Fundings & Exits
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Booming edtech M&A activity brings consolidation to a fragmented sector
As the COVID-19 pandemic continues to force teachers, students and parents to adopt new technologies, edtech’s total addressable market has massively grown in the last several months. The shift has urged venture capitalists to pour money into the sector accordingly, ushering a number of startups into the unicorn club.
But maturation doesn’t just mean bigger checks and high-flying unicorns — it also brings exits.
Edtech M&A activity is buzzier than usual: In the last week, Course Hero, a startup that sells Netflix-like subscriptions to students looking for learning and teaching content, bought Symbolab, an artificial intelligence-powered calculator. Saga Education, a tutoring nonprofit backed by Comcast, the Bill & Melinda Gates Foundation and others, acquired math software platform Woot Math. We also saw PowerSchool, which sells a suite of software services to manage schools, scoop up Hoonuit, a data management and analytics tool for educators. Finally, K-12 curriculum company Discovery Education bought K-5 science and stem curriculum upstart Mystery Science.
It’s a lot of news in a short period of time. Luckily, these consolidations offer some directional guidance regarding where some edtech businesses think the future of their industry is headed.
Smart content as a competitive advantage
Content, to an extent, is commoditized. If you can find a free tutorial on Youtube or Khan Academy, buy a subscription to an edtech platform that offers the same solution? The commodification of education is good for end-users and is often why startups have a freemium model as a customer acquisition strategy. To convert free users into paying subscribers, edtech startups need to offer differentiated and targeted content.
The Course Hero and Mystery Science deals show us that edtech businesses are hungry for personalized, targeted content. Course Hero’s acquisition of Symbolab was essentially a deal for more than a decade’s worth of data that captured which math questions students found hardest.
Symbolab is a math calculator that is set to answer over 1 billion questions this year. With each answer, Symbolab adds information to its algorithm regarding students’ most common pain points and confusion. Course Hero, in contrast, is a broader service that focuses on Q&A from a variety of subjects. CEO Andrew Grauer says Symbolab’s algorithm isn’t something that Course Hero, which has been operating since 2006, can drum up overnight. That’s precisely why he “decided to buy, instead of build.”
“It made a lot of sense to move fast enough so it wouldn’t take up multiple years to get this technology,” Grauer said. The deal was made as big companies get in the Q&A game too, he noted. Google acquired homework helper app Socratic in 2019 and Microsoft built Microsoft Solver in the same year.
Discovery Education, a curriculum provider for K-12 classrooms, acquired San Francisco-based K-5 STEM curriculum provider, Mystery Science. Discovery Education has launched a series of other products focused on science education, including Discovery Education Experience, the Science Techbook series and STEM Connect. However, Mystery Science is largely focused on offering a creative digital solution to science education. The programming, a mix of videos, prompts and projects, cover a range of questions such as, “Where do rivers flow?” and “Could a volcano pop up where you live?” for young students.
Mystery Science CEO and founder Keith Schact explained how his product focuses on kids and educators, while Discovery Education focuses on educators and districts, making the deal feel like a “natural marriage.” Even as edtech goes directly to consumers, Schact remains bullish on the role that institutions play in true adoption of technology.
“You can go straight to teachers and get a certain market share,” he said. “But the institutions still do have a big role.” The founder likened the dynamic to the state of media: With the rise of blogs, you can publish directly and reach an engaged audience, but writers who want a bigger positioning tend to join larger platforms to grow their overall reach. Edtech is the same, in that some startups need an official sign-off from schools before they can reach venture-scale returns.
According to a source familiar with the transaction, Mystery Science was sold for $175 million after only raising $4 million in venture financing.
Using data management and analytics to improve student outcomes
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Coupa Software snags Llamasoft for $1.5B to bring together spending and supply chain data
Coupa Software, a publicly traded company that helps large corporations manage spending, announced that it was buying Llamasoft, an 18-year-old Michigan company that helps large companies manage their supply chain. The deal was pegged at $1.5 billion.
This year Llamasoft released its latest tool, an AI-driven platform for managing supply chains intelligently. This capability in particular seemed to attract Coupa’s attention, as it was looking for a supply chain application to complement its spend management capabilities.
Coupa CEO and chairman Rob Bernshteyn says when you combine that supply chain data with Coupa’s spending data, it can produce a powerful combination.
“Llamasoft’s deep supply chain expertise and sophisticated data science and modeling capabilities, combined with the roughly $2 trillion of cumulative transactional spend data we have in Coupa, will empower businesses with the intelligence needed to pivot on a dime,” Bernshteyn said in a statement.
The purchase comes at a time when companies are focusing more and more on digitizing processes across enterprise, and when supply chains can be uncertain, depending on the location of COVID hotspots at any particular time.
“With demand uncertainty on one hand, and supply volatility on the other, companies are in need of supply chain technology that can help them assess alternatives and balance trade-offs to achieve desired business results. LLamasoft provides these capabilities with an AI-powered cloud platform that empowers companies to make smarter supply chain decisions, faster,” the company wrote in a statement.
Llamasoft was founded in 2002 in Ann Arbor, Michigan and has raised more than $56 million, according to Crunchbase data. Its largest raise was a $50 million Series B in 2015 led by Goldman Sachs .
The company generated more than $100 million in revenue and has 650 big customers, including Boeing, DHL, Kimberly-Clark and GM, according to company data.
Coupa has been extremely acquisitive over the years, buying 17 companies, according to Crunchbase data. This deal represents the fourth acquisition this year for the company. So far the stock market is not enamored with the acquisition; the company’s stock price is down 5.20% at publication.
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Twilio wraps $3.2B purchase of Segment after warp-speed courtship
It was barely a month ago we began hearing rumors that Twilio was interested in acquiring Segment. The $3.2 billion deal was officially announced three weeks ago, and this morning the communications API company announced that the deal had closed, astonishingly fast for an acquisition of this size.
While we can’t know for sure, the speed with which the deal closed could suggest that it was in the works longer than we had known, and when we began hearing rumors of the acquisition, it could have already been signed, sealed and delivered. In addition, the fact that Twilio CEO Jeff Lawson and Segment CEO Peter Reinhardt knew one another before coming to terms might have helped accelerate the process.
Regardless, the two companies are a nice fit. Both deal with the API economy, providing a set of tools to help developers easily add a particular set of functions to their applications. For Twilio, that’s a set of communications APIs, while Segment focuses on customer data.
When you pull the two sets of tooling together, and combine that with Twilio’s 2018 SendGrid acquisition, you can see the possibility to build more complete applications for interacting with customers at every level, including basic communications like video, SMS and audio from Twilio, as well as customer data from Segment and customized emails and ads based on those interactions from SendGrid.
As companies increasingly focus on digital engagement, especially in the midst of a pandemic, Twilio’s Lawson believes the biggest roadblock to this type of engagement has been that data has been locked in silos, precisely the kind of problem that Segment has been attacking.
“With the addition of Segment, Twilio’s Customer Engagement Platform now enables companies to both understand their customer and engage with them digitally — the combination is key to building great digital experiences,” Lawson said in a statement.
In a recent post looking at the reasoning behind the deal, Brent Leary, founder and principal analyst at CRM Essentials, saw it this way: “This move allows Twilio to impact the data-insight-interaction-experience transformation process by removing friction from developers using their platform,” Leary explained.
With the deal closed, Segment will become a division of Twilio. Reinhardt will continue to be CEO, and will report directly to Lawson.
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Email creation startup Stensul raises $16M
Stensul, a startup aiming to streamline the process of building marketing emails, has raised $16 million in Series B funding.
When the company raised its $7 million Series A two years ago, founder and CEO Noah Dinkin told me about how it spun out of his previous startup, FanBridge. And while there are many products focused on email delivery, he said Stensul is focused on the email creation process.
Dinkin made many similar points when we discussed the Series B last week. He said that for many teams, creating a marketing email can take weeks. With Stensul, that process can be reduced to just two hours, with marketers able to create the email on their own, without asking developers for help. Things like brand guidelines are already built in, and it’s easy to get feedback and approval from executives and other teams.
Dinkin also noted that while the big marketing clouds all include “some kind of email builder, it’s not their center of gravity.”
He added, “What we tell folks [is that] literally over half the company is engineers, and they are only working on email creation.”
Image Credits: Stensul
The team has recently grown to more than 100 employees, with new customers like Capital One, ASICS Digital, Greenhouse, Samsung, AppDynamics, Kroger and Clover Health. New features include an integration with work management platform Workfront.
Plus, with other marketing channels paused or diminished during the pandemic, Dinkin said that email has only become more important, with the old, time-intensive process becoming more and more of a burden.
“We need more emails — whether that’s more versions or more segments or more languages, the requests are through the roof,” he said. “The teams are the same size … and so that’s where especially the leaders of these organizations have looked inward a lot more. The ways that they have been doing it for years or decades just doesn’t work anymore and prevents them from being competitive in the marketplace.”
The new round was led by USVP, with participation from Capital One Ventures, Peak State Ventures, plus existing investors Javelin Venture Partners, Uncork Capital, First Round Capital and Lowercase Capital . Individual investors include Okta co-founder and COO Frederic Kerrest, Okta CMO Ryan Carlson, former Marketo/Adobe executive Aaron Bird, Avid Larizadeh Duggan, Gary Swart and Talend CMO Lauren Vaccarello.
Dinkin said the money will allow Stensul to expand its marketing, product, engineering and sales teams.
“We originally thought: Everybody who sends email should have an email creation platform,” he said. “And ‘everyone who sends email’ is synonymous with ‘every company in the world.’ We’ve just seen that accelerate in that last few years.”
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Warren gets $1.4 million to help local cloud infrastructure providers compete against Amazon and other giants
Started as a side project by its founders, Warren is now helping regional cloud infrastructure service providers compete against Amazon, Microsoft, IBM, Google and other tech giants. Based in Tallinn, Estonia, Warren’s self-service distributed cloud platform is gaining traction in Southeast Asia, one of the world’s fastest-growing cloud service markets, and Europe. It recently closed a $1.4 million seed round led by Passion Capital, with plans to expand in South America, where it recently launched in Brazil.
Warren’s seed funding also included participation from Lemonade Stand and angel investors like former Nokia vice president Paul Melin and Marek Kiisa, co-founder of funds Superangel and NordicNinja.
The leading global cloud providers are aggressively expanding their international businesses by growing their marketing teams and data centers around the world (for example, over the past few months, Microsoft has launched a new data center region in Austria, expanded in Brazil and announced it will build a new region in Taiwan as it competes against Amazon Web Services).
But demand for customized service and control over data still prompt many companies, especially smaller ones, to pick local cloud infrastructure providers instead, Warren co-founder and chief executive officer Tarmo Tael told TechCrunch.
“Local providers pay more attention to personal sales and support, in local language, to all clients in general, and more importantly, take the time to focus on SME clients to provide flexibility and address their custom needs,” he said. “Whereas global providers give a personal touch maybe only to a few big clients in the enterprise sectors.” Many local providers also offer lower prices and give a large amount of bandwidth for free, attracting SMEs.
He added that “the data sovereignty aspect that plays an important role in choosing their cloud platform for many of the clients.”
In 2015, Tael and co-founder Henry Vaaderpass began working on the project that eventually became Warren while running a development agency for e-commerce sites. From the beginning, the two wanted to develop a product of their own and tested several ideas out, but weren’t really excited by any of them, he said. At the same time, the agency’s e-commerce clients were running into challenges as their businesses grew.
Tael and Vaaderpass’s clients tended to pick local cloud infrastructure providers because of lower costs and more personalized support. But setting up new e-commerce projects with scalable infrastructure was costly because many local cloud infrastructure providers use different platforms.
“So we started looking for tools to use for managing our e-commerce projects better and more efficiently,” Tael said. “As we didn’t find what we were looking for, we saw this as an opportunity to build our own.”
After creating their first prototype, Tael and Vaaderpass realized that it could be used by other development teams, and decided to seek angel funding from investors, like Kiisa, who have experience working with cloud data centers or infrastructure providers.
Southeast Asia, one of the world’s fastest-growing cloud markets, is an important part of Warren’s business. Warren will continue to expand in Southeast Asia, while focusing on other developing regions with large domestic markets, like South America (starting with Brazil). Tael said the startup is also in discussion with potential partners in other markets, including Russia, Turkey and China.
Warren’s current clients include Estonian cloud provider Pilw.io and Indonesian cloud provider IdCloudHost. Tael said working with Warren means its customers spend less time dealing with technical issues related to infrastructure software, so their teams, including developers, can instead focus on supporting clients and managing other services they sell.
The company’s goal is to give local cloud infrastructure providers the ability to meet increasing demand, and eventually expand internationally, with tools to handle more installations and end users. These include features like automated maintenance and DevOps processes that streamline feature testing and handling different platforms.
Ultimately, Warren wants to connect providers in a network that end users can access through a single API and user interface. It also envisions the network as a community where Warren’s clients can share resources and, eventually, have a marketplace for their apps and services.
In terms of competition, Tael said local cloud infrastructure providers often turn to OpenStack, Virtuozzo, Stratoscale or Mirantis. The advantage these companies currently have over Warren is a wider network, but Warren is busy building out its own. The company will be able to connect several locations to one provider by the first quarter of 2021. After that, Tael said, it will “gradually connect providers to each other, upgrading our user management and billing services to handle all that complexity.”
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Is Wall Street losing its tech enthusiasm?
This is The TechCrunch Exchange, a newsletter that goes out on Saturdays, based on the column of the same name. You can sign up for the email here.
Over the past few months the IPO market made it plain that some public investors were willing to pay more for growth-focused technology shares than private investors. We saw this in both strong tech IPO pricing — the value set on companies as they debut — and in resulting first-day valuations, which were often higher.
One way to consider how far public valuations rose for tech startups, especially those with a software core in 2020, is to ask yourself how often you heard about a down IPO this year. Maybe a single time? At most? (You can catch up on 2020 IPO performance here, if you need to.)
IPO enthusiasm exposed a gap between what many venture capitalists and private investors were paying for tech shares, and what the public market was doing with its own valuation calculations. Insurtech startup Hippo’s $150 million private round from July is a good example. The company was valued at $1.5 billion in the round, a healthy uptick from its preceding private valuation. But if we valued it like the then-newly-public Lemonade, a related company, at the time, Hippo was priced inexpensively.
This week, however, the concept of private investors being more conservative than public investors in certain cases (some eight-figure private rounds happened this year at valuations that were even more bullish than public investor treatment of IPOs, to be clear) took a ding as most big tech companies lost ground, SaaS stocks sold off, and other tech firms struggled to keep up with investor enthusiasm.
Not only tech companies took a beating, but as I write to you on this Friday afternoon, the American stock markets were on a path for their worst week since March, CNBC reported, “led by major tech shares.”
A change in the wind? Perhaps.
Notable is that it was just in September that VCs seemed resigned to having startup valuations pulled higher by public markets’ endless optimism for related companies. Canaan’s Maha Ibrahim told me during Disrupt 2020 that it was a time when VCs had to “play the game” and pay up for startups, so long as companies were being “rewarded in the public markets for high growth the way that Snowflake” was at the time. A16z’s David Ulevitch concurred.
Perhaps that dynamic is changing as stocks dip. If so, startup valuations could decline en masse, along with the more exotic areas of startup-related finance. The SPAC boom, for example, may wane. Chatting with Hippo’s CEO Assaf Wand this week, he posited that SPACs were a market-response to the public-private valuation gap, an accelerant-cum-bridge to help startups get public while demand was hot for their equity.
Without the same red-hot demand for growth and risk, SPACs could cool. So, too, could private valuations that the hottest startups have taken for granted. Whether what we’re feeling in the wind this week is a hiccup or tipping point is not clear. But the public market’s fever for tech equities may have broken at a somewhat awkward time for Airbnb, Coinbase, DoorDash and other not-quite-yet-IPOs.
Market Notes
It started to snow this week where I live, putting a somewhat sad cap on an otherwise turbulent week. Still! There’s lots from our world to get into. Here’s our week’s market notes:
- Remember when we dug into how quickly startups grew in Q3? Another company that I’ve covered before, Drift, wrote in. The Boston-based marketing software company reported to The Exchange that it grew more than 50% in Q3 compared to the year-ago quarter, with its CEO adding that June and Q3 were the strongest month and three-month periods in its history.
- The fintech boom continued with DriveWealth raising nearly $57 million this week, with the startup being yet another API-driven play. That a company sitting in-between two key startup trends of the year is doing well is not surprising. DriveWealth helps other fintech companies provide users access to the American equities markets. Alpaca, which also recently raised, is working along similar lines.
This week featured two IPOs that we cared about. MediaAlpha’s debut, giving the advertising-and-insurtech company a $19 per-share IPO price, quickly exploded out of the gate. Today the company is worth nearly $38 per share. Why? On its IPO day MediaAlpha CEO Steve Yi said that he had chosen the current moment because public markets had garnered an appreciation for insurtech. His share price growth seems to concur.
Until we look at Root, to some degree. Root, a neo-insurance provider focused on the automotive space, priced at $27 when it debuted this week, $2 above the top-end of its range. The company is now worth less than $24 per share. So, whatever wave MediaAlpha caught appears to have missed Root.
I honestly don’t know what to make of the difference in the two debuts, but please email in if you do know (you can just reply to this email, and I’ll get your note).
Regardless, I chatted with Root CEO Alex Timm after his company went public. The executive said that Root had laid down plans to go public a year ago, and that it can’t control market noise around the time of its debut. Timm stressed the amount of capital that Root added to its coffers — north of $1 billion — is a win. I asked how the company intended to not fuck up its newly swollen accounts, to which Timm said that his company was going to stay “laser focused” on its core automotive insurance opportunity.
Oh, and Root is based in Ohio. I asked what its debut might mean for Midwest startups. Timm was positive, saying that the IPO could highlight that there are a lot of smart folks and GDP in the middle of the country, even if venture capital tallies for the region remain underdeveloped.
- I know that by now you are tired of earnings, but Five9 did something that other companies struggled to accomplish, namely, beat expectations and bolstered its forward guidance. Its shares soared. The Exchange got on the phone with the call center software company to chat about its latest acquisition and earnings. How did it crush expectations as it did? By selling a product that its market needed when COVID-19 hit, the accelerating digital transformation more broadly, and rising e-commerce spend, which is driving more customer support work onto phone lines, it said. A lot of stuff at once, in other words.
- Five9 took on a bunch of convertible debt earlier this year, despite making gobs of adjusted profit. I asked its CEO Rowan Trollope how he was going to go about investing cash to take advantage of market tailwinds, while not overspending. He said that the company takes very regular looks at revenue performance, helping it tailor new spend nimbly. It’s apparently working.
- What else? Peek this week at big, important rounds from SimilarWeb, PrimaryBid and EightFold, a company that I have known for some time. Oh, and I covered The Wanderlust Group’s Series B and Teampay’s Series A extension, which were good fun.
Various and Sundry
- What’s going on in the world of venture debt as VC gets back to form? We dug in.
- For the Europhiles amongst us, here’s what’s up with the continent’s VC receipts.
- Here are 10 favorites from recent Techstars demo days.
- And here’s some mathmagic about Databricks, after it was rumored to have an H1 2021 IPO target.
- We’re way out of space this week, but I have some fun stuff in the tank for later, including a Capital G investor’s take on RPA, a call with the CEO of Zapier about no-code/low-code growth and notes from a chat about developer ecosystems with Dell Capital. More on all of that when the news calms down.
Stay safe, and vote.
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Equity shot: Boo! It’s the Halloween earnings special!
Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast (now on Twitter!), where we unpack the numbers behind the headlines.
As promised, the whole gang is back, this time to chew on the biggest, baddest, worstest, and most troubling earnings reports from the current cycle. This week saw Amazon and Alphabet and Microsoft and Apple and Facebook report, along with a host of smaller companies.
Spoiler alert: there were more tricks than treats.
- Danny, Natasha and Alex wanted to get to the bottom of the big tech results, asking what really mattered from each of them?
- Then it was time to dig into themes. We saw plan price increases coming from Netflix and Spotify, advertising getting a boo-st from politics and 2020’s overall meltdown, and boo-ming billions of consumer interest in…desktops.
- After that, a dive into the results of smaller SaaS and cloud companies, picking out trends that might help us see around the corner a bit; is the tech boom slowing, or is corporate growth merely failing to keep up with inflated investor expectations?
- This week felt like a shudder ran through the spine of our economy. The earnings paint a neutral picture, which isn’t exactly an exhale to rejoice over. The coronavirus continues to be a threat that poses a risk to public businesses. For startups, that could mean a less frothy exit market nad lower valuations. And for the public, it means that the uncertain is still ahead of us. So wear a mask.
And with that, the show is back Monday morning. Have a good weekend, everyone.
Equity drops every Monday at 7:00 a.m. PDT and Thursday afternoon as fast as we can get it out, so subscribe to us on Apple Podcasts, Overcast, Spotify and all the casts.
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Nestlé acquires healthy meal startup Freshly for up to $1.5B
Nestlé USA just announced that it has acquired Freshly for $1.5 billion — $950 million plus potential earnouts of up to $550 million based on future growth.
Founded in 2015, Freshly is a New York City-based startup that offers healthy meals delivered to your home in weekly orders, which can then be prepared in a few minutes in your microwave or oven. So you get the benefit of fresh, healthy meals but — unlike signing up with a meal kit startup — you don’t have to spend a lot of time cooking them yourself.
If anything, this sounds even more appealing now, as so many of us are spending most of our time at home, doing our best to cook for ourselves. According to Nestlé’s press release, Freshly is now shipping more than 1 million meals per week across 48 states, with forecasted sales of $430 million for 2020.
The startup raised a total of $107 million from investors, including Highland Capital Partners, White Star Capital, Insight Venture Partners and Nestlé itself, which led the Series C in 2017. Today’s announcement describes the earlier investment as giving the food and beverage giant a 16% stake in Freshly and serving as “a strategic move to evaluate and test the burgeoning market.”
“Consumers are embracing ecommerce and eating at home like never before,” said Nestlé USA Chairman and CEO Steve Presley in a statement. “It’s an evolution brought on by the pandemic but taking hold for the long term. Freshly is an innovative, fast-growing, food-tech startup, and adding them to the portfolio accelerates our ability to capitalize on the new realities in the U.S. food market and further positions Nestlé to win in the future.”
In a note to customers, Freshly co-founder and CEO Michael Wystrach said that as a result of the acquisition, his team has plans to triple the number of menu items offered each week. Beyond that, however, he suggested that things won’t change too dramatically:
I can assure you that your meals, pricing, and subscription will remain just as you know them. Freshly will continue to operate as a standalone business to accomplish our core mission to remove the barriers to healthy eating with convenient, nutritious and delicious meal solutions, backed by the power of Nestlé to open new doors for a fresher, faster food delivery to your door. We will continue to maintain our own strict standards and maintain complete control of our products. Our meals will not be changing, and there are no plans to change ingredients or integrate Nestlé products into Freshly meals, but we are excited about potential opportunities for the future.
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Teampay adds $5M to its Series A at higher valuation after growing ARR 320% growth since the round
What do you call the grey area between a Series A and a Series B? In 2020, when the money is taken on opportunistically, you call it a Series A-1 extension, according to Teampay. Even if the new capital was raised at a new, higher valuation.
At least that’s what Teampay CEO Andrew Hoag has done with his company’s new $5 million investment, adding it onto its September, 2019-era Series A. TechCrunch covered that round, and the company’s $4 million seed round in 2018, keeping tabs on the corporate spend-management company as it grows.
Indeed, Teampay has posted big growth since its Series A was announced, pushing its annual recurring revenue (ARR) up by 320% and its total spend managed up by 800%. The first number implies that it has managed to monetize well as its usage, the second number, has spiked.
Teampay, Hoag said in an interview, wants to help companies control their bank accounts. This has gotten harder in 2020, as companies went from having an office with many employees to many employees in home offices. The rising complexity of running companies in the aftermath of COVID-19 and its economic disruptions has been a boon for the startup, with Teampay seeing its sales cycle cut in half, the CEO said, and bigger companies coming to its door, looking for help.
The startup targets the midmarket with its spend software, helping companies control what Hoag views as a business process problem, not merely an ability-to-spend issue. Teampay doesn’t want to reinvent the corporate card, but instead provide a set of tools to help companies manage their outflows, no matter what format they take (ACH, virtual cards, etc.).
So unlike Divvy, say, or Brex, Teampay generates most of its income from software fees instead of interchange revenues, though the company did tell TechCrunch that it has room to derive more revenues from spend over time. On the topic of competition, Teampay has lots in various forms. Brex and Ramp and Divvy and Airbase, not to mention old-guard products like Concur and Expensify, are in the market.
But with a fresh $5 million led by Fin Venture Capital and participated in by prior investors like Crosscut, and Tribe, and the ubiquitous Precursor, Teampay has new ammunition with which to go hunting.
With this raise, Teampay has now raised $21 million in known equity financing to date. I asked Hoag why the new round is not simply called a Series B. He said that the letter-series round demarcations have lost some of their specificity in 2020 (true), undercutting the main thrust of my quibble, and that this round was too small to be called a Series B (also true).
Instead, he said, Teampay pulled forward a bit of its future Series B on the back of big growth, presumably to help the company do more today in anticipation of its later, more traditionally sized next round.
TechCrunch has covered aggressive extension rounds in recent months, putting Teampay in good company with firms that are doing well, leading to their taking on more capital to go even faster. Let’s see how much further it can amp its ARR before its real Series B.
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Passion Capital backs UK fertility workplace benefits provider, Fertifa
U.K.-based Fertifa has bagged a £1 million (~$1.3 million) seed to plug into a fertility-focused workplace benefits platform. Passion Capital is investing in the round, along with some unnamed strategic angel investors.
The August 2019-founded startup sells bespoke reproductive health and fertility packages to U.K. employers to offer as workplace benefits to their staff — drawing on the use of technologies like telehealth to expand access to fertility support and cater to rising demand for reproductive health services.
Challenges conceiving can affect around one in seven couples, per the U.K.’s National Health Service (NHS).
In recent years fertility startups have been getting more investor attention as VC firms cotton on to growing market. Employers have also responded, with tech industry workplaces among those offering fertility “perks” to staff. Although the access-to-services issue can be more acute in the U.S. — given substantial costs involved in obtaining treatments like IVF.
In the U.K. the picture is a little different, given that the country’s taxpayer-funded NHS does fund some fertility treatments — meaning IVF can be free for couples to access. Although how much support couples get can depend on where in the country they live, with some NHS trusts funding more rounds of IVF than others. There can also be access restrictions based on factors such as a woman’s age and the length of time trying to conceive.
This means U.K. couples can run out of free fertility support before they’ve been able to conceive — pushing them toward paying for private treatment. Hence Fertifa spotting an opportunity for a workplace benefits model around reproductive health services.
It signed up its first employers this spring and summer, and says it now has a portfolio of corporate clients with an employee pool from a few hundreds to >10,000 — although it isn’t breaking out customer numbers. Rather, it says its services are available to around 700,000 U.K. employees at this point.
“At Fertifa we want to make fertility services more widely accessible to people,” says founder and CEO Tony Chen. “Some levels of fertility services can be provided by the NHS but every single NHS trust is different with eligibility, requirements and resources, and so unfortunately it can too often be reduced to a “postcode lottery”.
“We believe that everyone should have easy access to information, resources, education and services relating to fertility — and that working with workplaces is one way to start. With our efforts and partnerships we hope to normalise the conversations about fertility at work, just as other forms of health are openly discussed and provided for.”
Passion Capital partner Eileen Burbidge — who is joining Fertifa’s board (along with Passion’s Malin Posern) — has been public about her own use of IVF and takes a very personal interest in the fertility space.
“The unfortunate fact is that over recent years, even though success rates have increased and of course more and more patients are exploring the benefits of IVF, NHS funding has been declining and the number of patients using the NHS for their first cycle has also been decreasing,” she tells TechCrunch.
“This doesn’t take away from the fact that it’s brilliant what we get from the NHS here in the U.K., but there’s clearly a lot more which can be done to further increase accessibility and affordability — given less and less funding for the NHS in the face of increasing demand of both the NHS and private routes.”
Fertifa says its model is to provide direct care and support to employees — rather than being a broker or acting as part of a referral system. So it has two in-house clinicians at this stage (out of a team of 10-15 people). Although it also says it “partners” with clinicians and clinics across the U.K. So it’s not doing everything in-house.
It offers what it bills as a “full range” of fertility and gynaecology services — from assisted reproductive technology such as IVF, IUI and more; fertility planning such as egg, sperm and embryo freezing to donor-assisted and third-party reproduction such as donor eggs and sperm; as well as surrogacy and adoption.
Its doctors, nurses and “fertility advocates” are there to provide a one-to-one care service to support patients throughout the process.
“We use technology in a number of ways and are ambitious about how it will help us to maintain an advantage over others in the sector and provide the best customer experience,” says Chen, noting it has developed “a full end-to-end” app for patients to guide them through the various stages of their fertility journey.
“On the employer side we have a full employer portal as well which provides educational resources, support options and access to services for HR/People teams to use and share with their workforces. Additionally, we use telehealth to enable more efficient, convenient (particularly in the age of COVID-19 restrictions) and immediate consultations with clinicians and nurses. Finally, we are refining our machine learning algorithms to help drive more informed decision making for patients and clinicians alike.”
It’s not currently applying AI but says that over time its in-house medical experts will use artificial intelligence to aid decision-making — with the aim of reducing clinic visits, enhancing the patient experience and yielding better clinical pregnancy rates.
Chen points to the U.K.’s Human Fertilisation and Embryology Authority having already made its data publicly available on more than 100,000 couples and their treatment and outcomes — suggesting such data-sets will underpin the development of new predictive models for fertility.
“With additional insight and data sources [we] could more accurately predict probability of success for a patient — or the best type of treatment for them,” he adds.
While Fertifa’s current focus is U.K. expansion — targeting workplaces of all sizes and scale — it’s also got its eye on scaling overseas down the line. Although it will of course face more competition at that point, with the likes of Y Combinator backed Carrot already offering global fertility benefits packages for employers.
“Fertility and reproductive health is important to people all over the world,” says Chen. “Globally one in four women experience a miscarriage, every LGBT+ individual requires support to become a parent, and everyone needs to be increasingly empowered to take control of their reproductive health through fertility preservation treatment.”
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