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Yesterday — June 5th 2020Your RSS feeds

The accelerating digital transformation, redux

By Alex Wilhelm

Earlier this week, TechCrunch covered a grip of earnings reports showing that some companies helping other businesses move to modern software solutions are seeing accelerated growth. Inside the Software as a Service (SaaS) world, this is known as the digital transformation. Based on how many software companies are talking about it, the pace of change is only picking up.

But since we published that first entry, a number of SaaS companies that have posted financial results seemed to disappoint investors. Seeing some companies in the high-flying sector struggle made us sit back and think. What was going on?

Today we’re going to explore how the digital transformation’s acceleration seems real enough, but how it’s not landing equally. We’ll start by going over a short run of earnings results, talk to Yext CEO Howard Lerman about what his B2B SaaS company is seeing, and wrap with notes on what could be coming next from software shops.

A quick word on digital transformation

We all hear about digital transformation, but it’s hard to define. Generally, it’s a broad area that includes digitization of manual processes, modern software development practices like continuous delivery and containerization and a general way of moving faster via technology — especially in the cloud.

Speaking last month on Extra Crunch Live, Box CEO Aaron Levie defined the term as he sees it. “The way that we think about digital transformation is that much of the world has a whole bunch of processes and ways of working — ways of communicating and ways of collaborating where if those business processes or that way we worked were able to be done in digital forms or in the cloud, you’d actually be more productive, more secure and you’d be able to serve your customers better. You’d be able to automate more business processes.” he said.

What we’re seeing now is that the pandemic has accelerated the rate of change much faster than many had anticipated. Efforts to slow the spread of COVID-19 and its related workplace disruptions have accelerated what would have been a normal timetable. But on its own, that doesn’t mean the market is seeing equal results across every company and industry that might be part of that trend.

Earnings results

Lots of SaaS companies reported earnings this week, but two sets of returns stuck out as we reviewed the results, those from Slack and Smartsheet.

The IPO window is open (again)

By Alex Wilhelm

Hello and welcome back to our regular morning look at private companies, public markets and the gray space in between.

ZoomInfo went public yesterday. After pricing its IPO $1 ahead of its proposed range at $21 per share, the company closed its first day’s trading worth $34.00, up 61.9%, according to Yahoo Finance. Then the company gained another 5.2% in after-hours trading.

Whether or not you feel that this SaaS player was worth the revenue multiple its original, $8 billion valuation dictated — let alone that same multiple times 1.6x — the message from the offering was clear: the IPO window is open.

This is not news to a few companies looking to take advantage of today’s strong equity prices.

Used-car marketplace Vroom is looking to get its shares public before its Q2 numbers come out, despite a history of slim gross profit generation. The company hopes to go public for as much as $1.9 billion, a modest uptick from its final private valuations.

We’ll get another dose of data when Vroom does price — how much investors are willing to pay for slim-margin revenue will tell us a bit more than what we learned from ZoomInfo, which has far superior gross margins. Investors have already signaled that they are content to value high-margin software-ish revenues richly; Vroom is more of a question, but if it does price strongly we’ll know public investors are looking for any piece of growth they can find.

This brings us to the latest news: Amwell has confidentially filed to go public. Formerly known as American Well, CNBC reports that the venture-backed telehealth company has dramatically expanded its customer base:

Telemedicine has seen an uptick in recent months, as people in need of health services turned to phone calls and video chats so they could avoid exposure to Covid-19. The company told CNBC last month that it’s seen a 1,000% increase in visits due to coronavirus, and closer to 3,000% to 4,000% in some places.

Before yesterdayYour RSS feeds

VMware acquires network security firm Lastline, said to lay off 40% of staff

By Zack Whittaker

VMware is acquiring network security firm Lastline, TechCrunch has learned.

Since its launch in 2012, Lastline raised about $52.2 million, according to Crunchbase. Investors include Thomvest Ventures, which led the company’s $28.5 million Series C round in 2017, Redpoint and e.ventures, which led the company’s 2013 funding round, as well as Barracuda Networks, NTT Finance and Dell Technologies Capital.

A source tells us that VMware will let go some 40 percent of Lastline’s employees — about 50 staffers — as part of the acquisition. We asked a Lastline spokesperson for comment prior to publication but did not hear back. A spokesperson for VMware also did not respond to a request for comment.

After we published, Lastline confirmed the acquisition in a blog post.

“By joining forces with VMware, we will be able to offer additional capabilities to our customers and bring to market comprehensive security solutions for the data center, branch office and remote and mobile users,” said Lastline’s chief executive John DiLullo.

Terms of the deal were not disclosed. The deal, subject to regulatory approvals is expected to close by the end of July.

Lastline provides threat detection services mostly focus on the network level, but they range from malware analysis to intrusion detection and network traffic analysis. The company prides itself on being a cloud native platform and as such, it promises to secure cloud deployments and on-premises networks, as well as multi-cloud and hybrid environments.

Recently, support for cloud-native hybrid- and multi-cloud deployments has very much been a focus for VMware, which makes Lastline a pretty obvious fit for its overall strategy. This also marks VMware’s third security acquisition this year, after it picked up network analytics firm Nyansa in January and cloud-native security platform Octarine in May. VMware also acquired security firm Carbon Black in August 2019. The trend here is pretty obvious and VMware is obviously trying to position itself as the provider of choice for enterprises that are looking for cloud-native

The company was founded by Christopher Kruegel, Engin Kirda, Giovanni Vigna, a team of computer science professors from the University of California, Santa Barbara and Northeastern University.

News of the acquisition comes a week after VMware announced solid Q1 earnings of $386 million, or $0.92 a share. Revenues came in at $2.73 billion, up about 12% on the same period a year ago. VMware CEO Pat Gelsinger attributed the quarter to the shift to work-from-home sparked by the coronavirus pandemic.

VMware shares were down slightly at Thursday’s market close.

Updated to include Lastline’s blog post on the acquisition.

Unpacking ZoomInfo’s IPO as the firm starts to trade

By Alex Wilhelm

Hello and welcome back to our regular morning look at private companies, public markets and the gray space in between.

The ZoomInfo IPO slipped through our fingers in the last news cycle, so we’re going to catch up.

Founded in 2000, the company has had a somewhat complicated history. ZoomInfo raised a Series A in 2004, according to Crunchbase data, but that’s where its funding history stops. The firm, a SaaS operation that provides information on business people, later sold itself to private equity firm Great Hill Partners in 2017 for a reported $240 million. That wasn’t the end, however. ZoomInfo was later sold to DiscoverOrg for a sum reported to be more than $500 million. DiscoverOrg is a sales and marketing services company based in Washington state that has raised money from private equity.

As you can imagine given the transactions ZoomInfo has gone through, the company’s accounting is a mess to understand. It’s latest S-1/A has the following wording to describe what the IPO encompasses, just to give you a taste:

Immediately following this offering, ZoomInfo Technologies Inc. will be a holding company, and its sole material asset will be a controlling equity interest in ZoomInfo HoldCo, which will be a holding company whose sole material asset will be a controlling equity interest in ZoomInfo OpCo. ZoomInfo Technologies Inc. will operate and control all of the business and affairs of ZoomInfo OpCo through ZoomInfo HoldCo and, through ZoomInfo OpCo and its subsidiaries, conduct our business. Following this offering, ZoomInfo OpCo will be the predecessor of ZoomInfo Technologies Inc. for financial reporting purposes…..

You don’t need to understand all that. Instead, this morning, let’s take a few minutes to dig into the company’s recent earnings results, and its valuation. How is the market valuing this firm? And did its previous owners do well to pay as much as they did for the company?

IPO fundamentals

NetApp to acquire Spot (formerly Spotinst) to gain cloud infrastructure management tools

By Ron Miller

When Spotinst rebranded to Spot in March, it seemed big changes were afoot for the startup, which originally helped companies find and manage cheap infrastructure known as spot instances (hence its original name). We had no idea how big at the time. Today, NetApp announced plans to acquire the startup.

The companies did not share the price, but Israeli publication CTECH pegged the deal at $450 million. NetApp would not confirm that price.

It may seem like a strange pairing, a storage company and a startup that helps companies find bargain infrastructure and monitor cloud costs, but NetApp sees the acquisition as a way for its customers to bridge storage and infrastructure requirements.

“The combination of NetApp’s leading shared storage platform for block, file and object and Spot’s compute platform will deliver a leading solution for the continuous optimization of cost for all workloads, both cloud native and legacy,” Anthony Lye, senior vice president and general manager for public cloud services at NetApp said in a statement.

Holger Mueller, an analyst with Constellation Research says the deal makes sense on that level, but it depends on how well NetApp incorporates the Spot technology into its stack. “At the end of the day to run next generation applications successfully in the cloud you need to be efficient on compute and storage usage. NetApp is doing great on the latter but needed way to monitor and automate compute consultation. This is what Spot brings to the table, so the combination makes sense, but as in all acquisitions execution is key now,” Mueller told TechCrunch.

Spot helps companies do a couple of things. First of all it manages spot and reserved instances for customers in the cloud. Spot instances in particular, are extremely cheap because they represent unused capacity at the cloud provider. The catch is that the vendor can take the resources back when they need them, and Spot helps safely move workloads around these requirements.

Reserved instances are cloud infrastructure you buy in advance for a discounted price. The cloud vendor gives a break on pricing, knowing that it can count on the customer to use a certain amount of infrastructure resources.

At the time it rebranded, the company also had gotten into monitoring cloud spending and usage across clouds. Amiram Shachar, co-founder and CEO at Spot, told TechCrunch in March, “With this new product we’re providing a more holistic platform that lets customers see all of their cloud spending in one place — all of their usage, all of their costs, what they are spending and doing across multiple clouds — and then what they can actually do [to deploy resources more efficiently],” he said at the time.

Shachar writing in a blog post today announcing the deal indicated the company will continue to support its products as part of the NetApp family, and as startup CEOs typically say at a time like this, move much faster as part of a large organization.

“Spot will continue to offer and fully support our products, both now and as part of NetApp when the transaction closes. In fact, joining forces with NetApp will bring additional resources to Spot that you’ll see in our ability to deliver our roadmap and new innovation even faster and more broadly,” he wrote in the post.

NetApp has been quite acquisitive this year. It acquired Talon Storage in early March and CloudJumper at the end of April. This represents the twentieth acquisition overall for the company, according to Crunchbase data.

Spot was founded in 2015 in Tel Aviv. It has raised over $52 million, according to Crunchbase data. The deal is expected to close later this year, assuming it passes typical regulatory hurdles.

Salesforce names Vlocity founder David Schmaier CEO of new Salesforce Industries division

By Ron Miller

When Salesforce announced it was acquiring Vlocity for $1.33 billion in February, it was a deal that made sense for both companies. Today, the company announced that the deal has closed and Vlocity CEO David Schmaier has been named CEO of a new division called Salesforce Industries.

Vlocity has built several industry-specific CRM tools such media and entertainment, healthcare and government on top of the Salesforce platform. While Salesforce has developed some of its own industry solutions, having a division devoted to verticalized tools creates additional market opportunities for the company.

Schmaier sees the new division as a commitment from the company on the value of an industry-focused approach.

“As Vlocity becomes part of what we’re calling Salesforce industries, this will be a larger group within Salesforce to really focus on bringing these industry-specific solutions to the customer, helping them go digital and working in a whole new way,” Schmaier told TechCrunch.

Salesforce president and COO Bret Taylor will be Schmaier’s boss. Writing in a blog post announcing the new division, Taylor said that like so many aspects of technology solutions these days, the industry focus is about helping companies with digital transformation. As the world changes before our eyes during the pandemic, companies are being forced to move operations online, and Salesforce wants to provide more specific solutions for customers who need it.

“Companies in every industry have a digital transformation imperative like never before — and many are accelerating their plans for a digital-first, work-from-anywhere environment. With Salesforce Customer 360 and Vlocity, our customers have the most advanced industries platform as well as tools and expert guidance completely tailored to their specific needs,” Taylor wrote.

Schmaier says the fact that his company’s tooling was already built on top of Salesforce allows them to really hit the ground running without the integration challenges that combining organizations typically face after an acquisition like this one.

“I’ve been involved in various mergers and acquisitions over my 30-year career, and this is the most unique one I’ve ever seen because the products are already 100% integrated because we built our six vertical applications on top of the Salesforce platform. So they’re already 100% Salesforce, which is really kind of amazing. So that’s going to make this that much simpler,” he said.

It’s likely that Salesforce will continue to build on the new division and add additional applications over time given the platform is already in place. “We basically have a platform now inside Salesforce to build verticals. So the cost to build new verticals is a fraction of what it was for us to build the first one because of this industry cloud platform. So we are going to look at opportunities to build new ones but we’re not ready to announce that today. For starters, we are forming this one organization,” Schmaier said.

The company reported a record quarter last Thursday, but light guidance for next quarter spooked investors and the stock was down on Friday (It is up .77% today as of publication). The company does not rest on its laurels though and having a division in place like Salesforce Industries provides a more focused way of dealing with verticals and another possible source of revenue.

Danggeun Market, the South Korean secondhand marketplace app, raises $33 million Series C

By Catherine Shu

Danggeun Market, the startup behind Karrot, South Korea’s largest neighborhood marketplace and networking app, announced today that that it has raised a $33 million Series C. The round was led by Goodwater Capital and Altos Ventures.

The funding brings Danggeun Market’s total raised so far to $40.5 million. Its list of investors also include Kakao Ventures, Strong Ventures, SoftBank Ventures and Capstone Partners. Danggeun Market, which launched Karrot in the United Kingdom last November, will use part of the funding to expand into more international markets and increase its monetization tools.

One of Karrot’s most unique features is that its peer-to-peer marketplace only shows people listings from sellers located within a 6-kilometer radius (the distance is set slightly wider for more remote areas), and most transactions are completed in person. As a safety measure, all user identities are verified through their mobile numbers and location.

In a call with TechCrunch, Danggeun Market co-founder and co-CEO Gary Kim and vice president Chris Heo said Karrot’s model works because of the high population density in many South Korean cities. As the app launches overseas, the company will focus on other densely populated areas, especially ones that don’t already have a dominant neighborhood marketplace app.

Danggeun Market planned to enter three new countries this year, but slowed down the pace of its expansion because of the COVID-19 pandemic. Instead, it will focus on enhancing its community features in South Korea, with the goal of launching in at least one new country by the end of this year.

Danggeun Market was founded in 2015 by Gary Kim and Paul Kim, both of whom previously worked at KakaoTalk, South Korea’s largest messaging app. Before Danggeun Market launched, the most popular online secondhand marketplace in South Korea was website Joonggonara, but it didn’t have a mobile app.

Being designed for smartphones helps Karrot differentiate from other peer-to-peer marketplaces. For example, its distance limits make listings easier to spot, and also encourages interactions among neighbors. Its approach to neighborhood networking is also the foundation of the company’s monetization model. Instead of charging listing fees, the app is free to use, and the company makes money through hyperlocalized advertising.

Danggeun Market says its monthly active users have grown 130% year-over-year, reaching seven million in April and making Karrot the second-largest shopping app in South Korea after Coupang, the country’s largest e-commerce platform. Users spend an average of 20 minutes per day on the app, and gross merchandise value increased by 250% year-over-year, despite the COVID-19 pandemic.

Heo said the number of listings on the app actually grew from 4.4 million in January to 8.4 million in April, as more people spent time at home and found things they wanted to get rid of, and also preferred to remain within their neighborhoods. Danggeun Market’s community features also saw a jump in the number of postings made.

Heo said face-to-face transactions continued, because many South Koreans were already used to wearing masks and other safety measures that were ramped up during the pandemic. The company added a new feature called Karrot Help, with tools to help match people with neighbors who needed help running errands and a mask inventory checker for nearby pharmacies, and implemented tools to automatically control the price of mask listings and prevent profiteering.

Zoom’s earnings to test hot tech valuations

By Alex Wilhelm

Hello and welcome back to our regular morning look at private companies, public markets and the gray space in between.

This week will see two richly-valued SaaS business share their Q1 earnings reports: CrowdStrike and Zoom. Both are 2019 IPOs, but these relatively young public companies have enjoyed a strong run in the public markets this year.

Zoom started off 2020 worth around $69 per share; today it is worth $179.48 ahead of the start of today’s trading. CrowdStrike started the year at a little over $49 per share; today it’s worth $87.81 per share. The business-focused, but consumer-friendly video chat service Zoom and the cybersecurity-focused CrowdStrike are perfect examples of the updraft that SaaS businesses have rode this year.

With both firms reporting earnings at the same time, we’ll get notes on the work-from-home trend, and how it is impacting services that help make remote-work possible; and, CrowdStrike’s earnings will inform us on how the cybersecurity space is performing — are businesses shelling out more than expected to keep their networks and employees safe when so many are out of the office?

If Zoom and CrowdStrike report results that disappoint investors, they could do more than just deflate their own shares. Missed earnings reports from either could puncture SaaS valuations more broadly, perhaps impacting private valuations for companies that are in the market for new capital. Why?

Prominence and timing.

Earnings expectations

Equinix is buying 13 data centers from Bell Canada for $750M

By Ron Miller

Equinix, the data center company, has the distinction of recently recording its 69th straight positive quarter. One way that it has achieved that kind of revenue consistency is through strategic acquisitions. Today, the company announced that it’s purchasing 13 data centers from Bell Canada for $750 million, greatly expanding its footing in the country.

The deal is financially detailed by Equinix across two axes, including how much the data centers cost in terms of revenue, and adjusted profit. Regarding revenue, Equinix notes that it is paying $750 million for what it estimates to be $105 million in “annualized revenue,” calculated using the most recent quarter’s results multiplied by four. This gives the purchase a revenue multiple of a little over 7x.

Equinix also provided an adjusted profit multiple, saying that the 13 data center locations “[represent] a purchase multiple of approximately 15x EV / adjusted EBITDA.” Unpacking that, the company is saying that the asset’s enterprise value (similar to market capitalization, a popular valuation metric for public companies) is worth about 15 times its earnings before interest, taxes, deprecation and amortization (EBITDA). This seems a healthy price, but not one that is outrageous.

Global reach of Equinix including expanded Canadian operations shown in left panel. Image: Equinix

The acquisition not only gives the company that additional revenue and a stronger foothold in the 10th largest economy in the world, it also gains 600 customers using the Bell data centers, of which 500 are net new.

As much of the world is attempting to digitally transform in the midst of the pandemic and current economic crisis, Equinix sees this as an opportunity to help more Canadian customers go digital more quickly.

“Equinix has been serving the Canadian market in Toronto for more than a decade. This expansion and scale gives the Canadian market a clear and rapid migration path to digital transformation. We’re looking forward to deepening our relationships with our existing Canada-based customers and helping new companies throughout the country position themselves for digital success,” Jon Lin, Equinix President, Americas told TechCrunch.

This is not the first time that Equinix has taken a bunch of data centers off of the hands of a telco. In fact, three years ago, the company bought 29 centers from Verizon (which is the owner of TechCrunch) for $3.6 billion.

As telcos move away from the data center business, companies like Equinix are able to come in and expand into new markets and increase revenue. It’s one of the ways it continues to generate positive revenue year after year.

Today’s deal is just part of that strategy to keep expanding into new markets and finding new ways to generate additional revenue as more companies use their services. Equinix rents space in its data centers and provides all the services that companies need without having to run their own. That would include things like heating, cooling, racks and wiring.

Even though public cloud companies like Amazon, Microsoft and Google are generating headlines with growing revenues, plenty of companies still want to run their own equipment without going to the expense of actually owning the building where the equipment resides.

Today’s deal is expected to close in the second half of the year, assuming it clears all of the regulatory scrutiny required in a purchase like this one.

Equity Monday: Tech’s stance on change, two funding rounds and fintech layoffs

By Alex Wilhelm

Good morning and welcome back to TechCrunch’s Equity Monday, a brief jumpstart for your week.

A big thanks to start to the whole Equity crew for doing a stellar job last week with the show while I was on vacation, especially to Danny for taking on this particular installment of the podcast. Equity Monday is still pretty new, frankly, so him stepping up and into the role was a huge boon. Thanks, Danny.

Right, so, what did we talk about today?

  • In the face of outrageous police action and systemic racism, most of tech — both public and private, alike — said something or did something in the last few days. We go over some of the latest statements and pledges from the VC and startup world in the episode, but do take a look for yourself and decide if what’s been done and said is enough.
  • For more, read this.
  • Coming up this week: Zoom earnings. Zoom’s earnings report matters a bit more than a regular digest of three-months’ worth of corporate performance. The company is a key plank in the group of companies are have been buoyed by COVID-19 pandemic, meaning that investors that have made similar bets will have their eyes on the videochatting giant’s results. And, SaaS and cloud stocks are trading at all-time highs. If Zoom can turn in good numbers, that run might be able to continue.
  • Tia Health put together nearly $25 million for women-centric telehealth.
  • Beam, a micromobility startup headquartered in Singapore, raised $26 million.
  • And, finally, fintech layoffs. I was off last week but was a bit surprised at the number of fintech companies that were cutting staff. Why? Well, we have a guess or two on that count. (You can read more here, and here, from our own Natasha Mascarenhas for background).

Equity will be back Friday morning with more. Welcome to the week, and please help others as much as you can.

Equity drops every Monday at 7:00 AM PT and Friday at 6:00 am PT, so subscribe to us on Apple PodcastsOvercastSpotify and all the casts.

Zynga acquires Turkey’s Peak Games for $1.8B, after buying its card games studio for $100M in 2017

By Ingrid Lunden

Today, some news of a huge acquisition out of Turkey that represents the first billion-dollar-plus exit for a startup out of the country. Social gaming company Zynga confirmed that it is buying Istanbul-based Peak Games, the company behind popular Candy-Crush-style mobile gaming apps Toon Blast and Toy Blast, for $1.8 billion — $900 million in cash, and $900 million in Zynga shares. Interestingly, this is the second time that Zynga has made a Peak Games acquisition. In 2017, it purchased the company’s mobile card games business for $100 million.

The news caps off a short period of speculation about an upcoming deal, with local tech publications like Webrazzi calling the sale (and correct price) last month. Peak’s investors had included European VCs Earlybird and Hummingbird Ventures — both active backers of startups in emerging markets in the region — and Endeavor Global (the nonprofit that invests via its Endeavor Catalyst fund). Sidar Sahin, the founder and CEO, had been the company’s biggest shareholder.

As with all M&A in the world of gaming, Zynga is getting a couple of big gains out of this sale.

The first is picking up two very popular games that it doesn’t have do develop from scratch (in hopes of investing R&D budget in what it hopes but can’t guarantee will be a hit). Toon Blast and Toy Blast together totalling more than 12 million DAUs. On top of that, those two games are some of the highest-grossing among all in Apple’s App Store, ranking among the top-10 and top-20 games in the past two years.

It’s not just about adding popular games content, but expanding Zynga’s advertising business as well. Significantly, Peak Games’ primary users are outside of Zynga’s home market of the US, representing a real growth opportunity for the company to cross-sell other games. Zynga says that bolting on Peak’s games network to its own will boost its number of mobile daily active users by 60%, which mean a lot of scaling up for its ad network.

Of course, sustaining both of those titles and their respective franchises as hits for the long run is not a given — the world of gaming regularly sees blockbusters fizzle out when the next big thing comes along — although these “forever franchises” with their steady popularity have a strong play to be exactly that. However, the long play is also where the third big asset comes in: talent. Peak has 100 employees working on its current franchises and other games. So while the back ends (and revenues) may be getting combined, Zynga says Peak’s people will stay put and continue to work under the Peak brand on the existing franchises as well as on new projects that are already in development.

Zynga says the deal will close in the third quarter of 2020, and it’s updated its guidance already on the news, sending its stock up more than 5% in pre-market trading. Specifically, Zynga today said it believes the deal will bump up revenues by $40 million for the year, to $1.840 billion.

A startup so nice, Zynga bought it twice

The deal is notable not just because of what it’s adding to Zynga today, but because it highlights some interesting history between the two companies.

Back in November 2017, Zynga acquired one division of Peak Games, its mobile card games studio, for $100 million in cash.

The deal included games like Spades Plus and Gin Rummy Plus, respectively the largest spade and rummy mobile games in the world at the time; and games that were popular in Peak’s home market, 101 Okey Plus and Okey Plus. And according to analysis from Apptopia, it looks like Zynga was set to recoup the money it paid out by 2019, meaning that business is now profitable.

The remainder of Peak Games is another story. If Zynga tried to buy the whole business two years ago, it might have been that Peak was reluctant to sell its remaining two titles Toon Blast and Toy Blast for anything near $100 million — and with good reason since (as Zynga itself pointed out) they went on to become some of the consistently highest-grossing games in all of the App Store. In the intervening period, Zynga tried to create its own rivals, namely with Wonka’s World of Candy, but it’s never been as big of a hit as the others. Hence, Zynga possibly finally found a price for the whole of Peak Games.

“We are honored to welcome Sidar and team to Zynga. Peak is one of the world’s best puzzle game makers and we could not be more excited to add such creative and passionate talent to our company,” said Frank Gibeau, Chief Executive Officer of Zynga, in a statement. “With the addition of Toon Blast and Toy Blast, we are expanding our live services portfolio to eight forever franchises, meaningfully increasing our global audience base and adding to our exciting new game pipeline. As a combined team, we are well positioned to grow faster together.”

“This is a monumental partnership not only for Zynga and Peak, but for the whole mobile gaming industry,” said Sidar Sahin, founder and Chief Executive Officer of Peak, in a statement. “Both companies share a common vision — to bring people together through games. Peak’s culture is rooted in relentless learning and progress, so as we embark on this new chapter in our journey together with Zynga, we remain as committed as ever to our unique culture. We’re very excited for our combined future and what we will accomplish together.”

Ultimately, this is also a huge deal for Turkey’s tech ecosystem. This has been a steady presence straddling both the European and MENA markets (much as Turkey’s wider economy and political presence does), but so far with little impact in terms of exits and activity that extend outside of the region. This acquisition is a testament to the exciting companies and talent that are being developed in the market, and is of course yet another sign of how big tech companies based out of more established centres like the Bay Area will continue to take bigger leaps to tap talent ever further afield, in their ongoing consolidation and search for both business and audience growth.

One impact of the COVID-19 pandemic has been that many are starting to see a much faster decentralisation in the world of technology. People are working remotely, and some are even planning to move away from tech hubs; while deals are getting done not in person but over videoconferencing links. This acquisition also demonstrates how that is also playing out in the world of M&A, too.

Jeremy Conrad left his own VC firm to start a company, and investors like what he’s building

By Connie Loizos

When this editor first met Jeremy Conrad, it was in 2014, at the 8,000-square-foot former fish factory that was home to Lemnos, a hardware-focused venture firm that Conrad had cofounded three years earlier.

Conrad —  who as a mechanical engineering undergrad at MIT worked on self driving cars, drones and satellites — was still excited about investing in hardware startups, having just closed a small new fund even while hardware was very unfashionable. One investment his team had made around that time was in Airware, a company that made subscription-based software for drones and attracted meaningful buzz and $118 million in venture funding before abruptly shutting down in 2018.

For his part, Conrad had already moved on, deciding in late 2017 that one of the many nascent teams that was camping out at Lemnos was on to a big idea relating the future of construction. Conrad didn’t have a background in real estate per se or even an earlier interest in the industry. But the “more I learned about it — not dissimilar to when I started Lemnos — It felt like there was a gap in the market, an opportunity that people were missing,” says Conrad from his home in San Francisco, where he has hunkered down throughout the COVID-19 crisis.

Enter Quartz, Conrad’s now 1.5-year-old, 14-person company, which quietly announced $7.75 million in Series A funding earlier this month, led by Baseline Ventures, with Felicis Ventures, Lemnos and Bloomberg Beta also participating.

What it’s selling to real estate developers, project managers and construction supervisors is really two things, which is safety and information. Using off-the-shelf hardware components that are reassembled in San Francisco and hardened (meaning secured to reduce vulnerabilities), the company incorporates its machine-learning software into this camera-based platform, then mounts the system onto cranes a construction sites. From there, the system streams 4K live feeds of what’s happening on the ground, while also making sense of the action.

Say dozens of concrete pouring trucks are expected on a construction site. The cameras, with their persistent view, can convey through a dashboard system whether and when the trucks have arrived and how many, says Conrad. It can determine how many people on are on a job site, and whether other deliveries have been made, even if not with a high degree of specificity. “We can’t say [to project managers] that 1,000 screws were delivered, but we can let them know whether the boxes they were expecting were delivered and where they were left,” he explains.

It’s an especially appealing proposition in the age of coronavirus, as the technology can help convey information that’s happening at a site that’s been shut down, or even how closely employees are gathered. Conrad says the technology also saves on time by providing information to those who might not otherwise be able to access it. Think of the developer who is on the 50th floor of the skyscraper he or she is building, or even the crane operator who is perhaps moving a two-ton object and has to rely on someone on the ground to deliver directions but can enjoy far more visibility with the aid of a multi-camera set-up.

Quartz, which today operates in California but is embarking on a nationwide rollout, was largely inspired by what Conrad was seeing in the world of self-driving. From sensors to self-perception systems, he knew the technologies would be even easier to deploy at construction sites, and he believed it could make them safer, too. Indeed, like cars, construction sites are astonishingly dangerous. According to the Occupational Safety and Health Administration, of the worker fatalities in private industry in 2018, more than 20% were in construction.

Conrad also saw an opportunity to take on established companies like Trimble, a 42-year-old, publicly traded, Sunnyvale, Ca.-based company that sells a portfolio of tools to the construction industry and charges top dollar for them, too. (Quartz is currently charging $2,000 per month per construction site for its series of cameras, their installation, a livestream and “lookback” data, though this may well rise at its adds additional features.)

It’s a big enough opportunity in fact, that Quartz is not alone in chasing it. Last summer, for example, Versatile, an Israeli-based startup with offices in San Francisco and New York City, raised $5.5 million in seed funding from Germany’s Robert Bosch Venture Capital and several other investors for a very similar platform,  though it uses sensors mounted under the hook of a crane to provide information about what’s happening. Construction Dive, a media property that’s dedicated to the industry, highlights many other, similar and competitive startups in the space, too.

Still, Quartz has Conrad, who isn’t just any founding CEO. Not only does he have that background in engineering, but having founded a venture firm and spent years as an investor may serve him well, too. He thinks a lot about the payback period on its hardware, for example.

Unlike a lot of founders, he also says he loves the fundraising process. “I get the highest quality feedback from some of the smartest people I know, which really helps focus your vision,” says Conrad, who says that Quartz, which operates in California today, is now embarking on a nationwide rollout.

“When you talk with great VCs, they ask great questions. For me, it’s best free consulting you can get.”

Cisco to acquire internet monitoring solution ThousandEyes

By Ron Miller

When Cisco bought AppDynamics in 2017 for $3.7 billion just before the IPO, the company sent a clear signal it wanted to move beyond its pure network hardware roots into the software monitoring side of the equation. Yesterday afternoon the company announced it intends to buy another monitoring company, this time snagging internet monitoring solution ThousandEyes.

Cisco would not comment on the price when asked by TechCrunch, but published reports from CNBC and others pegged the deal at around $1 billion. If that’s accurate, it means the company has paid around $4.7 billion for a pair of monitoring solutions companies.

Cisco’s Todd Nightingale, writing in a blog post announcing the deal said that the kind of data that ThousandEyes provides around internet user experience is more important than ever as internet connections have come under tremendous pressure with huge numbers of employees working from home.

ThousandEyes keeps watch on those connections and should fit in well with other Cisco monitoring technologies. “With thousands of agents deployed throughout the internet, ThousandEyes’ platform has an unprecedented understanding of the internet and grows more intelligent with every deployment, Nightingale wrote.

He added, “Cisco will incorporate ThousandEyes’ capabilities in our AppDynamics application intelligence portfolio to enhance visibility across the enterprise, internet and the cloud.”

As for ThousandEyes, co-founder and CEO Mohit Lad told a typical acquisition story. It was about growing faster inside the big corporation than it could on its own. “We decided to become part of Cisco because we saw the potential to do much more, much faster, and truly create a legacy for ThousandEyes,” Lad wrote.

It’s interesting to note that yesterday’s move, and the company’s larger acquisition strategy over the last decade is part of a broader move to software and services as a complement to its core networking hardware business.

Just yesterday, Synergy Research released its network switch and router revenue report and it wasn’t great. As companies have hunkered down during the pandemic, they have been buying much less network hardware, dropping the Q1 numbers to seven year low. That translated into a $1 billion less in overall revenue in this category, according to Synergy.

While Cisco owns the vast majority of the market, it obviously wants to keep moving into software services as a hedge against this shifting market. This deal simply builds on that approach.

ThousandEyes was founded in 2010 and raised over $110 million on a post valuation of $670 million as of February 2019, according to Pitchbook Data.

Join GGV’s Hans Tung and Jeff Richards for a live Q&A: June 4 at 3:30 pm EDT/12:30 pm PDT

By Natasha Mascarenhas

What does a global mindset look like in a world where most of us no longer travel? And what does it mean to be local when everyone is connected?

Those are the first questions we had in mind when we read GGV Capital’s Twitter bio, which asserts that the investing shop with offices in five cities is a “global venture capital firm that invests in local founders.”

Certainly, some of its investments are far from home, including Khatabook (based in Bangalore), Keep (Beijing), Coder, (Austin) and Slice (New York City). And those are just GGV deals from the last few months.

But what constitutes a local investment in a world where, until recently, no deal was more than a plane ride or two away? Hans Tung and Jeff Richards, managing partners at GGV Capital, are swinging by Extra Crunch Live next week, and we’re going to dive into the above to figure it out.

Of course, we’ll also ask critical, founder-focused questions about their current investing pace, check sizes and how they are adapting to the COVID-19 era. But after that, there’s a lot of work to do.

We’ll call on Tung to share some of what he’s learned from his time investing in China’s tech landscape, with a specific focus on what he sees in the future that might prove encouraging. The other GGV partner joining, Richards, also has international experience working in Asia and Latin America, so the conversation should be interesting.

In February, the firm published a mom-and-pop shop investment thesis. GGV Capital wants to invest in startups that help small retailers digitize operations and work with better supply chains. It is also interested in startups that want to establish logistic and online payment infrastructure. (Surely Shopify can’t be this entire market, right?)

The thesis hinges on consumer shopping habits and retailers open for business, so we’ll see how Tung and Richards are changing their appetite, or further shaping it. 

Details are below for Extra Crunch subscribers; if you need a pass, get a cheap trial here

Chat with you all in a week!

When, where, Zoom

BeeHero smartens up hives to provide ‘pollination as a service’ with $4M seed round

By Devin Coldewey

Vast monoculture farms outstripped the ability of bee populations to pollinate them naturally long ago, but the techniques that have arisen to fill that gap are neither precise nor modern. Israeli startup BeeHero aims to change that by treating hives both as living things and IoT devices, tracking health and pollination progress practically in real time. It just raised a $4 million seed round that should help expand its operations into U.S. agriculture.

Honeybees are used around the world to pollinate crops, and there has been growing demand for beekeepers who can provide lots of hives on short notice and move them wherever they need to be. But the process has been hamstrung by the threat of colony collapse, an increasingly common end to hives, often as the result of mite infestation.

Hives must be deployed and checked manually and regularly, entailing a great deal of labor by the beekeepers — it’s not something just anyone can do. They can only cover so much land over a given period, meaning a hive may go weeks between inspections — during which time it could have succumbed to colony collapse, perhaps dooming the acres it was intended to pollinate to a poor yield. It’s costly, time-consuming, and decidedly last-century.

So what’s the solution? As in so many other industries, it’s the so-called Internet of Things. But the way CEO and founder Omer Davidi explains it, it makes a lot of sense.

“This is a math game, a probabilistic game,” he said. “We’ve modeled the problem, and the main factors that affect it are, one, how do you get more efficient bees into the field, and two, what is the most efficient way to deploy them?”

Normally this would be determined ahead of time and monitored with the aforementioned manual checks. But off-the-shelf sensors can provide a window into the behavior and condition of a hive, monitoring both health and efficiency. You might say it puts the API in apiculture.

“We collect temperature, humidity, sound, there’s an accelerometer. For pollination, we use pollen traps and computer vision to check the amount of pollen brought to the colony,” he said. “We combine this with microclimate stuff and other info, and the behaviors and patterns we see inside the hives correlate with other things. The stress level of the queen, for instance. We’ve tested this on thousands of hives; it’s almost like the bees are telling us, ‘we have a queen problem.’ ”

All this information goes straight to an online dashboard where trends can be assessed, dangerous conditions identified early and plans made for things like replacing or shifting less or more efficient hives.

The company claims that its readings are within a few percentage points of ground truth measurements made by beekeepers, but of course it can be done instantly and from home, saving everyone a lot of time, hassle and cost.

The results of better hive deployment and monitoring can be quite remarkable, though Davidi was quick to add that his company is building on a growing foundation of work in this increasingly important domain.

“We didn’t invent this process, it’s been researched for years by people much smarter than us. But we’ve seen increases in yield of 30-35% in soybeans, 70-100% in apples and cashews in South America,” he said. It may boggle the mind that such immense improvements can come from just better bee management, but the case studies they’ve run have borne it out. Even “self-pollinating” (i.e. by the wind or other measures) crops that don’t need pollinators show serious improvements.

The platform is more than a growth aid and labor saver. Colony collapse is killing honeybees at enormous rates, but if it can be detected early, it can be mitigated and the hive potentially saved. That’s hard to do when time from infection to collapse is a matter of days and you’re inspecting biweekly. BeeHero’s metrics can give early warning of mite infestations, giving beekeepers a head start on keeping their hives alive.

“We’ve seen cases where you can lower mortality by 20-25%,” said Davidi. “It’s good for the farmer to improve pollination, and it’s good for the beekeeper to lose less hives.”

That’s part of the company’s aim to provide value up and down the chain, not just a tool for beekeepers to check the temperatures of their hives. “Helping the bees is good, but it doesn’t solve the whole problem. You want to help whole operations,” Davidi said. The aim is “to provide insights rather than raw data: whether the queen is in danger, if the quality of the pollination is different.”

Other startups have similar ideas, but Davidi noted that they’re generally working on a smaller scale, some focused on hobbyists who want to monitor honey production, or small businesses looking to monitor a few dozen hives versus his company’s nearly 20,000. BeeHero aims for scale both with robust but off-the-shelf hardware to keep costs low, and by focusing on an increasingly tech-savvy agriculture sector here in the States.

“The reason we’re focused on the U.S. is the adoption of precision agriculture is very high in this market, and I must say it’s a huge market,” Davidi said. “Eighty percent of the world’s almonds are grown in California, so you have a small area where you can have a big impact.”

The $4 million seed round’s investors include Rabo Food and Agri Innovation Fund, UpWest, iAngels, Plug and Play, and J-Ventures.

BeeHero is still very much also working on R&D, exploring other crops, improved metrics and partnerships with universities to use the hive data in academic studies. Expect to hear more as the market grows and the need for smart bee management starts sounding a little less weird and a lot more like a necessity for modern agriculture.

Truthset raises $4.75M to help marketers score their data

By Anthony Ha

Data, the cliche goes, is the new oil of the digital economy. But Truth{set} co-founder and CEO Scott McKinley wants to know: “Why does no one care about the quality of that fuel?”

That’s an issue McKinley saw in his seven years as an executive at Nielsen, where he said he realized that marketing data products are “all built on massive error.” As evidence, he pointed to recent studies showing that bad data leads marketers to waste 21 cents of every dollar, and that in many cases, consumer data is “similar to or even worse than what you’d get if you used random chance to create a target list.

McKinley argued, “You wouldn’t drive a car to a gas station where there’s no octane rating on the pump.” He created Truth{set} to provide that octane rating to marketers, and to “shine the light on that whole ecosystem.”

More specifically, the company scores the consumer data that marketers are buying on accuracy, on a scale between 0.00 and 1.00. To create these scores, Truth{set} checks the data against independent data sources, as well as first-party data and panels.

“In order for us to do this, we had to develop a perspective on what is truthful and what is not,” McKinley said. “And so instead of building our own data sets, we said, ‘Let’s be smarter than that, let’s verify everybody else’s data with these independent sources of truth.'”

Truthset screenshot

Image Credits: Truthset

In addition to coming out of stealth, Truth{set} is also announcing that it has raised $4.75 million in seed funding from startup studio super{set}, WTI, Ulu Ventures, and strategic angel investors.

The company says it’s compatible with demand-side platforms, data management platforms and customer platforms. It also integrates with the leading data providers including Facebook, LiveRamp and The Trade Desk.

McKinley added that the platform can even “suppress” consumer IDs that don’t meet a marketer’s standards, so that they’re not used in targeting.

Throughout our conversation, he emphasized the idea of independence, arguing that in order to provide trustworthy scores, “You cannot have a conflict of interest.” At the same time, Truthset is working closely with the data providers to score their data and to help them improve their accuracy. The goal is to create an expectation among marketers that if data is accurate, it will come with a score from Truth{set}.

“There’s a FOMO thing here — if you’re not being measured, what are you hiding?” McKinley said.

Existing backers put another £40M into UK challenger bank Starling

By Steve O'Hear

Starling Bank, the U.K.-based challenger bank founded by banking veteran Anne Boden, has raised an additional £40 million in funding, TechCrunch has learned.

The round is led by existing backers Harry McPike’s JTC and Merian Chrysalis Investment Company Limited, and adds to the £60 million raised in February this year.

Now boasting 1.4 million accounts, including 155,000 business accounts, Starling Bank has raised a total of £363 million since its launch in 2014. Noteworthy, I’m told that its deposit base has doubled in the last six months and it now holds more than £2.4 billion in deposits.

“This additional funding from our existing investors demonstrates their commitment both to Starling and to our small business and personal customers who need our support now more than ever,” said Starling’s Anne Boden in a statement confirming the fundraise.

I understand the new funding will enable the bank to continue investing in growth, and, more specifically, to provide “much-needed support to small business customers who have been hit by the coronavirus emergency.”

This has seen it collaborate with the U.K. government to increase lending to SMEs as part of the country’s various coronavirus crisis business support packages, including £300 million under the government-backed Coronavirus Business Interruption Loan Scheme (CBILS) and direct to its customers under its own CBIL and Bounce Back Loan Schemes.

To that end, since launching SME accounts in March 2018 and securing £100 million in state aid via the Capability and Innovation Fund (CIF), business banking has become a big bet for Starling. It appears to be starting to pay off, too, with the bank now claiming to hold a 2.6% share of the U.K.’s SME banking market, with almost £500 million of SME lending currently on its balance sheet.

Storage marketplace Warehouse Exchange raises $2.2M

By Anthony Ha

Warehouse Exchange, a startup that describes itself as the Airbnb of warehouse space, has raised $2.2 million in seed funding.

The company was founded Jonathan Rosenthal (CEO of Saybrook Management) and Dan Pimentel (previously CFO/COO of startup Hub TV). They recently brought on former eHarmony CEO Grant Langston as Warehouse Exchange’s chief executive.

Langston admitted that his new job might sound pretty different from running an online dating company, but he said that in both cases, it’s really about using technology to build a marketplace.

In the case of Warehouse Exchange, Langston said the opportunity lies in the fact that “businesses that wanted warehouse space were not welcome in warehouses.” Specifically, there are plenty of new e-commerce companies that want “smaller footprints for shorter periods of time and want to handle their own inventory,” but particularly pre-pandemic, most of the third-party logistics companies (known as 3PLs) operating warehouses weren’t interested in that business.

So Warehouse Exchange has created a marketplace connecting renters with flexible warehouse space. Langston said businesses are renting space through the marketplace for an average of 11 months (though it usually starts with a shorter amount of time and then gets extended).

Warehouse Exchange CEO Grant Langston

Warehouse Exchange CEO Grant Langston

In fact, the company said it’s seen 22,000 searches on its site in the past 18 months. The warehouse space, meanwhile, might not come from traditional warehouse operators, but instead from other organizations that have extra space that they want to monetize.

Langston added, “3PLs are typically not interested in this small e-commerce demand, but what has happened in the last eight weeks is that a lot of these companies have lost their anchor tenant and need to rethink their revenue.”

In order for a warehouse shift to this model, Langston said some rethinking is required, but “the infrastructure is quite light.” Usually, you just need partitions to separate different parts of the warehouse.

Given the broader concerns about warehouse safety during the COVID-19 pandemic, I also asked about who is responsible for those issues within the warehouses. Langston said it’s up to the individual tenants, noting that in many cases it’s just one person running an e-commerce business, and that “in a general sense, there’s not a lot of intermingling between tenants.”

The new funding comes from investors including Xebec Realty. Langston said he’s already working to raise a Series A, with a target of $6 to $7 million.

Cookware startup Caraway raises $5.3M as it eyes new product categories

By Anthony Ha

Caraway, a direct-to-consumer startup selling ceramic pots and pans, is announcing that it has raised $5.3 million in seed funding.

Founder and CEO Jordan Nathan (previously a brand manager at e-commerce holding company Mohawk Group) told me that he became interested in cookware after burning a Teflon pan and learning more about the dangers of Teflon poisoning.

In fact, although nonstick materials like Teflon are used in most of the cookware sold in the United States, it turns out that that there are real health risks when those pots and pans are overheated.

So Nathan said Caraway offers non-toxic, eco-friendly pots and pans that are also well-designed and premium quality. The four-item cookware set costs $395 and also comes with pot and lid holders (Nathan noted that many consumers also struggle with storage).

When I brought up some of the broader issues facing direct-to-consumer startups before the pandemic, particularly around costly user acquisition, Nathan said, “Caraway has been focused on sustainable growth since day one. We’re only a few months old and growing very fast, but at the same time, we’re focused on cutting cost and making sure every dollar returns a profitable first purchase from consumers.”

Caraway racks

Image Credits: Caraway

Caraway isn’t revealing any sales numbers, but Nathan suggested that the company has definitely benefited from increased consumer interest as everyone is stuck at home and doing more cooking.

And he said that interest extends beyond buying Caraway products: “It’s been a really good time to activate our community. There’s been a lot more engagement, a lot of sharing of user generated content, sharing on Instagram — not just for cookware and pans, but education around cooking, around storage, around design.”

The company’s supply chain has also been affected by the pandemic. Nathan said his team has done work to expedite shipments, but “where we’ve put our focus has really just been communicating with customers that there will be delays.”

The new funding comes from more than 100 investors, including Republic Labs, Springdale Ventures, Wesray Social, Bridge Investments, WTI, CompanyFirst, G9 Ventures, Super Angel Syndicate (led by Ben Zises), Five Four Ventures, Bonobos co-founder Andy Dunn, PopSugar co-founder Brian Sugar (PopSugar), Glossier and Arfa founders/executives Henry Davis and Bryan Mahoney, One Kings Lane co-founder Ali Pincus and Nik Sharma of Sharma Brands.

In a statement, Dunn said:

Many people think direct-to-consumer brands are going to struggle in this new economy. From being an investor in two dozen brands, the truth is more nuanced: some are really flourishing. Caraway had strong momentum at launch, with a clear vision from founder Jordan Nathan around the future of home goods. The COVID-19 pandemic then amplified that momentum with the surge of in-home cooking. Caraway’s out of the gates growth rate is in the top 1% of what I’ve seen in DTC brands. This is not a pots and pans company, this is a disruptor to traditional brick and mortar multi-category home brands.

To that last point, Nathan said Caraway has already expanded into kitchen linens, and there are plans for other home products.

“With every new product we launch, we’re bringing the same focus [that we brought to] cookware,” he said. “The same colors, the same sleek and timeless design, the non-toxic, eco-friendly material. And every product we launch will have a storage solution built into it.”

Video news startup Stringr raises $5.75M from Thomson Reuters and others

By Anthony Ha

Stringr, a video-focused startup that says it can help news organizations adapt to the challenges of COVID-19, is announcing that it’s raised $5.75 million in new funding.

When I wrote about the the company at the end of 2015, it was creating a marketplace that connected news organizations with videographers who could provide them with news footage. Since then, co-founder and CEO Lindsay Stewart (a former TV news producer herself) told me the network has grown to more than 100,000 videographers.

At the same time, Stringr has added new tools for things like live streaming, transcription and editing, creating what Stewart described as “the most efficient video production platform.”

And she suggested that media companies need a platform like this more than ever. Yes, some Stringr customers are just using the service when they need footage, but she said others see Stringr as a purely cloud-based solution for producing news programming “when nobody’s coming into the office.”

And speaking of footage, newsrooms are going to need help on that front too, particularly with the COVID-19 pandemic having a dramatic impact on the media industry’s bottom line.

“I don’t think it’s lost on anyone that media companies … the business model, even more than before COVID, has been challenged,” Stewart added. So those companies are turning to Stringr for help in figuring out “how they become as cost effective as they possibly can, while still providing a valuable service to society overall.”

Stringr has also launched a division called Embed Studios that taps into the startup’s videographer network to create content for brands including Corcoran, Zillow, HBO Max, Amazon, Lightworkers, TikTok, Mastercard, United Way and MGM.

The company has now raised a total of $7.25 million. The new funding comes from Thomson Reuters, as well as previous investors G5 Capital and Advection Growth Capital.

It sounds like the Reuters investment is part of a broader partnership where the wire service’s customers can request video footage from Stringr. In fact, Stewart said that the startup’s work with Reuters is also pushing it to recruit videographers globally, starting in western Europe. (It was previously focused on the United States and the United Kingdom.)

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