Fundings & Exits
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T-Mobile and Sprint have finally announced a merger agreement
Sprint and T-Mobile, after years of going back and forth as to whether they are going to tie up two of the largest telecom providers in the U.S., have announced that the two companies have entered a merger agreement this morning.
The merger will be an all-stock transaction, and will now be subject to regulatory approval. That latter part is going to be its biggest challenge, because it will not only tie up the No. 3 and No. 4 carriers into the U.S. into a single unit, but also that international organizations hold significant stakes in both companies. SoftBank controls a majority of Sprint while Deutsche Telekom controls a significant chunk of T-Mobile. Following the administration’s intervention in the Broadcom-Qualcomm takeover attempt, it isn’t clear what will actually go through in terms of major mergers these days.
Bloomberg is reporting that Deutsche Telekom will have 42% ownership of the combined company, while SoftBank will own around 27% of the company.
As expected, the argument here is for the expansion of 5G networks as plans for that start to ramp up. T-Mobile argues in its announcement that it will help it be competitive with AT&T and Verizon as telecom companies start to roll out a next-generation 5G network, though it does in the end remove a carrier choice for end consumers in the U.S..
“The New T-Mobile will have the network capacity to rapidly create a nationwide 5G network with the breadth and depth needed to enable U.S. firms and entrepreneurs to continue to lead the world in the coming 5G era, as U.S. companies did in 4G,” T-Mobile said in a statement as part of the announcement. “The new company will be able to light up a broad and deep 5G network faster than either company could separately. T-Mobile deployed nationwide LTE twice as fast as Verizon and three times faster than AT&T, and the combined company is positioned to do the same in 5G with deep spectrum assets and network capacity.”
Both companies appeared to be finalizing the deal on Friday, when they set valuation terms and were preparing to announce the merger today. The deal values Sprint at an enterprise value of around $59 billion, with the combined company having an enterprise value of $146 billion. AT&T has a market cap of around $214 billion, while Verizon has a market cap of around $213 billion, as of Sunday.
I’m excited to announce that @TMobile & @Sprint
have reached an agreement to come together to form a new company – a larger, stronger competitor that will be a force for positive change for all US consumers and businesses! Watch this & click through for details.— John Legere (@JohnLegere) April 29, 2018
The transaction, the companies said, is of course subject to regulatory approval. But, pending approval, it is expected to close “no later than the first half of 2019.”
Disclosure: Verizon is the parent company of Oath, which owns TechCrunch.
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DocuSign CEO: ‘we’re becoming a verb,’ company up 37% following public debut
DocuSign CEO Dan Springer was all smiles at the Nasdaq on Friday, following the company’s public debut.
And he had a lot to be happy about. After pricing the IPO at a better-than-expected $29, the company raised $629 million. Then DocuSign finished its first day of trading at $39.73, up 37% in its debut.
Springer, who took over DocuSign just last year, spoke with TechCrunch in a video interview about the direction of the company. “We’ve figured out a way to help businesses really transform the way they operate,” he said about document-signing business. The goal is to “make their life more simple.”
But when asked about the competitive landscape which includes Adobe Sign and HelloSign, Springer was confident that DocuSign is well-positioned to remain the market leader. “We’re becoming a verb,” he said. Springer believes that DocuSign has convinced large enterprises that it is the most secure platform.
Yet the IPO was a long-time coming. The company was formed in 2003 and raised over $500 million over the years from Sigma Partners, Ignition Partners, Frazier Technology Partners, Bain Capital Ventures and Kleiner Perkins, amongst others. It is not uncommon for a venture-backed company to take a decade to go public, but 15 years is atypical, for those that ever reach this coveted milestone.
Dell Technologies Capital president Scott Darling, who sits on the board of DocuSign, said that now was the time to go public because he believes the company “is well positioned to continue aggressively pursuing the $25 billion e-signature market and further revolutionizing how business agreements are handled in the digital age.”
Sales are growing, but it is not yet profitable. DocuSign brought in $518.5 million in revenue for its fiscal year ending in 2018. This is an increase from $381.5 million last year and $250.5 million the year before. Losses for this year were $52.3 million, reduced from $115.4 million last year and, $122.6 million for 2016.
Springer says DocuSign won’t be in the red for much longer. The company is “on that fantastic path to GAAP profitability.” He believes that international expansion is a big opportunity for growth.
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T-Mobile is reportedly much closer to a merger deal with Sprint
It looks like a potential merger deal between T-Mobile and Sprint, two of the major telecom companies in the U.S., is getting closer and now has set valuation terms, according to a report by Bloomberg.
The deal could be announced as soon as Sunday, according to a report by CNBC. The proposed tie-up of the two companies was called off in November last year, but now that deal appears to be coming closer, with T-Mobile’s backer valuing Sprint at around $24 billion, according to Bloomberg. As part of the deal, Deutsche Telekom AG will get a 69% voting interest on a 42% stake in the company, according to that report. (Both reports, however, disagree on the valuation — with CNBC citing a $26 billion valuation.)
This deal seems to have been a long time coming, and consolidates two of the four major telecom providers in the U.S. into one larger entity. That could, in theory, offer it some more flexibility as they expand into 5G networks. Still, a deal of this scale could still fall apart and would be subject to regulation — with significant international ownership of both companies (Softbank for Sprint, and Deutsche Telekom for T-Mobile).
Sprint shares fell more than 8% in extended trading to under $6, while T-Mobile shares were largely unchanged. Shares of Sprint were up around 8% on the day up to $6.50 in early trading.
A representative from Sprint declined to comment. A representative from T-Mobile did not immediately respond to a request for comment.
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DocuSign raises $629 million after pricing IPO
DocuSign priced its IPO Thursday evening at $29 per share, netting the company $629 million.
It was a better price than the e-signature company had been expecting. The initially proposed price range was $24 to $26 and then that was raised to $26 to $28.
The price gives the company a valuation of $4.4 billion on the eve of its public debut, above the $3 billion the company had raised for its last private round.
The IPO has been a long-time coming. Founded in 2003, DocuSign had raised over $500 million over the course of 15 years.
The company brought in $518.5 million in revenue for its fiscal year ending in 2018. This is up from $381.5 million last year and $250.5 million the year before. Losses for this year were $52.3 million, down from $115.4 million last year and, $122.6 million for 2016.
“We have a history of operating losses and may not achieve or sustain profitability in the future,” the company warned in the requisite “risk factors” section of the prospectus.
The filing reveals that Sigma Partners is the largest shareholder, owning 12.9% of the company. Ignition Partners owns 11.7% and Frazier Technology Ventures owns 7.2%.
DocuSign, competes HelloSign and Adobe Sign, among others, but has managed to sign up many of the largest enterprises. T-Mobile, Salesforce, Morgan Stanley and Bank of America are amongst its clients. It has a tiered business model, with companies paying more for added services.
HelloSign COO Whitney Bouck said that “this space is changing the way business is done at its foundation — we are finally realizing the future of digital business and exactly how much more profitable it can be by removing the friction caused by outdated technology and processes.” But she said that DocuSign should be wary of competitive “more nimble vendors that can provide more innovative, faster, and more user-friendly solutions at a cheaper price.”
DocuSign has gone through several management changes over the years. Dan Springer took over as CEO in early 2017, after running Responsys, which went public and then was later bought by Oracle for $1.5 billion. Chairman Keith Krach had been running the company since 2011. He was previously CEO of Ariba, which was acquired by SAP for $4.3 billion.
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Digital banking startup Revolut raises $250M at a valuation of $1.7B
Revolut, the London-based fintech that offers a digital banking account and sprawling set of other financial services, is disclosing that it has raised a whopping $250 million in Series C funding, less than three years since launching.
The new round, which gives the company a $1.7 billion post-money valuation — a five-fold increase in under a year, we’re told — was led by Hong Kong based DST Global, along with a group of new and existing investors that includes Index Ventures, and Ribbit Capital. In case you aren’t keeping up, it brings the total amount raised by Revolut to $340 million in less than 36 months.
To put this into context, TransferWise — London’s undisputed fintech darling and on some features a direct competitor to Revolut — recently announced $280 million in Series D investment, giving the company a reported post-money valuation of $1.6 billion. The difference? It took TransferWise seven years compared to Revolut’s three.
That’s testament to how much value investors are now placing on bank-disrupting fintech or perhaps signs of a fintech bubble. Or both. It is also worth remembering that these are private valuations with neither company yet to float on the public markets, even if TranserWise looks increasingly a candidate to do so.
Meanwhile, Revolut says the new round of funding and surge in valuation follows “incredible growth figures to date,” with the fintech now processing $1.8 billion through the platform each month and signing up between 6,000 and 8,000 new customers every day.
It claims nearly 2 million customers in total, of which 250,000 are daily active users, roughly 400,000 are weekly active users and 900,000 are monthly active users. The company says the target is 100 million customers in the next five years.
For a little more context, TransferWise has 3 million customers. I’m also told U.K. challenger bank Monzo now has 630,000 current account customers, of which 200,000 are daily active users, 360,000 are weekly active users and 500,000 are monthly active users. (In both Revolut and Monzo’s case, active users are defined as making at least one financial transaction.)
With the aim of persuading both consumers and businesses to ditch their traditional bank, Revolut offers most of the features you’d expect of a current account, including physical and virtual debit cards, direct debits and money transfer. Its “attack vector” (to borrow Monzo’s Tom Blomfield’s phrase) was originally low exchange fees when spending in a foreign currency, which undoubtedly fuelled much of the startup’s early growth and mindshare, but new features and products are being added at an increasingly fast pace.
Many of these are through partnerships with other fintech companies, and include travel insurance, phone insurance, credit, savings, and cryptocurrency. The latter looks like riding the hype cycle almost perfectly. Revolut is also applying for a European banking license, which would enable it to begin balance sheet lending, too.
To that end, Revolut says the Series C funding will be used to go beyond Europe and expand worldwide, starting with the U.S., Canada, Singapore, Hong Kong, and Australia this year. The company also expects to increase its workforce from 350 to around 800 employees in 2018.
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Etleap scores $1.5 million seed to transform how we ingest data
Etleap is a play on words for a common set of data practices: extract, transform and load. The startup is trying to place these activities in a modern context, automating what they can and in general speeding up what has been a tedious and highly technical practice. Today, they announced a $1.5 million seed round.
Investors include First Round Capital, SV Angel, Liquid2, BoxGroup and other unnamed investors. The startup launched five years ago as a Y Combinator company. It spent a good 2.5 years building out the product, says CEO and founder Christian Romming. They haven’t required additional funding until now because they have been working with actual customers. Those include Okta, PagerDuty and Mode, among others.
Romming started out at adtech startup VigLink and while there he encountered a problem that was hard to solve. “Our analysts and scientists were frustrated. Integration of the data sources wasn’t always a priority and when something broke, they couldn’t get it fixed until a developer looked at it.” That lack of control slowed things down and made it hard to keep the data warehouse up-to-date.
He saw an opportunity in solving that problem and started Etleap . While there were (and continue to be) legacy solutions like Informatica, Talend and Microsoft SQL Server Integration Services, he said when he studied these at a deeply technical level, he found they required a great deal of help to implement. He wanted to simplify ETL as much as possible, putting data integration into the hands of much less technical end users, rather than relying on IT and consultants.
One of the problems with traditional ETL is that the data analysts who make use of the data tend to get involved very late after the tools have already been chosen, and Romming says his company wants to change that. “They get to consume whatever IT has created for them. You end up with a bread line where analysts are at the mercy of IT to get their jobs done. That’s one of the things we are trying to solve. We don’t think there should be any engineering at all to set up an ETL pipeline,” he said.
Etleap is delivered as managed SaaS or you can run it within your company’s AWS accounts. Regardless of the method, it handles all of the managing, monitoring and operations for the customer.
Romming emphasizes that the product is really built for cloud data warehouses. For now, they are concentrating on the AWS ecosystem, but have plans to expand beyond that down the road. “We want to help more enterprise companies make better use of their data, while modernizing data warehousing infrastructure and making use of cloud data warehouses,” he explained.
The company currently has 15 employees, but Romming plans to at least double that in the next 12-18 months, mostly increasing the engineering team to help further build out the product and create more connectors.
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Catalyst brothers find capital success with $2.4M from True
Over the past few years, the old language of “customer support” has been supplanted by the new language of “customer success.” In the old model, companies would essentially disappear following the conclusion of a sale, merely handling customer problems when they arose. Now, companies are actively reaching out to customers, engaging them with education and training and monitoring them with analytics to ensure they have the best time with the product as possible.
What’s changing is the nature of product and services today: subscription. Customers no longer just make a single buying decision about a product, but instead must actively commit to using the product, or else they churn.
New York-based Catalyst, founded by brothers Edward and Kevin Chiu, wants to rebuild customer success from the ground up with an integrated software platform. They have received some capital success of their own, securing $2.4 million in venture capital from Phil Black of True Ventures with participation from Ludlow Ventures and Compound.
New York has had something of an increase in founder mafias, as TechCrunch reported this weekend. Catalyst is no exception to this trend, with the Chiu brothers both working at DigitalOcean, one of New York’s many high-flying enterprise startups. Edward Chiu was director of customer success at the company for a number of years, but had a unique background in sales and also in coding before starting.
Kevin Chiu was head of inside sales at DigitalOcean . “I brought my brother on to do sales at DigitalOcean,” Edward Chiu explains. “We always knew that we wanted to start a company together, but wanted to see if we would kill each other.” The two worked together, and lo and behold, they didn’t kill each other.
Edward Chiu wanted to match the product experience of using DigitalOcean with the experience of using its internal customer success tools. Nothing on the market fit. “Given that DigitalOcean was a very technical product,” Chiu explained, “we decided to build our own tool.” Chiu thought of customer success at DigitalOcean as its own product, and his team built up the platform to improve its functionality and scalability. “We just used the tool and we loved it,” he said, so we “started to show this tool to a bunch of other customer success leaders I am connected with.”
Other customer success leaders said they wanted the platform, and “after the 20th person told me that,” he and his brother spun out of DigitalOcean to go on their own. Unlike enterprise startups in New York a couple of years ago that often struggled to find any investors, Catalyst found cash quickly. “Two weeks in we had more offers than we knew what to do with,” Chiu explained. The two said they had originally targeted a fundraise of $750,000, but ended up at $2.4 million.
Catalyst is a platform that integrates between a number of other major SaaS services such as Salesforce, Zendesk, Mixpanel and others to create a unified dashboard for data around customer success. From there, customer success managers have a set of automated tools to handle engagement, such as customer segmentation and email campaigns.
A major challenge in the customer success world is that these managers often don’t have the skills required to do advanced data analytics, so they often rely on their friends in engineering to run scripts or perform database lookups. The hope is that Catalyst’s feature set is powerful enough that these sorts of ad hoc tasks become a thing of the past. “Because we aggregate all this data, you can run queries,” Chiu explains.
Chiu says that Catalyst doesn’t just want to be a software platform, but rather a movement that pushes every company to think about how they can make their customers successful. “There are so many companies that are starting to understand that it is not something that you do once you raise a Series A, but something you do from day one,” Chiu said. “If you take care of your very first customer, they will constantly promote you and constantly promote your business.”
The company is based in Flatiron, and has eight employees.
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Razer doubles down on Southeast Asia and payments with acquisition of MOL
Gaming hardware maker Razer, which went public in a big IPO in Hong Kong last year, is doubling down on payments after it announced a deal to acquire MOL, a company that offers online and offline payments in Southeast Asia.
Razer made an initial $20 million investment in MOL last June to supercharge its zGold virtual credit program for gamers by allowing them to buy using MOL’s online service or its offline, over-the-counter network of retailers that includes 7-Eleven. Now Razer aims to gobble up MOL in full by acquiring the remaining 65 percent, which will allow it to grow its alternative revenue streams by pushing fully into payment services by merging MOL’s virtual payment platform with zGold.
It’s worth noting that the deal is an intention to buy MOL. It’ll be subject to review from shareholders, but Razer said it has already secured support from major shareholders. The transaction gives MOL, which delisted from the Nasdaq in 2016 following a bumpy two-year spell, the same $100 million valuation it held for the initial Razer investment.
The acquisition will boost Razer’s recently announced online games store, which rivals services like Steam, but first and foremost it is focused on growing the firm’s share of online sales in Southeast Asia’s growing e-commerce and payment space. To that end, Razer recently launched a store on Lazada, the Alibaba-owned e-commerce service in Southeast Asia, something that Apple did earlier this year.
“We are already the No. 1 gaming brand in the U.S., Europe and China, but Southeast Asia is still nascent and a very small part of our business,” Razer CEO and co-founder Min-Liang Tan told TechCrunch in an interview. “We see this [deal with MOL] as stuff we can do immediately.”
Tan said that, in particular, working with MOL saw revenue grow “dramatically” while MOL itself surpassed $1.1 billion in GMV across its payment network last year.
“This is the perfect opportunity for us to not just be a minority shareholder, but to combine the business and continue scaling from here,” he added, reiterating that he believes the deal gives Razer the world’s largest virtual credit system for gamers based on user registrations. “That’s a huge opportunity for us.”
Away from its core business, the push will also help Razer in Singapore where it has applied to develop a unified e-payment system that would be used across the country, which is the Razer CEO home nation.
Tan said he has kept an ongoing dialogue with regulators, adding that he believes this deal “makes it clear that we don’t just have the scale, we also have the right technology.”
Beyond the Singapore opportunity, where Razer is a new entrant and thus considered an outsider for the license, Tan said the focus is on enabling cash-less payments right across Southeast Asia.
The blockchain has been widely touted as a building block that can help develop financial inclusion platforms in emerging markets, but for now Razer isn’t talking about whether it will hop on that wagon.
“We are excited about blockchain and the technology it brings, but we don’t have anything to comment on at this juncture,” Tan said.
The Razer chief was more vocal on the company’s wider goal, which he said is to develop “an entire ecosystem for our games partners.” The goal is to offset Razer’s impressive hardware sales business by constructing services that span game payments, game distribution and analytics on gamers and their behavior.
That optimism isn’t shared right now by investors in Hong Kong, however, which lured Razer as part of a push to attract more tech listings. Despite a surge when it when public in November, the stock traded at an all-time low of HK$2.44 today, down from its initial list price of HK$3.88.
Tan said he is focused on growing the business and its services regardless, but he did admit there’s a need for “the Hong Kong investment public to be more educated on tech companies.”
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Pivotal CEO talks IPO and balancing life in Dell family of companies
Pivotal has kind of a strange role for a company. On one hand its part of the EMC federation companies that Dell acquired in 2016 for a cool $67 billion, but it’s also an independently operated entity within that broader Dell family of companies — and that has to be a fine line to walk.
Whatever the challenges, the company went public yesterday and joined VMware as a separately traded company within Dell. CEO Rob Mee says the company took the step of IPOing because it wanted additional capital.
“I think we can definitely use the capital to invest in marketing and R&D. The wider technology ecosystem is moving quickly. It does take additional investment to keep up,” Mee told TechCrunch just a few hours after his company rang the bell at the New York Stock Exchange.
As for that relationship of being a Dell company, he said that Michael Dell let him know early on after the EMC acquisition that he understood the company’s position. “From the time Dell acquired EMC, Michael was clear with me: You run the company. I’m just here to help. Dell is our largest shareholder, but we run independently. There have been opportunities to test that [since the acquisition] and it has held true,” Mee said.
Mee says that independence is essential because Pivotal has to remain technology-agnostic and it can’t favor Dell products and services over that mission. “It’s necessary because our core product is a cloud-agnostic platform. Our core value proposition is independence from any provider — and Dell and VMware are infrastructure providers,” he said.
That said, Mee also can play both sides because he can build products and services that do align with Dell and VMware offerings. “Certainly the companies inside the Dell family are customers of ours. Michael Dell has encouraged the IT group to adopt our methods and they are doing so,” he said. They have also started working more closely with VMware, announcing a container partnership last year.
Photo: Ron Miller
Overall though he sees his company’s mission in much broader terms, doing nothing less than helping the world’s largest companies transform their organizations. “Our mission is to transform how the world builds software. We are focused on the largest organizations in the world. What is a tailwind for us is that the reality is these large companies are at a tipping point of adopting how they digitize and develop software for strategic advantage,” Mee said.
The stock closed up 5 percent last night, but Mee says this isn’t about a single day. “We do very much focus on the long term. We have been executing to a quarterly cadence and have behaved like a public company inside Pivotal [even before the IPO]. We know how to do that while keeping an eye on the long term,” he said.
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Pivotal Software closed up 5% following IPO, raised $555 million
Stock market investors showed lukewarm enthusiasm for Pivotal Software’s debut on Friday. After pricing the IPO at $15, the company closed the day at $15.73.
Although it didn’t “pop” for new investors, pricing at the midpoint of its proposed range allowed Pivotal to raise $555 million. Its public company market cap exceeded $3 billion.
The enterprise cloud computing company has been majority-owned by Dell, which came about after its merger with EMC in 2016. It was spun off from Dell, EMC and VMware in April 2013.
After that, it raised $1.7 billion in funding from Microsoft, Ford and General Electric.
Here’s how it describes its business in the S-1 filing:
Pivotal looks to “provide a leading cloud-native platform that makes software development and IT operations a strategic advantage for our customers. Our cloud-native platform, Pivotal Cloud Foundry (‘PCF’), accelerates and streamlines software development by reducing the complexity of building, deploying and operating new cloud-native applications and modernizing legacy applications.”
According to the filing, Pivotal brought in $509.4 million in revenue for its fiscal year ending in February. This is up from $416.3 million in revenue for 2017 and $280.9 million in revenue the year before.
The company is still losing a lot of money, however. Losses for fiscal 2018 stood at $163.5 million, improved from the than the negative $232.5 million seen in 2017 and $282.5 million in 2016.
“We have incurred substantial losses and may not be able to generate sufficient revenue to achieve and sustain profitability,” the company warned in the requisite “risk factors” section of its IPO filing.
Pivotal also acknowledged that it faces competition from “legacy application infrastructure and middleware form vendors” like IBM and Oracle. The company says it additionally competes with “open-source based offerings supported by vendors” like RedHat. Pivotal also faces challenges from SAP Cloud Platform, Amazon Web Services and Microsoft Azure.
The company says it believes it will stand out from the pack because of its strong security and easy-to-use platform. Pivotal also claims to have strong brand awareness and a good reputation. It has 118 U.S. patents and 73 pending and is betting that it will remain innovative.
Morgan Stanley and Goldman Sachs served as lead underwriters. Davis Polk and Fenwick & West worked as counsel.
The company listed on the New York Stock Exchange under the ticker “PVTL.”
It has been an active spring for tech IPOs, after a slow winter. Dropbox, Spotify and Zuora are amongst the companies that have gone public in recent weeks. DocuSign, Smartsheet, Carbon Black and Pluralsight are all expected to debut within the next month.
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