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Equity Monday: Edtech consolidation, and Amazon continues to make you like it less
Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast where we unpack the numbers behind the headlines.
This is Equity Monday, our weekly kickoff that tracks the latest private market news, talks about the coming week, digs into some recent funding rounds and mulls over a larger theme or narrative from the private markets. You can follow the show on Twitter here and myself here.
This morning we took a global look at the news, trying to take in the latest from around our little planet:
- American stocks are set to rise as much of the world had the day off from trading; Indian stocks fell on the back of poor COVID-19 news.
- The biggest tech news was this bit of bad news from Facebook, if you are a fan of privacy. And the FT has data on the Chinese tech liquidity market that isn’t great news.
- Amazon is in trouble after it illegally retaliated against workers. And there’s more reporting on how low the company was willing to stoop to try to block union activity. Corporations, they’re always letting us down.
- And edtech giant Byju’s is buying an IRL tutoring service for a billion dollars.
- On the funding front, Meesho is now worth $2.1 billion thanks to SoftBank Vision Fund 2, while Cresta now has $50 million more in its own coffers.
- And we wrapped with a peek at the Alkami Technology IPO, which was good fun thanks to where the company was founded.
It’s going to be a blast of a week. Talk to you Wednesday!
Equity drops every Monday at 7:00 a.m. PST, Wednesday, and Friday at 6:00 AM PST, so subscribe to us on Apple Podcasts, Overcast, Spotify and all the casts!
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ConductorOne raises $5M in seed round led by Accel to automate your access requests
Over the course of their careers, Alex Bovee and Paul Querna realized that while the use of SaaS apps and cloud infrastructure was exploding, the process to give employees permission to use them was not keeping up.
The pair led Zero Trust strategies and products at Okta, and could see the problem firsthand. For the unacquainted, Zero Trust is a security concept based on the premise that organizations should not automatically trust anything inside or outside its perimeters and, instead must verify anything and everything trying to connect to its systems before granting access.
Bovee and Querna realized that while more organizations were adopting Zero Trust strategies, they were not enacting privilege controls. This was resulting in delayed employee access to apps, or to the over-permissioning employees from day one.
Last summer, Bovee left Okta to be the first virtual entrepreneur-in-residence at VC firm Accel. There, he and Accel partner Ping Li got to talking and realized they both had an interest in addressing the challenge of granting permissions to users of cloud apps quicker and more securely.
Recalls Li: “It was actually kind of fortuitous. We were looking at this problem and I was like ‘Who can we talk to about the space?’ And we realized we had an expert in Alex.”
At that point, Bovee told Li he was actually thinking of starting a company to solve the problem. And so he did. Months later, Querna left Okta to join him in getting the startup off the ground. And today, ConductorOne announced that it raised $5 million in seed funding in a round led by Accel, with participation from Fuel Capital, Fathom Capital and Active Capital.
ConductorOne plans to use its new capital to build what the company describes as “the first-ever identity orchestration and automation platform.” Its goal is to give IT and identity admins the ability to automate and delegate employee access to cloud apps and infrastructure, while preserving least-privilege permissions.
“The crux of the problem is that you’ve got these identities — you’ve got employees and contractors on one side and then on the other side you’ve got all this SaaS infrastructure and they all have sort of infinite permutations of roles and permissions and what people can do within the context of those infrastructure environments,” Bovee said.
Companies of all sizes often have hundreds of apps and infrastructure providers they’re managing. It’s not unusual for an IT helpdesk queue to be more than 20% access requests, with people needing urgent access to resources like Salesforce, AWS or GitHub, according to Bovee. Yet each request is manually reviewed to make sure people get the right level of permissions.
“But that access is never revoked, even if it’s unused,” Bovee said. “Without a central layer to orchestrate and automate authorization, it’s impossible to handle all the permissions, entitlements and on- and off-boarding, not to mention auditing and analytics.”
ConductorOne aims to build “the world’s best access request experience,” with automation at its core.
“Automation that solves privilege management and governance is the next major pillar of cloud identity,” Accel’s Li said.
Bovee and Querna have deep expertise in the space. Prior to Okta, Bovee led enterprise mobile security product development at Lookout. Querna was the co-founder and CTO of ScaleFT, which was acquired by Okta in 2018. He also led technology and strategy teams at Rackspace and Cloudkick, and is a vocal and active open-source software advocate.
While the company’s headquarters are in Portland, Oregon, ConductorOne is a remote-first company with 10 employees.
“We’re deep in building the product right now, and just doing a lot of customer development to understand the problems deeply,” Bovee said. “Then we’ll focus on getting early customers.”
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India’s Swiggy nears $5 billion valuation in new $800 million fundraise
Swiggy has raised about $800 million in a new financing round, the Indian food delivery startup told employees on Monday, as it looks to expand its business in the country quarters after the startup cut its workforce to navigate the pandemic.
In an email to employees, first reported by Times of India journalist Digbijay Mishra, Swiggy co-founder and chief executive Sriharsha Majety said the startup had raised about $800 million from new investors, including Falcon Edge Capital, Goldman Sachs, Think Capital, Amansa Capital and Carmignac, and existing investors Prosus Ventures and Accel.
“This fundraise gives us a lot more firepower than the planned investments for our current business lines. Given our unfettered ambition though, we will continue to seed/experiment new offerings for the future that may be ready for investment later. We will just need to now relentlessly invent and execute over the next few years to build an enduring iconic company out of India,” wrote Majety in the email obtained by TechCrunch.
Majety didn’t disclose the new valuation of Swiggy, but said the new financing round was “heavily subscribed given the very positive investor sentiments towards Swiggy.” According to a person familiar with the matter, the new round valued Swiggy at over $4.8 billion $4.9 billion. The startup has now raised about $2.2 billion to date.
Swiggy had raised $157 million last year at about $3.7 billion valuation. That investment is not part of the new round, a person familiar with the matter told TechCrunch.
He said the long-term goal for the startup, which competes with heavily-backed Zomato and new entrant Amazon, is to serve 500 million users in the next 10-15 years, pointing to Chinese food giant Meituan, which had 500 million transacting users last year and is valued at over $100 billion.
“We’re coming out of a very hard phase during the last year given Covid and have weathered the storm, but everything we do from here on needs to maximise the chances of our succeeding in the long-term,” wrote Majety.
Swiggy last year eliminated some jobs — so did Zomato — and scaled down its cloud kitchen efforts as it attempted to stay afloat during the pandemic, which had prompted New Delhi to enforce a months-long lockdown.
Monday’s reveal comes amid Zomato raising $910 million in recent months as the Gurgaon-headquartered firm prepares for an IPO this year. The last tranche of investment valued Zomato at $5.4 billion. During its fundraise, Zomato said it was raising money partially to fight off “any mischief or price wars from our competition in various areas of our business.”
A third player, Amazon, also entered the food delivery market in India last year, though its operations are still limited to parts of Bangalore.
At stake is India’s food delivery market, which analysts at Bernstein expect to balloon to be worth $12 billion by 2022, they wrote in a report to clients earlier this year. Zomato currently leads the market with about 50% market share, Bernstein analysts wrote.
“We find the food-tech industry in India to be well positioned to sustained [sic] growth with improving unit economics. Take-rates are one of the highest in India at 20-25% and consumer traction is increasing. Market is largely a duopoly between Zomato and Swiggy with 80%+ share,” wrote analysts at Bank of America in a recent report, reviewed by TechCrunch.
“The food delivery business is the strongest it’s ever been, and we’re now well on our way to drive continued growth over the next decade. In addition, some of our new bets like Instamart [grocery delivery business] are showing amazing promise while we’ve also made strides in setting up some of our other adjacencies for liftoff very soon.”
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FinanZero, Brazil’s free online credit marketplace, raises $7M
FinanZero, a Brazilian online credit marketplace, announced today that it has closed a $7 million round of funding — its fourth since it launched in 2016. It has raised a total of $22.85 million to date.
The real-time online loan broker allows people to apply for a personal loan, a car equity loan or a home equity loan for free and receive an answer in minutes. A key to FinanZero’s success is that it doesn’t offer the loans itself, but has instead partnered with about 51 banks and fintechs who back the loans.
FinanZero is based in Brazil’s financial capital, São Paulo, and has 52 employees.
“From day one we said, ‘We only work with a success fee,’ so we only get paid when the customer signs the loan contract,” said Olle Widen, the company’s co-founder and CEO.
Instead of charging the customer, FinanZero gets a commission from one of its partners, and with a growing volume of credit applications — an average of 750,000 applications per month — the company has seen 61% revenue growth from 2019-2020.
Olle Widen, co-founder and CEO of FinanZero. Image Credits: FinanZero
The Brazilian finance and banking market has been ripe for disruption, as it has traditionally favored the rich.
Those with low incomes — the vast majority of Brazilian citizens — are then left with few options when it comes to financing, and which in turn forces them into compounding debt from which they’ll likely never escape. Traditionally, young Brazilians have lived with their families until they got married, and while there is a cultural aspect to it, the bottom line is that mortgages were infinitely hard to get approved.
With products like FinanZero and Nubank — Latin America’s largest digital bank — Brazilians are starting to see more economic mobility and independence from the legacy institutions that dictated their lives for so long.
Widen, who is Swedish, moved to Brazil about 10 years ago for personal reasons, and while there, was pitched the idea of FinanZero by Webrock Ventures, an investment company focused on bringing Nordic innovation to Brazil.
At the time, Swedish startup Lendo — a precursor to FinanZero — was making waves in Sweden, and the team felt that a similar model would succeed in Brazil, a country known for its bureaucracy and red tape, and thus primed for a streamlined and hassle-free approach to loans.
The original idea was to just copy Lendo, Widen said, but as others have discovered, along the way the team needed to “tropicalize” the product and the experience, meaning they had to build a custom solution for the Brazilian market and its people.
“The founder of Lendo was a childhood friend of mine,” said Widen, of his close ties to the Swedish fintech.
To apply for a loan on FinanZero you don’t need to provide your credit score. Instead, all you need is a utility bill (proof of address), proof of income and your government ID. The process is so simple, Widen said, that 92% of loan applications are initiated from a smartphone.
“Our business model is very based on the bank’s risk appetite and we saw 60% growth from 2019-2020. We are close to 3 million visits per month, about 1.5 are unique and in March of 2021, we had 800,000 people fill out the entire loan form. We have about a 10% approval rating across all products,” Widen said.
The round was led by the Swedish investors VEF, Dunross & Co, and Atlant Fonder, which are all previous investors in the company. The funding will go toward marketing — most of which will be on T.V. — product development, and talent acquisition.
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You might have just missed the best time to sell your startup
Welcome back to The TechCrunch Exchange, a weekly startups-and-markets newsletter. It’s broadly based on the daily column that appears on Extra Crunch, but free, and made for your weekend reading. Want it in your inbox every Saturday? Sign up here.
Happy Saturday, everyone. I do hope that you are in good spirits and in good health. I am learning to nap, something that has become a requirement in my life after I realized that the news cycle is never going to slow down. And because my partner and I adopted a third dog who likes to get up early, please join me in making napping cool for adults, so that we can all rest up for Vaccine Summer. It’s nearly here.
On work topics, I have a few things for you today, all concerning data points that matter: Q1 2021 M&A data, March VC results from Africa, and some surprising (to me, at least) podcast numbers.
On the first, Dan Primack shared a few early first-quarter data points via Refinitiv that I wanted to pass along. Per the financial data firm, global M&A activity hit $1.3 trillion in Q1 2021, up 93% from Q1 2020. U.S. M&A activity reached an all-time high in the first quarter, as well. Why do we care? Because the data helps underscore just how hot the last three months have been.
I’m expecting venture capital data itself for the quarter to be similarly impressive. But as everyone is noting this week, there are some cracks appearing in the IPO market, as the second quarter begins that could make Q2 2021 a very different beast. Not that the venture capital world will slow, especially given that Tiger just reloaded to the tune of $6.7 billion.
On the venture capital topic, African-focused data firm Briter Bridges reports that “March alone saw over $280 million being deployed into tech companies operating across Africa,” driven in part by “Flutterwave’s whopping $170 million round at a $1 billion valuation.”
The data point matters as it marks the most active March that the African continent has seen in venture capital terms since at least 2017 — and I would guess ever. African startups tend to raise more capital in the second half of the year, so the March result is not an all-time record for a single month. But it’s bullish all the same, and helps feed our general sentiment that the first quarter’s venture capital results could be big.
And finally, Index Ventures’ Rex Woodbury tweeted some Edison data, namely that “80 million Americans (28% of the U.S. 12+ population) are weekly podcast listeners, +17% year-over-year.” The venture capitalist went on to add that “62% of the U.S. 12+ population (around 176 million people) are weekly online audio listeners.”
As we discussed on Equity this week, the non-music, streaming audio market is being bet on by a host of players in light of Clubhouse’s success as a breakout consumer social company in recent months. Undergirding the bets by Discord and Spotify and others are those data points. People love to listen to other humans talk. Far more than I would have imagined, as a music-first person.
How nice it is to be back in a time when consumer investing is neat. B2B is great but not everything can be enterprise SaaS. (Notably, however, it does appear that Clubhouse is struggling to hold onto its own hype.)
Look I can’t keep up with all the damn venture capital rounds
TechCrunch Early Stage was this week, which went rather well. But having an event to help put on did mean that I covered fewer rounds this week than I would have liked. So, here are two that I would have typed up if I had had the spare hours:
- Striim’s $50 million Series C. Goldman led the transaction. Striim, pronounced stream I believe, is a software startup that helps other companies move data around their cloud and on-prem setups in real time. Given how active the data market is today, I presume that the TAM for Striim is deep? Quickly flowing? You can supply a better stream-centered word at your leisure.
- Kudo’s $21 million Series A. I covered Kudo last July when it raised $6 million. The company provides video-chat and conferencing services with support for real-time translation. It had a good COVID-era, as you can imagine. Felicis led the A after taking part in the seed round. I’ll see if I can extract some fresh growth metrics from the company next week. One to watch.
And two more rounds that you also might have missed that you should not. Holler raised $36 million in a Series B. Per our own Anthony Ha, “[y]ou may not know what conversational media is, but there’s a decent chance you’ve used Holler’s technology. For example, if you’ve added a sticker or a GIF to your Venmo payments, Holler actually manages the app’s search and suggestion experience around that media.”
I feel old.
And in case you are not paying enough attention to Latin American tech, this $150 million Uruguayan round should help set you straight.
Various and sundry
Finally this week, some good news. If you’ve read The Exchange for any length of time, you’ve been forced to read me prattling on about the Bessemer cloud index, a basket of public software companies that I treat with oracular respect. Now there’s a new index on the market.
Meet the Lux Health + Tech Index. Per Lux Capital, it’s an “index of 57 publicly traded companies that together best represent the rapidly emerging Health + Tech investment theme.” Sure, this is branded to the extent that, akin to the Bessemer collection, it is tied to a particular focus of the backing venture capital firm. But what the new Lux index will do, as with the Bessemer collection, is track how a particular venture firm is itself tracking the public comps for their portfolio.
That’s a useful thing to have. More of this, please.
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Nonobvious acquisitions are on my 2021 bingo board
At the end of 2020, I argued that edtech needs to think bigger in order to stay relevant after the pandemic. I urged founders to think less about how to bundle and unbundle lecture experience, and more about how to replace outdated systems and methods with new, tech-powered solutions. In other words, don’t simply put engaging content on a screen, but innovate on what that screen looks like, tracks and offers.
A few months into 2021, the exit environment in edtech…feels like it’s doing exactly that. The same startups that hit billion and multi-billion valuations during the pandemic are scooping up new talent to broaden their service offerings.
Ruben Harris, the founder of Career Karma, a platform that matches aspiring coding professionals to bootcamps, put together a massive report recently with his team to talk about the pandemic’s impact on the bootcamp market.
James Gallagher, the author of the report, tells me:
It is important to note that the full potential of bootcamps has not yet been realised. We are now seeing more exploration of niches like technology sales which provide gateways into new careers in tech for people who otherwise may not have been able to acquire training. To scale such models, new businesses will need venture capital.
He went on to explain how a notable acquisition from 2020 was K12 scooping up Galvanize, “which would give K12 exposure into corporate training and the coding bootcamp space, a market outside of K12’s focus at the moment.”
To me this report signal two things: the financial interest in boot camps isn’t simply stemming from other bootcamps (although that is happening), but it’s surprising partnerships. Leaving this subsector, we see creative acquisitions such as a Roblox for edtech buying a language learning tool, and a startup known for flashcards scooping up a tech tutoring service.
- How is edtech spending its extra capital
- Byju’s in talks to acquire US-based reading platform, Epic
- The tech-powered wave of smart, not slow, tutoring sessions
Readers should know by this point that I love a nonobvious acquisition (except when this almost happened), so if you have any more tips on coming deals in edtech, please Signal me or direct message me on Twitter.
I’ll end with this: Successful startup founders are innately ambitious, finding opportunity in moonshots and convincing others that the odds are in their favor. However, the ceiling for what defines ambition heightens almost everyday. What used to be a win is now a nonnegotiable, and a feat is only a feat until your competitor hits the exact same milestone.
Acquisitions are one way to scoop up competition and synergistic talent, but it’s what happens next that matters the most.
In the rest of this newsletter, we will talk about Clubhouse competitors, how a homegrown experiment became one of the fastest growing companies in fitness tech and a cool-down in public markets (?!). As always, you can get this newsletter in your inbox each Saturday morning, so subscribe here to join the cool kids.
Clubhouse might create billions in value, but could capture none of it
Remember when everyone was buzzing around about building Stories? That’s so pre-pandemic. A number of companies recently announced plans to build their own versions of Clubhouse, after the buzzy app unearthed the consumer love for audio.
Here’s what to know: It might be easier to start guessing who isn’t building a Clubhouse clone at this point. Our predictions are already starting, but jokes aside, the rise in clones could mean that Clubhouse might have to make a run for its pre-monetized money (cough, cough, Twitter spaces). It doesn’t matter if a startup is first in unlocking a key insight, all that matters is who executes that key insight the best.
- Facebook’s Clubhouse rival looks a lot like Clubhouse right now
- Discord is launching new Clubhouse-like channels for audio events
- LinkedIn confirms it’s working on a Clubhouse rival, too
- Swell launches its app for asynchronous voice conversations
- Slack wants to be more than a text-based messaging platform
- Twitter Spaces arrives on Android ahead of Clubhouse
- Spotify is getting into live audio because of course it is
- Career Karma built audio rooms
- China’s Clubhouse clones via Protocol
Image Credits: Getty Images
A strong unicorn, literally
Tonal, a fitness tech startup, became a unicorn this week after raising a new tranche of capital.
Here’s what to know: The new status underscores market growth for at-home fitness solutions. And while we don’t have a Tonal S-1 yet, we do have a Tonal EC-1. EC-1’s are TechCrunch’s riff on an S-1, and are essentially a deep dive into a company.
Reporter JP Mangalindan wrote thousands and thousands of words about Tonal, from its origin story to business model, its focus on communities and its biggest hurdles ahead.
- How a homegrown experiment became one of the fastest-growing companies in fitness tech
- Millions of dollars and 3.5 years, and it all came down to this
- Building online communities for fun, profit and product
- Can Tonal become the luxury fitness market champion?
Image Credits: Nigel Sussman
Initial public o….no
You’ve probably had a better week than Compass, Deliveroo and Kaltura. The three companies all had different events that illustrate a potential damper on the part that has been the public markets.
Here’s what to know: Compass cut its shares and lowered pricing of said shares, Deliveroo had a rough debut as a delivery company on the public markets, and Kaltura postponed its IPO after valuation demand didn’t hit expectations.
In other news, though:
- Coursera prices IPO at top end of its range in boon to edtech valuations
- Coinbase to direct list on April 14th, provide financial update on April 6th
- UiPath’s IPO filing suggests robotic process automation is booming
Photo Taken In Arizona, United States. Image Credits: Jure Batagelj / 500px / Getty Images
Around TechCrunch
Thanks to everyone who tuned in to TechCrunch Early Stage! If you enjoyed the event (or missed it), don’t worry: Disrupt is almost here.
- Buy a pass to Disrupt 2021 and get a free Extra Crunch membership
- And I want to give a shout-out to two newsletters that I hope you read each week along with Startups Weekly: This Week in Apps and The Exchange.
Across the week
Seen on TechCrunch
How startups can go passwordless, thanks to zero trust
Tips for founders thinking about doing a remote accelerator
US iPhone users spent an average of $138 on apps in 2020, will grow to $180 in 2021
Niantic CEO shares teaser image of AR glasses device
The Weeknd will sell an unreleased song and visual art via NFT auction
Seen on Extra Crunch
Embedded procurement will make every company its own marketplace
5 mistakes creators make building new games on Roblox
E-commerce roll-ups are the next wave of disruption in consumer packaged goods
How our SaaS startup improved net revenue retention by more than 30 points in two quarters
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Extra Crunch roundup: Tonal EC-1, Deliveroo’s rocky IPO, is Substack really worth $650M?
For this morning’s column, Alex Wilhelm looked back on the last few months, “a busy season for technology exits” that followed a hot Q4 2020.
We’re seeing signs of an IPO market that may be cooling, but even so, “there are sufficient SPACs to take the entire recent Y Combinator class public,” he notes.
Once we factor in private equity firms with pockets full of money, it’s evident that late-stage companies have three solid choices for leveling up.
Seeking more insight into these liquidity options, Alex interviewed:
- DigitalOcean CEO Yancey Spruill, whose company went public via IPO.
- Latch CFO Garth Mitchell, who discussed his startup’s merger with real estate SPAC $TSIA.
- Brian Cruver, founder and CEO of AlertMedia, which recently sold to a private equity firm.
After recapping their deals, each executive explains how their company determined which flashing red “EXIT” sign to follow. As Alex observed, “choosing which option is best from a buffet’s worth of possibilities is an interesting task.”
Thanks very much for reading Extra Crunch! Have a great weekend.
Walter Thompson
Senior Editor, TechCrunch
@yourprotagonist
Full Extra Crunch articles are only available to members.
Use discount code ECFriday to save 20% off a one- or two-year subscription.
The Tonal EC-1
Image Credits: Nigel Sussman
On Tuesday, we published a four-part series on Tonal, a home fitness startup that has raised $200 million since it launched in 2018. The company’s patented hardware combines digital weights, coaching and AI in a wall-mounted system that sells for $2,995.
By any measure, it is poised for success — sales increased 800% between December 2019 and 2020, and by the end of this year, the company will have 60 retail locations. On Wednesday, Tonal reported a $250 million Series E that valued the company at $1.6 billion.
Our deep dive examines Tonal’s origins, product development timeline, its go-to-market strategy and other aspects that combined to spark investor interest and customer delight.
We call this format the “EC-1,” since these stories are as comprehensive and illuminating as the S-1 forms startups must file with the SEC before going public.
Here’s how the Tonal EC-1 breaks down:
- Part 1: How a homegrown experiment became one of the fastest-growing companies in fitness tech
- Part 2: Millions of dollars and 3.5 years, and it all came down to this
- Part 3: Building online communities for fun, profit and product
- Part 4: Can Tonal become the luxury fitness market champion?
We have more EC-1s in the works about other late-stage startups that are doing big things well and making news in the process.
What to make of Deliveroo’s rough IPO debut
Image Credits: Nigel Sussman (opens in a new window)
Why did Deliveroo struggle when it began to trade? Is it suffering from cultural dissonance between its high-growth model and more conservative European investors?
Let’s peek at the numbers and find out.
Kaltura puts debut on hold. Is the tech IPO window closing?
Image Credits: Nigel Sussman (opens in a new window)
The Exchange doubts many folks expected the IPO climate to get so chilly without warning. But we could be in for a Q2 pause in the formerly scorching climate for tech debuts.
Is Substack really worth $650M?
Image Credits: Nigel Sussman (opens in a new window)
A $65 million Series B is remarkable, even by 2021 standards. But the fact that a16z is pouring more capital into the alt-media space is not a surprise.
Substack is a place where publications have bled some well-known talent, shifting the center of gravity in media. Let’s take a look at Substack’s historical growth.
RPA market surges as investors, vendors capitalize on pandemic-driven tech shift
Image Credits: Visual Generation / Getty Images
Robotic process automation came to the fore during the pandemic as companies took steps to digitally transform. When employees couldn’t be in the same office together, it became crucial to cobble together more automated workflows that required fewer people in the loop.
RPA has enabled executives to provide a level of automation that essentially buys them time to update systems to more modern approaches while reducing the large number of mundane manual tasks that are part of every industry’s workflow.
E-commerce roll-ups are the next wave of disruption in consumer packaged goods
Image Credits: Javier Zayas Photography (opens in a new window) / Getty Images
This year is all about the roll-ups, the aggregation of smaller companies into larger firms, creating a potentially compelling path for equity value. The interest in creating value through e-commerce brands is particularly striking.
Just a year ago, digitally native brands had fallen out of favor with venture capitalists after so many failed to create venture-scale returns. So what’s the roll-up hype about?
Hack takes: A CISO and a hacker detail how they’d respond to the Exchange breach
Image Credits: TarikVision (opens in a new window) / Getty Images
The cyber world has entered a new era in which attacks are becoming more frequent and happening on a larger scale than ever before. Massive hacks affecting thousands of high-level American companies and agencies have dominated the news recently. Chief among these are the December SolarWinds/FireEye breach and the more recent Microsoft Exchange server breach.
Everyone wants to know: If you’ve been hit with the Exchange breach, what should you do?
5 machine learning essentials nontechnical leaders need to understand
Image Credits: David Malan (opens in a new window) / Getty Images
Machine learning has become the foundation of business and growth acceleration because of the incredible pace of change and development in this space.
But for engineering and team leaders without an ML background, this can also feel overwhelming and intimidating.
Here are best practices and must-know components broken down into five practical and easily applicable lessons.
Embedded procurement will make every company its own marketplace
Image Credits: Busakorn Pongparnit / Getty Images
Embedded procurement is the natural evolution of embedded fintech.
In this next wave, businesses will buy things they need through vertical B2B apps, rather than through sales reps, distributors or an individual merchant’s website.
Knowing when your startup should go all-in on business development
Image Credits: twomeows / Getty Images
There’s a persistent fallacy swirling around that any startup growing pain or scaling problem can be solved with business development.
That’s frankly not true.
Dear Sophie: What should I know about prenups and getting a green card through marriage?
Image Credits: Bryce Durbin/TechCrunch
Dear Sophie:
I’m a founder of a startup on an E-2 investor visa and just got engaged! My soon-to-be spouse will sponsor me for a green card.
Are there any minimum salary requirements for her to sponsor me? Is there anything I should keep in mind before starting the green card process?
— Betrothed in Belmont
Startups must curb bureaucracy to ensure agile data governance
Image Credits: RichVintage / Getty Images
Many organizations perceive data management as being akin to data governance, where responsibilities are centered around establishing controls and audit procedures, and things are viewed from a defensive lens.
That defensiveness is admittedly justified, particularly given the potential financial and reputational damages caused by data mismanagement and leakage.
Nonetheless, there’s an element of myopia here, and being excessively cautious can prevent organizations from realizing the benefits of data-driven collaboration, particularly when it comes to software and product development.
Bring CISOs into the C-suite to bake cybersecurity into company culture
Image Credits: Jetta Productions Inc (opens in a new window) / Getty Images
Cyber strategy and company strategy are inextricably linked. Consequently, chief information security officers in the C-suite will be just as common and influential as CFOs in maximizing shareholder value.
How is edtech spending its extra capital?
Image Credits: Tetra Images (opens in a new window) / Getty Images
Edtech unicorns have boatloads of cash to spend following the capital boost to the sector in 2020. As a result, edtech M&A activity has continued to swell.
The idea of a well-capitalized startup buying competitors to complement its core business is nothing new, but exits in this sector are notable because the money used to buy startups can be seen as an effect of the pandemic’s impact on remote education.
But in the past week, the consolidation environment made a clear statement: Pandemic-proven startups are scooping up talent — and fast.
Tech in Mexico: A confluence of Latin America, the US and Asia
Image Credits: Orbon Alija (opens in a new window)/ Getty Images
Knowledge transfer is not the only trend flowing in the U.S.-Asia-LatAm nexus. Competition is afoot as well.
Because of similar market conditions, Asian tech giants are directly expanding into Mexico and other LatAm countries.
How we improved net retention by 30+ points in 2 quarters
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There’s certainly no shortage of SaaS performance metrics leaders focus on, but NRR (net revenue retention) is without question the most underrated metric out there.
NRR is simply total revenue minus any revenue churn plus any revenue expansion from upgrades, cross-sells or upsells. The greater the NRR, the quicker companies can scale.
5 mistakes creators make building new games on Roblox
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Even the most experienced and talented game designers from the mobile F2P business usually fail to understand what features matter to Robloxians.
For those just starting their journey in Roblox game development, these are the most common mistakes gaming professionals make on Roblox.
CEO Manish Chandra, investor Navin Chaddha explain why Poshmark’s Series A deck sings
Image Credits: Poshmark
“Lead with love, and the money comes.” It’s one of the cornerstone values at Poshmark. On the latest episode of Extra Crunch Live, Chandra and Chaddha sat down with us and walked us through their original Series A pitch deck.
Will the pandemic spur a smart rebirth for cities?
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Cities are bustling hubs where people live, work and play. When the pandemic hit, some people fled major metropolitan markets for smaller towns — raising questions about the future validity of cities.
But those who predicted that COVID-19 would destroy major urban communities might want to stop shorting the resilience of these municipalities and start going long on what the post-pandemic future looks like.
The NFT craze will be a boon for lawyers
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There’s plenty of uncertainty surrounding copyright issues, fraud and adult content, and legal implications are the crux of the NFT trend.
Whether a court would protect the receipt-holder’s ownership over a given file depends on a variety of factors. All of these concerns mean artists may need to lawyer up.
Viewing Cazoo’s proposed SPAC debut through Carvana’s windshield
Image Credits: Nigel Sussman (opens in a new window)
It’s a reasonable question: Why would anyone pay that much for Cazoo today if Carvana is more profitable and whatnot? Well, growth. That’s the argument anyway.
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Want to take a road trip with Kevin Costner? Investors are betting you will
Woody Sears has long been interested in storytelling. Following the debut in 2007 of the first iPhone, he founded a storytelling app called Zuuka that built up a library of narrated and illustrated kids’ books for the iPhone and iPad.
Sears later sold that company to a small New York-based outfit. But Sears, who is based in Santa Barbara, California, isn’t done with stories yet. Instead, he just raised $1.6 million in seed funding for his second and newest storytelling startup, HearHere, a subscription-based audio road-trip app that, with users’ permission, pushes information to them as they’re driving, giving them informational tidbits in three- to five-minute segments about their surroundings, including points of interest they might not have been aware of at all.
The idea is to surface the unknown or forgotten history of regions, which makes sense in a world where more people have returned to road trips and parents have grown desperate to pull their kids’ attention away from TikTok. In fact, Sears’s neighbor, Kevin Costner, liked the idea so much that he recently joined its five-person team as a co-founder and narrator and investor, along with Snap Inc., the law firm Cooley, Camping World CEO and reality TV star Marcus Lemonis, AAA and numerous other individual investors, including from NextGen Venture Partners.
Because we, too, like history and road trips (and okay, fine, Kevin Costner), we talked with Sears and Costner earlier today to learn why they think they’ll succeed with HearHere when other content-rich geo-location based apps have fallen short of meaningful adoption.
Excerpts from that chat follow, edited lightly for length.
TC: You’re creating an audio map of the U.S., so how many stories do you have banked as we speak?
WS: We’re up to 5,500 stories across 22 states, and we’ll be nationwide by summer. The mission is to connect people to the places that they’re traveling through, lending people stories about the history, the natural wonders and the colorful characters who’ve lived in that area. We also do stories about sports and music and provide local insights.
TC: That’s a lot of content to gather up, edit down, then record. What does the process look like?
WS: At the end of the day, the content is king, and we take great care with these stories, producing them with a team of 22 researchers, writers, editors and narrators, most whom come from a travel journalism background. We really feel like we get the best end result through that team approach.
Eventually, we’ll open up to third-party content contributors, where we’re hosting both professional content and also user-generated content.
TC: Is there an AI component or will there be?
WS: We more see this as augmented reality in that these stories really do overlay the landscape and give you a different perspective while traveling. But AI and machine learning are things that we’ll incorporate as we start to move into foreign languages and better tailor the content for the end user.
TC: How do you prioritize which stories to tell as you’re building up this content library?
WS: The major historical markers are a big inspiration, but we’re looking for those lesser-known gems, too, and we look at travel patterns — the way that people move when they’re on leisure trips, meaning what interstate highways they’re taking and which scenic routes are most popular.
TC: How does the subscription piece work?
WS: You get five free free stories each month; for unlimited streaming, it’s $35.99 per year.
TC: Kevin, you must be approached a lot with startup ideas and investment opportunities. Why get so involved with this one?
KC: Obviously I’m story-oriented; that doesn’t come as a shock to anybody. But you’re right, a lot of ideas come to me.
HearHere came through my wife, who said that Woody had something he wanted to talk about, and as she explained it to me, I got it, you know? That’s the shiny thing for me, storytelling and having the ability for a good story to come out, especially when it comes to our country.
So we had this meeting and he explained the concept to me, which is kind of equal to what I’d already been doing my whole life, which is stopping at the bronze plaques all over the country and reading about their historical significance — those [moments] that kind of interrupt everybody’s trip except mine. [Laughs.] You know, [it’s] getting out and stretching my legs and reading a little history and dreaming while the rest of the people in the car are kind of moaning because we stopped our progress.
This [product] is an extension of that for me, without getting out of the car, and with stories that can evolve and perhaps get longer. And I can become more involved in what I was driving past and the people in the car can maybe sense what it was that interested me enough to stop.
Image Credits: Hearhere
TC: You love history.
KC: HearHere is a lot more than history, but for me, it was the history [that I found so compelling]. And it’s how the foundation was set for me to become more involved in the company and understand it a lot better and then become somebody who wanted to be a part of the founding of it.
TC: AAA and Camping World are among the company’s strategic investors. How might they promote the app and what other partnerships have you struck to get HearHere in front of people at the right time?
WS: Camping World also owns Good Sam Club, which is the largest organization of RV owners in the world, and AAA is a giant with 57 million members in the U.S., and they all see this as a way to fulfill something they’re aren’t currently doing for their audience; it’s making that bridge to digital, and we’re really excited to get this in front of their members and customers.
We also have partnerships with [the RV marketplaces] Outdoorsy and RVshare [and the RV rental and sales company] Cruise America. It’s a very hot market.
TC: There have been similar ideas. Caterina Fake’s Findery was an early app that aimed to help users discover much more about locations. Detour, a startup that provided walking audio tours of cities that was founded by Groupon co-founder Andrew Mason, seemed interesting but failed to take off with users. What makes you think this startup will click?
WS: I loved Detour. I ate up both of those.
I guess where I think [Detour] missed product-market fit was the number of scenarios where you could use it and also, it was competing for people’s time. We chose to start with road trips because you have a captive audience; there’s only so much you can do when you’re driving in the car, unlike when you’re in a city, where there are all kinds of options to explore its history, including physical books and tour guides. You also had to carve out two hours of your time, and it’s easy to get distracted while you’re walking around.
We want to capture the places that are along the journey and lesser known and more untold and where people have the space to engage in it. Starting as short form helps. It’s also on-demand, so you don’t have to follow a pre-designated route. We’re not taking you on a specific tour, where you have to turn left or turn right. We’re going to surface stories for you no matter what route you take.
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Uruguayan payments startup dLocal quadruples valuation to $5B with $150M raise
Cross-border payments startup dLocal has raised $150 million at a $5 billion valuation, less than seven months after securing $200 million at a $1.2 billion valuation.
This means that the five-year-old Uruguayan company has effectively quadrupled its valuation in a matter of months.
Alkeon Capital led the latest round, which also included participation from BOND, D1 Capital Partners and Tiger Global. General Atlantic led its previous round, which closed last September and made dLocal Uruguay’s first unicorn and one of Latin American’s highest-valued startups.
DLocal connects global enterprise merchants with “billions” of emerging market consumers in 29 countries across Asia-Pacific, the Middle East, Latin America and Africa. More than 325 global merchants, including e-commerce retailers, SaaS companies, online travel providers and marketplaces use dLocal to accept over 600 local payment methods. They also use its platform to issue payments to their contractors, agents and sellers. Some of dLocal’s customers include Amazon, Booking.com, Dropbox, GoDaddy, MailChimp, Microsoft, Spotify, TripAdvisor, Uber and Zara.
In conjunction with this latest round, dLocal has named Sumita Pandit to the role of COO. Pandit is former global head of fintech and managing director for JP Morgan, and also worked at Goldman Sachs.
“Sumita is a highly respected and accomplished fintech investment banker, and she’s played a pivotal role advising some of the world’s most successful fintech companies as they’ve scaled to become global leaders,” said dLocal CEO Sebastián Kanovich in a written statement.
Meanwhile, former COO Jacobo Singer has been promoted to president of dLocal.
The company plans to use its new capital to enhance its technology and continue to expand geographically.
Alkeon General Partner Deepak Ravichandran believes that emerging markets represent some of the fastest growth opportunities in digital payments.
“However, as global merchants look to access these markets, they are often faced with a complex web of local payment methods, cross-border regulations, and other operational roadblocks,” he said in a written statement. “dLocal’s unique platform empowers merchants with a single integrated payment solution, to reach billions of customers, accept payments, send payouts, and settle funds globally.”
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Private equity, a SPAC and an IPO walk into a bar
The first quarter of 2021 was a busy season for technology exits. Coming off a hot period in the final quarter of 2020, it was no surprise that tech upstarts pursued liquidity through a variety of mechanisms as the new year began.
There were IPOs, there were direct listings, there were PE deals. Hell, we even saw enough SPACs that we lost track of a few; amid all the noise, you’ll miss the occasional note no matter how well-tuned your ear.
The Exchange explores startups, markets and money. Read it every morning on Extra Crunch, or get The Exchange newsletter every Saturday.
Each path is still open for later-stage startups to pursue exits: The IPO market was welcoming until a few minutes ago and private equity firms are stacked with cash and willing to pay higher multiples than they might in more normal times. And there are sufficient SPACs to take the entire recent Y Combinator class public.
Choosing which option is best from a buffet’s worth of possibilities is an interesting task for startup CEOs and their boards.
DigitalOcean went public via a traditional IPO, raising a slug of capital in the process. The SMB-focused public cloud company likely felt like a somewhat obvious IPO candidate when you read its results. The Exchange spoke with the company’s CEO, Yancey Spruill, about the choice.
Latch, in contrast, decided that a SPAC was its best route out the gate. The Exchange caught up with the company’s CFO, Garth Mitchell, about the transaction and why it made sense for his company.
And, finally, The Exchange spoke with AlertMedia’s founder and CEO, Brian Cruver, about his decision to sell his Texas-based company to a private equity firm.
To prevent this post from reaching an astronomic word count, we’ll give a brief overview of each deal and then summarize the company’s views about why their liquidity choice was the right one.
Three paths to liquidity
Kicking off with DigitalOcean, a few notes: First, the company has been pretty darn public about its growth in the last few years. We knew that it had an annualized run rate of around $200 million in 2018, $250 million in 2019 and around $300 million in the first half of 2020. It later announced that it hit that mark in May of last year.
So when DigitalOcean decided to go public, we weren’t bowled over. The company wound up pricing at $47 per share, the high end of its range. Since then, its stock has struggled somewhat, falling below $37 per share before recovering to $43.80 at the end of trading yesterday.
Enough of all that. Why did the company choose to go public via a traditional IPO? Spruill said his company looked at SPAC deals and direct listings. It selected the IPO route because it fit the company’s goals of generating a broad base of shareholders while creating a branding opportunity.
The cost of an IPO is comparable, he added, to other exit options. Spruill also praised the IPO process itself, noting that its rigorous requirements made DigitalOcean a better company.
Earlier in our chat, I asked Spruill a question that I put to every CEO on IPO day: How are you feeling? It’s a bit of a sop, but it sometimes elicits insights from executives and founders who, after weeks of discussing their companies’ inner workings, are asked a rare personal question.
Spruill said he felt incredible and that nothing could replicate an IPO as the culmination of so much work put into building a company and its team. If you add up the wins and losses over time, with more of the former than the latter, and can cross the finish line with the right metrics and market, you can earn a spot to be “grilled” by the “best investors,” he said.
Those investors put $750 million or so into his company, Spruill added. Funds that it can use to retire debt and free up more cash flow. Not a bad day, I’d say.
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