing from the likes of Marc Benioff. The company utilizes virtual reality so surgical operations can be performed remotely. The SPAC deal values the firm at $1.1 billion and will net Vicarious up to $425 million.

Sizable round from Canvas last week, as well. No, not the autonomous cart company acquired by Amazon Robotics a couple of years back. The San Francisco-based robotic drywall startup raised a $24 million Series B. One of the most interesting things we’re seeing out of the robotics construction space isn’t just the potential size of the industry, but the breadth of applications. There are just so many different places where robotics and automation could play a key role in the future.

Image Credits: ANYbotics

One of the bigger surprises of the week is the commercial arrival of ANYbotics’ ANYmal robot. We’ve seen the quadrupedal robot in a number of different iterations over the years. The comparisons to Boston Dynamics’ Spot system is, of course, unavoidable, though the Swiss company has been working on their proprietary tech for several years now.

With that in mind, it’s probably not surprising that the first commercial application for the robot is similar to that of Spot. Specifically, it’s designed to patrol potentially unsafe working spaces, including electrical and industrial plants. ANYmal has a customizable array of sensors up top for visual and audio inspections, among others.

Image Credits: University of Tubingen

Here’s a neat project out of Germany’s University of Tubingen. Researchers designed a robot to mimic the movements of an elephant trunk. This early version is comprised of low-cost (and colorful) 3D-printed components that are capable of grasping a range of different objects. The group hopes to one day adapt the technology for industrial grasping applications.

#anymal, #canvas, #robotics, #spacs, #vicarious-surgical

With a reported deal in the wings for Joby Aviation, electric aircraft soars to $10B business

One year after nabbing $590 million from investors led by Toyota, and a few months after picking up Uber’s flying taxi businessJoby Aviation is reportedly in talks to go public in a SPAC deal that would value the electric plane manufacturer at nearly $5.7 billion.

News of a potential deal comes on the heels of another big SPAC transaction in electric planes, for Archer Aviation. If the Financial Times‘ reporting is accurate, then that would mean that the two will soon be publicly traded at a total value approaching $10 billion.

It’s a heady time for startups making vehicles powered by anything other than hydrocarbons, and the SPAC wave has hit it hard.

Electric car companies Arrival, Canoo, ChargePoint, Fisker, Lordstown Motors, Proterra and The Lion Electric Company are some of the companies that have merged with SPACs — or announced plans to — in the past year.

Now it appears that any company that has anything to do with the electrification of any mode of transportation is going to get waved onto the runway for a public listing through a special purpose acquisition company vehicle — a wildly popular route at the moment for companies that might find traditional IPO listings more challenging to carry out but would rather not stay in startup mode when it comes to fundraising.

The investment group reportedly taking Joby to the moon! out to public markets is led by the billionaire tech entrepreneurs and investors Reid Hoffman, the co-founder of LinkedIn, and Mark Pincus, who launched the casual gaming company, Zynga.

Together the two men had formed Reinvent Technology Partners, a special purpose acquisition company, earlier in 2020. The shell company went public and raised $690 million to make a deal.

Any transaction for Joby would be a win for the company’s backers including Toyota, Baillie Gifford, Intel Capital, JetBlue Technology Ventures (the investment arm of the US-based airline), and Uber, which invested $125 million into Joby.

Joby has a prototype that has already taken 600 flights, but has yet to be certified by the Federal Aviation Administration. And the success of any transaction between the company and Hoffman and Pincus’ SPAC group is far from a sure thing, as the FT noted.

The deal would require an additional capital infusion into the SPAC that the two men established, and without that extra cash, all bets are off. Indeed, that is probably one reason why anyone is reading about this now.

Alternatively powered transportation vehicles of all stripes and covering all modes of travel are the rage right now among the public investment crowd. Part of that is due to rising pressure among institutional investors to find companies with an environmental, sustainability, and good governance thesis that they can invest in, and part of that is due to tailwinds coming from government regulations pushing for the decarbonization of fleets in a bid to curb global warming.

The environmental impact is one chief reason that United chief executive Scott Kirby cited when speaking about his company’s $1 billion purchase order from the electric plane company that actually announced it would be pursuing a public offering through a SPAC earlier this week.

“By working with Archer, United is showing the aviation industry that now is the time to embrace cleaner, more efficient modes of transportation,” Kirby said. “With the right technology, we can curb the impact aircraft have on the planet, but we have to identify the next generation of companies who will make this a reality early and find ways to help them get off the ground.”

It’s also an investment in a possible new business line that could eventually shuttle United passengers to and from an airport, as TechCrunch reported earlier. United projected that a trip in one of Archer’s eVTOL aircraft could reduce CO2 emissions by up to 50% per passenger traveling between Hollywood and Los Angeles International Airport.

The agreement to go public and the order from United Airlines comes less than a year after Archer Aviation came out of stealth. Archer was co-founded in 2018 by Adam Goldstein and Brett Adcock, who sold their software-as-a-service company Vettery to The Adecco Group for more than $100 million. The company’s primary backer was Marc Lore, who sold his company Jet.com to Walmart in 2016 for $3.3 billion. Lore was Walmart’s e-commerce chief until January.

For any SPAC investors or venture capitalists worried that they’re now left out of the EV plane investment bonanza, take heart! There’s still the German tech developer, Lilium. And if an investor is interested in supersonic travel, there’s always Boom.

#adam-goldstein, #airline, #baillie-gifford, #canoo, #chargepoint, #co-founder, #corporate-finance, #e-commerce, #economy, #evtol, #federal-aviation-administration, #finance, #fisker, #intel-capital, #investment, #jet-com, #jetblue-technology-ventures, #joby, #joby-aviation, #lilium, #linkedin, #lordstown-motors, #marc-lore, #mark-pincus, #private-equity, #proterra, #reid-hoffman, #reinvent-technology-partners, #software-as-a-service, #spacs, #special-purpose-acquisition-company, #tc, #the-adecco-group, #the-financial-times, #toyota, #transportation, #uber, #united-airlines, #vettery, #walmart, #zynga

SPACs are the construct VCs need to fund clean tech

In light of climate change and escalating global energy demand, more emphasis is being placed on emerging clean technologies — ranging from renewables and energy storage to nuclear power. Although these technologies have tremendous potential, they require lots of innovation, and innovation needs abundant capital.

The issue: early-stage financing for clean tech hasn’t been plentiful, and it’s stifling the growth of new energy companies. Why is this? In general, clean tech companies lack the startup advantages of agility and flexibility.

“Moving fast” works for products such as consumer mobile apps and SaaS solutions. The clean tech sector, on the other hand, tends to involve highly regulated, capital-intensive, mission-critical infrastructure.

That has hurt both returns and well-intentioned impact. According to Cambridge Associates, venture-backed companies have returned, on average, -15% internal rate of return (IRR) since 2000. Contrast that to venture-backed companies in healthcare, which returned 24% in IRR over the same time period.

Why clean tech lacks funding

While noble in its aims to make the world a better, cleaner, safer, healthier place through technology, clean tech venture capital has suffered simply because clean tech does not fit the traditional venture capital model. Central to the venture capital model is the ability to de-risk new ideas and significantly capitalize the most promising ones, allowing for liquidity via M&A or initial public offering (IPO).

Early-stage financing for clean tech hasn’t been plentiful, and it’s stifling the growth of new energy companies.

This construct allows for the return of venture capital dollars, plus appreciation that enables VC firms to raise new funds. These capitalization events also allow the venture-backed company to accelerate growth and maximize market impact.

How this construct works is evident when comparing healthcare and clean tech. In healthcare, new innovations are de-risked by VCs. More mature innovations are acquired or reach IPO every year. As a result, the average annual ratio of dollars raised via an exit to VC-invested dollars since 2012 is 1.8. This ratio is only 0.2 for clean tech, an 800-plus percent difference in the wrong direction. This has resulted in poor returns and limited capitalization of clean tech companies.

Enter (or reenter) the SPAC

Given the state of the world’s environment and lack of abundant energy in emerging economies, we need to collectively fix this issue. Special purpose acquisition companies (SPACs) are significantly improving clean tech’s venture capital construct. According to Investopedia:

SPACs are companies with no commercial operations that are formed strictly to raise capital through an initial public offering (IPO) for the purpose of acquiring an existing company.

Also known as “blank-check companies,” SPACs have been around for decades. In recent years, they’ve become more popular, attracting big-name underwriters and investors and raising a record amount of IPO money in 2019.

In 2020, more than 110 SPACs completed transactions in the U.S., capitalizing these companies with more than $29 billion.

In 2020, SPACs capitalized clean tech companies with almost $4 billion of capital, including Fisker, Lordstown Motors, QuantumScape, Hyliion, XL Fleet and others. This helped push the ratio of funds raised at exit to venture capital invested in 2020 from the previous 0.2 average to a much healthier 0.6, a 200% improvement.

In 2021, we will likely see even further improvement. Why? Because there are 43 active SPACs looking toward or finalizing merger targets with a clean tech focus, potentially providing $12 billion in growth capital. Even if there are no more new SPACs in 2021 and a historically low average of M&As and IPOs, 2021 promises continued improvement for clean tech investment.

Don’t let Nikola tarnish the pack

One of the most high-profile clean tech SPACs was Nikola Corporation. The battery-electric and hydrogen-powered truck maker has attracted much fanfare since going public last June through a reverse merger with special purpose acquisition company VectoIQ. The company’s market capitalization soared and things seemed to be going well, but things became controversial later in the year when the company was accused of making false statements about its technology and other things.

Although examples such as Nikola have the potential to tarnish the emergence of SPACs as a way to spur clean tech investing, they shouldn’t. There are plenty of examples of emerging companies that scream quality and integrity. For example, Stem*, a leader in the energy storage optimization space, is now going public, pending SEC approval, via the Star Peak SPAC.

Public markets are receiving the SPAC with enthusiasm. Assuming the merger happens, Stem will be capitalized with greater than $450 million of cash to accelerate growth and drive impact. It’s an illustration of SPACs as a positive venture capital construct that is needed to make clean tech work and become a thriving sector.

As a long-time clean tech venture capitalist myself, it is interesting that public investment via the SPAC may be the correcting element for the clean tech VC construct. For years, I assumed that corporates would step up their M&A activity at premium valuations to solve this issue, but I’ve spent a long time waiting.

Judging by activity, corporates seem content to continue playing the still very important investor/nurturer role, versus the “owning” role. Regardless, capitalizing promising clean tech companies can only mean one thing: clean-tech-related impact is coming like never before as these companies require and use capital to scale.

New and more diverse approaches to finding and funding new, great clean tech companies are sorely needed. SPACs are going to be the tool needed to bring clean tech up to par with sectors such as healthcare. It’s a development that will benefit all of us.

*Stem is a Wind Ventures portfolio company.

#cleantech, #column, #greentech, #opinion, #private-equity, #spacs, #special-purpose-acquisition-company, #venture-capital

Vista’s $3.5B purchase of Pluralsight signals a maturing edtech market

On Monday, Pluralsight, a Utah-based startup that sells software development courses to enterprises, announced that it has been acquired by Vista for $3.5 billion.

The deal, yet to close, is one of the largest enterprise buys of the year: Vista is getting an online training company that helps retrain techies with in-demand skills through online courses in the midst of a booming edtech market. Additionally, the sector is losing one of its few publicly traded companies just two years after it debuted on the stock market.

The Pluralsight acquisition is largely a positive signal that shows the strength of edtech’s capital options as the pandemic continues.

Investors and founders told Techcrunch that the Pluralsight acquisition is largely a positive signal that shows the strength of edtech’s capital options as the pandemic continues.

“What’s happening in edtech is that capital markets are liquidating,” said Deborah Quazzo, managing partner of GSV Advisors.

Quazzo, a seed investor in Pluralsight, said the ability to move fluidly between privately held and publicly held companies is a characteristic of tech sectors with deep capital markets, which is different from edtech’s “old days, where the options to exit were very narrow.”

#edtech, #education, #education-startups, #enterprise, #fundings-exits, #pluralsight, #private-equity, #spacs

AvePoint to go public via SPAC valued at $2B

AvePoint, a company that gives enterprises using Microsoft Office 365, SharePoint and Teams a control layer on top of these tools, announced today that it would be going public via a SPAC merger with Apex Technology Acquisition Corporation in a deal that values AvePoint at around $2 billion.

The acquisition brings together some powerful technology executives with Apex run by former Oracle CFO Jeff Epstein and former Goldman Sachs head of technology investment banking Brad Koenig, who will now be working closely with AvePoint’s CEO Tianyi Jiang. Apex filed for a $305 million SPAC in September 2019.

Under the terms of the transaction, Apex’s balance of $352 million plus a $140 million additional private investment will be handed over to AvePoint. Once transaction fees and other considerations are paid for, AvePoint is expected to have $252 million on its balance sheet. Existing AvePoint shareholders will own approximately 72% of the combined entity, with the balance held by the Apex SPAC and the private investment owners.

Jiang sees this is a way to keep growing the company. “Going public now gives us the ability to meet this demand and scale up faster across product innovation, channel marketing, international markets and customer success initiatives,” he said in a statement.

AvePoint was founded in 2001 as a company to help ease the complexity of SharePoint installations, which at the time were all on-premise. Today, it has adapted to the shift to the cloud as a SaaS tool and primarily acts as a policy layer enabling companies to make sure employees are using these tools in a compliant way.

The company raised $200 million in January this year led by TPG Sixth Street Partners, with additional participation from prior investor Goldman Sachs, meaning that Koenig was probably familiar with the company based on his previous role.

The company has raised a total of $294 million in capital before today’s announcement. It expects to generate almost $150 million in revenue by the end of this year with ARR growing at over 30%. It’s worth noting that the company’s ARR and revenue has been growing steadily since Q12019. The company is projecting significant growth for the next two years with revenue estimates of $257 million and ARR of $220 million by the end of 2022.

Graph of revenue and projected revenue

Image Credits: AvePoint

The deal is expected to close in the first quarter of next year. Upon close the company will continue to be known as AvePoint and be publicly traded on NASDAQ under the new ticker symbol AVPT.

#avepoint, #enterprise, #exit, #fundings-exits, #saas, #spacs, #startups

Entrepreneurship and investing as social good

2020 has been a year of social upheaval. Around the world, society is identifying different problems in our culture and pushing for widespread change. While there are notable steps we can all take, from altering exclusionary company policies to signing action-oriented petitions, the VC and investment world has another, often overlooked option: Investing in change-the-world startups.

Increasingly, angel investors and institutional funds have begun allocating a portion of their funds to startups focused on diversity and social good, whether focused on democratized access to healthcare and education, or larger scale issues like climate change.

Initially, shifting funds to empower social good may seem like a hefty feat, however investors can embrace this mindshift in three simple steps: (1) redistributing stagnant investments; (2) leveraging democratized access to change-making startups; and (3) identifying founders tracking toward success.

Allocating more investments to foster change

Most of the world’s money is tied up in stagnant places. Whether invested in real estate, bonds or other traditional vehicles, this capital typically often shows conservative returns to investors — and has negligible impact on society. The intent isn’t malicious.

Most family offices and private wealth managers strive to minimize losses and these sorts of uniformed portfolios are safe. Even the most seasoned investors should incorporate more variety into their portfolios, determining where they can make profitable investments that yield higher returns while advancing societal good. Investors can take small steps to get more confident in expanding their strategies.

To start, reframe your thinking into seeing the potential opportunity rather than the risk. A good way to do this: Look at how high-risk public equities performed over the last five years and compare it to ventures within tech. Investors will see a significant disparity and the opportunity to make different returns.

The idea is not to put an entire profile in a single venture. Rather, an investor should take a portion of their portfolio in a high-risk investment sector, like public equities or fund structures, and put it in a similar risk profile with a better return. Gradually increasing these increments, starting at 15% and slowly scaling up, can help investors to see outsized returns while making a difference in the process.

A world of passion at your fingertips

For startups of all sizes, democratized access to investors will accelerate the use of capital for social good. Until recently, only the world’s wealthiest people had exposure to premium capital, but crowdfunding and accelerator programs have ushered in new opportunities, forging connections that might not have otherwise been possible.

These avenues have opened new doors for investors and startups. Access to developed networks or innovation hubs like Silicon Valley are no longer make-or-breaks for those looking to raise capital. Extended global opportunity for startups also means investors have more options to find promising ventures that align with their values, regardless of their location.

But while crowdfunding and accelerators have made the world more accessible, they come with sizable challenges. Despite making early-stage investment more obtainable, crowdfunding often does not bring the most valuable investors to the table.

Crowdfunding also inundates platforms with poor-quality deal flow, making it more strenuous for investors to connect with fruitful opportunities. Meanwhile, various accelerators and incubation platforms have emerged, which have advanced global connection, but tend to be quite noisy.

To succeed, entrepreneurs need more than capital. Rather, they need strategic support from experienced investors who can help them make decisions and scale in an impactful way. With a world of ideas at their fingertips, investors should take time to sift through their options and find the ideas that move them the most, prioritizing quality deals and looking toward platforms that curate promising connections.

Empowering entrepreneurs poised for success

Now is the right time to invest in startups. People who innovate during the pandemic have triple the hustle of those who build in safer economies. But while the timing is right, it’s equally important that the fit is right. I’m a big believer in investing in potential: Ambition, unwavering tenacity and empathy are desirable qualities that can help bring game-changing ideas to fruition.

If an investor funds a passionate leader with a strong vision and ability to attract talent, then the groundwork is laid to build something meaningful. When considering the change-makers to invest in, ask: Is this the right person to be building this company? Do they have the ability to attract and lead talent? Is the market big enough, and is there a significant enough problem to build a company around?

If the answer isn’t yes to all of these questions, it’s important to gauge if you can see a theoretical exit, or if the company is pre-seed or Series A, if they have the ability to scale to a decent size.

Despite this, investing in startups, no matter how good their intentions, can scare investors. One way to overcome trepidation is to invest in larger-stage startups that seem less risky and then wade into earlier-stage startups at your own pace. Special purpose acquisition companies (SPACs) are also becoming an interesting investment option.

SPACs are corporations formed for the sole purpose of raising investment capital through an IPO. The proceeds are then used to buy one or more existing companies, an option that could decrease anxiety for risk-averse investors looking to expand their comfort zone.

Any strategy an investor chooses to embrace social good is a step in the right direction. Capital is a tangible way to fuel innovation and bring about impactful change.

Democratized access to startups yields more opportunity for investors to find ventures that align with their values while diversifying their profiles can provide tremendous results. And when that return means disrupting the status quo and empowering societal change? Everyone wins.

#angel-investor, #business-incubators, #column, #crowdfunding, #entrepreneurship, #opinion, #philanthropy, #private-equity, #social-good, #spacs, #startup-company, #startups, #tc

Extra Crunch Friday roundup: Edtech funding surges, Poland VC survey, inside Shift’s SPAC plan, more

I live in San Francisco, but I work an East Coast schedule to get a jump on the news day. So I’d already been at my desk for a couple of hours on Wednesday morning when I looked up and saw this:

As unsettling as it was to see the natural environment so transformed, I still got my work done. This is not to boast: I have a desk job and a working air filter. (People who make deliveries in the toxic air or are homeschooling their children while working from home during a global pandemic, however, impress the hell out of me.)

Not coincidentally, two of the Extra Crunch stories that ran since our Tuesday newsletter tie directly into what’s going on outside my window:

As this guest post predicted, a suboptimal attempt I made to track a delayed package using interactive voice response (IVR) indeed poisoned my customer experience, and;

Sheltering in place to avoid the novel coronavirus — and wildfire smoke — is fueling growth in the video-game industry, perhaps one factor in Unity Software Inc.’s plan to go public ahead of competitor Epic Games. In a two-part series, we looked at how the company has expanded beyond games and shared a detailed financial breakdown.

We covered a lot of ground this week, so scroll down or visit the recently redesigned Extra Crunch home page. If you’d like to receive this roundup via email each Tuesday and Friday, please click here.

Thanks very much for reading Extra Crunch; I hope you have a relaxing and safe weekend.

Walter Thompson
Senior Editor
@yourprotagonist


Bear and bull cases for Unity’s IPO

In a two-part series that ran on TechCrunch and Extra Crunch, former media columnist Eric Peckham returned to share his analysis of Unity Software Inc.’s S-1 filing.

Part one is a deep dive that explains how the company has grown beyond gaming to develop multiple revenue streams and where it’s headed.

For part two on Extra Crunch, he studied the company’s numbers to offer some context for its approximately $11 billion valuation.


10 Poland-based investors discuss trends, opportunities and the road ahead

The Palace of Culture and Science is standing reminder of communism in Warsaw, Masovian Voivodeship, Poland.

Image Credits: Edwin Remsberg (opens in a new window) / Getty Images

As we’ve covered previously, the COVID-19 pandemic is making the world a lot smaller.

Investors who focus on their own backyards still have an advantage, but the ability to set up a quick coffee meeting with a promising investor is no longer one of them.

Even though some VCs are cutting first checks after Zoom calls, regional investors’ personal networks are still a trump card. Tourists will always rely on guide books, however, which is why we continue to survey investors around the world.

A Dealroom report issued this summer determined that 97 VC funds backed more than 1,600 funding rounds in Poland last year. With over 2,400 early- and late-stage startups and 400,000 engineers in the country, it’s easy to see why foreign investors are taking notice.

Editor-at-large Mike Butcher reached out to several investors who focus on Warsaw and Poland in general to learn more about the startups fueling their interest across fintech, gaming, security and other sectors:

  • Bryony Cooper, managing partner, Arkley Brinc VC
  • Anna Wnuk-Błażejczyk, investor relations manager, Experior.vc
  • Rafał Roszak, investment director, YouNick Mint
  • Michal Mroczkowski, partner, Market One Capital
  • Marcus Erken, partner, Sunfish Partners
  • Borys Musielak, partner, SMOK Ventures
  • Mathias Åsberg, partner, Nextgrid
  • Kuba Dudek, SpeedUp Venture Capital Group
  • Marcin Laczynski, partner, Next Road Ventures
  • Michał Rokosz, partner, Inovo Venture Partners

We’ll run the conclusion of his survey next Tuesday.


Brands that hyper-personalize will win the next decade

Customer Relationship Management and Leader Concepts on Whiteboard

Image Credits: cnythzl (opens in a new window) / Getty Images

Even for fledgling startups, creating a robust customer service channel — or at least one that doesn’t annoy people — is a reliable way to keep users in the sales funnel.

Using AI and automation is fine, but now that consumers have grown used to asking phones and smart speakers to predict the weather and read recipe instructions, their expectations are higher than ever.

If you’re trying to figure out what people want from hyper-personalized customer experiences and how you can operationalize AI to give them what they’re after, start here.


VCs pour funding into edtech startups as COVID-19 shakes up the market

For today’s edition of The Exchange, Natasha Mascarenhas joined Alex Wilhelm to examine how the pandemic-fueled surge of interest in edtech is manifesting on the funding front.

The numbers suggest that funding will far surpass the sector’s high-water mark set in 2018, so the duo studied the numbers through August 31, which included a number of mega-rounds that exceeded $100 million.

“Now the challenge for the sector will be keeping its growth alive in 2021, showing investors that their 2020 bets were not merely wagers made during a single, overheated year,” they conclude.


How to respond to a data breach

Digital Binary Code on Red Background. Cybercrime Concept

Image Credits: WhataWin (opens in a new window) / Getty Images

The odds are low that someone’s going to enter my home and steal my belongings. I still lock my door when I leave the house, however, and my valuables are insured. I’m an optimist, not a fool.

Similarly: Is your startup’s cybersecurity strategy based on optimism, or do you have an actual response plan in case of a data breach?

Security reporter Zack Whittaker has seen some shambolic reactions to security lapses, which is why he turned in a post-mortem about a corporation that got it right.

“Once in a while, a company’s response almost makes up for the daily deluge of hypocrisy, obfuscation and downright lies,” says Zack.


Shift’s George Arison shares 6 tips for taking your company public via a SPAC

Number 6 By Railroad Tracks During Sunset

Image Credits: Eric Burger/EyeEm (opens in a new window) / Getty Images

There’s a lot of buzz about special purpose acquisition companies these days.

Used-car marketplace Shift announced its SPAC in June 2020, and is on track to complete the process in the next few months, so co-founder/co-CEO George Arison wrote an Extra Crunch guest post to share what he has learned.

Step one: “If you go the SPAC route, you’ll need to become an expert at financial engineering.”


Dear Sophie: What is a J-1 visa and how can we use it?

Image Credits: Sophie Alcorn

Dear Sophie:

I am a software engineer and have been looking at job postings in the U.S. I’ve heard from my friends about J-1 Visa Training or J-1 Research.

What is a J-1 status? What are the requirements to qualify? Do I need to find a U.S. employer willing to sponsor me before I apply for one? Can I get a visa? How long could I stay?

— Determined in Delhi


As direct listing looms, Palantir insiders are accelerating stock sales

While we count down to the September 23 premiere of NYSE: PLTR, Danny Crichton looked at the “robust secondary market” that has allowed some investors to acquire shares early.

“Given the number of people involved and the number of shares bought and sold over the past 18 months, we can get some insight regarding how insiders perceive Palantir’s value,” he writes.


Use ‘productive paranoia’ to build cybersecurity culture at your startup

Vector illustration of padlocks and keys in a repeating pattern against a blue background.

Image Credits: JakeOlimb / Getty Images

Zack Whittaker interviewed Bugcrowd CTO, founder and chairman Casey Ellis about the best practices he recommends for creating a startup culture that takes security seriously.

“It’s an everyone problem,” said Ellis, who encouraged founders to promote the notion of “productive paranoia.”

Now that the threat envelope includes everyone from marketing to engineering, employees need to “internalize the fact that bad stuff can and does happen if you do it wrong,” Ellis said.

#education, #europe, #extra-crunch, #immigration-law, #investor-surveys, #palantir, #policy, #saas, #security, #spacs, #startups, #tc, #unity, #venture-capital

Chamath Palihapitiya’s next big Hustle

Chamath Palihapitiya, the founder of Social Capital, does not do minority investing anymore. If he finds a startup he likes, he just buys it outright.

The billionaire co-founded Social Capital in 2011, and seven years later, he pivoted the investment firm into a technology holding company. The transition wasn’t one that the investors hired into Social Capital were expecting — or a direction in which they wanted to move with Palihapitiya — prompting virtually all of them to jump ship over time.

Palihapitiya, who said publicly in the aftermath of that exodus that he doesn’t think investing is a team sport, is now modeling his strategy after that of Warren Buffett. He wants Social Capital to be similar to Berkshire Hathaway, which owns businesses and holds billion-dollar stakes in companies like Apple and Coca-Cola.

One way Palihapitiya plans to achieve that scale centers on creating special purpose acquisition companies, or SPACs. SPACs are blank-check companies which raise a bunch of cash, go public and then merge with a private company. The esoteric series of steps allows a private firm to go public without the strenuous work of a traditional IPO. In 2019, Social Capital made $1.7 billion in cash and cash equivalents, due to its investment in Slack, which staged a direct listing, and Virgin Galactic, which went public through a SPAC.

But the other, quieter tactic he is using to pursue his Buffet-like ambitions? Acquiring businesses one by one.

The investor tells TechCrunch that he has acquired Hustle, a startup backed by Insight Venture Partners, Google’s GV and Salesforce Ventures. Hustle co-founder Roddy Lindsay worked on Palihapitiya’s team on Facebook for over a decade, where they got to know each other closely. But it wasn’t their shared time at Facebook that sealed the deal. It was their shared vision of a world where text-messaging would kill e-mail.

The company is one of many startups that think e-mail will no longer be a reality in a few decades. If that’s the case, then businesses will need new ways to convert users into customers. So, Hustle lets businesses communicate with users in a personalized one-on-one way with, ideally, higher conversion rates.

But the startup’s real differentiator lies in its unabashed strategy to not sell to Republican parties or Republican candidates. Steven Pease, the CEO of Hustle, said that “many non-partisan customers use our platform, but we do apply a filter when considering organizations that are at odds with the Company’s values.”

This year, Hustle sent out more than 1 billion text messages. The company has north of a $10 million annual revenue run rate, Palihapitiya said, adding that the company is profitable.

Politicians have long leveraged technology to spread their message (take Donald Trump’s Twitter, for example) and communicate with their supporters. But, as we approach the United States’ 2020 presidential election in November, direct-to-consumer political technology used to activate voters feels even more prescient.

“Whether it’s every town for gun control, whether it’s Planned Parenthood, whether it’s the Democratic National Party, there’s hundreds and hundreds [of thousands?] of customers here that are going to try to activate their customer base to do all kinds of things,” Palihapitiya said. “And I would like to own such a platform over the next 20 to 30 years.”

Hustle is Social Capital’s third acquisition in the past three years. In 2018, Social Capital bought a healthcare business that has a repository of data around human physiology. Last year, the firm scooped up a mental health startup that’s centered around software-based treatments and tracks how users progress. Palihapitiya declined to disclose the names of either investment, citing competitive advantages in keeping them out of the press for now.

“I like businesses that build non-obvious data links,” he said, noting that it is unlike AI, machine learning and other futuristic technologies.

Although his SPAC returns could fuel acquisitions, he says that his deals have been funded through personal capital.

Palihapitiya’s long-term strategy for Hustle is to create an empire around it. He plans to acquire auxiliary businesses that see $5 to $15 million in ARR, consolidate them, and “now all of a sudden, you can see us getting to hundreds of millions of ARR.”

The Hustle deal closed in about a week. He says that investing out of a permanent balance sheet of his own capital lets him underwrite decisions faster than a traditional venture capital firm, which lines up with the investor’s general anti-VC sentiment.

He pointed to Credit Karma and Intuit’s merger that is yet to close.

“We’re still waiting for that deal,” Palihapitiya said. “You know, I couldn’t write an $8.8 billion acquisition myself. But I could write a $5 billion one.”

#chamath-palihapitiya, #hustle, #ma, #social-capital, #spacs, #startups, #tc