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The virtual state of corporate venture capital today

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GHI Fund President Bill Taranto has spent more than two decades in the healthcare industry and has 15 years of experience in healthcare investing. In addition to his venture investing knowledge, Bill has decades of management operations experience.

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When the going gets tough, it’s common for some corporate VCs to head for the hills.

Today, it’s a narrative that’s emerging again amid the COVID-19 crisis. Global corporate venture deals fell from a total of 580 in April/May of 2019 to 486 in the same period this year, according to Global Corporate Venturing.

However, institutional VC deals are also headed for a decline, with PitchBook anticipating a drop in transaction volume over the next several quarters, as well as a downturn in valuations.

It remains to be seen how it will play out this time, but I believe corporate venture capital (CVC) will not only stick around, but also be a vital part of the innovation ecosystem going forward.

I know that Merck Global Health Innovation Fund (MGHIF) remains fully committed to “doing” venture. Now, more than ever, health innovation is vital. Second, we understand that many of today’s most successful companies were funded in times of uncertainty. In fact, to put our money where our mouth is, we’ve recently completed two spinouts, three follow-on investments, and two new deals in 2020 — all since COVID hit. We intend to increase that pace going forward in 2020 and beyond.

It hasn’t been easy. It’s hard to do venture when you can’t venture out into the world, meet founders and do diligence the way we did in the past. But it is possible, if you do some innovating of your own and set up a smoothly functioning system to do CVC virtually.

Here’s how we’ve done it.

Finding real benefits in virtual CVC

Startups

Picap está llevando la logística en Latam al siguiente nivel

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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.

Héctor Nera (cofundador), Andrea Lucero (gerente de producto) y

daniel Rodríguez (cofundador)

“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.

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.

Como el producto está hecho para ser flexible, la startup ya estableció socios estratégicos como Mercado Libre y Linio, una plataforma de e-commerce colombiana.

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! 

-ML

Traducido por Alejandra Rodríguez

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A recapitalization reckoning

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If you’re an angel who invested in a startup that was meant to go public in 2014, you might be getting a little bit impatient. High-risk, high-reward investing has lost its shine in this environment: the stock market is a mess these days, and you want your cash back.

Enter recapitalization events, where startups restructure their entire cap table to squeeze out old investors, bring on new ones and shift the way equity and debt is managed. For investors, it’s a killer way to enter a company on friendlier terms than normal (read: desperation), and a nice way to get liquidity on a startup you’re betting on.

For founders, it’s rarely good news, as departing investors is not a metric they’re going to add to the pitch deck. As one investor said on background, the spur of coronavirus-related recapitalization events shows “hella dilution for desperate times.”

That’s what makes Workhuman’s transparency with its recent recapitalization event all the more enticing.

Last year, the human-resources platform brought in $580 million in revenue from customers like LinkedIn, Cisco, J&J and other clients. In April, business grew 40%. Co-founder and CEO Eric Mosley says business has grown five times in size since the company pulled back from its 2014 plans to IPO. Workhuman hasn’t raised a single venture round since 2004 (and doesn’t plan to any time soon).

Being conservative has paid off; although Workhuman has operated for nearly two decades, Mosley says he thinks the company is still at the “tip of the iceberg.” The company recently had a recapitalization event to sell the stakes of its earliest investors, who cut a $200,000 check more than 20 years ago.

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Rackspace preps IPO after going private in 2016 for $4.3B

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After going private in 2016 after accepting a $32 per share, or $4.3 billion, price from Apollo Global Management, Rackspace is looking once again to the public markets. First going public in 2008, Rackspace is taking second aim at a public offering around 12 years after its initial debut.

The company describes its business as a “multicloud technology services” vendor, helping its customers “design, build and operate” cloud environments. That Rackspace is highlighting a services focus is useful context to understand its financial profile, as we’ll see in a moment.

But first, some basics. The company’s S-1 filing denotes a $100 million placeholder figure for how much the company may raise in its public offering. That figure will change, but does tell us that firm is likely to target a share sale that will net it closer to $100 million than $500 million, another popular placeholder figure.

Rackspace will list on the Nasdaq with the ticker symbol “RXT.” Goldman, Citi, J.P. Morgan, RBC Capital Markets and other banks are helping underwrite its (second) debut.

Financial performance

Similar to other companies that went private, only later to debut once again as a public company, Rackspace has oceans of debt.

The company’s balance sheet reported cash and equivalents of $125.2 million as of March 31, 2020. On the other side of the ledger, Rackspace has debts of $3.99 billion, made up of a $2.82 billion term loan facility, and $1.12 billion in senior notes that cost the firm an 8.625% coupon, among other debts. The term loan costs a lower 4% rate, and stems from the initial transaction to take Rackspace private ($2 billion), and another $800 million that was later taken on “in connection with the Datapipe Acquisition.”

The senior notes, originally worth a total of $1,200 million or $1.20 billion, also came from the acquisition of the company during its 2016 transaction; private equity’s ability to buy companies with borrowed money, later taking them public again and using those proceeds to limit the resulting debt profile while maintaining financial control is lucrative, if a bit cheeky.

Rackspace intends to use IPO proceeds to lower its debt-load, including both its term loan and senior notes. Precisely how much Rackspace can put against its debts will depend on its IPO pricing.

Those debts take a company that is comfortably profitable on an operating basis and make it deeply unprofitable on a net basis. Observe:

Image Credits: SECLooking at the far-right column, we can see a company with material revenues, though slim gross margins for a putatively tech company. It generated $21.5 million in Q1 2020 operating profit from its $652.7 million in revenue from the quarter. However, interest expenses of $72 million in the quarter helped lead Rackspace to a deep $48.2 million net loss.

Not all is lost, however, as Rackspace does have positive operating cash flow in the same three-month period. Still, the company’s multi-billion-dollar debt load is still steep, and burdensome.

Returning to our discussion of Rackspace’s business, recall that it said that it sells “multicloud technology services,” which tells us that its gross margins will be service-focused, which is to say that they won’t be software-level. And they are not. In Q1 2020 Rackspace had gross margins of 38.2%, down from 41.3% in the year-ago Q1. That trend is worrisome.

The company’s growth profile is also slightly uneven. From 2017 to 2018, Rackspace saw its revenue expand from $2.14 billion to $2.45 billion, growth of 14.4%. The company shrank slightly in 2019, falling from $2.45 billion in revenue in 2018 to $2.44 billion the next year. Given the economy that year, and the importance of cloud in 2019, the results are a little surprising.

Rackspace did grow in Q1 2020, however. The firm’s $652.7 million in first-quarter top-line easily bested in its Q1 2019 result of $606.9 million. The company grew 7.6% in Q1 2020. That’s not much, especially during a period in which its gross margins eroded, but the return-to-growth is likely welcome all the same.

TechCrunch did not see Q2 2020 results in its S-1 today while reading the document, so we presume that the firm will re-file shortly to include more recent financial results; it would be hard for the company to debut at an attractive price in the COVID-19 era without sharing Q2 figures, we reckon.

How to value Rackspace is a puzzle. The company is tech-ish, which means it will find some interest. But its slow growth rate, heavy debts and lackluster margins make it hard to pin a fair multiple onto. More when we have it.

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