CoolBitX, a blockchain security startup based in Taiwan, announced today it has raised $16.75 million in Series B funding, led by returning investor SBI Holdings, a Japanese financial group.
Korean cryptocurrency exchange Bitsonic, Monex Group, another Japanese financial group, and Taiwan’s National Development Fund also participated.
Founded in 2014, CoolBitX makes two products. One is CoolWallet S, a Bluetooth-enabled hardware wallet for cryptocurrency. The other is called called Sygna, a solution created to help virtual asset service providers (VASPs) become compliant with a new rule passed last year by the Financial Action Task Force (FATF).
Referred to as the “travel rule,” it is meant to prevent money laundering and the financing of terrorist acts by requiring virtual asset service providers to collect personally identifiable information (PII) from customers during transactions. All virtual asset service providers in FATF member countries need to comply by June.
With its new funding, CoolBitX plans to expand Sygna’s presence beyond the Asia-Pacific region. The startup says that 12 cryptocurrency exchanges have already signed memorandums of understanding with it and are currently using or testing Sygna, including SBI VC Trade, Coincheck, Bitbank, DMM Bitcoin, BITpoint, MaiCoin, BitoPro and Ace.
CoolBitX founder and CEO Michael Ou told TechCrunch in an email that Sygna’s deployment helps differentiates it from competitors like Shyft and Ciphertrace, which also offer travel rule compliance solutions, because it has been tested and proven by users.
“In addition, Sygna ensures that VASPs can quickly comply with new regulations with minimal disruptions to their day-to-day operations,” he added. “By focusing on seamless user experience, maximum security during the transmission of data, Sygna aims t facilitate the mainstream adoption of the crypto currency.”
In a press statement, SBI Holdings president and CEO Yoshitaka Kitao said, “As one of the early investors in CoolBitX, SBI Holdings is happy to see the breakthroughs made by the CoolBitX team to drive cryptocurrency adoption forward. As such, we are delighted to participate in our second tranche of investment in CoolBitX. The borderless nature of digital assets requires a solution that isn’t bound by geographical boundaries and we are proud to partner with CoolBitX on their journey to bring a secure and easy-to-implement system to the world.”
TripActions, a Palo Alto-based, corporate travel-focused unicorn, has secured a new, half-billion-dollar credit facility to help support the launch of its second product line. Called TripActions Liquid, the service helps companies that do not offer corporate cards to workers a way to avoid forcing those employees to use their personal cards to float costs for corporate travel.
Liquid plugs into the broader TripActions corporate travel service, which TechCrunch has written about here.
You can see where the debt fits into the news; if TripActions is going to float a lot of spend for other companies so that they can avoid temporarily offload travel spend to employee’s personal cards (which frankly should be illegal), it’s going to involve a lot of money — money that TripActions would rather not deduct from the business equivalent of its checking account. So, a short-term revolving credit line — the corporate version of a high-limit credit card, merely minus the usurious interest rates — is the answer.
Per the company, the money comes from “Silicon Valley Bank with participation from Goldman Sachs and Comerica Bank.” Or more specifically, the dollars are coming from the Iron Bank of California, its East Coast equivalent and Drake’s credit union. Jokes aside, it’s a good trio, showing presumably wide interest in helping funding TripActions’ new product.
Not that the company is itself short on funds. Crunchbase has more than $480 million in tracked equity funding down for the company, including a $250 million Series D from last June (a16z, Group 11, Lightspeed and Zeev Ventures). That funding round valued the company at around $3 billion, according to Crunchbase data.
According to a TripActions interview with TechCrunch, travel costs are “the second biggest expenditure that’s controllable for companies and most finance leaders feel like they’re not managing it well,” putting its Liquid product in a spot in the market where there’s demand from both employees and management for a better service.
With TripActions Liquid helping workers avoid taking on company expenses, and the TripActions product theoretically making booking travel itself a less onerous task, this news item could make life less bad for the working corporates among us.
On that note, a story. Watching members of the TripActions brass walk me through a product demo during a briefing for this post was actually a bit annoying. I am currently in a back-and-forth with various elements of my corporate home regarding travel that I booked through our current provider — I will not name them, but their moniker rhymes with fun-purr — about whether I booked the trip inside that same software suite. So I was curious about Liquid for the perspective of a corporate traveler who, you know, has other things to do than expenses. It did look less irksome and deleterious to my mental health than what I use today.
And with $500 million in available spend, TripActions has lots of room to fund it.
All this is well and good, but with a new product fired up, when is TripActions going to go public? It claimed to be growing quickly in 2019, when discussing its 2018 performance. Get on with it!
Speedinvest, the European seed-stage VC that was started from Vienna but has since added offices in London, Berlin, Munich and San Francisco, has raised a new €190 million fund. It brings the firm’s total assets under management to more than €400 million.
Describing its third fund as “oversubscribed” and ahead of schedule, SpeedInvest’s remit remains largely the same. The VC writes first cheques of between €50,000 and €1.5 million, but has also set aside €100 million of the fund for follow-on investments in its most promising portfolio companies.
Sector-wise, Speedinvest says it is targeting fintech, “deep tech”, marketplaces, industrial tech, digital health and consumer tech startups — so a pretty wide brief. To make this possible, the firm has what it describes as 40 investment professionals divided into teams working across these five sectors.
In addition, the VC claims 20 “operational experts” providing portfolio companies with “full-service HR, growth marketing, business development, and U.S. expansion support”.
Cue statement from Speedinvest CEO Oliver Holle: “Having been a founder myself, I have a clear view on value creation by investors. You need to deliver sector-specific, operationally relevant input that goes far beyond boardroom advice and cash. In our experience, the best way to do that is to be face-to-face with our founders”.
Meanwhile, Speedinvest’s portfolio includes a number of Europe’s fast-growing tech companies, such as insurtech Wefox (€235 million Series B), e-scooter rentals company Tier Mobility (€55 million Series B), and fintech Curve (€50 million Series B). Other notable investments include Coachhub, TWAICE, Billie, Tourradar, Inkitt and Luko.
In fact, Speedinvest says it has already invested in over ten startups from this new fund.
Separately, it says it will be increasing its on the ground presence in France this Spring, where it has already invested in companies such as Luko, Lemon Way, Actiondesk and FairMoney.
Fintech startup Revolut is raising a large Series D round of funding. TCV is leading the $500 million round, valuing the company at $5.5 billion. Over the past few years, Revolut has raised $836 million in total.
If you’re not familiar with Revolut, the company is building a financial service to replace traditional bank accounts. You can open an account from an app in just a few minutes. You can then receive, send and spend money from the app or using a debit card.
On top of that, Revolut has added a ton of features that it has built in-house or through partnerships. You can insure your phone, get a travel medical insurance package, buy cryptocurrencies, buy shares, donate to charities, save money and more.
Revolut currently has more than 10 million customers, mostly in Europe and the U.K. The company doesn’t share specific numbers when it comes to transaction volume and monthly active customers, but here are some percentage-based metrics:
With the new influx of cash, the company says that it’ll focus on improving its product for existing users as well as revenue. It’s all about making Revolut more useful and stickier going forward.
In particular, you can expect new lending services for both retail customers as well as companies using Revolut for Business. While Revolut provides a ton of services in the U.K., customers in other markets don’t have the same feature set. For instance, Revolut recently launched savings vaults in the U.K. — customers in other markets will be able to open savings sub-accounts in the future, as well.
Other than that, Revolut wants to double down on the core features. The company will improve its two subscription tiers (Premium and Metal) and improve banking operations across Europe — you can expect full bank accounts in Europe in the future.
There are currently 2,000 people working for Revolut. “We’re on a mission to build a global financial platform — a single app where our customers can manage all of their daily finances, and this investment demonstrates investor confidence in our business model. Going forward, our focus is on rolling-out banking operations in Europe, increasing the number of people who use Revolut as their daily account, and striving towards profitability,” Revolut co-founder and CEO Nik Storonsky said in the release.
Revolut is currently live in the U.K., Europe, Singapore and Australia (in beta). While the company has announced plans to expand to a handful of countries, the main focus is on launching in the U.S. and Japan in the coming months.
DSP Concepts — a startup whose Audio Weaver software is used by companies as varied as Tesla, Porsche, GoPro and Braun Audio — is announcing that it has raised $14.5 million in Series B funding.
The startup goal, as explained to me by CEO Chin Beckmann and CTO Paul Beckmann (yep, they’re a husband-and-wife founding team), is to create the standard framework that companies use to develop their audio processing software.
To that end, Chin told me they were “picky about who we wanted on the B round, we wanted it to represent the support and endorsement of the industry.”
So the round was led by Taiwania Capital, but it also includes investments from the strategic arms of DSP Concepts’ industry partners — BMW i Ventures (which led the Series A), the Sony Innovation Growth Fund by Innovation Growth Ventures, MediaTek Ventures, Porsche Ventures and the ARM IoT Fund.
Paul said Audio Weaver started out as the “secret weapon” of the Beckmanns’ consulting business, which he could use to “whip out” the results of an audio engineering project. At a certain point, consulting customers started asking him, “Hey, how about you teach me how to use that?,” so they decided to launch a startup focused on the Audio Weaver platform.
Paul described the software as a “graphical block diagram editor.” Basically, it provides a way for audio engineers to combine and customize different software modules for audio processing.
“Audio is still in the Stone Ages compared to other industries,” he said. “Suppose you’re building a product with a touchscreen — are you going write the graphics from scratch or use a framework like Qt?”
Similarly, he suggested that while many audio engineers are still “down in the weeds writing code,” they can take advantage of Audio Weaver’s graphical interface to piece everything together, as well as the company’s “hundreds of different modules — pre-written, pre-tested, pre-optimized functions to build up your system.”
For example, Paul said that by using the Audio Weaver platform, DSP Concepts engineers could test out “hundreds of ideas” for algorithms for reducing wind noise in the footage captured by GoPro cameras, then ultimately “hand the algorithms over to GoPro,” whose team could them plug the algorithms into their software and modify it themselves.
The Beckmanns said the company also works closely with chip manufacturers to ensure that audio software will work properly on any device powered by a given chipset.
Other modules include TalkTo, which is designed to give voice assistants like Alexa “super-hearing,” so that they can still isolate voice commands and cancel out all the other noise in loud environments, even rock concerts. (You can watch a TalkTo demo in the video below.)
DSP Concepts has now raised more than $25 million in total funding.
Hello and welcome back to our regular morning look at private companies, public markets and the gray space in between.
This morning we’re digging into Dropbox’s earnings report (Q4 2019), and why its recent financial performance and plans for 2020 are making the storage and productivity-focused SaaS player shares soar.
While the broader SaaS category has seen huge valuation gains in recent quarters, Dropbox has not. Along with Box, the two file-sharing focused companies were left behind as their broader unicorn cohort’s value surged. Why? Slowing growth, mostly. But with Dropbox shares up 13% pre-market to more than $21 this morning — its original IPO price — perhaps things are changing for one of the two firms.
To figure out what happened, we’ll start by unearthing what Dropbox managed to pull off in Q4 and compare its projections with market expectations. At the end, we’ll translate what we’ve learned from public SaaS companies for their private, startup brethren. As always, when we look at public companies, we’re hunting for market signals that will impact startup fundraising and valuations.
Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast, where we unpack the numbers behind the headlines.
This week was a fun combination of early-stage and late-stage news, with companies as young as seed stage and as old as PE-worthy joining our list of topics.
Here’s what the team argued about this week:
Equity is nearly three years old, and we have some neat stuff coming up that you haven’t heard about yet. Stay tuned, and thank you for sticking with us for so long.
Robotics and automation tools are now foundational parts of warehouses and manufacturing facilities around the world. Unlike many other robotics and AI use cases, the technology has moved well beyond the theoretical into practice and is used by small suppliers and large companies like Amazon and Walmart.
There’s no doubt that automation will transform every step of the supply chain, from manufacturing to fulfillment to shipping and logistics. The only question is how long such a revolution will take.
There’s still plenty of market left to transform and lots of room for new players to redefine different verticals, even with many of the existing leaders having already staked their claim. Naturally, VCs are plenty eager to invest millions in the technology. In 2019 alone, manufacturing, machinery and automation saw roughly 800-900 venture-backed fundraising rounds, according to data from Pitchbook and Crunchbase, close to two-thirds of which were still early-stage (pre-seed to Series B) investments.
With our 2020 Robotics+AI sessions event less than two weeks away, we’ve decided to perform temperature checks across some of the hottest robotics sub-verticals to see which trends are coming down the pipe and where checks are actually being written. Just as we did with construction robotics last week, this time, we asked six leading VCs who actively invest in manufacturing automation robotics to share what’s exciting them most and where they see opportunities in the sector:
Which trends are you most excited about in manufacturing/warehouse automation robotics from an investing perspective?
Autonomous air mobility company Volocopter has added to the Series C funding round it announced in September 2019. The German electric vertical take-off and landing (eVTOL) aircraft maker announced €50 million ($54 million at today’s exchange rate) in funding at the time, and the C round has now grown to €87 million ($94 million) thanks to new lead investor DB Schenker, a German logistics company with operations all over the world.
This round also includes participation by Mitsui Sumitomo Insurance Group, as well as the venture arm of its parent MS&AD, along with TransLink Capital . Existing investors, including Lukasz Gadowski and btov, also participated in this round extension.
With this new funding, Volocopter brings its total raised to around $132 million, and it says it will use the newly acquired capital to help certify its VoloCity aircraft, its air taxi eVTOL designed to transport people, which is on track to become the company’s first-ever vehicle licensed for commercial operation. Meanwhile, Volocopter will also use the new funds to help continue development of a next-generation iteration of its VoloDrone, which is the cargo-carrying version of its aircraft. It aims to use VoloDrone to expand its market to include logistics, as well as construction, city infrastructure and agriculture.
Already, Volocopter has formed partnerships with companies including John Deere for pilots of its VoloDrone, but it says that a second-generation version of the vehicle will help it commercialize the drone. On the VoloCity side, the company recently flew a demonstration flight in Singapore, and then announced they’d be working with Grab on a feasibility study about air taxi services for potential deployment across Southeast Asia in key cities.
Alongside this round extension, Volocopter adds two advisory board members — Yifan Li from Geely Holding Group, which led the first tranche of this round closed in September, and DB Schenker CEO Jochen Thewes. Both of these are key strategic partners from investors who stand to benefit the company not only in terms of funding, but also in terms of supply-side and commercialization.
Tier, the European e-scooter rentals startup that operates in 55 cities across 11 countries, has topped up its funding for the second time in four months.
The Berlin-based company has extended its Series B round to over $100 million, up from $60 million disclosed in October. The additional capital is a mix of equity and debt financing provided by Moscow’s RTP Global, London’s Novator, and an unnamed U.S. debt fund. Part one of the Series B was co-led by Mubadala Capital and Goodwater Capital.
Tier says the additional funds will be invested in R&D in order to create further efficiency and for vehicle development. The so-called “micro-mobility” startup will also continue to strengthen its management team — the company recently recruited a new CCO and COO — and pursue M&A activities.
In addition, Tier says it will expand its vehicle fleet — perhaps with new micro-mobility product categories — in order to bring “sustainable mobility to more people and more cities across Europe”.
Meanwhile, in January, Tier quietly acquired U.K. startup Pushme Bikes, a manufacturer of replaceable batteries and other mobility-related hardware. The company was thought to be developing a network of battery change stations for “last mile” transport, which would seem to tie directly into Tier’s recent move to upgrade its scooter fleet with new scooters that use swappable batteries.
In a brief WhatsApp call with Tier co-founder and CEO Lawrence Leuschner, he framed the purchase of Pushme Bikes as an “acqui-hire” based on the team’s design and development expertise, which he said will give Tier a needed boost in its future hardware plans.
He also said that Tier’s move to swappable battery-based e-scooters has already seen 80% of its fleet replaced with scooters using swappable battery technology, which in turn is helping drive much better unit economics. That’s because the scooters no longer need to be taken off the streets and driven by van to a central location for charging and maintenance, only to be driven back several hours later. Instead, on-location maintenance where possible is carried out and dead batteries are simply swapped out and taken by cargo e-bike (pictured) to a central charging warehouse or, in some instances, nearby charging “hub”.
Noteworthy, unlike the majority of e-scooter rental companies, Tier shunned gig economy workers for charging from the get-go, preferring to use a centralised system in order to maintain quality of service. “The gig economy is dead [in relation to e-scooter rentals],” Leuschner says emphatically, noting that swappable battery tech means a centralised system makes even greater sense.
And in case you’re wondering what Tier did with its old e-scooters after replacing most of its fleet with newer hardware, Leuschner explained that the Okai manufactured devices are being re-sold directly to German consumers for private use via MyTier app. Perhaps that’s unsurprising given that the Tier CEO previously founded reBuy, a European market leader in used electronics.
Cue statement from Anton Inshutin, Partner at RTP Global: “We were impressed by the team’s meticulous focus on capital efficiency and enhancing operational excellence. They have managed to deliver class-leading unit economics, enabling them to expand profitably in the winter. We are very much looking forward to partnering with this impressive team that is unrivalled in its execution as the company continues to scale”.
Specifically, he argued that the experience of shopping on Amazon — not what happens after you buy the product, but browsing the website itself — is pretty bad, full of sponsored results and fake products.
“What we’re seeing happen is that all this vast wave of direct-to-consumer brands is nibbling around edges of Amazon and beating them on buying experience,” Taylor said.
Shogun was designed to support those brands. Taylor and his co-founder Nick Raushenbush created the first product in 2015, and they treated it as a side project at first. But Taylor said that by May 2017, “It ate up all of our free time and it was obviously much bigger than we expected,” so they quit their jobs (Taylor was working as a software engineer at Y Combinator) and devoted themselves to it full-time.
The company now has 11,000 customers, including MVMT, K-Swiss and Leesa. And today, Shogun is announcing that it has raised a $10 million Series A, led by Initialized Capital, with participation from VMG Partners and YC. (The startup has now raised a total of $12 million.)
The company’s first product, Page Builder, offers a drag-and-drop interface to make it easier for e-commerce brands to build their storefronts on Shopify, BigCommerce, Salesforce and Magento.
And there’s a new product, Shogun Frontend, which allows brands to create a web-customized storefront that’s entirely customized while still using one of the big commerce platforms as their back end.
Taylor pitched this as part of a broader trend toward “headless commerce,” where the e-commerce front end and back end are handled separately. He suggested that this is a “mutually beneficial” split, as Shopify and its competitors are going “super deep” on building the infrastructure needed to operate a store online, while Shogun focuses on the actual experience of the customer visiting that store.
Meanwhile, website builders like Squarespace and Weebly (owned by Square) have introduced e-commerce features, but Taylor suggested that they’re still “not really a professional choice” for most e-commerce businesses.
As one of the key features of Shogun Frontend, Taylor pointed to the fact that it creates progressive web apps that should be as fast and smooth as a native app.
Brett Gibson, general partner at Initialized Capital and a Shogun board member, made a similar point in a statement:
For DTC brands competing against goliaths like Amazon, Shogun Frontend now gives them features and capabilities once only reserved for enterprise companies. And when it comes to speed, Shogun Frontend’s sub-second load time is the critical difference between retaining or losing a customer.
Taylor added that the company will be “continuing to invest in Page Builder too,” but he suggested that Frontend is “more of an enterprise offering” that can help Shogun’s biggest customers “future proof themselves.”
DigitalOcean, a cloud infrastructure provider targeting smaller business and younger companies, announced today that it has secured $100 million in new debt from a group of investors, bringing its 2016-era debt raise to a total of around $300 million. The company’s nearly $200 million debt raise in 2016 was preceded by an $83 million Series B in 2015.
TechCrunch spoke with DigitalOcean’s CEO Yancey Spruill (hired in 2019, along with a new, IPO-experienced CFO; the company added a new CMO earlier this year) to get under the skin of the new funding, and better understand the company’s revenue scale, its financial health and its future IPO plans.
The firm intends to use the new funds to invest in partnerships, boost product investment and grow what its CEO called an “early-stage” inside sales capacity.
For readers of our regular $100 million ARR club series, consider this something of a sister post. We’ll induct DigitalOcean later on. Today, let’s focus on the company’s momentum, and its choice of selecting debt over equity-derived fundraising.
DigitalOcean is a large private company in revenue terms, with the former startup reporting an annualized run rate of $200 million in 2018 and $250 million toward the end of 2019. According to Spruill, all the company’s revenue is recurring, so we can treat those figures as effective annual recurring revenue (ARR) results.
Sticking to the financial realm, DigitalOcean told TechCrunch that it has a mid-20s percentage growth rate, and the company claims that its EBITDA (an adjusted profit metric) are in the low 20s. Citing a “strategy over the next several years to continue to focus very specifically on the SMB and developer communities,” Spruill told TechCrunch that DigitalOcean will scale to $1 billion in revenue in the next five years, and it will become free cash flow profitable (something the CEO also referred to, loosely, as profitability) in the next two.
All that and the company expects to reach a $300 million annualized run rate inside the first half of 2020. How has it done all of that without raising new capital since it put roughly $200 million in debt onto its book back in 2016? A good question. Let’s talk about DigitalOcean’s economics.
DigitalOcean has a pretty efficient go-to-market motion, which in human terms means that it can attract new customers at relatively low costs. It does this, per the CEO, by attracting millions of folks (around four million, he said) to its website each month. Those turn into tens of thousands of new customers.
Because DigitalOcean is a self-serve SaaS business, folks can show up and get started without hand-holding from sales. Sales cycles are expensive and slow. But, while allowing small companies to sign up on their own sounds attractive, companies that often lean on this acquisition method struggle with churn. So, I asked Spruill about that, specifically digging into customer churn via graduation, the pace at which customers that joined DigitalOcean as small companies left it for other players like Azure and AWS as they themselves grew (quote slightly condensed for readability):
Like any self-serve, early-stage, or SMB-focused business, [the] first three to four months is critical for [customers]. But when you look at our customer base over time — we look at every cohort of the eight year history of our company — all of our cohorts have grown each year, and our churn, which is what [your graduation rate] question is, do customers leave our platform, is de minimis after customers have been on our platform for a year or more.
So it doesn’t appear that churn is a catastrophe at DigitalOcean, which gives it what I’d call pretty attractive economics: Customers come in at relatively low customer acquisition costs, and with churn slipping very low after an initial quarter or so, the company can extract gross margin from those customers for quite some time. What does it do with that cash? It reinvests it. Here’s how Spruill explained that process:
The high retention rates of the customers and the strong revenue growth enable cash flow to support the growth and investment of the business and paying and supporting the debt. And when you think about the dilution, when you think about a business at our size and scale — the roughly $400 million of capital raised is probably the right proxy, if you look at our peers and our size and stage of company development — most of them the vast majority of the capital is equity. In our case, only a quarter of the capital, a little over quarter the capital is equity. So we’re going to use the cash flow leverage of the business to drive enormous returns to the equity in terms of not taking on that significant dilution, and still being able to grow the business in a in a responsible and exciting way.
The chorus sound effect you are hearing in the background are the company’s early-stage investors rejoicing at DigitalOcean not selling more shares to grow, concentrating the value-upside to existing shares. Shares that they own a lot of.
So let’s sum quickly: DigitalOcean is working to carve out an SMB and developer-focused cloud infra niche, keeping its economics in a good place by using low-CAC, self-serve revenue generation. The margins from that are paying for the company’s development, and its overall economics are good enough to allow it to leverage debt to invest in itself instead of equity. Overall, not what I expected to hear this morning, but that’s the fun part of news.
What’s in the future? Probably not an IPO any time soon. The company just raised more debt, money that it probably intends to use before debuting. The CEO told TechCrunch that “the IPO option for DigitalOcean is on the table,” going on to cite his company’s growth, growth rate, operating margins, “soon-to-be free cash flow margins” and scale as allowing the upstart “to have the conversation that this is a company that could go public.”
Next, adding DigitalOcean to the $100 million ARR club, and then I fancy a few more revenue milestones until an eventual S-1.
Before it was worth $7.6 billion, the original idea for Robinhood was a stock trading social network. At my kitchen table in San Francisco in 2013, the founders envisioned an app for sharing hot tips to a feed complete with a leaderboard of whose predictions were most accurate. Once they had SEC approval, they pivoted towards the real money maker: letting people buy and sell stocks in the app, and pay to borrow cash to do so.
Now seven years later, Robinhood is subtly taking the first steps back to its start. Today it’s launching Profiles. For now, they let users see analytics about their portfolio like how concentrated they are in stocks vs options vs cryptocurrency, as well across different business sectors. Complete with usernames and a photo, Profiles let you follow self-made or Robinhood provided lists of stocks and other assets.
Profiles could give Robinhood’s customers the confidence to trade more, and create a sense of lock-in that stop them from straying to other brokerages that have dropped their per trade fees to zero to match the startup, like Charles Schwab, Ameritrade, and ETrade that was acquired for $13 billion today by Morgan Stanley, as reported by the Wall Street Journal.
The Profile features certainly sound helpful. They could reveal that your portfiolio is to centered around Tech, Media, and Telecom stocks, or that you’re ignoring cryptocurrency or corporations from your home state. Lists also makes it easier to track specific business verticals, save stocks to buy when you have the cash, or set aside some for deeper research. Robinhood pulls info from FactSet, Morningstar, and other trusted sources to figure out which stocks and ETFs go into sector lists, or you can make and name your own. Profiles and lists begin to roll out to all users next week.
But what’s most interesting is how profiles lay the foundation for Robinhood as a social network. It’s easy to imagine letting users follow other accounts or lists they create. The original Robinhood app let users make predictions like “17% increase in Facebook share price over the next 11 weeks” with comments to explain why. It showed users prediction accuracy, their average holding time for assets, a point score for smart foresight, community BUY or SELL ratings on stocks.
If Robinhood rebuilt some of these features, it might lessen the need for an expensive financial advisor or having enough cash to qualify for one with a different brokerage. Robinhood could let you crowdsource advice. “We understand the connotation of taking something from the rich and giving it to the poor. Robinhood is liberating information that’s locked up with professionals and giving it to the people” Robinhood co-founder and co-CEO Vlad Tenev told me back in 2013.
Robinhood would certainly need to be careful about scammy tips going viral. Improper safeguards could lead to pump and dump schemes where those late to buy in get screwed when prices snap back to reality.
But embracing social could leverage some of its strongest assets: the youthfulness of its userbase and the depth of connection to its users. The median age of a Robinhood customer is 30 and half say they’re first time investors. Being able to turn to friends or experts within the app might convince them to pull the trigger on trades.
Most online brokerages are somewhat undifferentiated beyond differences in pricing while their clunky, unstylized products don’t generate the same brand affinity as people have for Robinhood. Unsatisfied users could bail for a competitor at any time. Robinhood’s users are accustomed to social networking and the way it locks in users since they don’t want to abandon their community.
When I asked Robinhood Profiles’ product manager Shanthi Shanmugam directly about whether this was the start of more social trading features, they suspiciously dodged the question, telling me “When thinking about how to reflect who you are as an investor, we looked at how other apps represent you and it felt natural to leverage a design that felt more like a profile. When helping people group their investment ideas, it was easy to envision this as a playlist you might find on your favorite music app.”
That’s far from a denial. Offering social validation for trading could help Robinhood earn more from its customers despite their small total account balances. While Robinhood might have over 10 million accounts versus E-Trade’s 5.2 million and Morgan Stanley’s 3 million, but E-Trade’s average account size is $69,230 and Morgan Stanley’s is $900,000 while a survey found most of Robinhood’s held $1,000 to $5,000.
That all means that Robinhood earns less on interest sitting in users’ accounts than the old incumbents. But Robinhood earns the majority of its money on selling order flow and through its subscription Robinhood Gold feature that lets users pay monthly so they can borrow cash to trade with. Profiles and lists, and then eventually more social features, could get Robinhood’s users trading more so there’s more order flow to sell and more reason for them to buy subscriptions.
“Democratizing access is about lowering fees, minimums and other barriers people face — like confidence. Profiles and lists make finance easier to understand and more familiar for people” says Shanmugam. More social features built safely, more reassurance, more trading, more revenue. Robinhood has raised $910 million. But to outgun larger competitors like the newly assembled Morgan Stanley/E-Trade that’s matched its zero-fee pricing, Robinhood will have to win with product.
Hello and welcome back to our regular morning look at private companies, public markets and the gray space in between.
Today we’re living up to the introduction of this daily column by digging into the recently announced E-Trade sale and what its new price and recent financial performance can tell us about Robinhood, a startup competitor, and the unicorn’s valuation.
As always, when we’re comparing a fast-growing, private company in contrast to a larger, more mature, slower-growing, and profitable business, we’re working in broad strokes. But if we don’t take our contrasts too literally, we’ll be able to learn a thing or two.
After all, Robinhood is not only a richly-valued unicorn, it’s also a leading player in the burgeoning fintech and finservices startup niches, a sector we recently learned has capital flowing in at nearly record rates. So what we can learn about the value of Robinhood comps should prove illustrative and important.
We’ll start with an overview of the E-Trade sale, dig into its 2019 results and then compare the resulting multiples (with reasonable amounts of caveating, of course) to what we know about Robinhood. This will be fun!
ChartHop, a startup that aims to modernize and automate the organizational chart, announced a $5 million seed investment today led by Andreessen Horowitz.
A big crowd of other investors also participated including Abstract Ventures, the a16z Cultural Leadership Fund, CoFound, Cowboy Ventures, Flybridge Capital, Shrug Capital, Work Life Ventures and a number of unnamed individual investors, as well.
Founder, CEO and CTO, Ian White says that at previous jobs including as CTO and co-founder at Sailthru, he found himself frustrated by the available tools for organizational planning, something that he says every company needs to get a grip on.
White did what any good entrepreneur would do. He left his previous job and spent the last couple of years building the kind of software he felt was missing in the market. “ChartHop is the first org management platform. It’s really a new type of HR software that brings all the different people data together in one place, so that companies can plan, analyze and visualize their organizations in a completely new way,” White told TechCrunch.
While he acknowledges that among his early customers, the Head of HR is a core user, White doesn’t see this as purely an HR issue. “It’s a problem for any executive, leader or manager in any organization that’s growing and trying to plan what the organization is going to look like more strategically,” he explained.
Lead investor at a16z David Ulevitch, also sees this kind of planning as essential to any organization. “How you structure and grow your organization has a tremendous amount of influence on how your company operates. This sounds so obvious, and yet most organizations don’t act thoughtfully when it comes to organizational planning and design,” Ulevitch wrote in a blog post announcing the investment.
The way it works is that out of the box it connects to 15 or 20 standard types of company systems like BambooHR, Carta, ADP and Workday, and based on this information it can build an organizational chart. The company can then slice and dice the data by department, open recs, gender, salary, geography and so forth. There is also a detailed reporting component that gives companies insight into the current makeup and future state of the organization.
The visual org chart itself is set up so that you can scrub through time to see how your company has changed. He says that while it is designed to hide sensitive information like salaries, he does see it as a way of helping employees across the organization understand where they fit and how they relate to other people they might not even know because the size of the company makes that impossible.
ChartHop org chart organized by gender. Screenshot: ChartHop
White says that he has dozens of customers already, who are paying ChartHop by the employee on a subscription basis. While his target market is companies with more than 100 employees, at some point he may offer a version for early-stage startups who could benefit from this type of planning, and could then have a complete history of the organization over the life of the company.
Today, the company has 9 employees, and he only began hiring in the fall when this seed money came through. He expects to double that number in the next year.
HungryPanda, a food delivery service for Chinese communities in cities around the world, announced today it has raised $20 million in funding. The round was led by investors 83North and Felix Capital and will be used on hiring, product development and global expansion, particularly in the United States. The startup, which did not disclose its current valuation, said its goal is to reach an annual run rate of $200 million by May.
Founded in the United Kingdom, where its service first launched in Nottingham, HungryPanda is now available in 31 cities in the U.K., Italy, France, Australia, New Zealand and the U.S.
Food delivery is a competitive space with tight margins, but HungryPanda is carving out its own niche, and differentiating from competitors like UberEats, Deliveroo and FoodPanda, by tailoring its platform for Chinese-language users, including business owners, and focusing on Chinese food and grocery deliveries. It also accepts payment services like Alipay and WeChat Pay, and uses WeChat for marketing.
Chinese communities around the world present a major market opportunity and HungryPanda says its operations in the United Kingdom and New York City are already profitable. According to a U.S. Census Bureau report published last year, the Chinese diaspora around the world ranges from about 10 million, when counting people born in China, to about 45 million under a wider definition that also includes second-generation immigrants and other groups.
In a press statement, HungryPanda CEO Eric Liu said “we are delighted to secure the backing of 83North and Felix Capital to bring our unique service to more people in more places. Their unrivaled industry investment experience, coupled with our ability to focus on the precise needs of our customers and launch in every new city within a two-week window, means we are in an ideal position to significantly scale to the business to meet the huge level of demand created by Chinese cuisine.”
Both 83North and Felix Capital already have other food delivery startups in their portfolios. 83North is an investor and Just Eat and Helsinki-based Wolt, while Felix Capital has backed Deliveroo and Frichti, a French startup that makes all its meals in-house.
It sounds like Liquid Death has won over investors with its promise to “murder your thirst” — the startup is announcing that it’s raised $9 million in Series A funding.
Liquid Death sells water in a tallboy aluminum can, and it’s expanding the lineup with a sparkling water can that it plans to start shipping in March. A 12-pack of either regular or sparkling mountain water currently costs $18.99 on the Liquid Death website.
Co-founder and CEO Mike Cessario has worked as a creative director and copywriter at companies like VaynerMedia, and he told me that his goal is to create a brand that’s healthy and sustainable while being “just as exciting, if not more exciting, than energy drinks, soda, alcohol and candy.”
Hence the “murder your thirst” tagline, as well as a generally tongue-in-cheek approach to marketing, including aggressive, heavy metal-influenced art. The startup is expanding those efforts with a new “Keep the Underworld Beautiful” campaign that asks customers to save Hell itself from plastic bottles.
“When you’re launching a new brand, if you don’t have millions and millions of dollars to push it out there with [advertising], your only chance of survival is the product itself has to be insanely shareable,” Cessario said. “You’re going to have a hard enough time funding production. You’re not going to have the money to compete with the Cokes and the Pepsis, so the only way get it out there is if people organically want to share it because of the funny, irreverent marketing.”
As one piece of evidence that the message is resonating, the company says there are at least 20 “random customers” who have received Liquid Death tattoos.
The emphasis on branding left me wondering whether the water itself was a bit of a sidenote. Cessario responded that when it comes to food and beverage products, branding is the biggest differentiator, because “consumers aren’t stupid.” They don’t actually believe that one product is dramatically better than the other; it’s more about which brand they feel affinity with.
At the same time, he said that when it comes to turning Liquid Death into more than a one-time novelty purchase, “The most important thing, first and foremost, is that when someone buys it, they enjoy drinking this water from a can. When they actually have a freezing cold can of Liquid Death, people will continue to come back because they like the product experience.”
I’ll note that I’ve tried out Liquid Death myself and can confirm that it’s perfectly fine water. Most notably, there’s something genuinely fun and satisfying about cracking open a new can (though if you do it work, you also risk drawing some suspicious or amused stares from your coworkers).
Cessario also argued that the brand is about “so much more than loud marketing, it’s about sustainability.” The company makes a big point out of the fact that its aluminum cans are made out of more than 70% recycled material, and that aluminum is “infinitely recyclable,” making the packaging much more environmentally friendly than plastic bottles. Liquid Death also donates 5 cents for every can sold to nonprofits like 5 Gyres (which fights plastic pollution) and Thirst Project (which works on providing access to clean drinking around the world).
The sustainability message has prompted criticism around the fact that packaged water — even if it’s in an aluminum can — is less sustainably than simply filling up a reusable container with tap water.
“We’re definitely not against reusable bottles,” Cessario said when I brought this up. “But the reality is: Do you think it’s possible to actually get 300 million people, people in the Midwest, to do that 100 percent of the time? It’s highly unrealistic.”
Instead, he suggested that he’s happy for people to drink tap water from reusable bottles when it makes sense, and they can turn to Liquid Death at other times — “at a concert venue, when you’re having a house party, when you’re at a bar.”
Liquid Death’s Series A was led by Velvet Sea Ventures, a new firm created by Buddy Media co-founder Michael Lazerow. Ring founder Jamie Siminoff, TOMS founding members Jake Strom and Blake Mycoskie, GirlBoss founder/CEO Sophia Amoruso and Thrive Market CEO Nick Green also participated, as did existing investors Science Inc. and Away co-founder Jen Rubio. Liquid Death has now raised a total of $11.25 million.
Cessario said that until now, the majority of the startup’s sales have either come from its website or from Amazon, but one of the main aims with the funding is to get the water into brick-and-mortar stores. In fact, it’s already taking a big step in that direction, with nationwide availability in Whole Foods stores planned for next month.
Teikametrics, a startup that helps retailers optimize their online ad spending, has raised $15 million in additional funding.
The company launched with the goal of helping Amazon sellers advertise more effectively. More recently, it launched a similar partnership with Walmart.
CEO Alasdair McLean-Foreman said that on both platforms, the startup’s Flywheel platform can improve the ad-buying process using retailer data about things like transactions, inventory and pricing.
McLean-Foreman praised Amazon for creating “an incredible closed loop” where “millions of consumers [are] meeting millions of suppliers across the long tail.” And of the other online platforms, he said Walmart is “the one that’s closest to parity.”
He added that by working with Teikametrics, retailers (whether they’re third-party sellers, or brands promoting products that Amazon and Walmart are selling themselves) can optimize their campaigns across both marketplaces, and eventually on other platforms as well.
McLean-Foreman added that the company will be launching products that go beyond advertising later this year. His vision is for Teikametrics to use that same data to create a retail “operating system” that optimize every aspect of a retailer’s business, including inventory and pricing.
“It’s about creating very simple solution to a very, very complicated problem that is much more dynamic and much more complicated than just the ads,” he said.
The Boston-headquartered startup raised a $10 million Series A in 2018. The new round was led by Jump Capital, with participation from Granite Point Capital, Jerry Hausman (an MIT econometrics professor who also serves as a scientific advisor) and Ed Baker (former head of growth at Facebook and Uber).
Teikametrics says it’s working with more than 3,000 brands, including Clarks, Razer, Power Practical, Zipline Ski and Mark Cuban’s Brands. It also recently hired former Amazon ad executive Srini Guddanti as its chief product officer.
Looking at the broader retail and advertising landscape, McLean-Foreman acknowledged, “AI is almost a buzzword,” but he argued, “We are actually AI-first. The product itself is automation, it is intelligent decision-making.”
He added, “Advertising is a huge lever to pull and a really good problem for AI to solve, but I’m super excited to apply those same AI components or solutions to an even bigger problem at the same time.”
Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast, where we unpack the numbers behind the headlines.
This is the first Equity Shot in what feels like a long time, so, let me explain. Most of the time Equity comes out on Friday. It’s a mix of news and chat and venture happenings. It’s fun! But sometimes, a topic comes up that demands more immediate attention. That’s what happened today as we stared at Tesla’s share price wondering what in the hell was going on.
Shares of the electric car company are surging — again — today, pushing ever-closer to the $1,000 per-share mark. So, Danny, myself and Chris on the turntables got together to riff and chat about what is going on.
For those of you who want some links, here you go:
Today was all about fun. The main, more serious (kinda) show is back Friday. Stay cool!
The new vehicle, inventively named Fund II, will mostly focus on early-stage companies in the cybersecurity space. The fund’s timing is somewhat unsurprising. As we noted in our earlier coverage, the recent IPOs of Cloudflare (more here) and CrowdStrike (more here) have given cybsersecurity a halo, showing founders and investors alike that outsize returns are possible in the space. Such successes can’t hurt VCs looking for fresh capital.
To get a stronger grip on how ForgePoint sees the market, TechCrunch corresponded with the group, asking about fund mechanics (check sizes, investing pace), the cybersecurity sector itself (business models, valuations) and recent liquidity events (CrowdStrike in particular). ForgePoint’s Alberto Yépez, a co-founder and managing director at the group, answered our questions.
The following interview has been lightly edited for clarity and length. Let’s have some fun:
TechCrunch: The new fund is $150 million larger than its predecessor. Why raise 50% more for the new vehicle? What is the target number of checks per year? Will it be faster than the preceding fund?
ForgePoint Capital: We were one of the first investors to focus on cybersecurity when we raised our first fund. Since then, the cybersecurity market has grown by more than 50%, driven by the constantly evolving challenges facing businesses, governments and individuals. We’ve also doubled our investment team. Our team has a singular focus on the market, driving unparalleled domain expertise and insights into emerging industry trends.
We will continue to invest in six to ten new cybersecurity companies per year, and find great opportunities with leading entrepreneurs.
Putting capital to work in “early-stage and select growth companies” is delightfully flexible. What check size range is the fund targeting, and what is the target deal size for growth-oriented deals?
We target up to $25 million for early-stage ventures throughout the life of an investment, and up to $50 million for growth-oriented companies achieving considerable revenue growth.
How much did Crowdstrike’s successful IPO boost cybersecurity-focused startup valuations and fundraising last year?
A rising tide lifts all boats. In cybersecurity, as elsewhere, the market rewards rapid growth and valuations reflect [that]. We target companies with great teams building innovative solutions that are poised for high growth. While the Crowdstrike IPO certainly boosted attention on the market, over 90% of successful cybersecurity exits are through M&A. Strategic buyers and financial sponsors pay up for companies that can scale.