This morning, while checking the latest price for shares of recent IPO Poshmark, I noticed that they were down from their first-day results. The company’s pricing was more than strong, and its first trading results were nearly comical.
After setting a $ 35 to $ 39 per-share IPO price range, Poshmark sold shares in its IPO at $ 42 apiece. Then it opened at $ 97.50. Such was the exuberance of the stock market regarding the the used goods marketplace’s debut.
But today it’s worth a more modest $ 76.30 — for this piece we’re using all Yahoo Finance data, and all current prices are those from yesterday’s close ahead of the start of today’s trading — which sparked a question: How many recent tech IPOs are also down from their opening price?
So The Exchange, ever at your service, raced around to collect the data. And what did we find? Most hot tech IPOs have held onto their gains, and many have actually run up the score in the ensuing weeks.
Lemonade is a great example. It first targeted a $ 23 to $ 26 per-share IPO price. That rose to $ 26 to $ 28 per share, then it priced at $ 29 per share. It opened at $ 50.06 per share, closing the day worth $ 69.41.
And today? A single Lemonade share will set you back $ 145.21. The company is now worth $ 8.22 billion, despite only posting Q3 revenues of $ 17.8 million, a decline from the year-ago period (for more on why that is, and why it isn’t as bad as you might initially think, read this.)
Analysts anticipate that Lemonade will post revenues of $ 18.91 million in Q4 2020, again via Yahoo Finance, putting the company on an annualized run rate of 109x. For a business running with net margins of -173.6% in its most recent quarter. And that’s after Lemonade announced a large share sale!
All this is to say that the fiery optimism fueling dazzling IPO debuts has the potential to keep pushing them higher. Which you can view as troubling, if you are a boring index funder like myself, enticing, if you are a founder looking to go public in the near-future, and potentially irksome if you are a VC annoyed when upside leaks to parties other than yourself.
This brings us to our data set. Below, I’ve collated a host of recent IPOs, their opens and their current prices. Only one has shed value.
And then we reexamined eight 2020 offerings that you will recall so we could run the same exercise. The results were not what I expected and indicate a stock market — let alone an IPO market — sufficiently inflated to warrant the whispered moniker of bubble.
Let’s have some fun.
Up, and then up some more
Some time ago, I gave up on the idea of finding a thread that connects each story in the weekly Extra Crunch roundup; there are no unified theories of technology news.
The stories that left the deepest impression were related to two news pegs that dominated the week — Visa and Plaid calling off their $ 5.3 billion acquisition agreement, and sizzling-hot IPOs for Affirm and Poshmark.
Watching Plaid and Visa sing “Let’s Call The Whole Thing Off” in harmony after the U.S. Department of Justice filed a lawsuit to block their deal wasn’t shocking. But I was surprised to find myself editing an interview Alex Wilhelm conducted with with Plaid CEO Zach Perret the next day in which the executive said growing the company on its own is “once again” the correct strategy.
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In an analysis for Extra Crunch, Managing Editor Danny Crichton suggested that federal regulators’ new interest in antitrust enforcement will affect valuations going forward. For example, Procter & Gamble and women’s beauty D2C brand Billie also called off their planned merger last week after the Federal Trade Commission raised objections in December.
Given the FTC’s moves last year to prevent Billie and Harry’s from being acquired, “it seems clear that U.S. antitrust authorities want broad competition for consumers in household goods,” Danny concluded, and I suspect that applies to Plaid as well.
In December, C3.ai, Doordash and Airbnb burst into the public markets to much acclaim. This week, used clothing marketplace Poshmark saw a 140% pop in its first day of trading and consumer-financing company Affirm “priced its IPO above its raised range at $ 49 per share,” reported Alex.
In a post titled A theory about the current IPO market, he identified eight key ingredients for brewing a debut with a big first-day pop, which includes “exist in a climate of near-zero interest rates” and “keep companies private longer.” Truly, words to live by!
Come back next week for more coverage of the public markets in The Exchange, an interview with Bustle CEO Bryan Goldberg where he shares his plans for taking the company public, a comprehensive post that will unpack the regulatory hurdles facing D2C consumer brands, and much more.
If you live in the U.S., enjoy your MLK Day holiday weekend, and wherever you are: thanks very much for reading Extra Crunch.
Senior Editor, TechCrunch
Rapid growth in 2020 reveals OKR software market’s untapped potential
After spending much of the week covering 2021’s frothy IPO market, Alex Wilhelm devoted this morning’s column to studying the OKR-focused software sector.
Measuring objectives and key results are core to every enterprise, perhaps more so these days since knowledge workers began working remotely in greater numbers last year.
A sign of the times: this week, enterprise orchestration SaaS platform Gtmhub announced that it raised a $ 30 million Series B.
To get a sense of how large the TAM is for OKR, Alex reached out to several companies and asked them to share new and historical growth metrics:
“Some OKR-focused startups didn’t get back to us, and some leaders wanted to share the best stuff off the record, which we grant at times for candor amongst startup executives,” he wrote.
5 consumer hardware VCs share their 2021 investment strategies
For our latest investor survey, Matt Burns interviewed five VCs who actively fund consumer electronics startups:
- Hans Tung, managing partner, GGV Capital
- Dayna Grayson, co-founder and general partner, Construct Capital
- Cyril Ebersweiler, general partner, SOSV
- Bilal Zuberi, partner, Lux Capital
- Rob Coneybeer, managing director, Shasta Ventures
“Consumer hardware has always been a tough market to crack, but the COVID-19 crisis made it even harder,” says Matt, noting that the pandemic fueled wide interest in fitness startups like Mirror, Peloton and Tonal.
Bonus: many VCs listed the founders, investors and companies that are taking the lead in consumer hardware innovation.
A theory about the current IPO market
If you’re looking for insight into “why everything feels so damn silly this year” in the public markets, a post Alex wrote Thursday afternoon might offer some perspective.
As someone who pays close attention to late-stage venture markets, he’s identified eight factors that are pushing debuts for unicorns like Affirm and Poshmark into the stratosphere.
TL;DR? “Lots of demand, little supply, boom goes the price.”
Poshmark prices IPO above range as public markets continue to YOLO startups
Clothing resale marketplace Poshmark closed up more than 140% on its first trading day yesterday.
In Thursday’s edition of The Exchange, Alex noted that Poshmark boosted its valuation by selling 6.6 million shares at its IPO price, scooping up $ 277.2 million in the process.
Poshmark’s surge in trading is good news for its employees and stockholders, but it reflects poorly on “the venture-focused money people who we suppose know what they are talking about when it comes to equity in private companies,” he says.
Will startup valuations change given rising antitrust concerns?
This week, Visa announced it would drop its planned acquisition of Plaid after the U.S. Department of Justice filed suit to block it last fall.
Last week, Procter & Gamble called off its purchase of Billie, a women’s beauty products startup — in December, the U.S. Federal Trade Commission sued to block that deal, too.
Once upon a time, the U.S. government took an arm’s-length approach to enforcing antitrust laws, but the tide has turned, says Managing Editor Danny Crichton.
Going forward, “antitrust won’t kill acquisitions in general, but it could prevent the buyers with the highest reserve prices from entering the fray.”
Dear Sophie: What’s the new minimum salary required for H-1B visa applicants?
I’m a grad student currently working on F-1 STEM OPT. The company I work for has indicated it will sponsor me for an H-1B visa this year.
I hear the random H-1B lottery will be replaced with a new system that selects H-1B candidates based on their salaries.
How will this new process work?
— Positive in Palo Alto
Venture capitalists react to Visa-Plaid deal meltdown
After news broke that Visa’s $ 5.3 billion purchase of API startup Plaid fell apart, Alex Wilhelm and Ron Miller interviewed several investors to get their reactions:
- Anshu Sharma, co-founder and CEO, SkyflowAPI
- Amy Cheetham, principal, Costanoa Ventures
- Sheel Mohnot, co-founder, Better Tomorrow Ventures
- Lucas Timberlake, partner, Fintech Ventures
- Nico Berardi, founder and general partner, ANIMO Ventures
- Allen Miller, VC, Oak HC/FT
- Sri Muppidi, VC, Sierra Ventures
- Christian Lassonde, VC, Impression Ventures
Plaid CEO touts new ‘clarity’ after failed Visa acquisition
Alex Wilhelm interviewed Plaid CEO Zach Perret after the Visa acquisition was called off to learn more about his mindset and the company’s short-term plans.
Perret, who noted that the last few years have been a “roller coaster,” said the Visa deal was the right decision at the time, but going it alone is “once again” Plaid’s best way forward.
2021: A SPAC odyssey
In Tuesday’s edition of The Exchange, Alex Wilhelm took a closer look at blank-check offerings for digital asset marketplace Bakkt and personal finance platform SoFi.
To create a detailed analysis of the investor presentations for both offerings, he tried to answer two questions:
- Are special purpose acquisition companies a path to public markets for “potentially-promising companies that lacked obvious, near-term growth stories?”
- Given the number of unicorns and the limited number of companies that can IPO at any given time, “maybe SPACS would help close the liquidity gap?”
Flexible VC: A new model for startups targeting profitability
12 ‘flexible VCs’ who operate where equity meets revenue share
Growth-stage startups in search of funding have a new option: “flexible VC” investors.
An amalgam of revenue-based investment and traditional VC, investors who fall into this category let entrepreneurs “access immediate risk capital while preserving exit, growth trajectory and ownership optionality.”
In a comprehensive explainer, fund managers David Teten and Jamie Finney present different investment structures so founders can get a clear sense of how flexible VC compares to other venture capital models. In a follow-up post, they share a list of a dozen active investors who offer funding via these non-traditional routes.
These 5 VCs have high hopes for cannabis in 2021
For some consumers, “cannabis has always been essential,” writes Matt Burns, but once local governments allowed dispensaries to remain open during the pandemic, it signaled a shift in the regulatory environment, and investors took notice.
Matt asked five VCs about where they think the industry is heading in 2021 and what advice they’re offering their portfolio companies:
- Morgan Paxhia, managing director, Poseidon Investment Management
- Emily Paxhia, managing partner, Poseidon Investment Management
- Anthony Coniglio, CEO, NewLake Capital
- Matt Shalhoub, managing partner, Green Acre Capital
- Jerel Registre, managing director, Curio WMBE Fund
Editor’s note: Get this free weekly recap of TechCrunch news that any startup can use by email every Saturday morning (7 a.m. PT). Subscribe here.
Maybe it is a stock market bubble, or a tech-stock bubble at least. And maybe DoorDash, Airbnb and C3.ai and their bankers should have priced higher regardless to take advantage of all of the enthusiasm. It’s hard to avoid reactions like that, after DoorDash, for example, doubled its final private share price to $ 102 for its public debut on Wednesday — only to see the price climb to $ 175 at the end of the week.
Or maybe none of this will matter, because the future is way bigger and the companies are going to get there regardless. That’s what Saar Gur tells Connie Loizos this week about DoorDash, which he had invested in many years ago:
I actually started my career at Lehman Brothers on the investment banking team, and so having seen the IPO process, while I can appreciate [frustration that a] company left some money on the table based on the pricing, the tactical challenge [is that] it’s very hard to predict. You know what the market will bear once it moves to retail investors.
What’s exciting to me is [that] DoorDash is raising money because they are just getting started. I do think this could be a $ 500 billion-plus company. There’s so much to be excited about. As for the capital-raising event, I think it’s hard for the bankers to know where it will land with the broader market, so I’m not as negative as maybe some others.
Here’s the blow-by-blow coverage of the craziest tech IPO week in the craziest (IPO) year in decades, resuming from where I left off last Friday:
Meet Natasha Mascarenhas, your future Startups Weekly newsletter author
The year is coming to a close for my time writing this newsletter, too. I’m going to be returning full-time to my regular job editing Extra Crunch and stuff in the back offices here at TechCrunch virtual HQ. My colleague Natasha Mascarenhas will be taking over starting next week.
You’re in good hands. In fact you may have noticed many of her articles and her weekly contributions to Equity showing up here already. Since joining us from Crunchbase News earlier this year, she’s been covering early-stage startups and the San Francisco tech scene in general, with a big focus on edtech. We have a lot more planned across Equity, Extra Crunch and more, and she’ll be able to tie it all together around her daily coverage. Stay tuned for an action-packed 2021 (and follow her on Twitter in the meantime).
How to bootstrap to $ 200m+ in revenue
Alex Wilhelm hears from one startup founder who has taken a bit of an alternative approach to building a SaaS company. Here’s more:
Now north of $ 200 million in revenue, [Nextiva] is a quiet giant and, notably, has not taken venture capital funding along its path to scale. Chatting with CEO and co-founder Tomas Gorny, I got to dig a little under the skin of the company’s history. It goes a little something like this: After moving to California in 1996 at the age of 20, Gorny eventually founded a web hosting company in 2001 after working for tech companies during the dot-com boom. The web hosting company wound up selling to another company called Endurance International in 2007, which sold as a combined entity for around a billion dollars in 2011, later going public before being taken private last month for $ 3 billion — you can read this TechCrunch piece that mentions Endurance from 2010 for a bit of the historical record.
Gorny founded Nextiva in 2008, focused on what it describes today as “UcaaS,” or unified communications as a service. The startup grew to about $ 40 million in annual recurring revenue (ARR), at which point it ran into issues with a third-party system that would integrate hardware, and support and services software, which sparked a shift in its thinking. The company set out to build a platform.
Nextiva expanded horizontally, adding CRM software, analytics and other functionality to its broader suite as it scaled. And it grew efficiently; starting with money from its founding team, Gorny told TechCrunch that even if he had used someone else’s money, he would have built the company in the same manner.
So why does TechCrunch cover so many early-stage funding rounds, anyway?
Here’s Natasha’s take, from a little explainer we did this week following some Twitter conversations:
The reason I love writing about tech and do the sometimes formulaic funding-round story is because I meet people who are crazy enough to bet their entire legacy on a napkin-stage idea. That’s the story, and the surprise and the tension. The dollar sign is just the first way in.
Having raised fundings that got covered in TechCrunch, and having written many many funding round articles over the year, I agree. The funding round is often the only way to prove that you have traction, if you are trying to get more attention.
The Klarna founding story
Swedish fintech decacorn Klarna pioneered new ways for users to buy online without credit cards over the decade, and is now battling rivals large and small across the world. How did it all happen? Steve O’Hear sits down with founder Sebastian Siemiatkowski for an exclusive in-depth interview that Extra Crunch subscribers have been eating up this week. Here’s his description:
In a wide-ranging interview, Siemiatkowski confronts criticisms head on, including that Klarna makes it too easy to get into debt, and that buy now, pay later needs to be regulated. We also discuss Klarna’s business model and the balancing act required to win over consumers and keep merchants onside.
We also learn how, under his watch and as the company began to scale, Klarna missed the next big opportunity in fintech, instead being usurped by Adyen and Stripe. Siemiatkowski also shares what’s next for the company as it ventures further into the world of retail banking after gaining a bank license in 2017.
Here’s a painfully fascinating excerpt from Siemiatkowski:
One of the drawbacks that we had at the company was that none of the three co-founders had any engineering background; we couldn’t code. We were connected to five engineers that by themselves were amazing engineers, but we had a slight misunderstanding. Their idea was that they were going to come in, build a prototype, ship it, and then leave for 37% of the equity. Our understanding was that they were going to come in, ship it, and if it started scaling they would stay with us and work for a longer period of time. This is the classic mistake that you do as a startup.
Those Facebook antitrust lawsuits
It seems that the US government has finally had enough of Facebook’s aggressive expansion and acquisition practices. After years of light regulation, the Federal Trade Commission and, separately, 49 state attorneys general are suing to break up social networking company. You can find lots of commentary about the details on TechCrunch and elsewhere.
But here’s my take for you to remember, as you watch headlines about this continue into next year: Facebook was always ready. I covered the company closely during its early years, and even back then it was talking about being the operating system for the internet, like Microsoft Windows was for desktop. The implied and whispered goal was to get as big as possible before regulations inevitably hit, like what Microsoft did. Here we are, with Facebook in a leading market position, with a massive army of lawyers who have been preparing for years. Without getting further into the lawsuits or political landscape where it’s all happening… I don’t expect a breakup. But maybe new restrictions on acquisitions or something could limit growth potential? Its big wins this decade have been from acquisitions.
One boring scenario I don’t see discussed much is simply that its products remain the phone book of the era for much of the world. Somewhat regulated this way or that way in various jurisdictions and banned outright in some — and very big and successful still.
Across the week
What a week, yeah? Instead of the news cycle slowing as the year races to a close, things are still as hot as ever. We have funding rounds big and small, IPOs, first-day extravaganza and more.
- Career Karma raised $ 10 million, and we have thoughts and concerns.
- Skyflow raised $ 17.5 million in an effort to try to get the Equity team to understand the nuances of different encryption types.
- Calm raised $ 75 million, which felt pretty reasonable given reports and its fundraising history.
- Squire tripled its valuation in a new round that included $ 45 million in equity capital along with some debt.
- We also talked about the DoorDash and C3.ai IPO pops, where Airbnb priced, and who is coming next.
- We rounded off with what’s up with TikTok stars investing in tech startups. Danny was not a fan.
And that’s that! If you aren’t tired, have you even been paying attention?
Aquarius Engines hopes to raise $ 65 million and Highcon Systems is trying to raise $ 45 million.
Read more here.
The post [Highcon in Globes] Two more tech cos file for TASE IPOs appeared first on OurCrowd Blog.
Jason Green has a pretty solid reputation as venture capitalists go. The enterprise-focused firm the cofounded 17 years ago, Emergence Capital, has backed Saleforce, Box, and Zoom, among many other companies, and even while every firm is now investing in software-as-a-service startups, his remains a go-to for many top founders selling business products and services.
To learn more about the trends impacting Green’s slice of the investing universe, we talked with him late last week about everything from SPACs to valuations to how the firm differentiates itself from the many rivals with which it’s now competing. Below are some outtakes edited lightly for length.
TC: What do you make of the assessment that SPACs for companies that aren’t generating enough revenue to go public the traditional route?
JG: Well, yeah, it’ll be really interesting. This has been quite a year for SPACs, right? I can’t remember the number, but it’s been something like $ 50 billion of capital raised this year in SPACs, and all of those have to put that money to work within the next 12 to 18 months or they give it back. So there’s this incredible pent-up demand to find opportunities for those SPACs to convert into companies. And the companies that are at top of the charts, the ones that are the high growth and profitable companies, will probably do a traditional IPO, I would imagine.
So [SPAC candidates are] going to be companies that are growing fast enough to be attractive as a potential public company but not top of the charts. So I do think [sponsors are] going to target companies that are probably either growing slightly slower than the top-quartile public companies but slightly profitable, or companies that are growing faster but still burning a lot of cash and might actually scare all the traditional IPO investors.
TC: Are you having conversations with CEOs about whether or not they should pursue this avenue?
JG: We just started having those conversations now. There are several companies in the portfolio that will probably be public companies in the next year or two, so it’s definitely an alternative to consider. I would say there’s nothing impending I see in the portfolio. With most entrepreneurs, there’s a little bit of this dream of going public the traditional way, where SPACs tend to be a little bit less exciting from that perspective. So for a company that maybe is thinking about another private round before going public, it’s like a private-plus round. I would say it’s a tweener, so the companies that are considering it are probably ones that are not quite ready to go public yet.
TC: A lot of the SPAC fundraising has seemed like a reaction to uncertainty around when the public window might close. With the election behind us, do you think there’s less uncertainty?
JG: I don’t think risk and uncertainty has decreased since the election.There’s still uncertainty right now politically. The pandemic has reemerged in a significant way, even though we have some really good announcements recently regarding vaccines or potential vaccines. So there’s just a lot there’s a lot of potential directions things could head in.
It’s an environment generally where the public markets tend to gravitate more toward higher-quality opportunities, so fewer companies but higher quality, and that’s where I think SPACs could play a role. I’d say first half of next year, I could easily see SPACs being the more likely go-to-market for a public company, then the latter half of next year, once the vaccines have kicked in and people feel like we’re returning to somewhat normal, I could see the traditional IPO coming back.
TC: When we sat down in person about a year ago, you said Emergence looks at maybe 1,000 deals a year, does deep due diligence on 25, and funds just a handful or so of these startups every year. How has that changed in 2020?
JG: I would say that over the last five years, we’ve made almost a total transition. Now we’re very much a data-driven, thesis-driven outbound firm, where we’re reaching out to entrepreneurs soon after they’ve started their companies or gotten seed financing. The last three investments that we made were all relationships that [date back] a year to 18 months before we started engaging in the actual financing process with them. I think that’s what’s required to build a relationship and the conviction, because financings are happening so fast.
I think we’re going to actually do more investments this year than we maybe ever done in the history of the firm, which is amazing to me [considering] COVID. I think we’ve really honed our ability to build this pipeline and have conviction, and then in this market environment, Zoom is actually helping expand the landscape that we’re willing to invest in. We’re probably seeing 50% to 100% more companies and trying to whittle them down over time and really focus on the 20 to 25 that we want to dig deep on as a team.
TC: For founders trying to understand your thinking, what’s interesting to you right now?
JG: We tend to focus on three major themes at any one time as a firm, and one we’ve termed ‘coaching networks’. This is this intersection between AI and machine learning and human interaction. Companies like [the sales engagement platform] SalesLoft or [the knowledge management system] Guru or Drishti [which sells video analytics for manual factory assembly lines] fall into this category, where it’s really intelligent software going deep into a specific functional area and unleashing data in a way that’s never been available before.
The second [theme] is going deep into more specific industry verticals. Veeva was the best example of this early on with with healthcare and life sciences, but we now have one called p44 in the transportation space that’s doing incredibly well. Doximity is in the healthcare space and going deep like a LinkedIn for physicians, with some remote health capabilities, as well. And then [lending company] Blend, which is in the financial services area. These companies are taking cloud software and just going deep into the most important problems of their industries.
The third them [centers around] remote work. Zoom, which has obviously has been [among our] best investments is almost as a platform, just like Salesforce became a platform after many years. We just funded a company called ClassEDU, which is a Zoom-specific offering for the education market. Snowflake is becoming a platform. So another opportunity is is not just trying to come up with another collaboration tool, but really going deep into a specific use case or vertical.
TC: What’s a company you’ve missed in recent years and were any lessons learned?
JG: We have our hall of shame. [Laughs.] I do think it’s dangerous to assume that things would have turned out the same if if we had been investors in the company. I believe the kinds of investors you put around the table make a difference in terms of the outcome of your company, so I try not beat myself up too much on the missed opportunities because maybe they found a better fit or a better investor for them to be successful.
But Rob Bernshteyn of Coupa is one where I knew Rob from SuccessFactors [where he was a product marketing VP], and I just always respected and liked him. And we always chasing it on valuation. And I think I think we probably turned it down at an $ 80 million or $ 100 million dollar valuation [and it’s valued at] $ 20 billion today. That can keep you up at night.
Sometimes, in the moment, there are some risks and concerns about the business and there are other people who are willing to be more aggressive and so you lose out on some of those opportunities. The beautiful thing about our business is that it’s not a zero-sum game.
Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast where we unpack the numbers behind the headlines.
This is Equity Monday, our weekly kickoff that tracks the latest big news, chats about the coming week, digs into some recent funding rounds and mulls over a larger theme or narrative from the private markets. You can follow the show on Twitter here and myself here — and don’t forget to check out last Thursday’s main ep, and our bonus episode that went out on Saturday.
If you like Equity, your cup runeth over.
So, what did we get into this morning? A grip of things, which I’ve listed below in order:
- American Thanksgiving is this week, so news may slow as we move towards Thursday.
- New, good vaccine news is boosting stocks and hopes that the pandemic could be brought under control next year.
- Bitcoin is racing towards new records.
- LA-based Credit Key raises $ 33 million for its business-to-business payments platform — in light of the Affirm IPO this round is no surprise.
- Digital freight forwarder Forto raises another $ 50M in round led by Inven Capital — the pandemic is messing around with supply chains, perhaps leaving room for startups in the space to aggressively grow.
- Digital electricity supplier Tibber closes $ 65M Series B led by Eight Roads, Balderton — of our three rounds, this one took me the longest to understand.
- This essay from Tomasz Tunguz, which is good.
Please stay safe this week, America. Do something boring and unfun, so that we can keep more of us alive into next year.
This is an all-time first for the show, it’s an Equity Leftovers. Which means that we’re not focusing on a single topic like we would in an Equity Shot. This is just, well, more Equity.
- Our piece looking at which venture capital firms are expected to make the most bank from the recent IPO deluge.
- Roblox’s IPO filing, and our take on its impending debut.
- All things Wish IPO, including what’s up with its revenue costs, and the broader ecommerce market.
- DoorDash’s epic financials, and how COVID helped propel the food delivery giant into the business hall of fame.
- The exit of one of Robinhood’s co-CEOs from the role.
- The HuffPo-Buzzfeed tie-up. And what is up with media companies in general.
And with this, our fourth episode in six days, we shall pause until Monday. Hugs from the Equity crew.
Tech companies that go public capture our imagination because they are literal happy endings. An Initial Public Offering is the promised land for startup pilgrims who may wander the desert for years seeking product-market fit. After all, the “I” in “ISO” stands for “incentive.”
A flurry of new S-1s in a single week forced me to rearrange our editorial calendar, but I didn’t mind; our 360-degree coverage let some of the air out of various hype balloons and uncovered several unique angles.
For example: I was familiar with Affirm, the service that lets consumers finance purchases, but I had no idea Peloton accounted for 30% of its total revenue in the last quarter.
“What happens if Peloton puts on the brakes?” I asked Alex Wilhelm as I edited his breakdown of Affirm’s S-1. We decided to use that as the subhead for his analysis.
The stories that follow are an overview of Extra Crunch from the last five days. Full articles are only available to members, but you can use discount code ECFriday to save 20% off a one or two-year subscription. Details here.
Thank you very much for reading Extra Crunch this week; I hope you have a relaxing weekend.
Senior Editor, TechCrunch
What is Roblox worth?
Gaming company Roblox filed to go public yesterday afternoon, so Alex Wilhelm brought out a scalpel and dissected its S-1. Using his patented mathmagic, he analyzed Roblox’s fundraising history and reported revenue to estimate where its valuation might land.
Noting that “the public markets appear to be even more risk-on than the private world in 2020,” Alex pegged the number at “just a hair under $ 10 billion.”
What China’s fintech can teach the world
For all the hype about new forms of payment, the way I transact hasn’t been radically transformed in recent years — even in tech-centric San Francisco.
Sure, I use NFC card readers to tap and pay and tipped a street musician using Venmo last weekend. But my landlord still demands paper checks and there’s a tattered “CASH ONLY” taped to the register at my closest coffee shop.
In China, it’s a different story: Alibaba’s employee cafeteria uses facial recognition and AI to determine which foods a worker has selected and who to charge. Many consumers there use the same app to pay for utility bills, movie tickets and hamburgers.
“Today, nobody except Chinese people outside of China uses Alipay or WeChat Pay to pay for anything,” says finance researcher Martin Chorzempa. “So that’s a big unexplored side that I think is going to come into a lot of geopolitical risks.”
Inside Affirm’s IPO filing: A look at its economics, profits and revenue concentration
Consumer lending service Affirm filed to go public on Wednesday evening, so Alex used Thursday’s column to unpack the company’s financials.
After reviewing Affirm’s profitability, revenue and the impact of COVID-19 on its bottom line, he asked (and answered) three questions:
- What does Affirm’s loss rate on consumer loans look like?
- Are its gross margins improving?
- What does the unicorn have to say about contribution profit from its loans business?
If you didn’t make $ 1B this week, you are not doing VC right
“The only thing more rare than a unicorn is an exited unicorn,” observes Managing Editor Danny Crichton, who looked back at Exitpalooza 2020 to answer “a simple question — who made the money?”
Covering each exit from the perspective of founders and investors, Danny makes it clear who’ll take home the largest slice of each pie. TL;DR? “Some really colossal winners among founders, and several venture firms walking home with billions of dollars in capital.
5 questions from Airbnb’s IPO filing
The S-1 Airbnb released at the start of the week provided insight into the home-rental platform’s core financials, but it also raised several questions about the company’s health and long-term viability, according to Alex Wilhelm:
- How far did Airbnb’s bookings fall during Q1 and Q2?
- How far have Airbnb’s bookings come back since?
- Did local, long-term stays save Airbnb?
- Has Airbnb ever really made money?
- Is the company wealthy despite the pandemic?
Autodesk CEO Andrew Anagnost explains the strategy behind acquiring Spacemaker
Earlier this week, Autodesk announced its purchase of Spacemaker, a Norwegian firm that develops AI-supported software for urban development.
TechCrunch reporter Steve O’Hear interviewed Autodesk CEO Andrew Anagnost to learn more about the acquisition and asked why Autodesk paid $ 240 million for Spacemaker’s 115-person team and IP — especially when there were other startups closer to its Bay Area HQ.
“They’ve built a real, practical, usable application that helps a segment of our population use machine learning to really create better outcomes in a critical area, which is urban redevelopment and development,” said Anagnost.
“So it’s totally aligned with what we’re trying to do.”
Unpacking the C3.ai IPO filing
On Monday, Alex dove into the IPO filing for enterprise artificial intelligence company C3.ai.
After poring over its ownership structure, service offerings and its last two years of revenue, he asks and answers the question: “is the business itself any damn good?”
Is the internet advertising economy about to implode?
In his new book, “Subprime Attention Crisis,” writer/researcher Tim Hwang attempts to answer a question I’ve wondered about for years: does advertising actually work?
Managing Editor Danny Crichton interviewed Hwang to learn more about his thesis that there are parallels between today’s ad industry and the subprime mortgage crisis that helped spur the Great Recession.
So, are online ads effective?
“I think the companies are very reticent to give up the data that would allow you to find a really definitive answer to that question,” says Hwang.
Will Zoom Apps be the next hot startup platform?
Even after much of the population has been vaccinated against COVID-19, we will still be using Zoom’s video-conferencing platform in great numbers.
That’s because Zoom isn’t just an app: it’s also a platform play for startups that add functionality using APIs, an SDK or chatbots that behave like smart assistants.
Enterprise reporter Ron Miller spoke to entrepreneurs and investors who are leveraging Zoom’s platform to build new applications with an eye on the future.
“By offering a platform to build applications that take advantage of the meeting software, it’s possible it could be a valuable new ecosystem for startups,” says Ron.
Will edtech empower or erase the need for higher education?
Without an on-campus experience, many students (and their parents) are wondering how much value there is in attending classes via a laptop in a dormitory.
Even worse: Declining enrollment is leading many institutions to eliminate majors and find other ways to cut costs, like furloughing staff and cutting athletic programs.
Edtech solutions could fill the gap, but there’s no real consensus in higher education over which tools work best. Many colleges and universities are using a number of “third-party solutions to keep operations afloat,” reports Natasha Mascarenhas.
“It’s a stress test that could lead to a reckoning among edtech startups.”
3 growth tactics that helped us surpass Noom and Weight Watchers
I look for guest-written Extra Crunch stories that will help other entrepreneurs be more successful, which is why I routinely turn down submissions that seem overly promotional.
However, Henrik Torstensson (CEO and co-founder of Lifesum) submitted a post about the techniques he’s used to scale his nutrition app over the last three years. “It’s a strategy any startup can use, regardless of size or budget,” he writes.
According to Sensor Tower, Lifesum is growing almost twice as fast as Noon and Weight Watchers, so putting his company at the center of the story made sense.
Send in reviews of your favorite books for TechCrunch!
Every year, we ask TechCrunch reporters, VCs and our Extra Crunch readers to recommend their favorite books.
Have you read a book this year that you want to recommend? Send an email with the title and a brief explanation of why you enjoyed it to email@example.com.
We’ll compile the suggestions and publish the list as we get closer to the holidays. These books don’t have to be published this calendar year — any book you read this year qualifies.
Please share your submissions by November 30.
Dear Sophie: Can an H-1B co-founder own a Delaware C Corp?
My VC partner and I are working with 50/50 co-founders on their startup — let’s call it “NewCo.” We’re exploring pre-seed terms.
One founder is on a green card and already works there. The other founder is from India and is working on an H-1B at a large tech company.
Can the H-1B co-founder lead this company? What’s the timing to get everything squared away? If we make the investment we want them to hit the ground running.
— Diligent in Daly City