Using an asset from one business to develop a second – investor perspective?

Founders of Saas Startup A want to use a resource like Data/Userbase/etc* from Business A to jump-start Startup B, without really charging Startup B. How will this be seen by investors in Startup A?

Investment contributed to the development of the asset but the founders and not the investors will benefit from its use in Business B, so should the investors be compensated in some way?

Does anyone know of a precedent for this?

*GDPR aside.

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Startups – Rapid Growth and Innovation is in Our Very Nature!

London-based global communications company OneWeb raises funding from SoftBank and Hughes to fund its satellite fleet

OneWeb

In a recent move, Japan’s SoftBank Group and Hughes Network Systems LLC have invested $ 400M (approx €331M) in OneWeb, a London-based global communications company. This brings OneWeb’s total funding to $ 1.4B (approx €1.1B).

It’s worth mentioning that Hughes is an investor through its parent company EchoStar, and also an ecosystem partner, developing essential ground network technology for the OneWeb system.

Neil Masterson, CEO of OneWeb, adds, “We have made rapid progress to re-start the business since emerging from Chapter 11 in November. We welcome the investments by SoftBank and Hughes as further proof of progress towards delivering our goal.”

Fully funded for its first-gen satellite fleet

The capital raised to date positions the Company to be fully funded for its first-generation satellite fleet, totaling 648 satellites, by the end of 2022. With this funding, SoftBank will gain a seat on the OneWeb Board of Directors.

Founded by Greg Wyler, OneWeb’s mission is to deliver broadband connectivity worldwide by offering everyone, everywhere access including to the Internet of Things (IoT) future and a pathway to 5G.

The company’s LEO (Low Earth Orbit ) satellite system includes a network of global gateway stations and a range of user terminals for different customer markets capable of delivering affordable, fast, high-bandwidth, and low-latency communications services. 

Launched 36 satellites

Back in December 2020, OneWeb launched 36 new satellites, built at its Airbus Joint Venture assembly plant in Florida, USA, bringing the Company’s total fleet to 110 satellites, all fully-functioning and benefitting from the International Telecommunication Union spectrum priority.

Filed Chapter 11 bankruptcy

Back in March 2020, the UK company filed for Chapter 11 bankruptcy after failing to secure $ 2B (approx €1.65B) financing from SoftBank. However, a consortium of the UK Government (through the UK Secretary of State for Business, Energy and Industrial Strategy) and Bharti Global invested $ 1B (approx €828M) of new equity as a part of the resurrecting process. 

Pradman Kaul, President of Hughes, remarked, “OneWeb continues to inspire the industry and attract the best players in the business to come together to bring its LEO constellation to fruition. The investments made today by Hughes and SoftBank will help realise the full potential of OneWeb in connecting enterprise, government, and mobility customers, especially with multi-transport services that complement our own geostationary offerings in meeting and accelerating demand for broadband around the world.”

Startups – Silicon Canals

Amazon-backed Deliveroo snaps up pre-IPO funding of €149M from existing investors, valued at $7B

Deliveroo

The competition to gobble up the European market among food delivery companies is getting more fierce day by day. The online food delivery marketplace is becoming a very lucrative industry and is set to grow to a whopping $ 200 billion by 2025. 

A few days back Delivery Hero, a Berlin-based food delivery company raised €1.25B by issuing new shares to institutional investors. Just Eat TakeAway, on the other hand, is making some crucial investments to strengthen its position in the market.

Raised €149M at $ 7B valuation

In a recent move, Deliveroo, a London-based food delivery platform that allows users to order food from local restaurants, secured an additional $ 180M (approx €149M) in a Series H funding round, valuing the business at over $ 7B (approx €5.7B). This brings the total funding raised by Diliveroo to €1.5B. 

The round was led by existing investors — Durable Capital Partners LP and Fidelity Management & Research Company LLC. This funding round comes as Deliveroo is set to hold an initial public offering in the coming months, most probably in April. 

Develop new tech tools

The online food delivery company will use the funding to further invest in expanding delivery-only kitchen sites, allowing more restaurants to take orders from their websites, and increasing the on-demand grocery deliveries and subscription services.

Will Shu, founder, and CEO of Deliveroo said: “This investment will help us to continue to innovate, in developing new tech tools to support restaurants, to provide riders with more work and to extend choice for customers, bringing them the food they love from more restaurants than ever before.”

Helped local restaurants during COVID

During the COVID-19 pandemic, Deliveroo claims to have helped local restaurants by reducing onboarding fees, developing new services such as Table Service, as well as charging 0% commission on Pick Up orders. Notably, the company also supported the NHS throughout the pandemic, delivering hundreds of thousands of free meals.

Expansion in 2021

Following strong growth in 2020, the company plans to expand its services into around 100 new towns and cities across the UK IN 2021. The cities and towns include – Yeovil, Bangor (Northern Ireland), East Kilbride, King’s Lynn, Scarborough, Llanelli, and Exmouth.

As per the company’s claims, it has been profitable for over six months at the operating level in 2020. 

Furthermore, the company partnered with major supermarket brands including Waitrose, Sainsbury’s, Morrisons, Aldi,and Carrefour to grow its on-demand grocery offering amid the pandemic. 

Over 46,000 restaurants joined the platform in 2020, and the company now works with more than 140,000 restaurant partners globally.

Also, Deliveroo will also be expanding its reach in around 150 of the areas it currently operates in, such as Glasgow and the home counties. 

Carlo Mocci, Chief Business Officer UKI, Deliveroo says: With further lockdown measures now in place across the UK, we want to do everything possible to help households get the food they need and want and play our role to make sure families across the country have a wide selection of amazing food, drinks, and household products to order in as little as 30 minutes.”

Startups – Silicon Canals

Everlywell raises $75M from HealthQuest Capital following its recent $175M Series D round

At-home health testing kit startup Everlywell has raised $ 75 million, following the close of the $ 175 million Series D it announced in December. The new funding comes from HealthQuest Capital, and sees the fund’s founder and managing partners Dr. Garheng Kong join the company’s board of directors. The new funding is a secondary sale, with proceeds used to provide liquidity to existing investors rather than further diluting shares, so the startup’s $ 1.3 billion valuation from December still holds.

HealthQuest Capital’s investment portfolio has a heavy focus on commercialization of diagnostics businesses, and the company’s parent obviously has a board network of partners including hospitals, and healthcare payers, both of which are going to be very strategically useful to Everlywell as it looks to scale its business on the enterprise side.

Austin-based Everlywell develops at-home testing kits for a range of health concerns, including thyroid issues, allergies and food sensitivity. The company also added a COVID-19 home collection test kit in 2020, and that has resulted in a lot of growth – both from the COVID test itself, and for its other range of products, according to Everlywell CEO and founder Julia Cheek, who I spoke to in December for the Series D raise.

Having HealthQuest’s venture arm on board as a partner could help it take its direct-to-consumer business and further develop a complementary enterprise operation. The company already works with employers and health plans, but this should definitely help accelerate that aspect of its business as it looks towards more growth in 2021 and beyond.

Startups – TechCrunch

How To Prevent Your Founder’s Shares From Vaporizing

shares-founderWhen an entrepreneur first incorporates a business, they may find themselves the proud owner of 10 million shares of common stock, commonly called founder’s shares. It’s disconcerting for most to realize that these shares are initially worth nothing, and the challenge is to get that value up as quickly as possible, without losing it just as quickly to investors, lazy partners, and taxation.

This is where things get technical, but the principles are really quite simple. Every entrepreneur needs to understand the following basics, to be addressed at company formation, as they engage a qualified attorney to draw up the paperwork:

  1. Allocate founder’s stock commensurate with commitment. Even though initial stock has no value or market, it is extremely valuable in dividing entity ownership between multiple co-founders, commensurate with their investment, contribution and role. Startup owners need to assume a three to five year wait for a liquidity event, such as acquisition or going public, before they can cash out. At that time the original split makes all the difference.

  1. Make sure the government waits for a stock sale to collect taxes. In the U.S., every entrepreneur should incorporate early and file an 83(b) election with the IRS within 30 days of founding the company. Failing to file, or waiting to incorporate until a first investor arrives, is a common mistake, and will lead to a nasty tax bill when you can least afford it.

  1. Spread stock issuance over an earning period. This is the purpose of a vesting schedule, which issues allocated stock over time. Typically, vesting in startups occurs monthly over four years, starting with the first 25 percent of shares vesting only after an owner has remained active for at least 12 months (one year cliff). Key founder vesting should have no cliff.

  1. Retain the right to reclaim stock from anyone leaving the startup. To retain control, the original founder must reserve the right of first refusal to buy shares back at cost from a partner who decides to leave early or stop working. Otherwise, people with no ongoing effort (“free riders”) will own the value growth that you are adding after their departure.

  1. Minimize your own loss of ownership as major investors contribute. This is called stock dilution control. While new equity owners always have to get it from someone, actual re-allocation of existing shares should be based on a formula to maximize the value of your remaining founder shares.

  1. Accelerate your own vesting if pushed out or the startup is acquired. Don’t lose the value of stock not yet vested if your startup is bought out before the normal vesting schedule comes to a close. If new investors want to replace you as the founder early, make sure this action triggers an accelerated vesting clause as well.

  1. Facilitate an upgrade of founder’s common to founder’s preferred. Investors typically demand preferred stock to give them more control and first payouts, but these advantages can be at least partially offset (up to 20 percent) if you plan ahead. The acceptance of this option is now common, even though introduced only a few years ago.

  1. Limit board seats and manage member selection criteria. More board members is usually not better for the startup. Target no more than five members, with at least two being founders. This allows the entrepreneur more influence in controlling dilution of his or her shares, investment terms and acquisition decisions.

Every entrepreneur has heard the stories of a startup selling for millions of dollars or going public with the founder being squeezed out of all the gains. This situation only can be prevented by incorporating early, avoiding negative tax situations and managing your shares like gold.

Founder’s shares are just paper when you get them, and it’s up to you to turn them into a gold mine.

Marty Zwilling
Startup Professionals Musings

Has anyone ever transition from executive leadership in startups to larger, established businesses?

Hi,

I'm looking to get some feedback here to see if anyone has successfully made the transition out of c-level leadership in startups to larger, established businesses. Specifically, how experience in a startup translates to what levels of the org chart in larger companies.

I've worked for several startups over the last 10 years, beginning as an analyst and am currently in a COO role of a wellness company that has an established e-commerce presence and a B2B business that has been decimated by COVID. The company is about 3.5 years old and I have been COO since launch. We really struggled throughout the pandemic in 2020, and I'm not sure we're going to make it through 2021. My salary has been in half since June of 2020, and it's not sustainable. I'm not bailing yet, but really need to get started on what is (possibly) next. I've updated my resume but am really stumped where to go from here and what to look for. My partners and I have had open discussions about our situations and it is on the table that the compensation isn't sustainable for me personally and we're all aligned. I'm sure even if I left I would still be involved outside of normal hours and weekends as needed, and I'm happy to do so.

What I'm not clear on is what types of jobs I can/should be looking for in larger, established companies and what types of positions my current roles are advantageous for. I'm kind of burned out on startups and am looking for a little more consistency and reliability in my job. Has anyone made a transition similar to this or have any advice on what types of positions to look for? Should I hire a headhunter or some type of consultant?

Appreciate any insight you can share or if this would be better posted on another sub.

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Startups – Rapid Growth and Innovation is in Our Very Nature!

Mosaic raises $18.5M Series A from GC to rebuild the CFO software stack

CFOs are the supposed omniscient owners of a company. While the CEO sets strategy, messages, and builds culture, the CFO needs to know everything that it is going on in an organization. Where is revenue coming from, and when will it arrive? How much will new headcount cost, and when do those expenses need to be paid? How can cash flows be managed, and what debt products might help smooth out any discontinuities?

As companies have migrated to the cloud, these questions have gotten harder to answer as other departments started avoiding the ERP as a centralized system-of-record. Worse, CFOs are expected to be more strategic than ever about finance, but can struggle to deliver important forecasts and projections given the lack of availability of key data. CMOs have gotten a whole new software stack to run marketing in the past decade, so why not CFOs?

For three Palantir alums, the hope is that CFOs will turn to their new startup called Mosaic. Mosaic is a “strategic finance platform” that is designed to ingest data from all sorts of systems in the alphabet soup of enterprise IT — ERPs, HRISs, CRMs, etc. — and then provide CFOs and their teams with strategic planning tools to be able to predict and forecast with better accuracy and with speed.

The company was founded in April 2019 by Bijan Moallemi, Brian Campbell and Joe Garafalo, who worked together at Palantir in the company’s finance team for more than 15 years collectively. While there, they saw the company grow from a small organization with a bit more than one hundred people to an organization with thousands of employees, more than one hundred customers as we saw last year with Palantir’s IPO, and incoming revenue from more than a dozen countries.

Mosaic founders Bijan Moallemi, Brian Campbell and Joseph Garafalo. Photos via Mosaic.

Strategically handling finance was critical for Palantir’s success, but the existing tools in its stack couldn’t keep up with the company’s needs. So Palantir ended up building its own. We were “not just cranking away in Excel, which is really the default tool in the toolkit for CFOs, but actually building a technical team that was writing code, [and] building tools to really give speed, access, trust, and visibility across the organization,” Moallemi, who is CEO of Mosaic, described.

Most organizations can’t spare their technical talent to the CFO’s office, and so as the three co-founders left Palantir to other pastures as heads of finance — Moallemi to edtech startup Piazza, Campbell to litigation management startup Everlaw and Garafalo to blockchain startup Axoni — they continued to percolate on how finance could be improved. They came together to do for all companies what they saw at Palantir: build a great software foundation for the CFO’s office. “Probably the biggest advancements to the office of the CFO over the last 10 years has been moving from kind of desktop-based Excel to cloud-based Google Sheets,” Moallemi said.

So what is Mosaic trying to do to rebuild the CFO software stack? It wants to build a platform that is a gateway to connecting the entire company to discuss finance in a more collaborative fashion. So while Mosaic focuses on reporting and planning, the mainstays of the finance office, it wants to open those dashboards and forecasts wider into the company so more people can have insight into what’s going on and also give feedback to the CFO.

Screenshot of Mosaic’s planning function. Photo via Mosaic.

There are a handful of companies like publicly-traded Anaplan that have entered this space in the last decade. Moallemi says incumbents have a couple of key challenges that Mosaic hopes to overcome. First is onboarding, which can take months for some of these companies as consultants integrate the software into a company’s workflow. Second is that these tools often require dedicated, full-time staff to stay operational. Third is that these tools are basically non-visible to anyone outside the CFO office. Mosaic wants to be ready to integrate immediately, widely distributed within orgs, and require minimal upkeep to be useful.

“Everyone wants to be strategic, but it’s so tough to do because 80% of your time is pulling data from these disparate systems, cleaning it, mapping it, updating your Excel files, and maybe 20% of [your time] is actually taking a step back and understanding what the data is telling you,” Moallemi said.

That’s perhaps why it’s target customers are Series B and C-funded companies, who no doubt have much of their data already located in easily-accessible databases. The company started with smaller companies and Moallemi said “We’ve been slowly inching our way up there over the last 12 months or so working with larger, more complex customers.” The company has grown to 30 employees and has revenues in the seven figures (without a sales org according to Moallemi), although the startup didn’t want to be more specific than that.

With all that growth and excitement, the company is attracting investor attention. Today, the company announced that it raised $ 18.5 million of Series A financing led by Trevor Oelschig of General Catalyst, who has led other enterprise SaaS deals into startups like Fivetran, Contentful, and Loom. That round closed at the end of last year.

Mosaic previously raised a $ 2.5 million seed investment led by Ross Fubini of XYZ Ventures in mid-2019, who was formerly an investor at Village Global. Fubini said by email that he was intrigued by the company because the founders had a “shared pain” at Palantir over the state of software for CFOs, and “they had all experienced this deep frustration with the tools they needed to do their jobs.”

Other investors in the Series A included Felicis Ventures, plus XYZ and Village Global.

Along with the financing, the company also announced the creation of an advisory board that includes the current or former CFOs from nine tech companies, including Palantir, Dropbox, and Shopify.

Many functions of business have had a complete transformation in software. Now, Mosaic hopes, it’s the CFO’s time.

Startups – TechCrunch

I created a community of business founders where you can share your unique strategies, as well as get an advice from the people of your niche

I have just founded a place where there will be the opportunity to regularly discuss business ideas, icluding startups, how and in what area it is best to implement them. There will be appearing really useful tools soon, and the participation is free.

On the Russian segment I already have about 920 members, and their number is constantly growing. I decided to start the same activities in the foreign segment because my goal is to create a truly universal community where everyone could share their unique experience, as well as learn something new. Since business is constantly changing (due to Covid, too), the expansion of networks is now truly important. So be free to establish new connections here!

Appreciate any feedback or content to be added in. First of all, you can write about yourself and introduce the niche you work in. Yes, you can! I'll be waiting for it.

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Startups – Rapid Growth and Innovation is in Our Very Nature!