TX Zhuo is the managing partner of Fika Ventures, focusing on fintech, enterprise software and marketplace opportunities.
More posts by this contributor
Colton Pace is an investor at Fika Ventures. He previously held roles investing at Vulcan Capital and Madrona Venture Labs.
COVID-19 has transformed the global business landscape.
So much so that in a matter of weeks after the onset of the pandemic in the United States, Congress provided more than $1.1 trillion in fiscal stimulus directly to businesses and distressed industries — four times more than was distributed during the 2008-09 financial crisis.
It came as no surprise when, at the start of COVID-19, venture capital investors largely went pencils-down for several weeks and shifted their focus to their existing portfolio companies. Extending company runways, preparing for longer funding cycles and managing operations in a novel business environment became the crux of company resilience. Now, moving into May, we can see this shift reflected in both the decline in number of early-stage companies funded and total capital invested.
As investors begin acclimating to this new normal, they have begun wading into new opportunities in time-proven, healthy industries and new emerging industries that are positioned to succeed during the pandemic. While we are seeing lower valuations, we believe certain B2B technology companies may be uniquely poised to thrive, and are pursuing investment opportunities in this space with a renewed focus.
*Excluding Biotech & Pharmaceuticals (Source: Crunchbase Data via Tableau Public)
Prior to COVID-19, early-stage B2B investors wanted to see strong growth and healthy unit economics; 3X year-over-year sales growth or 10% monthly growth was the gold standard. An LTV-to-CAC ratio over 3X signified a healthy payback cycle. There was less focus on capital efficiency; for every $1 million invested, investors were happy with $500,000 in generated revenues. Get to these numbers and your next funding round was guaranteed — but no longer.
During COVID, and likely beyond, company expectations and goalposts have been adjusted; 2X year-over-year growth may be the new 3X. While growth and unit economics are important, there are now new health indicators that will determine if a B2B company will thrive in a post-COVID world. With that in mind, we have put together a COVID reslience test that startups can use as a north star to grow their business in this new world.
This COVID-19 test is meant to be a gated checklist that will indicate where efforts should be focused, whether it be sales, product or finance. Before we leave you to your own devices, we wanted to walk through a couple of these new post-COVID questions that you should try to answer (and why they are relevant).
Startups Weekly: The world is eating tech
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You could almost hear the internet cracking apart this week as international businesses pulled away from Hong Kong and the US considered a ban on TikTok. Software can no longer eat the entire world like it had attempted last decade. Startups across tech-focused industries face a new reality, where local markets and efforts are more protected and supported by national governments. Every company now has a smaller total addressable market, whether or not it succeeds in it.
Facebook, for example, appears to be getting an influx of creators who are worried about losing TikTok audiences, as Connie Loizos investigated this week. This might mean more users, engagement and ultimately revenue for many consumer startups, and any other companies that rely on paid marketing through Facebook’s valuable channels. But it means fewer platforms to diversify to, in case you don’t want to rely on Facebook so much for your business.
As trade wars look more and more like cold wars, it also means that Facebook itself will have a more limited audience than it once hoped to offer its own advertisers. After deciding to reject requests from Hong Kong-based Chinese law enforcement, it seems to be on the path to getting blocked in Hong Kong like it is on the mainland. But as with other tech companies, it doesn’t really have a choice — the Chinese government has pushed through legal changes in the city that allow it to arrest anyone in the world if it claims they are organizing against it. Compliance with China would bring on government intervention in the US and beyond, among other reasons why doing so is a non-starter.
This also explains why TikTok itself already pulled out of Hong Kong, despite being owned by mainland China-based Bytedance. The company is still reeling from getting banned in India last week and this maneuver is trying to the subsidiary look more independent. Given that China’s own laws allow its government to access and control private companies, expect many to find that an empty gesture.
Startups should plan for things to get harder in general. See: the next item below.
Student visas have become the next Trump immigration target
International students will not be allowed to stay enrolled at US universities that offer only remote classes this coming academic year, the Trump administration decided this past week. As Natasha Mascarenhas and Zack Whittaker explore, many universities are attempting a hybrid approach that tries to allow some in-person teaching without creating a community health problem.
Without this type of approach, many students could lose their visas. Here’s our resident immigration law expert, Sophie Alcorn, with more details on Extra Crunch:
International students have been allowed to take online classes during the spring and summer due to the COVID-19 crisis, but that will end this fall. The new order will force many international students at schools that are only offering remote online classes to find an “immigration plan B” or depart the U.S. before the fall term to avoid being deported.
At many top universities, international students make up more than 20% of the student body. According to NAFSA, international students contributed $41 billion to the U.S. economy and supported or created 458,000 jobs during the 2018-2019 academic year. Apparently, the current administration is continuing to “throw out the baby with the bathwater” when it comes to immigration.
Universities are scrambling as they struggle with this newfound untenable bind. Do they stay online only to keep their students safe and force their international students to leave their homes in this country? Or do they reopen to save their students from deportation, but put their communities’ health at risk?
For students, it means finding another school, scrambling to figure out a way to depart the States (when some home countries will not even allow them to return), or figuring out an “immigration plan B.”
Who knows how many startups will never exist because the right people didn’t happen to be at the right place at the right time together? What everyone does know is that remote-first is here to stay.
No Code goes global
A few tech trends seem unstoppable despite any geopolitics, and one seems to be the universal human goal of making enterprise software suck less. (Okay, nearly universal.) Alex Nichols and Jesse Wedler of CapitalG explain why now is the time for no code software and what the impact will bel, in a very popular article for Extra Crunch this week. Here’s their setup:
First, siloed cloud apps are sprawling out of control. As workflows span an increasing number of tools, they are arguably getting more manual. Business users have been forced to map workflows to the constraints of their software, but it should be the other way around. They need a way to combat this fragmentation with the power to build integrations, automations and applications that naturally align with their optimal workflows.
Second, architecturally, the ubiquity of cloud and APIs enable “modular” software that can be created, connected and deployed quickly at little cost composed of building blocks for specific functions (such as Stripe for payments or Plaid for data connectivity). Both third-party API services and legacy systems leveraging API gateways are dramatically simplifying connectivity. As a result, it’s easier than ever to build complex applications using pre-assembled building blocks. For example, a simple loan approval process could be built in minutes using third-party optical character recognition (a technology to convert images into structured data), connecting to credit bureaus and integrating with internal services all via APIs. This modularity of best-of-breed tools is a game changer for software productivity and a key enabler for no code.
Finally, business leaders are pushing CIOs to evolve their approach to software development to facilitate digital transformation. In prior generations, many CIOs believed that their businesses needed to develop and own the source code for all critical applications. Today, with IT teams severely understaffed and unable to keep up with business needs, CIOs are forced to find alternatives. Driven by the urgent business need and assuaged by the security and reliability of modern cloud architecture, more CIOs have begun considering no code alternatives, which allow source code to be built and hosted in proprietary platforms.
Palantir has finally filed to go public
It’s 16 years old, worth $26 billion and widely used by private and public entities of all types around the world, but this employer of thousands is counted as a startup tech unicorn, because, well, it was one of the pioneers of growing big, raising bigger, and staying private longer. Aileen Lee even mentioned Palantir as one of the 39 examples that helped inspire the “unicorn” term back in 2013. Now the secretive and sometimes controversial data technology provider is finally going to have its big liquidity event — and is filing confidentially to IPO, which means the finances are still staying pretty secret.
Alex Wilhelm went ahead and pieced together its funding history for Extra Crunch ahead of the action, and concluded that “Palantir seems like the Platonic ideal of a unicorn. It’s older than you’d think, has a history of being hyped, its valuation has stretched far beyond the point where companies used to go public, and it appears to be only recently growing into its valuation.”
It also appears to be one of the unicorns that has seen a lot of upside lately. It has been in the headlines recently for cutting big-data deals with governments for pandemic work, on top of a long-standing relationship with the US military and other arms of the government. As with Lemonade, Accolade and a range of other IPOing tech companies that we have covered in recent weeks, it is presumably in a positive business cycle and primed to take advantage of an already receptive market.
Meaningful change from BLM
In an investor survey for Extra Crunch this week, Megan Rose Dickey checked in with eight Black investors about what they are investing in, in the middle of what feels like a new focus on making the tech industry more representative of the country and the world. Here’s how Arlan Hamilton of Backstage Capital responded when Megan asked what meaningful change might come from the recent heightened attention on the Black Lives Matter movement.
I happen to be on the more optimistic side of things. I’m not at a hundred percent optimistic, but I’m close to that. I think that there’s an undeniable unflinching resolve right now. I think that if we were to go back to status quo, I would be incredibly surprised. I guess I would not be shocked, unfortunately, but I would be surprised. It would give me pause about the effectiveness of any of the work that we do if this moment fizzles out and doesn’t create change. I do think that there is going to be a shift. I can already feel it. I know that more people who are representative of this country are going to be writing checks, whether through being hired, or taken through the ranks, or starting their own funds, and our own funds. I think there’s more and more capital that’s going to flow to underrepresented founders. That alone, I think, will be a huge shift.
Across the week
Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast, where we unpack the numbers behind the headlines.
Before we get into topics, a reminder that if you are signing up for Extra Crunch and want to save some money, the code “equity” is your friend. Alright, let’s get into it:
- Robinhood is back in the news this week after a New York Times piece dug into its history, product decisions and more. Tidbits galore are to be had, but the Equity crew wanted to debate the morality of providing exotic financial tooling to less-experienced users.
- We followed that debate with a dive into immigration, the latest news from the government and our takes on the matter. TechCrunch has covered the recent news, and provided some context on the broader concept. Our takeaway is that doing self-defeating things for no reason isn’t brilliant for the country as a whole.
- Postmates has a home! After winding up somewhere in the middle of the pack of the on-demand cohort a few years back, the rise of DoorDash put Postmates in a pickle. Happily, Uber was on hand to de-brine the unicorn for $2.65 billion in stock. That’s a bit more money than Postmates’ last valuation. What we want to know next is how the sale price impacted common stockholders. Email us if you know.
- Palantir has filed to go public, but privately, so that’s really all there is to say about that. Unless you need a history lesson.
- Finally, funding rounds. We had three this week: MonkeyLearn raising $2.2 million for no-code AI, Quaestor raising $5.8 million for startup financial tooling and $4.5 million for Mmhmm, which is both timely and neat.
Whew! Past all that we had some fun, and, hopefully, were of some use. Hugs and chat Monday!
The Exchange: Remote dealmaking, rapid-fire IPOs, and how much $250M buys you
Welcome to The Exchange, an upcoming weekly newsletter featuring TechCrunch and Extra Crunch reporting on startups, money, and markets. You can sign up for it here to receive it regularly when it launches on July 25th. You can email me about it here, or talk to me about it on Twitter. Let’s go!
Ahead of parsing Q2 venture capital data, we got a look this week into the VC world’s take on making deals over Zoom. A few months ago it was an open question whether VCs would simply stop making new investments if they couldn’t chop it up in person with founders. That, it turns out, was mostly wrong.
This week we learned that most VCs are open to making remote deals happen, even if 40% of VCs have actually done so. This raises a worrying question: If only 40% of VCs have actually made a fully remote deal, how many deals happened in Q2?
Judging from my inbox over the past few months, it’s been an active period. But we can’t lean on anecdata for this topic; The Exchange will parse Q2 VC data next week, hopefully, provided that we can scrape together the data points we need to feel confident in our take. More soon.
As TechCrunch reported Friday, some startups are delaying raising capital for a few quarters. They can do this by limiting expenses. The question for startups that are doing this is what shape they’ll be in when they do surface to hunt for fresh funds; can they still grow at an attractive pace while trying to extend their runway through burn conservation?
But there’s another option besides waiting to raise a new round, and not raising at all. Startups can raise an extension to their preceding deal! Perhaps I am noticing something that isn’t a trend, or not a trend yet, but there have been a number of startups recently raised extensions lately that caught my eye. For example, this week MariaDB raised a $25 million Series C extension, for example. Also this week Sayari put together $2.5 million in a Series B extension. And CALA put together $3 million in a Seed extension. Finally, across the pond Machine Labs put together one million pounds in another Seed extension this week.
I don’t know yet how to numerically drill into the available venture data to tell if we’re really seeing an extension wave, but do let me know if you have any notes to share. And, to be completely clear, the above rounds could easily be merely random and un-thematic, so please don’t read into them more deeply than that they were announced in the last few days and match something that we’re watching.
On the public markets front, the news is all good. Tech stocks are up in general, and software stocks set some new record highs this week. It’s nearly impossible to recall how scary the world was back in March and April in today’s halcyon stock market run, but it was only a few months back that stocks were falling sharply.
The return-to-form has helped a number of companies go public this year like Vroom, Accolade, Agora, and others. This week was another busy period for startups, former startups, and other companies looking to go out.
In quick fashion to save time, this week we got to see GoHealth’s first IPO range, nCino’s second (more on the two companies’ finances here), learned that Palantir is going public (it’s financial history as best we can tell is here), and even got an IPO filing (S-1) from Rackspace, as it looks towards the public markets yet again.
The Exchange explores startups, markets and money. You can read it every morning on Extra Crunch, and now you can receive it in your inbox. Sign up for The Exchange newsletter, which drops every Friday starting July 25.
The IPO waters are so warm that Lemonade is still up more than 100% from its IPO price. So long as growth companies that are miles from making money can command rich valuations, expect companies to keep running through the public market’s door.
There’s fun stuff on the horizon. Coinbase might file later this year, or in early 2021. And the Airbnb IPO is probably coming within four or five quarters. Gear up to read some SEC filings.
Funding rounds worth noting
The coolest funding round of the week was obviously the one that I wrote about, namely the $2.2 million that MonkeyLearn put together from a pair of lead investors. But other companies raised money, and among them the following investments stood out:
- Sony poured a quarter of a billion dollars into the maker of Fortnite, for a 1.4% stake. This rounds stands out for how small a piece of Epic Games that Sony got its hands on. It feels reminiscent of the recent investment deluge into Jio.
- TruePill raised $25 million in a Series B. In the modern world it seems batty to me that I have to get off my ass, go to Walgreens or CVS, wait in line, and then ask someone to please sell me Claritin D. What an enormous waste of time. TruePill, which does pharma delivery, can’t get here fast enough. Also, investors in TruePill are probably fully aware that Amazon spent $1 billion on PillPack just a few year ago.
- From the slightly off-the-wall category, this headline from TechCrunch: “UK’s Farewill raises $25M for its new-approach online will writing, funerals and other death services.” Farewill is a startup name that is so bad it probably works; I won’t forget it any time soon, even though I don’t live in the U.K.! And this deal goes to show how big the internet really is. There’s so much demand for digital services that a company with Farewill’s particular focus can put together enough revenue growth to command a $25 million Series B.
- Finally, TechCrunch’s Ron Miller covered a $50 million investment into OwnBackup. What matters about this deal was how Ron spoke about it: “OwnBackup has made a name for itself primarily as a backup and disaster-recovery system for the Salesforce ecosystem, and today the company announced a $50 million investment.” What to take from that? That Salesforce’s ecosystem is maybe bigger than we thought.
That’s The Exchange for the week. Keep your eye on SaaS valuations, the latest S-1 filings, and the latest fundings. Chat Monday.
Picap está llevando la logística en Latam al siguiente nivel
Contxto – Gracias a la pandemia de coronavirus, las plataformas de ride-hailing, como Uber y Didi prácticamente están paradas. Por otro lado, las empresas de entregas de última milla y de logística están más ocupadas que nunca y en Colombia, Picap, una startup que primero se lanzó como un servicio de mototaxis, está desplegando una […]
The post Picap está llevando la logística en Latam al siguiente nivel appeared first on Contxto.
Don’t worry, we speak : English (Inglés), too!
Contxto – Gracias a la pandemia de coronavirus, las plataformas de ride-hailing, como Uber y Didi prácticamente están paradas.
Por otro lado, las empresas de entregas de última milla y de logística están más ocupadas que nunca y en Colombia, Picap, una startup que primero se lanzó como un servicio de mototaxis, está desplegando una solución para aprovechar al máximo estas circunstancias.
Desde el año pasado, ha estado ocupada desarrollando otra línea de productos para eficientar la logística, mientras que aprovechan al máximo su infraestructura.
El as bajo la manga de Picap es Pibox, un software para ayudar a las empresas, grandes o pequeñas, a desarrollar su propios servicios de entrega.
Héctor Neira (cofundador/CFO de Picap) y Andrea Lucero (gerente de proyecto en Pibox) recientemente compartieron con Contxto la dirección que la startup está tomando y cómo la logística cambiará la era post Covid.
Hacer lo que puedas con lo que tengas
Picap se ha enfrentado a una serie de obstáculos con reguladores en Colombia y el extranjero por su plataforma de ride-hailing que usa motocicletas. Entonces, mientras que simultáneamente ofrecía sus servicios en 2019, volteó a ver su pizarra para decidir qué más podía hacer.
“Nosotros arrancamos hace poco más de un año, tratando de encontrar el mayor provecho para nuestra flota que en horas pico transportaba pasajeros”, dijo Lucero durante nuestra llamada.
“[Y] vimos la oportunidad de conectar esa flota para servicios de mensajería.”
Y así surgió Pibox, una plataforma de paquetería que fue bien recibida incluso antes del brote de coronavirus.
- Artículo relacionado:Picap no quiere quedarse atrás: lanza 2 servicios nuevos en México
“Antes de la pandemia veníamos creciendo en promedio un 30 por ciento mes a mes,” explicó la gerente de proyecto de Pibox.
Esto se explica en gran medida por la continua adopción del e-commerce en Latam. Sin embargo, cuando Covid-19 llegó, las operaciones en Pibox tomaron fuerza. La startup informa que su servicio de logística ha estado creciendo por encima del 57 por ciento mensual.
Y todo eso está muy bien, ¿verdad? Pero eso no es nada nuevo. Sin embargo, la startup está llevando las cosas al siguiente nivel con su nuevo rubro.
Pibox, software de logística para todos
“En esencia lo que nosotros tenemos es un servicio normal de mensajería, que podría hacer Mensajeros Urbanos, o cualquier compañía” señaló el CFO de Picap “Y lo que estamos viendo y haciendo es evolucionar nuestro servicio hacia un servicio mucho más empresarial.”
Para la startup eso significa crear software que pueda ajustarse a las necesidades de los sistemas de entregas de una compañía. Este nuevo producto, Pibox Enterprise, ayudará especialmente a empresas que ya tengan su propia flota de emtregas, pero que les falta la tecnología para coordinar a sus repartidores.
Este producto abordaría muchas necesidades en logística incluyendo funcionalidades de rastreo y control. La meta es hacer de Pibox Enterprise la única plataforma tecnológica que las empresas necesitan para supervisar las entregas.
Estas alianzas también han funcionado para generar confianza para que otras plataformas de América Latina busquen los servicios de Pibox Enterprise.
Además, detrás del software hay mucha escalabilidad.
“Pero hoy en día nuestra integración —y eso es lo chévere de la tecnología— es que se puede replicar a donde la lleves”, explicó Lucero. “Si Mercado Libre quisiera implementar en Ecuador, Guatemala, el país que quiera, nosotros con la tecnología ya estamos listos para hacerlo”.
Y qué bueno porque los problemas entre países latinoamericanos son similares: desarticulados y con mala visibilidad.
En ese sentido, Pibox Enterprise quiere ser una solución integral que pueda adoptarse fácilmente.
¡Información exclusiva, data y análisis semanales sobre el ecosistema tecnológico de Latam directo a tu correo!
Porqué deberías ir a por todo
El equipo de Pibox se dió cuenta de que aliarse con plataformas como Mercado Libre y Linio, pueden aventajar mucho. Además de ganarse el voto de confianza para contactar a los sitios de e-commerce más pequeños, la startup aprendió y perfeccionó su producto.
Eso se debe a que estos jugadores más grandes ofrecen comentarios sobre los problemas de logística a los que se enfrentan todos los días y Pibox lo tomó todo en cuenta.
De hecho, una startup puede tener un equipo y producto escelente pero es igual de important aliarse con las personas correctas.
Artículos relacionados: ¡Tecnología y startups de Colombia!
Traducido por Alejandra Rodríguez
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