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The Exchange: Remote dealmaking, rapid-fire IPOs, and how much $250M buys you

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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.

Private markets

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.

Public markets

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.

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IPO mistakes, fintech results, and the Zenefits ‘mafia’

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Welcome back to The TechCrunch Exchange, a weekly startups-and-markets newsletter for your weekend enjoyment. It’s broadly based on the weekday column that appears on Extra Crunch, but free. And it’s made just for you. You can sign up for the newsletter here

With that out of the way, let’s talk money, upstart companies and the latest spicy IPO rumors. 

(In time the top bit of the newsletter won’t get posted to the website, so do make sure to sign up if you want the whole thing!)

BigCommerce isn’t worried about its IPO pricing

One of the most interesting disconnects in the market today is how VC Twitter discusses successful IPOs and how the CEOs of those companies view their own public market debuts.

If you read Twitter on an IPO day, you’ll often see VCs stomping around, shouting that IPOs are a racket and that they must be taken down now. But if you dial up the CEO or CFO of the company that actually went public to strong market reception, they’ll spend five minutes telling you why all that chatter is flat wrong.

Case in point from this week: BigCommerce. Well-known VC Bill Gurley was incensed that shares of BigCommerce opened sharply higher after they started trading, compared to their IPO price. He has a point, with the Texas-based e-commerce company pricing at $24 per share (above a raised range, it should be said), but opened at $68 and is worth around $88 on Friday as I write to you.

So, when I got BigCommerce CEO Brent Bellm on Zoom after its debut, I had some questions. 

First, some background. BigCommerce filed confidentially back in 2019, planned on going public in April, and wound up delaying its offering due to the pandemic, according to Bellm. Then in the wake of COVID-19, sales from existing customers went up, and new customers arrived. So, the IPO was back on.

BigCommerce, as a reminder, is seeing growth acceleration in recent quarters, making its somewhat modest growth rate more enticing than you’d otherwise imagine.

Anyhoo, the company was worth more than 10x its annual run-rate at its IPO price if I recall the math, so it wasn’t cheap even at $24 per share. And in response to my question about pricing Bellm said that he was content with his company’s final IPO price. 

He had a few reasons, including that the IPO price sets the base point for future return calculations, that he measures success based on how well investors do in his stock over a ten-year horizon, and that the more long-term investors you successfully lock in during your roadshow, the smaller your first-day float becomes; the more investors that hold their shares after the debut, the more the supply/demand curve can skew, meaning that your stock opens higher than it otherwise might due to only scarce equity being up for purchase.

All that seems incredibly reasonable. Still, VCs are livid. 

Market Notes

The Exchange spent a lot of time on the phone this week, leading to a host of notes for your consumption. And there was a deluge of interesting data. So, here’s a digest of what we heard and saw that you should know:

  • Fintech mega-rounds are heating up, with 28 in the second quarter of 2020. Total fintech rounds dipped, but it appears that the sky is still pretty much afloat for financial technology startups.
  • Tech stocks set new records this week, something that has become so common that the new all-time highs for the Nasdaq didn’t really create a ripple. Hell, it’s Nasdaq 11,000, where’s our gosh darn party?
  • Axios’ Dan Primack noted this week that SPACs may be raising more money than private equity at the moment, and that there were “over $1 billion in new [SPAC] filings over past 24 hours” on Wednesday. I’ve given up keeping tabs on the number of SPACs taking place, frankly.
  • But we did dig into two of the more out-there SPACs, in case you wanted a taste of today’s market.
  • The Exchange also spoke with the chief solutions officer of Rackspace, Matt Stoyka, before its shares had started to trade. The chat stressed post-COVID-19 momentum, and the continuing cloud transition of lots of IT spend. Rackspace intends on lowering its debt load with a chunk of its IPO proceeds. It priced at $21, the lower-end of its range, so it didn’t get an extra debut check. And as the company’s shares are sharply under its IPO price today, there was no VC chatter about mispricing, notably. (That stuff only tends to crop up when the results bend in a particular direction.)
  • I also chatted with Joshua Bixby, the CEO of Fastly this week. The cloud services company wound up giving back some of its recent gains after earnings, which goes to show how the market is perhaps overpricing some public tech shares. After all, Fastly beat on Q2 profit, Q2 revenue, and raised its full-year guidance — and its shares fell? That’s wild. Perhaps the income it generates from TikTok was concerning? Or perhaps after racing from a 52 week low of $10.63 to a 52 week high of over $117, the market realized that Fastly could only accelerate so much.

Whatever the case, during our chat Fastly CEO Joshua Bixby taught me something new: Usage-based software companies are like SaaS firms, but more so.

In the old days, you’d buy a piece of software, and then own it forever. Now, it’s common to buy one-year SaaS licenses. With usage-based pricing, you make the buying choice day-to-day, which is the next step in the evolution of buying, it feels. I asked if the model isn’t, you know, harder than SaaS? He said maybe, but that you wind up super aligned with your customers. 

Various and Sundry

To wrap up, as always, here’s a final whack of data, news and other miscellania that are worth your time from the week:

  • TechCrunch chatted with Intercom, which recently hired a CFO and is therefore prepping to go public. But then it said the debut is at least two years away, which was a bummer. The company wrapped its January 31, 2020 fiscal year with $150 million ARR. It’s now much larger. Go public!
  • The Zenefits “mafia” raised a lot, and a little this week. “Mafia” is a terrible term, by the way. We should come up with a new one.
  • Danny Crichton wrote about SaaS revenue securitization, which was cool.
  • Natasha Mascarenhas wrote about learning pods, which aren’t super germane to The Exchange but struck me as incredibly topical to our current lives, so I am including the piece all the same.
  • I spoke with the CEO of Wrike this week, noodling on his company’s size (over $100 million ARR), and his competitors Asana and Monday.com. The whole cohort is over $100 million ARR each, so I might turn them into a post next week entitled “Go public you cowards,” or something. But probably with a different title as I don’t want to argue with 17 internal and external PR teams about why I’m right.
  • The Exchange also chatted with VC firms M13 (big on services, various domestic office locations, focus on consumer spend over time) and Coefficient Capital (D2C brand focused, super interesting thesis) this week. Our takeaway is that there is more juice, and focus on the more consumer-focused side of VC than you’d probably expect given recent data

We’ve blown past our 1,000 word target, so, briefly: Stay tuned to TechCrunch for a super-cool funding round on Monday (it has the fastest growth I can recall hearing about), make sure to listen to the latest Equity ep, and parse through the latest TechCrunch List updates.

Hugs, fistbumps, and good vibes, 

Alex

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Startups Weekly: What countries want your startup?

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Editor’s note: Get this free weekly recap of TechCrunch news that any startup can use by email every Saturday morning (7am PT). Subscribe here.

They say business needs certainty to succeed, but new tech startups are still getting funded aggressively despite the pandemic, recession, trade wars and various large disasters created by nature or humans. But before we get to the positive data, let’s spend some time reviewing the hard news — there is a lot of it to process.

TikTok is on track to get banned if it doesn’t get sold first, and leading internet company Tencent’s WeChat is on the list as well, plus Trump administration has a bigger “Clean Network” plan in the works. The TikTok headlines are the least significant part, even if they are dominating the media cycle. The video-sharing social network is just now emerging as an intriguing marketing channel, for example. And if it goes, few see any real opening in the short-form video space that market leaders aren’t already deep into. Indeed, TikTok wasn’t a startup story since the Musical.ly acquisition. It was actually part of an emerging global market battle between giant internet companies, that is being prematurely ended by political forces. We’ll never know if TikTok could have continued leveraging ByteDance’s vast resources and protected market in China to take on Facebook directly on its home turf.

Instead of quasi-monopolies trying to finish taking over the world, those with a monopoly on violence have scrambled the map. WeChat is mainly used by the Chinese diaspora in the US, including many US startups with friends, family and colleagues in China. And the Clean Network plan would potentially split the Chinese mobile ecosystem from iOS and Android globally.

Let’s not forget that Europe has also been busy regulating foreign tech companies, including from both the US and China. Now every founder has to wonder how big their TAM is going to be in a world cleaved back the leading nation-states and their various allies.

“It’s not about the chilling effect [in Hong Kong],” an American executive in China told Rita Liao this week about the view in China’s startup world. “The problem is there won’t be opportunities in the U.S., Canada, Australia or India any more. The chance of succeeding in Europe is also becoming smaller, and the risks are increasing a lot. From now on, Chinese companies going global can only look to Southeast Asia, Africa and South America.”

The silver lining, I hope, is that tech companies from everywhere are still going to be competing in regions of the world that will appreciate the interest.

Startup fundraising activity is booming and set to boom more

A fresh analysis from our friends over at Docsend reveals that startup investment activity has actually sped up this year, at least by the measure of pitchdeck activity on its document management platform used by thousands of companies in Silicon Valley and globally (which makes it a key indicator of this hard-to-see action).

Founders are sending out more links than before and VCs are racing through more decks faster, despite the gyrations of the pandemic and other shocks. Meanwhile, many startups shared that they had cut back hard in March and now have more room to wait or raise on good terms. Docsend CEO Russ Heddleston concludes that the rest of the year could actually see activity increase further as companies finish adjusting to the latest challenges and are ready to go back out to market.

All this should shape how you approach your pitchdeck, he writes separately for Extra Crunch. Additional data shows that decks should be on the short side, must include a “why now” slide that addresses the COVID-19 era, and show big growth opportunities in the financials.

SaaS founders could transcend VC fundraising via securitized debt

“In one decade, we went from buying licenses for software to paying monthly for services and in the process, revolutionized the hundreds of billions spent on enterprise IT,” Danny Crichton observes. “There is no reason why in another decade, SaaS founders with the metrics to prove it shouldn’t have access to less dilutive capital through significantly more sophisticated debt underwriting. That’s going to be a boon for their own returns, but a huge challenge for VC firms that have been doubling down on SaaS.”

Sure, the market is sort of providing this with various existing venture debt vehicles, and by other routes like private equity (which has acquired a taste for SaaS metrics this past decade). Danny sees a more sophisticated world evolving, as he details on Extra Crunch this week. First, he sees underwriters tying loans to recurring revenues, even to the point that your customers could be your assets that the bank takes if you go bust. The trend could then build from there:

Part two is to take all those individual loans and package them together into a security… Imagine being an investor who believes that the world is going to digitize payroll. Maybe you don’t know which of the 30 SaaS providers on the market are going to win. Rather than trying your luck at the VC lottery, you could instead buy “2018 SaaS payroll debt” securities, which would give you exposure to this market that’s safer, if without the sort of exponential upside typical of VC investments. You could imagine grouping debt by market sector, or by customer type, or by geography, or by some other characteristic.

Image Credits: Hussein Malla / AP

Help the startup scene in Beirut

Beirut is home to a vibrant startup scene but like the rest of Lebanon it is reeling from a massive explosion at its main port this week. Mike Butcher, who has helped connect TechCrunch with the city over the years, has put together a guide to local people and organizations that you can help out, along with stories from local founders about what they are overcoming. Here’s Cherif Massoud, a dental surgeon turned founder of invisible-braces startup Basma:

We are a team of 25 people and were all in our office in Beirut when it happened. Thankfully we all survived. No words can describe my anger. Five of us were badly injured with glass shattered on their bodies. The fear we lived was traumatizing. The next morning day, we went back to the office to clean all the mess, took measurements of all the broken windows and started rebuilding it. It’s a miracle we are alive. Our markets are mainly KSA and UAE, so customers were still buying our treatments online, but the team needed to recover so we decided to take a break, stop the operations for a few days and rest until next Monday.

How to build a great “revenue stack”

Every business has been scrambling to figure out online sales and marketing during the pandemic. Fortunately the Cambrian explosion of SaaS products began years ago and now there are many powerful options for revenue teams of all shapes and sizes. The problem is how to put everything together right for your company’s needs. Tim Porter and Erica La Cava of Madrona Venture Group have created a framework for how to build what they call the “revenue stack.” While most companies are already using some form of CRM, communications and agreement management software generally, each one needs to figure out four new “capabilities.” What they define as revenue enablement, sales engagement, conversational intelligence and revenue operations.

Here’s a sample from Extra Crunch, about sales engagement:

Some think of sales engagement as an intelligent e-mail cannon and analysis engine on steroids. While in reality, it is much more. Consider these examples: How can I communicate with prospects in a way that is both personalized and efficient? How do I make my outbound sales reps more productive and enable them to respond more quickly to leads? What tools can help me with account-based marketing? What happened to that email you sent out to one of your sales prospects?

Now, take these questions and multiply them by a hundred, or even a thousand: How do you personalize a multitouch nurture campaign at scale while managing and automating outreach to many different business personas across various industry segments? Uh-oh. Suddenly, it gets very complicated. What sales engagement comes down to is the critical understanding of sending the right information to the right customer, and then (and only then) being able to track which elements of that information worked (e.g., led to clicks, conversations and conversions) … and, finally, helping your reps do more of that. We see Outreach as the clear leader here, based in Seattle, with SalesLoft as the number two. Outreach in particular is investing considerably in adding additional intelligence and ML to their offering to increase automation and improve outcomes.

Around TechCrunch

Hear how working from home is changing startups and investing at Disrupt 2020

Extra Crunch Live: Join Wealthfront CEO Andy Rachleff August 11 at 1pm EDT/10am PDT about the future of investing and fintech

Register for Disrupt to take part in our content series for Digital Startup Alley exhibitors

Boston Dynamics CEO Rob Playter is coming to Disrupt 2020 to talk robotics and automation

Across the week

TechCrunch

The tale of 2 challenger bank models

Majority of tech workers expect company solidarity with Black Lives Matter

‘Made in America’ is on (government) life support, and the prognosis isn’t good

What Microsoft should demand in exchange for its ‘payment’ to the US government for TikTok

Equity Monday: Could Satya and TikTok make ByteDance investors happy enough to dance?

Extra Crunch

5 VCs on the future of Michigan’s startup ecosystem

Eight trends accelerating the age of commercial-ready quantum computing

A look inside Gmail’s product development process

The story behind Rent the Runway’s first check

After Shopify’s huge quarter, BigCommerce raises its IPO price range

#EquityPod

From Alex Wilhelm:

Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast (now on Twitter!), where we unpack the numbers behind the headlines.

As ever, I was joined by TechCrunch managing editor Danny Crichton and our early-stage venture capital reporter Natasha Mascarenhas. We had Chris on the dials and a pile of news to get through, so we were pretty hyped heading into the show.

But before we could truly get started we had to discuss Cincinnati, and TikTok. Pleasantries and extortion out of the way, we got busy:

It was another fun week! As always we appreciate you sticking with and supporting the show!

Equity drops every Monday at 7:00 a.m. PT and Friday at 6:00 a.m. PT, so subscribe to us on Apple PodcastsOvercastSpotify and all the casts.

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Oico recauda US$1.5 millones para eficientar la compra de materiales para construcción, entra a Y Combinator

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Contxto – Donde hay una industria desarticulada, hay una oportunidad de negocio. Y para los emprendedores brasileños, Pedro Dellagnelo y Pedro Rocha, el mercado de materiales para la construcción todavía tiene un enfoque anticuado que necesita actualizarse.  En plena pandemia lanzaron su marketplace Oico y con cuatro meses de operación, ya cerró una inversión de […]
The post Oico recauda US$1.5 millones para eficientar la compra de materiales para construcción, entra a Y Combinator appeared first on Contxto.

Don’t worry, we speak : English (Inglés), too!

Contxto – Donde hay una industria desarticulada, hay una oportunidad de negocio. Y para los emprendedores brasileños, Pedro Dellagnelo y Pedro Rocha, el mercado de materiales para la construcción todavía tiene un enfoque anticuado que necesita actualizarse. 

En plena pandemia lanzaron su marketplace Oico y con cuatro meses de operación, ya cerró una inversión de US$1.5 millones. Los participantes de la ronda fueron MAYA Capital, FJ Labs y otros inversionistas ángeles que no se mencionaron. 

Como señaló acertadamente nuestro Data Manager, Salvador, al momento de escribir este artículo, la startup parece que ni siquiera tiene una página web completamente funcional. Aún así, ya cerró más de un millón de dólares y fue aceptada en la más reciente tanda de Y Combinator.

Los planes más inmediatos de la startup son el mejoramiento de las características de compra y servicio de su plataforma. 

El auge de los marketplaces especializados 

El coronavirus está llevando al e-commerce a nuevas alturas en toda América Latina. Los marketplaces “integrales” como Mercado Libre o Amazon sirven para comprar productos de consumo básicos (o basura que solo vas a guardar en tu armario).

Pero estas plataformas no abordan necesariamente las necesidades de una industria específica. Es por eso que yo anticipo el surgimiento y posicionamiento de más marketplaces especializados. 

¡Información exclusiva, data y análisis semanales sobre el ecosistema tecnológico de Latam directo a tu correo!


Los actores más pequeños podrán no tener los recursos que sitios de e-commerce consolidados tienen. Pero tienen la posibilidad de dominar al centrarse en un nicho específico. Esto a través de la oferta de, no únicamente una mayor variedad de artículos, sino de productos que sean particulares a la industria. 

Por ejemplo, en Colombia LAIKA , la plataforma de artículos para mascotas, tiene y entrega más de 4,000 productos para nuestros amigos de cuatro patas. Pero también conecta a los dueños con otros servicios como atención veterinaria y paseadores de perros.

Me encanta Amazon para comprar Funkos, pero yo sé que jamás le va a importar mi gato tanto como LAIKA .

¿Más marketplaces como Oico?

Pero incluso antes del brote de Covid-19 ya existían algunos marketplaces especializados. Se muestra más en la agroindustria con sitios de e-commerce como la argentina Agrofy y la brasileña InstaAgro.

Pero se está extendiendo rápidamente a otras verticales.

Rapicare, una startup brasileña que conecta a pequeños centros de salud con proveedores, levantó US$1 millón el mes pasado. Ahora llegó Oico para que la industria de la construcción obtenga sus materiales.

No dudes que surgirán más y pronto.

Artículos relacionados: ¡Tecnología y startups de Brasil! 

-ML

Traducido por Alejandra Rodríguez

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