Better.com acquires UK-based Property Partner ahead of SPAC close

Online mortgage company Better.com has acquired U.K.-based startup Property Partner as it seeks to expand into new markets and offer new product lines. The deal could give Better a way to augment its lending business with the potential to enable fractional ownership of properties in the U.S. and other markets.

Better plans to go public later this year through its planned merger with a special purpose acquisition company (SPAC) in a deal that values it at $7.7 billion. In the meantime the company has been active in the M&A market, acquiring two U.K.-based companies in the lead up to the deal’s close.

In July, Better announced its acquisition of Trussle, a digital mortgage brokerage in the U.K. that was widely seen as its first step to international expansion. But with the purchase of Property Partner, Better could gain technology capabilities to expand its feature set in the U.S. and other markets.

Launched in 2015, Property Partner enables fractional ownership of “buy to let” properties throughout the country. Through its platform, users could invest in individual properties or in a portfolio of properties and earn a portion of the rental income generated by those assets. It also created a resale market, enabling users to sell off their shares to other users.

The startup claims more than 9,000 investors on its property crowdfunding market and £140 million of assets under management. With the Better acquisition, the company expects to be able to expand both its investor base and properties to invest in.

Property Partner sent a message to users late last week to inform them of upcoming changes as a result of the deal. The startup announced it was temporarily pausing trading on the resale market while promoting some of Better’s plans as a result of the deal.

Under the new ownership, Property Partner said it would be able to reduce fees, grow its investor base, and dramatically expand investment opportunities by adding properties in the U.S. and other international locations to its platform.

For Better, the deal adds a new income stream in the short term while enabling the company to completely reimagine homeownership over a longer time horizon. Over the years Better has sought to augment its core mortgage lending business with additional products and services, including real estate agents, title and homeowners insurance, and the ability to make all-cash offers in certain markets in which it operates.

But in an interview with TechCrunch last month, Better CEO Vishal Garg previewed a vision for how fractional ownership could reduce friction and enable more freedom for the home-owning public:

You have a large population in this country that is composed of retirees and they don’t have a current income, so they cannot actually refinance their mortgage and they’re still paying interest at 6%. They’d like to move to a warmer climate. Well, they can’t, it’s gonna cost them 6% to sell their house, then it’s gonna cost them 6% to buy the other house.

Why can’t they set it up so they sell 1% of their house in Connecticut every year and establish an income stream that qualifies them to go get a cheap mortgage and sell that house in Connecticut over a period of time, to someone who wants to live there and buy a piece of property in Florida.

There are all these frictions and it’s honestly just a simple data-matching problem. There’s no reason you need to own 100% of your home. What if we could give you the ability to sell 10% a year or 3% of your home or 2% of your home to people who want to buy a home in your neighborhood and are not ready yet because they’re renting.

For a more detailed overview of Better’s upcoming SPAC and its product plans once it goes public, check out our feature on ExtraCrunch.

#better-com, #corporate-finance, #finance, #loans, #property-partner, #real-estate, #special-purpose-acquisition-company, #tc, #vishal-garg

Egyptian ride-sharing company Swvl plans to go public in a $1.5B SPAC merger

Cairo and Dubai-based ride-sharing company Swvl plans to go public in a merger with special purpose acquisition company Queen’s Gambit Growth Capital, Swvl said Tuesday. The deal will see Swvl valued at roughly $1.5 billion.

Swvl was founded by Mostafa Kandil, Mahmoud Nouh and Ahmed Sabbah in 2017. The trio started the company as a bus-hailing service in Egypt and other ride-sharing services in emerging markets with fragmented public transportation.

Its services, mainly bus-hailing, enables users to make intra-state journeys by booking seats on buses running a fixed route. This is pocket-friendly for residents in these markets compared to single-rider options and helps reduce emissions (Swvl claims it has prevented over 240 million pounds of carbon emission since inception).

After its Egypt launch, Swvl expanded to Kenya, Pakistan, Jordan and Saudi Arabia. The company also moved its headquarters to Dubai as part of its strategy to become a global company.

Swvl offerings have expanded beyond bus-hailing services. Now, the company offers inter-city rides, car ride-sharing, and corporate services across the 10 cities it operates in across Africa and the Middle East.

Queen’s Gambit, the women-led SPAC in charge of the deal, raised $300 million in January and added $45 million via an underwriters’ overallotment option focusing on startups in clean energy, healthcare and mobility sectors.

The statement also mentions a group of investors — Agility, Luxor Capital and Zain Group — which will contribute $100 million through a private investment in public equity, or PIPE.

Per Crunchbase, Swvl has raised over $170 million. From an African perspective, Swvl features as one of the most venture-backed startups on the continent. The company has been touted to reach unicorn status in the past and will when this SPAC merger is completed.

The company will aptly trade under the ticker SWVL. The listing will make it the first Egyptian startup to go public outside Egypt and the second to go public after Fawry. It will also make the mobility company the largest African unicorn debut on any U.S.-listed exchange, beating Jumia’s debut of $1.1 billion on the NYSE. Swvl joins music-streaming platform Anghami as the second startup in the region to go public via a SPAC merger in the Middle East.

Swvl had annual gross revenue of $26 million in 2020, according to the statement, and the company expects its annual gross revenue to increase to $79 million this year and $1 billion by 2025 after expanding to 20 countries across five continents.

On why Queen’s Gambit picked Swvl for this deal, Victoria Grace, founder and CEO, said in a statement that the company fit the profile of what she was looking for: “a disruptive platform that solves complex challenges and empowers underserved populations.”

“Having established a leadership position in key emerging markets, we believe Swvl is ready to capitalize on a truly global market opportunity,” she added.

In May, TechCrunch wrote that SPACs didn’t target African startups for several reasons, including a lack of global appeal and private capital and market satisfaction. Judging by Grace’s comments, Swvl has that global appeal and is ready to venture into the public market despite being in operation for just four years.

#africa, #cairo, #crunchbase, #egypt, #finance, #funding, #jordan, #kenya, #middle-east, #pakistan, #private-equity, #saudi-arabia, #special-purpose-acquisition-company, #startups, #swvl, #tc, #transportation

Fisker invests in EV charging network Allego’s SPAC merger

Less than a year after its own SPAC merger, electric vehicle startup Fisker has turned investor to support EV charging company Allego.

Fisker is investing $10 million in private-investment-in-public equity (PIPE) funding for the merger of Allego and special purpose acquisition company Spartan Acquisition Corp III. The merger, announced Tuesday, puts Allego at a pro forma equity value of $3.14 billion.

The transaction is expected to inject the EV charging provider with $702 million in cash, including $150 million in PIPE from Fisker, investors Landis+Gyr, as well as funds and accounts managed by London-based VC firm Hedosophia and ECP. Funds managed by Apollo Global Management affiliates and Meridiam, the majority shareholder of Allego, also participated in the PIPE. (Apollo is in the process of acquiring Verizon Media Group, which includes TechCrunch.)

Fisker, the sole EV automaker contributing to the PIPE, is interested in Allego’s infrastructure. The company operates more than 26,000 charging points throughout Europe.

Fisker has agreed to “a strategic partnership to deliver a range of charging options for its customers in Europe,” according to Allego. It includes a provision granting a free year of charging on the Allego network to drivers that purchase Fisker Ocean SUV between the beginning of 2023 to March 31, 2024.

The two companies are also working on a “seamless charging experience” for Fisker drivers using Allego chargers, the EV maker said in a separate statement.

“Allego has been a long-standing pioneer in the push to create a seamless pan-European electric vehicle charging network,” CEO Henrik Fisker said. “Our investment in the PIPE is motivated by strategic and tactical considerations, ensuring we have a stake in the future of EV charging networks while delivering tangible benefits to our customers.”

California-based Fisker is aiming to start deliveries of its all-electric Ocean SUV in November 2022, but it hasn’t always been a smooth road to pre-production. Henrik Fisker, a serial automotive entrepreneur best known for being the designer behind luxury vehicles like the Aston Martin V8 Vantage, raised nearly $1 billion in last year’s SPAC merger with Apollo Global Management Inc. That deal skyrocketed the startup’s valuation to $2.9 billion, but expectations deflated somewhat after major deals with Volkswagen fell apart.

Fisker has taken an outsourcing approach to its roster of electric vehicles. The Ocean will be produced via a long-term manufacturing agreement with Magna, Inc. The company signed an additional agreement with Taiwanese company Foxconn, the lead manufacturer of iPhones, to develop a new EV by the end of 2023 that will be sold under the Fisker brand.

#automotive, #charging-station, #electric-vehicles, #fisker, #henrik-fisker, #special-purpose-acquisition-company, #tc, #transportation

How to prepare for M&A, your most likely exit avenue

Despite the plentiful headlines about mega billion-dollar M&A transactions, record IPOs and the rapid growth of SPACs, small deals will continue to be the most likely exit for the vast majority of tech startups. In the over 30 years I’ve worked on M&A at White & Case, Barclays and my current firm Ascento Capital, I have seen too many startups that are not prepared for an exit via a merger or sale. This article will provide specific recommendations on how to prepare your startup for M&A.

While it is good to strive for a billion-dollar-plus sale, a successful IPO or a SPAC deal, it is practical to prepare your startup for a smaller transaction.

Global M&A hit record highs in the second quarter with a total deal value of $1.5 trillion, but smaller transactions vastly outnumber mega billion-dollar deals. The U.S. saw a total of 16,672 deals in the year ended June 31, but only 583, or 3% of that number, were valued at more than a billion dollars (FactSet). The IPO market is healthy again, but M&A still represents 88% of exits: So far this year, there were 503 IPOs and 5,203 deals, according to the CB Insights Q2 2021 State of Venture Report. After the SEC announced in early April that it was considering new guidance on SPAC IPOs, the rate of new SPAC issuances fell by around 90%.

While it is good to strive for a billion-dollar-plus sale, a successful IPO or a SPAC deal, it is practical to prepare your startup for a smaller transaction.

Here are a few recommendations that will prepare your startup for an M&A exit:

Track M&A in your subsector

Set up an alert on Google News for M&A activity in your subsector. For example, if your startup is in the IoT subsector, search for “IoT acqui” and this will pick up news stories on acquisitions in the IoT space. Save the search so you can go to Google News on a regular basis. Also track your closest competitors on Google News, particularly to see who is selling their company.

Prepare a list of likely acquirers

Prepare a list of the companies or firms most likely to buy your startup. This list should include domestic and international companies, businesses in non-tech industries, private equity firms and their portfolio companies, as well as VC-backed companies. Track these likely acquirers on Google News as well.

Consider executing a parallel track

Consider approaching the top 10 likely acquirers when you are raising the next round of capital. If your startup gets M&A offers and VC term sheets at the same time, this will provide your board of directors choices on the path ahead. Knowing the M&A activity in your startup’s subsector and the 10 most likely acquirers will impress VCs and increase the chances of being funded.

#column, #ec-column, #ec-how-to, #exits, #fundings-exits, #ipo, #ma, #mergers-and-acquisitions, #money, #private-equity, #spac, #special-purpose-acquisition-company, #startups

Extra Crunch roundup: Seed stage basics, SaaS marketing live chat, Zoom’s Five9 buy

A famous poem advises us not to compare ourselves with others, “for always there will be greater and lesser persons than yourself.”

The same holds true for startup fundraising; the size of your seed round will be determined solely by your company’s immediate needs and the investors you’re working with.

“Remember that fundraising is not the goal,” says three-time YC alum Yin Wu. “Building a successful business is.”


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If you are an early-stage founder who’s seeking clarity about apportioning equity — or if you’re biting your nails over how much to raise — read this primer. It’s also a useful overview for early employees and co-founders who may be new to startup financing.

Topics covered:

  • How financing works: SAFEs versus equity rounds
  • How much to raise
  • How to arrive at your valuation

Thanks very much for reading Extra Crunch! I hope you have a great week.

Walter Thompson
Senior Editor, TechCrunch
@yourprotagonist

Twitter Spaces: SaaS marketing with MKT1 founders Emily Kramer and Kathleen Estreich

MKT1 Co-Founders Green

Image Credits: MKT1

Join us today at 2 p.m. PT/5 p.m. ET/10 p.m. London for a Twitter Spaces conversation with Emily Kramer and Kathleen Estreich, founders of MKT1, a partnership that advises SaaS startups.

In addition to their work with individual companies, they also run founder workshops, a job board and a marketer-led syndicate.

Emily has built marketing teams from scratch at companies like Asana, Carta, and Astro, and Kathleen has scaled and led marketing and operations teams at several high-growth startups, including Intercom, Box, Facebook and Scalyr.

If you have an Android device or an iPhone and a Twitter account, click here to join the conversation or set a reminder:

https://twitter.com/i/spaces/1vAxRwkMWgzKl?s=20

Duolingo’s IPO could cast golden halo on edtech startups

Alex Wilhelm and Natasha Mascarenhas look into recent figures from U.S. edtech giant Duolingo.

It announced a first price range of $85 to $95 per share, which Alex and Natasha note “feels strong.”

“If Duolingo poses a strong debut, consumer edtech startups will be able to add a golden data point to their pitch decks,” they write. “A strong Duolingo listing could also signal that mission-driven startups can have impressive turns.”

But if it struggles?

“The wave of consumer edtech apps may lose some enthusiasm about going public.”

Outdoorsy co-founders detail how they expanded the sharing economy to RVs

Outdoorsy-founders-series

Image Credits: Bryce Durbin

Seven years ago, ad executive Jen Young and tech entrepreneur Jeff Cavins stepped away from the careers they’d built to launch Outdoorsy, an RV rental marketplace.

Last month, they announced a partnership with high-end camping company Collective Retreats and raised a $90 million Series D and $40 million in debt to speed up an already impressive rate of growth.

To learn more about their approach to building a transportation company that caters to people who crave a taste of nomadic existence, Rebecca Bella interviewed Young and Cavins for Extra Crunch.

Their conversation explored the impacts of COVID-19, their business strategy and why they decided to take on $30 million in debt financing:

Jeff Cavins: We like to look at macro trends as a business and I think U.S. monetary policy is going to get us all in a little bit of trouble. So we wanted to lock in a credit facility for the company at advantageous terms.

Cleo Capital’s Sarah Kunst explains how to get ready to raise your next round

Sarah Kunst at Disrupt SF 2017

Image Credits: Steve Jennings/Getty Images for TechCrunch

TechCrunch virtually sat down with venture capitalist and Cleo Capital managing director Sarah Kunst at our latest Early Stage event. Kunst joined us to chat about preparing for raising capital in today’s frenetic fundraising environment, digging into the gritty mechanics for the audience.

This post rounds up a few favorite excerpts from the chat, starting with Kunst’s notes on how to make a killer pitch deck.

She also offered advice regarding incorporation, how to find a co-founder and when startups are too large to join an accelerator.

In an increasingly hot biotech market, protecting IP is key

Protecting IP is key for biotechs

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

The good news for biotech startups is that investment in the sector is soaring.

“Along the way, founders will need to procure additional investments, develop strategic partnerships and stave off competition,” Kevin A. O’Connor, a partner in the Intellectual Property practice group at Neal Gerber Eisenberg, writes in a guest column. “All of which starts by protecting the fundamental asset of any biotech company: its intellectual property.”

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

Female worker working on a machine in factory. Woman in uniform operating a machine.

Image Credits: Luis Alvarez / Getty Images

Alex Wilhelm and Ron Miller dug into ServiceMax, a company that builds software for the field-service industry, after it announced it would go public via a SPAC.

“Broadly, ServiceMax’s business has a history of modest growth and cash consumption,” they write. “It promises a big change to that storyline, though. Here’s how.”

The head of Citi Ventures on how, and why, to leverage corporate venture arms like his

At our recent Early Stage event, we had the opportunity to talk with Arvind Purushotham, the managing director and global head of Citi Ventures, about how startups should think about corporate venture arms, including what a check from an enterprise like Citi can mean, and how to leverage that kind of goliath once it’s already a financial partner.

For founders trying to understand the benefits and potential pitfalls of working with a corporate venture arm versus a more traditional venture team, it’s worth zipping through this discussion.

Robinhood targets IPO valuation up to $35B amid warning that crypto incomes are slipping

Alex Wilhelm considers what Robinhood’s first IPO price range ($38 to $42 per share) means for the U.S. consumer fintech giant and whether we can expect it to raise the range again before it debuts.

In picking apart Robinhood’s latest filing, Alex noticed an aside about decreased crypto trading volume.

“Because Robinhood deals with consumers, who might decide to trade less in time, it has more uncertainty in its future growth than, say, Zoom,” he notes.

The Zoom-Five9 deal is a big bet for the video conferencing company

Video Conferencing Software Zoom Goes Public On Nasdaq Exchange

Image Credits: Kena Betancur / Getty Images

Zoom plans to spend a little less than a sixth of its value on Five9, which sells software that allows users to reach customers across platforms and record notes on their interactions.

Alex Wilhelm notes “that Five9’s revenue growth rate is a fraction of Zoom’s.”

“The larger company, then, is buying a piece of revenue that is growing slower than its core business. That’s a bit of a flip from many transactions that we see, in which the smaller company being acquired is growing faster than the acquiring entity’s own operations.

“Why would Zoom buy slower growth for so very much money?”

AngelList Venture’s Avlok Kohli on rolling funds and the busy state of VC

Few companies have deeper insights into the day-by-day state of venture capital than AngelList.

According to the company’s data, over 51% of the “top tier U.S. VC deals” involve their platform and tools, giving them a remarkably expansive view of everything going on.

AngelList Venture CEO Avlok Kohli joined us at TechCrunch Early Stage to discuss topics ranging from the state of the market to his thoughts on why there’s suddenly so much money flooding into VC (sending valuations to the sky), and where AngelList could go from here.

#angellist, #duolingo, #entrepreneurship, #extra-crunch-roundup, #five9, #growth-marketing, #mkt1, #outdoorsy, #sarah-kunst, #servicemax, #special-purpose-acquisition-company, #startups, #tc, #verified-experts, #yin-wu

Digital lending platform Blend valued at over $4B in its public debut

Mortgages may not be considered sexy, but they are a big business.

And if you’ve refinanced or purchased a home digitally lately, you may or may not have noticed the company powering the software behind it — but there’s a good chance that company is Blend.

Founded in 2012, the startup has steadily grown to be a leader in the mortgage tech industry. Blend’s white label technology powers mortgage applications on the site of banks including Wells Fargo and U.S. Bank, for example, with the goal of making the process faster, simpler and more transparent. 

The San Francisco-based startup’s SaaS (software-as-a-service) platform currently processes over $5 billion in mortgages and consumer loans per day, up from nearly $3 billion last July.

And today, Blend made its debut as a publicly-traded company on the New York Stock Exchange, trading under the symbol “BLND.” As of early afternoon, Eastern Time, the stock was trading up over 13% at $20.36.

On Thursday night, the company had said it would offer 20 million shares at a price of $18 per share, indicating the company was targeting a valuation of $3.6 billion.

That compares to a $3.3 billion valuation at the time of its last raise in January — a $300 million Series G funding round that included participation from Coatue and Tiger Global Management. Also, let’s not forget that Blend only became a unicorn last August when it raised a $75 million Series F. Over its lifetime, Blend had raised $665 million before Friday’s public market debut.

In filing its S-1 on June 21, Blend revealed that its revenue had climbed to $96 million in 2020 from $50.7 million in 2019. Meanwhile, its net loss narrowed from $81.5 million in 2019 to $74.6 million in 2020.

In 2020, the San Francisco-based startup significantly expanded its digital consumer lending platform. With that expansion, Blend began offering its lender customers new configuration capabilities so that they could launch any consumer banking product “in days rather than months.”

Looking ahead, the company had said it expects its revenue growth rate “to decline in future periods.” It also doesn’t envision achieving profitability anytime soon as it continues to focus on growth. Blend also revealed that in 2020, its top five customers accounted for 34% of its revenue.

Today, TechCrunch spoke with co-founder and CEO Nima Ghamsari about the company’s decision to go with a traditional IPO versus the ubiquitous SPAC or even a direct listing.

For one, Blend said he wanted to show its customers that it is an “around for a long time company” by making sure there’s enough on its balance sheet to continue to grow.

“We had to talk and convince some of the biggest investors in the world to invest in us, and that speaks to how long we’ll be around to serve these customers,” he said. “So it was a combination of our capital need and wanting to cement ourselves as a really credible software provider to one of the most regulated industries.”

Ghamsari emphasized that Blend is a software company that powers the mortgage process, and is not the one offering the mortgages. As such, it works with the flock of fintechs that are working to provide mortgages.

“A lot of them are using Blend under the hood, as the infrastructure layer,” he said.

Overall, Ghamsari believes this is just the beginning for Blend.

“One of the things about financial services is that it’s still mostly powered by paper. And so a lot of Blend’s growth is just going deeper into this process that we got started in years ago,” he said. As mentioned above, the company started out with its mortgage product but just keeps adding to it. Today, it also powers other loans such as auto, personal and home equity.

“A lot of our growth is actually powered by our other lines of business,” Ghamsari told TechCrunch. “There’s a lot to build because the larger digitization trends are just getting started in financial services. It’s relatively large industry that has lots of change.”

In May, digital mortgage lender Better.com announced it would combine with a SPAC, taking itself public in the second half of 2021.

 

#better-com, #blend, #coatue, #companies, #credible, #exit, #finance, #financial-services, #fintech, #fundings-exits, #ipo, #leader, #loans, #money, #new-york-stock-exchange, #saas, #san-francisco, #software, #special-purpose-acquisition-company, #startups, #tiger-global-management

Extra Crunch roundup: NS1 EC-1, Pakistan’s tech ecosystem, SPACs bonanza

Did you see the viral videos of yesterday’s flooding in New York City subways?

In one, riders waded through brown, waist-deep water; another video showed a cascade rushing down a flight of stairs to a subway platform where passengers waited for a train.

Infrastructure doesn’t attract much attention until it fails. Domain name services (DNS), the system that directs readers to techcrunch.com when they say or speak it into their web browser, are much the same way.

For the latest entry in a series of longform articles that explore the inner workings of notable startups, we looked at NS1, an internet infrastructure company best known for its software-defined DNS.

Since its founding in 2013, NS1 has raised more than $100 million to build an engineering team and robust product portfolio that’s expanded to include DDI, which helps companies manage internal networks.

If you’re curious about how NS1 transformed “a slumbering and dreary yet reliable aspect of the internet” into “a strategic moat and an enterprise win” in just eight years, read on.


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Part 1: Origin story: how three engineers decided to rebuild the internet’s core addressing system.

Part 2: Product development and roadmap: experimentation, open-source efforts and expanding beyond DNS.

Part 3: Competitive landscape: a look at the broader internet infrastructure market.

Part 4: Customer development: how their top competitor’s stumble became “the gift that kept on giving.”

Thanks very much for reading Extra Crunch — have a great weekend!

Walter Thompson
Senior Editor, TechCrunch
@yourprotagonist

Startups have never had it so good

Alex Wilhelm and Anna Heim didn’t mince words in today’s Exchange.

“The venture capital market is racing ahead, foot on the gas, middle finger out the window, hair on fire.”

That’s their hot take after analyzing the Q2 data released so far about how much money VCs deployed across the globe between April and the end of June.

Leaning on data from CB Insights, Crunchbase News and FactSet, Alex and Anna walk through the data from the U.S. and a few other regions — and promise deeper regional dives next week.

What I learned the hard way from naming 30+ startups

Image of a pink toy dinosaur holding a name tag on a yellow background.

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

If you’re starting a company, choosing a name can feel like a fraught choice. But actually, as long as you follow some basic guidelines, it shouldn’t lead to paralysis.

“The truth is that business names fall on a bell curve — you have a small number of outliers that actively contribute to your success and a small number of outliers that actively impair your ability to succeed,” Drew Beechler, who’s named more than 30 software startups, writes in a guest column. “The vast majority, though, fall somewhere in the middle in their impact on your business.”

Nextdoor’s SPAC investor deck paints a picture of sizable scale and sticky users

American Suburban Neighborhood Tilt-shift Aerial Photo

Image Credits: jhorrocks / Getty Images

The SPAC parade continued apace this week as Nextdoor announced it would go public via a blank-check company, with the community social network making its pitch based on scale, claiming users in one in three U.S. households.

Alex Wilhelm unpacks Nextdoor’s “clear-eyed look into [its] financial performance in both historical terms and in terms of what it might accomplish in the future,” noting that “our usual mockery of SPAC charts mostly doesn’t apply.”

Pakistan’s growing tech ecosystem is finally taking off

Image of the Karachi, Pakistan, skyline.

Image Credits: shan.shihan (opens in a new window)/ Getty Images

So far this year, startups in Pakistan are on track to raise more than in the previous five years combined, according to Mikal Khoso, an early-stage investor at Wavemaker Partners.

“Even more excitingly, a large portion of this capital is coming from international investors from across Asia, the Middle East and even famed investors from Silicon Valley,” he notes in a guest post for Extra Crunch.

He’s identified three factors that are fueling investor interest: rapidly expanding mobile connectivity, an improved security situation, and critical legal and regulatory changes that are making the country more startup- and VC-friendly.

Drawing a map of Pakistan’s tech ecosystem, Khoso identifies local companies trying to grab a slice of grocery delivery, e-commerce, ride-hailing and other sectors before examining the challenges still in place.

“The segments in Pakistan that are likely to attract the best entrepreneurs and most investor capital in the years to come will be fintech, e-commerce and edtech,” says Khoso.

Investors find European unicorns reluctant to join SPAC boom

The nonstop news of startups partnering up with SPACs in the United States had Alex Wilhelm and Anna Heim wondering if the blank-check boom expanded to other countries.

“Unicorns are hardly unique to the U.S. startup ecosystem,” they write. “Are we seeing similar SPAC interest in Europe?”

Anna and Alex talked to investors to see why — or why not — European startups would take the SPAC path to become a public company.

For successful AI projects, celebrate your graveyard and be prepared to fail fast

Image of an origami crane and several crumpled pieces of paper to represent success from failure.

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

When you’ve invested a lot of time and energy in a project, it can be difficult to decide to shelve it — or worse, kill it.

But for AI projects, teams should be prepared to fail fast, Sandeep Uttamchandani, the chief data officer of Unravel Data, writes in a guest column.

“In order to fail fast, AI initiatives should be managed as a conversion funnel analogous to marketing and sales funnels,” he writes. “Projects start at the top of the five-stage funnel and can drop off at any stage, either to be temporarily put on ice or permanently suspended and added to the AI graveyard.”

Uttamchandani walks through the five stages of the funnel and offers suggestions for when to start digging a hole for your project in the graveyard.

Circle is a good example of why SPACs can be useful

Yes, we’re all a bit over-SPAC-ed at this point. It’s just been a nonstop torrent of startups linking up with blank-check companies.

But Circle, a Boston-based technology company that provides API-delivered financial services and a stablecoin, is just “the sort of business that is correct for a SPAC-led debut,” Alex Wilhelm writes in The Exchange.

“It could not go public in a traditional manner in its current state of maturity,” he writes.

“But a SPAC can get it a huge slug of cash at a price that it has locked in, allowing it to complete its growth into corporate adulthood while public. A gamble, sure, but one that will be very fun to watch.”

Can advertising scale in VR?

Image of a person wearing a VR headset and two 3D orbs in front of his hands.

Image Credits: da-kuk (opens in a new window) / Getty Images

It’s not hard to imagine how advertising could be valuable in VR: billboards on streetscapes, magazine covers on newsstands, cereal boxes in virtual kitchens.

But Facebook’s stab at experimental VR ads didn’t last very long; after an onslaught of negative feedback from players, the test was quickly scuttled.

That said, VR advertising has a ton of untapped potential — but it’s going to take a minute to reach profitable scale.

Achieving digital transformation through RPA and process mining

concept of machine learning or digital transformation, wireframe hand pointing with key finger

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

“Robots are not coming to replace us,” Alp Uguray is quick to note in a guest column about robotic process automation. “They are coming to take over the repetitive, mundane and monotonous tasks that we’ve never been fond of.”

That’s the good news. But RPA is still in the early stages, despite rapid growth through IPOs, acquisitions and funding rounds.

“Adoption of RPA and process mining in your organization will define the operational excellence of your firm,” he writes. “If you are behind in this race, just think of how your enterprise can continue to compete with fully digital peers. Your organization won’t want to be in the back of this race.”

Demand Curve: 10 lies you’ve been told about marketing

Image of an advertiser speaking in front of a podium with a shadow of a long nose to represent lies.

Image Credits: Abscent84 (opens in a new window) / Getty Images

In a guest column, Nick Costelloe, the head of content for Demand Curve, notes that the content you stumble across in a Google search might not be “intentionally misleading,” it might not lead you in the right direction.

Here, he debunks 10 common myths about marketing — and offers suggestions for what to do instead.

5 fundraising imperatives for robotics startups

Image of a robot hand holding a fistful of cash to represent funding for robotics startups.

Image Credits: Paper Boat Creative (opens in a new window) / Getty Images

This guest post from three contributors from Next47, MassRobotics and Lux Capital looks at best practices for robotics startups looking to raise cash.

“There has never been a better time to pursue funding for robotics startups, but you are more likely to succeed if you build a fundraising strategy that is marked by the same sophistication and informed understanding you already bring to many other aspects of your new business,” the writers say.

Here, they lay out five strategies to ensure robotics startups get the funding they need.

#alex-wilhelm, #artificial-intelligence, #chief-data-officer, #dns, #e-commerce, #extra-crunch-roundup, #lux-capital, #massrobotics, #pakistan, #private-equity, #special-purpose-acquisition-company, #startups, #tc, #venture-capital, #wavemaker-partners

Satellite operator Planet to go public in $2.8B SPAC merger

Planet, which operates a network of around 200 satellites that provides Earth imaging, as well as analytics of the data derived from that observation, is going public in a merger with special purpose acquisition company (SPAC) dMY Technology Group IV. The deal has a post-transaction equity value of $2.8 billion, and will provide Planet with $545 million in cash balance at close, including $345 million from dMY IV’s contribution, and a $200 million PIPE provided by BlackRock-managed funds, Koch Strategic Platforms, Marc Benioff’s TIME Ventures and Google.

After a bit of a lull, Planet is now the second significant private space company this week to take the SPAC route to public markets. Both are in the business of Earth observation, though Satellogic, which announced its own SPAC merger on Tuesday, operates on a much smaller scale at the moment. Planet, founded in 2010, has raised around $374 million to date, and operates the largest Earth imaging satellite constellation in operation.

The company’s mission has been to transform the way Earth imaging data is collected and provided to commercial interests here on Earth. Planet’s network can provide a complete scan of all of the Earth’s landmass on a daily basis, and it offers that to customers “via a Bloomer-like terminal for Earth data,” as Planet founder and CEO Wiill Marshall puts it. Access is provided on a subscription basis, and Planet says it generated over $100 million in revenue during its most recent fiscal year, which ended in January.

Planet intends to use the funds resulting from the merger in part to pay down its existing debt, and also to fund its existing operations and “support new and existing growth initiatives.” The aim to to complete the merger sometime later this year, at which point the combined entity will trade under the ticker “PL” on the NYSE.

#blackrock, #corporate-finance, #google, #marc-benioff, #private-equity, #satellite-constellation, #satellite-imagery, #satellogic, #spac, #space, #special-purpose-acquisition-company, #tc, #time-ventures

Nextdoor’s SPAC investor deck paints a picture of sizable scale and sticky users

The SPAC parade continues in this shortened week with news that community social network Nextdoor will go public via a blank-check company. The unicorn will merge with Khosla Ventures Acquisition Co. II, taking itself public and raising capital at the same time.

Per the former startup, the transaction with the Khosla-affiliated SPAC will generate gross proceeds of around $686 million, inclusive of a $270 million private investment in public equity, or PIPE, which is being funded by a collection of capital pools, some prior Nextdoor investors (including Tiger), Nextdoor CEO Sarah Friar and Khosla Ventures itself.

Notably, Khosla is not a listed investor in the company per Crunchbase or PitchBook, indicating that even SPACs formed by venture capital firms can hunt for deals outside their parent’s portfolio.

Per a Nextdoor release, the transaction will value the company at a “pro forma equity [valuation] of approximately $4.3 billion.” That’s a great price for the firm that was most recently valued at $2.17 billion in a late 2019-era Series H worth $170 million, per PitchBook data. Those funds were invested at a flat $2.0 billion pre-money valuation.

So, what will public investors get the chance to buy into at the new, higher price? To answer that we’ll have to turn to the company’s SPAC investor deck.

Our general observations are that while Nextdoor’s SPAC deck does have some regular annoyances, it offers are clear-eyed look at the company’s financial performance both in historical terms and in terms of what it might accomplish in the future. Our usual mockery of SPAC charts mostly doesn’t apply. Let’s begin.

Nextdoor’s SPAC pitch

We’ll proceed through the deck in its original slide order to better understand the company’s argument for its value today, as well as its future worth.

The company kicks off with a note that it has 27 million weekly active users (neighbors, in its own parlance), and claims users in around one in three U.S. households. The argument, then, is that Nextdoor has scale.

A few slides later, Nextdoor details its mission: “To cultivate a kinder world where everyone has a neighborhood they can rely on.” While accounts like @BestOfNextdoor might make this mission statement as coherent as ExxonMobil saying that its core purpose was, say, atmospheric carbon reduction, we have to take it seriously. The company wants to bring people together. It can’t control what they do from there, as we’ve all seen. But the fact that rude people on Nextdoor is a meme stems from the same scale that the company was just crowing about.

Underscoring its active user counts are Nextdoor’s retention figures. Here’s how it describes that metric:

Image Credits: Nextdoor SPAC investor deck

These are monthly active users, mind, not weekly active, the figure that the company cited up top. So, the metrics are looser here. And the company is counting users as active if they have “started a session or opened a content email over the trailing 30 days.” How conservative is that metric? We’ll leave that for you to decide.

The company’s argument for its value continues in the following slide, with Nextdoor noting that users become more active as more people use the service in a neighborhood. This feels obvious, though it is nice, we suppose, to see the company codify our expectations in data.

Nextdoor then argues that its user base is distinct from that of other social networks and that its users are about as active as those on Twitter, albeit less active than on the major U.S. social networks (Facebook, Snap, Instagram).

Why go through the exercise of sorting Nextdoor into a cabal of social networks? Well, here’s why:

#ec-media, #fundings-exits, #khosla-ventures, #nextdoor, #sarah-friar, #social, #social-network, #spac, #special-purpose-acquisition-company, #startups, #tc, #united-states

Satellite imagery startup Satellogic to go public via SPAC valuing the company at $850M

The space SPAC frenzy might’ve died down, but it isn’t over: Earth observation startup Satellogic is the latest to go public via a merger with CF Acquisition Corp. V, a special purpose acquisition company set up by Cantor Fitzgerald. Satellogic already has 17 satellites in orbit, and aims to scale its constellation to over 300 satellites to provide sub-meter resolution imaging of the Earth updated on a daily frequency.

The SPAC deal values the company at $850 million, and includes a PIPE worth $100 million with funds contributed by SoftBank’s SBLA Advisers Group and Cantor Fitzgerald. It assumes revenue of around $800 million for the combined company by 2025, and Satellogic expects to have a cash balance of around $274 million resulting from the deal at close.

Satellogic has raised a total of just under $124 million since its founding in 2010, from investors including Tencent, Pitanga Fund and others. The company claims its satellites are the only ones that can provide imaging at the resolution it offers with a price tag that remains relatively affordable for commercial clients.

#commercial-spaceflight, #companies, #finance, #imaging, #satellite, #satellogic, #softbank, #softbank-group, #spac, #special-purpose-acquisition-company, #tc, #tencent

Extra Crunch roundup: Unpacking BuzzFeed’s SPAC, curb your meeting enthusiasm, more

Meetings should have a clear purpose, but instead, they’ve become a way to measure status and reinforce what is colloquially referred to as CYA culture.

There’s a kernel of truth in every joke, so whenever someone quips, “This meeting could have been an email!” you can bet that some small part of them meant it sincerely.

Few people know how to run meetings effectively and keep conversations on track. Making matters worse, attendees often don’t bother to prepare, which makes a boring session even less productive.

And then there’s the complication of workplace politics: How secure do you feel declining an invitation from a co-worker — or a manager?

“Every time a recurring meeting is added to a calendar, a kitten dies,” says Chuck Phillips, co-founder of MeetWell. “Very few employees decline meetings, even when it’s obvious that the meeting is going to be a doozy.”


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Use discount code ECFriday to save 20% off a one- or two-year subscription.


Changing your meeting culture is difficult, but given that 26% of workers plan to look for a new job when the pandemic ends, startups need to do all they can to retain talent.

Aimed at managers, this post offers several testable strategies that will help you boost productivity and say goodbye to poorly run, lazily planned meetings.

“Declining a bad meeting should never be taboo, and you should reiterate your trust in the team and challenge them to spend their and others’ time with more intention,” Phillips says. “Help them feel empowered to decline a bad meeting.”

Thanks very much for reading Extra Crunch, and have a great weekend.

Walter Thompson
Senior Editor, TechCrunch
@yourprotagonist

Why Amazon should pay attention to Shein

Image Credits: Shein

In the last year, online apparel shopping app Shein grew active daily users by 130%, reports Apptopia.

Each day, thousands of new products arrive on the app’s virtual shelves. Items are rapidly designed and prototyped before Shein’s contractors put them into production in Guangzhou factories — two weeks later, those SKUs arrive in fulfillment centers around the globe.

TechCrunch reporter Rita Liao examined how the company’s agile supply chain has become hot talk among e-commerce experts, but beyond a strong logistics game and data-driven product development, Shein’s close relationships with suppliers are integral to its success.

She also tried to answer a question many are asking: Is Shein a Chinese company?

“It’s hard to pin down where Shein is from,” answered Richard Xu from Grand View Capital, a Chinese venture capital firm.

“It’s a company with operations and supply chains in China targeting the global market, with nearly no business in China.”

Inside GM’s startup incubator strategy

General Motors Chief Engineer Hybrid and Electric Powertrain Engineering Pam Fletcher with the 2014 Spark EV Tuesday, November 27, 2012 at a Chevrolet event on the eve of the Los Angeles International Auto Show in Los Angeles, California. When it goes on sale next summer, the Spark EV is expected to have among the best EV battery range in its segment and will be priced under $25,000 with tax incentives. (Chevrolet News Photo)

Image Credits: Chevrolet

GM Vice President of Innovation Pam Fletcher is in charge of the company’s startups that tackle “electrification, connectivity and even insurance — all part of the automaker’s aim to find value (and profits) beyond its traditional business of making, selling and financing vehicles,” Kirsten Korosec writes.

Fletcher joined TechCrunch at a virtual TC Sessions: Mobility 2021 event to discuss what it’s like to launch a slew of startups under the umbrella of a 113-year-old automaker.

Investor Marlon Nichols and Wonderschool’s Chris Bennett on getting to the point with a pitch deck

Image Credits: MaC Venture Capital / Wonderschool

MaC Venture Capital founding managing partner Marlon Nichols and Wonderschool CEO Chris Bennett joined Extra Crunch Live to tear down the company’s early deck.

“The first thing that jumped out at all of us was just how bare-bones the presentation is: white text on a blue background, largely made up of bullet points,” Brian Heater writes before noting the CEO admitted that “not much changed aesthetically between that first pitch and the Series A deck.”

“It aligned with what we were valuing at the time,” Bennett says. “We were really focused on getting the product-market fit and really trying to understand what our customers needed. And we’re really focused on building the team.”

Dear Sophie: What options would allow me to start something on my own?

lone figure at entrance to maze hedge that has an American flag at the center

Image Credits: Bryce Durbin/TechCrunch

Dear Sophie,

I’ve been working on an H-1B in the U.S. for nearly two years.

While I’m grateful to have made it through the H-1B lottery and to be working, I’m feeling unhappy and frustrated with my job.

I really want to start something of my own and work on my own terms in the United States. Are there any immigration options that would allow me to do that?

— Seeking Satisfaction

Investors’ thirst for growth could bode well for SentinelOne’s IPO

Alex Wilhelm calls SentinelOne’s looming debut “fascinating.”

“Why? Because the company sports a combination of rapid growth and expanding losses that make it a good heat check for the IPO market,” he writes. “Its debut will allow us to answer whether public investors still value growth above all else.”

Alex delves into an early dataset from SentinelOne and why public market investors still appear to value growth above anything else.

Before an exit, founders must get their employment law ducks in a row

Rubber ducks in a line

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

Guest columnist Rob Hudock, a litigator who focuses on helping companies recruit the best talent available while avoiding distracting workplace issues or lawsuits, lays out the importance of putting out any employment-related fires before an exit.

“Inattention to employment issues can have a significant impact on deals — from preventing closings and reducing the deal value to altering the deal terms or significantly limiting the pool of potential buyers,” he writes.

“Fortunately, such issues typically can be resolved well in advance with a little forethought and legal guidance.”

Practice agile, iterative change to refine products and build company culture

Building an excellent product and a standout company culture require the same process, Heap CEO Ken Fine writes in a guest column.

“At Heap, the analytics solution provider I lead, a defining principle is that good ideas should not be lost to top-down dictates and overrigid hierarchies,” he writes. “The best results come when you approach leadership like you would create a great product — you hypothesize, you test and iterate, and once you get it right, you grow it.”

Here, he lays out his method that argues in favor of iterative change, not “one-and-done decrees.”

a16z’s new $2.2B fund won’t just bet on the crypto future, it will defend it

The big news on Thursday was the announcement of Andreessen Horowitz’s new cryptocurrency-focused fund. Most focused on the eye-popping $2.2 billion figure, but Alex Wilhelm dug a bit deeper into the announcement to note that a16z isn’t just pumping a ton of money into the crypto space, it’s putting on gloves to fight for it.

Alex writes that “a16z intends to run defense for crypto in the American, and perhaps global, market. Crypto-focused startups are likely unable to tackle the regulation of their market on their own because they’re more focused on product work in a particular region of the larger crypto economy. The wealthy and connected investment firm that backs them will take on the task for its chosen champions.”

5 takeaways from BuzzFeed’s SPAC deck

Image Credits: Nicholas Kamm / AFP / Getty Images

Alex Wilhelm dives headfirst into BuzzFeed’s announcement that it plans to go public via a blank check company.

He looked at its historical and anticipated revenue growth (the latter is very sunny, which is not atypical for SPAC presentations), what makes up that revenue (more “commerce” as time goes on), its long-term profitability projections, as well as fun stuff, like the Pulitzer Prize-winning BuzzFeed News.

Admit it. You’re curious.

3 issues to resolve before switching to a subscription business model

Three issues leaders need to address before switching to a subscription business model

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

Moving from a pay-as-you-go model to a subscription service is more than just putting a monthly or yearly price tag on a product, CloudBlue’s Jess Warrington writes in a guest column.

“Executives cannot just layer a subscription model on top of an existing business,” Warrington writes. “They need to change the entire operation process, onboard all stakeholders, recalibrate their strategy and create a subscription culture.”

Warrington says that in his role at CloudBlue, companies often approach him for “help with solving technology challenges while shifting to a subscription business model, only to realize that they have not taken crucial organizational steps necessary to ensure a successful transition.”

Here’s how to avoid that situation.

Veo CEO Candice Xie has a plan for building a sustainable scooter company, and it’s working

An illustration of Veo founder Candie Xie

Image Credits: Bryce Durbin

Rebecca Bellan interviewed Veo CEO Candice Xie about the micromobility startup’s “old-fashioned way” of doing business.

“I understand people are eager to prove their unit economics, their scalability and also improve their matrix to the VC to raise another round,” Xie says. “I would say that’s OK in the consumer industry, like consumer electronics or SaaS.

“But we are in transportation. It is a different business, and transportation takes years of collaboration and building between private and public partners. … So I don’t see it happening from day one, turning over a billion-dollar company, while simultaneously having it all make sense for the cities and users.”

5 companies doing growth marketing right

Image of five round wooden balls moving up steps to represent growth.

Image Credits: jayk7 (opens in a new window) / Getty Images

All companies want more or less the same thing: growth. But how do you accomplish it?

Ideally, don’t start from scratch.

The race to grow faster is more pressing than ever before. … “[F]orward-thinking entrepreneurs and growth marketers simply must make time to study their competition, learn best practices and apply them to their own business growth,” Mark Spera, the head of growth marketing at Minted, writes in a guest column.

“Of course, you should still run your own experiments, but it’s just more capital-efficient to emulate than to trial-and-error from scratch. Here are five companies with growth strategies worth emulating — including the most important lessons you can begin applying to your business today.”

Musculoskeletal medical startups race to enter personalized health tech market

Human anatomy, hand, arm,muscular system on plain studio background.

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

With more than 50 million Americans suffering from chronic pain and musculoskeletal (MSK) medical problems, a number of startups are offering patients new products “that don’t resemble the cookie-cutter status quo,” reports Natasha Mascarenhas.

Startups hoping to enter this space have an uphill climb. Setting aside regulations that cover aspects like product packaging and marketing, they must compete with well-entrenched competition from Big Pharma as they try to partner with health insurance companies.

Natasha profiles three companies that are each taking a different approach to personalized health: Clear, Hinge Health and PeerWell.

Like the US, a two-tier venture capital market is emerging in Latin America

In the second part of an Exchange series looking at the global early-stage venture capital market, Alex Wilhelm and Anna Heim unpacked the scene in Latin America, discovering it looked a lot like the situation in the United States: slow Series A rounds, fast B rounds.

“Mega-rounds are no longer an exception in Latin America; in fact, they have become a trend, with ever-larger rounds being announced over the last few months,” they write.

Despite that, the funds aren’t being equitably distributed, and the region still lags behind its peers: Brazil has the most $1 billion startups in Latin America, with 12. The U.S., meanwhile, has 369, and China has 159.

But the Latin American market remains hot, if not quite as scorching as the U.S. and China.

#andreessen-horowitz, #buzzfeed, #candice-xie, #china, #consumer-electronics, #corporate-finance, #cryptocurrency, #entrepreneurship, #latin-america, #mac-venture-capital, #marlon-nichols, #pam-fletcher, #shein, #special-purpose-acquisition-company, #startups, #supply-chain, #tc, #venture-capital, #veo, #verified-experts, #wonderschool

Extra Crunch roundup: Selling SaaS to developers, cracking YC after 13 tries, all about Expensify

Before Twilio had a market cap approaching $56 billion and more than 200,000 customers, the cloud-communications platform developed a secret sauce to fuel its growth: a developer-focused model that dispensed with traditional marketing rules.

Software companies that sell directly to end users share a simple framework for managing growth that leverages discoverability, desirability and do-ability — the “aha!” moment where a consumer is able to incorporate a new product into their workflow.

Data show that traditional marketing doesn’t work on developers, and it’s not because they’re impervious to a sales pitch. Builders just want reliable tools that are easy to use.

As a result, companies that are looking to create and sell software to developers at scale must toss their B2B playbooks and meet their customers where they are.


Attorney Sophie Alcorn, our in-house immigration law expert, submitted two columns: On Monday, she analyzed a decision by the U.S. Department of Homeland Security not to cancel the International Entrepreneur Parole program, which potentially allows founders from other countries to stay in the U.S. for as long as 60 months.

On Wednesday, she responded to a question from an entrepreneur who asked whether it made sense to sponsor visas for workers who are working remotely inside the U.S.

Thanks very much for reading Extra Crunch this week, and have a great weekend.

Walter Thompson
Senior Editor, TechCrunch
@yourprotagonist

4 lessons I learned about getting into Y Combinator (after 13 applications)

Image of a chair and a trash can in an office, with the bin surrounded by crumpled paper, representing persistence.

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

Can you imagine making 13 attempts at something before attaining a successful outcome?

Alex Circei, CEO and co-founder of Git analytics tool Waydev, applied 13 times to Y Combinator before his team was accepted. Each year, the accelerator admits only about 5% of the startups that seek to join.

“Competition may be fierce, but it’s not impossible,” says Circei. “Jumping through some hoops is not only worth the potential payoff but is ultimately a valuable learning curve for any startup.”

In an exclusive exposé for TechCrunch, he shares four key lessons he learned while steering his startup through YC’s stringent selection process.

The first? “Put your business value before your personal vanity.”

The Expensify EC-1

The Expensify EC-1

Image Credits: Illustration by Nigel Sussman, art design by Bryce Durbin

In March, TechCrunch Daily Reporter Anna Heim was interviewing executives at Expensify to learn more about the company’s history and operations when they unexpectedly made themselves less available.

Our suspicions about their change of heart were confirmed on May 3 when the expense report management company confidentially filed to go public.

With a founding team comprised mainly of P2P hackers, it’s perhaps inevitable that Expensify doesn’t look and feel like something an MBA might envision.

“We hire in a super different way. We have a very unusual internal management structure,” said founder and CEO David Barrett. “Our business model itself is very unusual. We don’t have any salespeople, for example.”

Similar to the way companies must file a Form S-1 that describes their operations and how they plan to spend capital, TechCrunch EC-1s are part origin story, part X-ray. We published the first article in a series on Expensify on Monday:

We’ll publish the remainder of Anna’s series on Expensify in the coming weeks, so stay tuned.

As Procore looks to nearly double its private valuation, the IPO market shows signs of life

Construction tech unicorn Procore Technologies this week set a price range for its impending public offering. The news comes after the company initially filed to go public in February of 2020, a move delayed by the pandemic.

In March 2021, Procore filed again for a public offering, but its second shot ran into a cooling IPO market. The company filed another S-1/A in April, and then another in early May. This week’s filing is the first that sets a price for the Carpinteria, California-based software upstart.

But Procore is not the only company that filed and later put on hold an IPO to get back to work on floating. Kaltura, a software company focused on video distribution, also recently got its IPO back on track. Are we seeing a reacceleration of the IPO market? Perhaps.

3 golden rules for health tech entrepreneurs

Family physician Bobbie Kumar lays out the golden rules to ensure your healthcare product, service or innovation is on the right track.

Rule 1: “It’s not enough to develop a ‘new tool’ to use in a health setting,” Dr. Kumar writes. “Maybe it has a purpose, but does it meaningfully address a need, or solve a problem, in a way that measurably improves outcomes? In other words: Does it have value?”

Dear Sophie: How does the International Entrepreneur Parole program work?

lone figure at entrance to maze hedge that has an American flag at the center

Image Credits: Bryce Durbin/TechCrunch

Dear Sophie,

I’m the founder of an early-stage, two-year-old fintech startup. We really want to move to San Francisco to be near our lead investor.

I heard International Entrepreneur Parole is back. What is it, and how can I apply?

— Joyous in Johannesburg

Digging into digital mortgage lender Better.com’s huge SPAC

If you have heard of Better.com but really had no idea what it does before this moment, welcome to the club. Mortgage tech is like pre-kindergarten applications — it applies to a very specific set of folks at a very particular moment. And they care a lot about it. But the rest of us aren’t really aware of its existence.

Better.com, a venture-backed digital mortgage lender, announced this week that it will combine with a SPAC, taking itself public in the second half of 2021. The unicorn’s news comes as the American IPO market is showing signs of fresh life after a modest April.

As tech offices begin to reopen, the workplace could look very different

Colleagues in the office working while wearing medical face mask during COVID-19

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

The pandemic forced many employees to begin working from home, and, in doing so, may have changed the way we think about work. While some businesses have slowly returned to the office, depending on where you live and what you do, many information workers remain at home.

That could change in the coming months as more people get vaccinated and the infection rate begins to drop in the U.S.

Many companies have discovered that their employees work just fine at home. And some workers don’t want to waste time stuck on congested highways or public transportation now that they’ve learned to work remotely. But other employees suffered in small spaces or with constant interruptions from family. Those folks may long to go back to the office.

On balance, it seems clear that whatever happens, for many companies, we probably aren’t going back whole-cloth to the prior model of commuting into the office five days a week.

For unicorns, how much does the route to going public really matter?

4 progressively larger balls of US $1 bills, studio shot

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

On a recent episode of TechCrunch’s Equity podcast, hosts Natasha Mascarenhas and Alex Wilhelm invited Yext CFO Steve Cakebread and Latch CFO Garth Mitchell on to discuss when companies should go public, the costs and benefits of the process and when a SPAC can make sense. Yext pursued a traditional IPO a few years back; Latch is now going public via a blank-check company combination.

The chat was more than illustrative, as we got to hear two CFOs share their views on delayed public offerings and when different types of debuts can make the most sense. While the TechCrunch crew has, at times, made light of certain SPAC-led deals, the pair argued that the transactions can make good sense.

Undergirding the conversation was Cakebread’s recent IPO-focused book, which not only posited that companies going public earlier rather than later is good for their internal operations but also because it can provide the public with a chance to participate in a company’s success.

In today’s hypercharged private markets and frothy public domain, his argument is worth considering.

The truth about SDK integrations and their impact on developers

Image of three complex light trails converging against a white background to represent integration.

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

Ken Harlan, the founder and CEO of Mobile Fuse, writes about the perks and pitfalls of software development kits.

“The digital media industry often talks about how much influence, dominance and power entities like Google and Facebook have,” Harlan writes. “Generally, the focus is on the vast troves of data and audience reach these companies tout. However, there’s more beneath the surface that strengthens the grip these companies have on both app developers and publishers alike.

“In reality, SDK integrations are a critical component of why these monolith companies have such a prominent presence.”

Don’t hate on low-code and no-code

The Exchange caught up with Appian CEO Matt Calkins after his enterprise app software company reported its first-quarter performance to discuss the low-code market and what he’s hearing in customer meetings. To round out our general thesis — and shore up our somewhat bratty headline — we’ve compiled a list of recent low-code and no-code venture capital rounds, of which there are many.

As we’ll show, the pace at which venture capitalists are putting funds into companies that fall into our two categories is pretty damn rapid, which implies that they are doing well as a cohort. We can infer as much because it has become clear in recent quarters that while today’s private capital market is stupendous for some startups, it’s harder than you’d think for others.

Bird’s SPAC filing shows scooter-nomics just don’t fly

A pair of Bird e-scooters parked in Barcelona. Image Credits: Natasha Lomas/TechCrunch

Historically — and based on what we’re seeing in this fantastical filing — Bird proved to be a simply awful business. Its results from 2019 and 2020 describe a company with a huge cost structure and unprofitable revenue, per filings. After posting negative gross profit in both of the most recent full-year periods, Bird’s initial model appears to have been defeated by the market.

What drove the company’s hugely unprofitable revenues and resulting net losses? Unit economics that were nearly comically destructive.

Dear Sophie: Does it make sense to sponsor immigrant talent to work remotely?

lone figure at entrance to maze hedge that has an American flag at the center

Image Credits: Bryce Durbin/TechCrunch

Dear Sophie,

My startup is in big-time hiring mode. All of our employees are currently working remotely and will likely continue to do so for the foreseeable future — even after the pandemic ends. We are considering individuals who are living outside of the U.S. for a few of the positions we are looking to fill.

Does it make sense to sponsor them for a visa to work remotely from somewhere in the United States?

— Selective in Silicon Valley

The hamburger model is a winning go-to-market strategy

Follow the Hamburger model for your go-to-market strategy

Image Credits: ivan101 / Getty Images

“Today, we live in a world of product-led growth, where engineers (and the software they have built) are the biggest differentiator,” says Coatue Management general partner Caryn Marooney and investor David Cahn. “If your customers love what you’re building, you’re headed in the right direction. If they don’t, you’re not.

“However, even the most successful product-led growth companies will reach a tipping point, because no matter how good their product is, they’ll need to figure out how to expand their customer base and grow from a startup into a $1 billion+ revenue enterprise.

“The answer is the hamburger model. Why call it that? Because the best go-to-market (GTM) strategies for startups are like hamburgers:

  • The bottom bun: Bottom-up GTM.
  • The burger: Your product.
  • The top bun: Enterprise sales.”

Software subscriptions are eating the world: Solving billing and cash flow woes simultaneously

the recycle logo recreated in folded US currency no visible serial numbers/faces etc.

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

Krish Subramanian, the co-founder and CEO of Chargebee, writes that while subscription business models are attractive, there are two major pitfalls: First, payment.

“Regardless of company size, there’s an ongoing need to convince customers to sign up long term,” Subramanian writes. “The second issue: How do businesses cover the funding gap between when customers sign up and when they pay?”

Is there a creed in venture capital?

Scott Lenet, the president of Touchdown Ventures, asks how deal-makers should think about how to handle themselves when counter-parties attempt to change an agreement. “When is it OK to modify terms, and when should deal-makers stand firm?” he asks.

“Entrepreneurs and investors should recognize that contracts are worth very little without the ongoing relationship management that keeps all parties aligned. Enforcement is so unusual in the world of startups that I consider it a mostly dead-end path. In my experience, good communication is the only reliable remedy. This is the way.”

Even startups on tight budgets can maximize their marketing impact

Maximize the impact of your marketing strategy

Image Credits: Ray Massey / Getty Images

“Search engine optimization, PR, paid marketing, emails, social — marketing and communications is crowded with techniques, channels, solutions and acronyms,” writes Dominik Angerer, CEO and co-founder of Storyblok, which provides best practice guidance for startups on how to build a sustainable approach to marketing their content. “It’s little wonder that many startups strapped for time and money find defining and executing a sustainable marketing campaign a daunting prospect.

“The sheer number of options makes it difficult to determine an effective approach, and my view is that this complexity often obscures the obvious answer: A startup’s best marketing asset is its story.”

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Why SPACs aren’t targeting African startups

One. That’s the number of African tech companies that have gone public on the NYSE in the last 10 years. Two, if you’re counting local exchanges. The former is African-focused e-commerce company Jumia and the latter is Egyptian fintech company Fawry.

As a tech company, Fawry’s listing on the Egyptian Stock Exchange is a rarity. Typically, most exchanges in emerging markets like Africa, India, and Latin America are filled with traditional companies in age-old sectors like banking, telecoms, manufacturing, and energy.

Unlike Fawry, what you see these days are new-age tech companies from these markets going public abroad, especially in the U.S. Due to the friendly nature of U.S. exchanges such as Nasdaq and the NYSE, and their history building up the FAANG and other multibillion-dollar companies, they have become the top destination for IPO-ready companies in emerging markets. 

Last year, the U.S. IPO market was caught in a frenzy with a different way of going public: via special purpose acquisition companies (SPACs). Although these acquisition vehicles have been around for quite some time, they’ve lacked the sensational attributes we’ve now become accustomed to. Public and influential entrepreneurs from Chamath Palihapitiya to Richard Branson have made sure that SPACs — which many have called a fad — are here to stay.

Despite issues with the SEC as a liquidity option, SPACs have continued to remain popular for many companies because they have less completion time and regulatory hurdles than a traditional IPO.

We’ve covered a lot on this subject within the past year, and this article does a good job explaining SPACs.

In the U.S. alone, there are more than 300 SPACs. Last year, more than 85% of deals completed were executed with companies in the country, per Bloomberg. With fewer targets to acquire, an increasing number of SPACs are eyeing startups in other markets like Asia and Latin America, with the same endgame: take them public in the U.S.

Although Africa cannot be compared to these other regions in terms of technology and investment activities, it has some success stories. Companies like Jumia, GetSmarter, Paystack and Flutterwave are bright examples from the continent. But except for Tidjane Thiam’s $300 million blank-check company Freedom Acquisition I Corp (which has found no fintech target yet), there’s practically no SPAC targeting African tech companies.

Not SPACworthy

Iyinoluwa Aboyeji, founder and general partner at Future Africa, an early-stage VC firm, told TechCrunch that SPAC targets are most often billion-dollar companies. “The way the economics of a SPAC work, you want a billion-dollar company, and that’s a very short list in Africa. You can’t SPAC anything less than a billion dollars as you wouldn’t make enough money for it to be worth your while,” he said.

There are only a handful of African tech companies worth that much. Just recently, Flutterwave joined the illustrious club that includes Jumia, Fawry, and Interswitch. If what Aboyeji said is anything to go by, SPACs can only target Flutterwave and Interswitch. Yet, the chances of this happening are quite slim because the pair have expressed interest in going public via IPOs on local and international exchanges.

So, where exactly does it leave the continent if there are no billion-dollar companies to SPAC?

Aboyeji thinks SPACs could narrow down targets to companies that could become unicorns with their next rounds.

Eghosa Omoigui, managing partner at EchoVC Partners, an early-stage VC firm focused on sub-Saharan Africa, shares this view and adds that selecting these companies will boil down to the thrill they offer blank check companies should they choose to look Africa’s way.

“When you think about it, there’s only a small number of startups on the continent that have enough traction or excitement to be [packaged] in a SPAC,” he said.

From a neutral lens, some companies fit into this box of attractive African-focused companies with unicorn potential. A few of them, including Andela, Branch, Gro Intelligence and TymeBank, are worth more than $500 million and can easily double that with any SPAC activity.

But Omoigui believes a large number of these startups aren’t ready to go public yet.

“The real question I think is, even if you file for a SPAC and merge it with an African target, is that company ready to be public? The truth of the matter is that the valuations they get when private are much better than what they’ll get in the public markets.” 

Private capital seems sufficient… for now

The continent’s tech ecosystem is still very much nascent. In 2019, African startups raised a total of $2 billion, which is the peak of investments to have flowed in a year so far. That same year, Indian startups raised $14.5 billion. This disparity in investments is one reason there are few unicorns and acquisitions in the region. So it pretty much shows that there’s still a lot of ground to cover for African startups before thinking of going public. Maybe this is why SPACs aren’t targeting African startups now. 

“The way I see it, African startups are not ready yet to go public,” Aboyeji remarked. “They still need more time in the private markets. If you’re pursued by private capital and you see what happened to the likes of Jumia that went public, your inclination is just to take the private capital.”

In addition to that, private equity is catching up with what public financing can offer. Startups globally are staying private longer than ever. In the U.S., the number of publicly listed companies has dropped by 52% from the late 1990s to 2016. It’s a trend that has been passed to other markets, so it’s likely that African companies might stay private for the foreseeable future.

Nevertheless, Omoigui is optimistic that this situation might change in fewer than three years. In his opinion, SPACs will run out of interesting targets in other emerging markets and might start broadening their scope to include African companies.

The EchoVC managing partner added that the continent could do well with more SPACs from indigenous personalities like Thiam while waiting for those from foreign entities. This will build more excitement on the continent because in most cases, it isn’t the target that people usually get enthusiastic about but the vehicle itself.

“Sometimes you realize that it’s not really the startups that need to be hot and exciting; it is the SPAC sponsor. That’s what people are hopping on the bandwagon for.”

Before running Future Africa full-time, Aboyeji had stints with Andela as a co-founder and as CEO of Flutterwave. The startups are still private to date but are on anyone’s cards to go public within this decade. For Aboyeji, however, make that three as the entrepreneur-cum-investor wants to take his investment firm public, maybe via a SPAC.

“I’m definitely going to exit on the public market with Future Africa. That’s my goal. I would consider a SPAC as an entrepreneur, but it’s likely that I’ll decide to directly list as well,” he said.

Andela CEO Jeremy Johnson told me SPACs are here to stay, and most African startups will go public that way. However, he didn’t budge when asked if there were any chance his company would do the same.

“One of the benefits is that they allow you to talk about the future, and Africa’s growth rate means its future is going to be brighter than the past,” he said. “I think African startups will end up going public via this route.”

 

#africa, #asia, #economy, #finance, #india, #latin-america, #private-equity, #spac, #special-purpose-acquisition-company, #startups, #tc, #unicorn