If necessity is the mother of invention, then new business owners are getting very inventive in the ways in which they access cash. Relying on some long-tested and some new avenues to raise money, entrepreneurs are finding more ways to get public market cash faster than they would have in the past.
Whether it’s from Reg A crowdfunding dollars, Special Purpose Acquisition Companies (SPACs) or direct listings, these somewhat arcane and specialized financing vehicles are making a comeback alongside a rise in new funding mechanisms to get to market quickly and avoid the dilution that comes from private market rounds (especially since those rounds are likely to come at a reduced valuation given market conditions).
Some of these tools have existed for a while and are newly popular in an era where retail investors are driving much of the daily fluctuations of the public markets. Wall Street institutions are largely maintaining their conservative postures with regard to new offerings, so secondary market retail volume growth is outpacing institutional. Retail investors want into these new issues and are pouring into the markets, contributing to huge pops to new public offerings for companies like Lemonade this Thursday and creating an environment where SPACs and crowdfunding campaigns can flourish.
The rise of zero-commission brokerages and the popularization of fractional trading led by the startup Robinhood and adopted by every one of the major online brokers including Charles Schwab, TD Ameritrade, E-Trade and Interactive Brokers has created a stock market boom that defies the underlying market conditions in the U.S. and globally. For instance, daily trades on Robinhood are up 300% year-over-year as of March 2020.
According to data from the BATS exchange, the total trade count in the U.S. was up 71% and May trading was up more than 43% over 2019. Meanwhile, E-Trade daily average revenue trades posted a 244% increase in May over last year’s numbers.
The appetite for new issues is growing and if many of the largest venture-backed companies are holding off on going public, smaller names are using SPACs to access public capital and reach these new investors.
GoHealth, a Chicago-based company that provides consumers with a digital portal to help them select insurance products, set an initial price range for its IPO today. The firm intends to price its equity between $18 to $20 per share in its debut.
As the company expects to sell 39.5 million shares in the offering, its IPO haul is huge. At the low-end of its range, GoHealth would raise $711 million, a figure that rises to $790 million at other end of its pricing spectrum. Including the 5.925 million shares the company will offer its underwriting team, its fundraise swells to between $817.65 million and $908.5 million.
Valuing the company at its IPO price range is a bit tough, as the firm was previously majority-sold to a buyout firm called Centerbridge in a deal that valued the firm at what Reuters reported as a $1.5 billion price-tag in 2019 (others confirmed the price). That transaction turned the company’s organization, and shareholding structure, into a muddle.
Parts of its shareholding structure are simple. The firm’s Class A shares, for example, at the top end of its IPO price, are worth around $1.7 billion, including equity offered to underwriters. So, regardless of what happens with its other interests and shares, the IPO looks set to be a win for Centerbridge.
Next, there are several hundred million Class B shares that come with votes, but no “economic interest in GoHealth, Inc.” And, finally, there are LLC interests in the company, which correspond with Class B shares. Holders of LLC interests can swap them for “newly-issued shares of our Class A common stock on a one-for-one” when they’d like.
So, how does that all square out? When we properly count all the shares for the firm and apply its IPO price range, GoHealth could be worth between $5.6 billion and $6.3 billion, figures that we are glad other publications arrived at as well.
That’s a big price tag, but one befitting a company looking to raise $711 million to $908.5 million in its public debut.
In Q1 2020, GoHealth posted $141.0 million in revenue, and net income of $1.4 million. Not a fat profit margin to be sure, but it did make money in the period, which is always popular, if out-of-date in today’s IPO market.
The company has grown nicely in recent years, with its S-1 filing touting 139% “pro forma growth” from 2018 to 2019. That’s great, given that GoHealth has at least some history of making money as well.
Turning to the most recent quarter, however, we find some red ink. In the quarter ending June 30, 2020:
How investors will parse all that out and place a proper valuation on the firm is their job; have fun, ya’ll.
Sure, GoHealth raised capital while it was a private company, and, sure, its business is digital. But it’s not really the core substance of TechCrunch’s coverage, namely startups. The company is around 19 years old, for heaven’s sake.
But what matters for our purposes is that earlier this year there was a boom in insurance marketplaces raising capital, leading TechCrunch to write a piece entitled “Why VCs are dumping money into insurance marketplaces.” GoHealth is a related entity to those younger companies. If it has a good IPO, that’s good for its smaller brethren. If it struggles, or only attracts a slim, unattractive multiple, it could partially chill the fundraising climate for companies looking to follow in its footsteps.
Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast where we unpack the numbers behind the headlines.
This is Equity Monday, our week-starting primer in which we go over the latest news, dig into the week ahead, talk about some neat funding rounds and dive into the latest big news from the startup world. (You can follow the show on Twitter here, and myself here, if you are so inclined! Don’t forget to check out last Friday’s episode as well. All the cool kids are doing it.)
What a weekend! After some quiet, somewhat dull off-week periods, this weekend brought us twists and turns that were good fun. Most dealt with a possible Uber -Postmates tie up, so we wrote the show to talk about the transaction’s unconfirmed nature.
Then, it got confirmed. So, here’s the second edition of today’s Equity Monday, recast due to the deal’s official nature:
We wrapped this morning wondering if Postmates can provide a narrative boost to Uber, a company that isn’t going to have the best Q2 numbers in its history. With Postmates tucked under its arm going into the earnings call, Uber can double-down on its Uber Eats narrative, flash Postmates around the room and promise that Rides data will get better as well.
Perhaps that would be enough?
Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast, where we unpack the numbers behind the headlines.
This week was a bit feisty, but that’s only because Danny Crichton and Natasha Mascarenhas and I were all in pretty good spirits. It would have been hard to not be, given how much good stuff there was to chew over.
We kicked off with two funding rounds from companies that had received a headwind from COVID-19:
Those two rounds, however, represented just one side of the COVID coin. There were also companies busy riding a COVID-tailwind to the tune of new funds:
But we had room for one more story. So, we talked a bit about Robinhood, its business model, and the recent suicide of one of its users. It’s an awful moment for the family of the human we lost, but also a good moment for Robinhood to batten the hatches a bit on how its service works.
How far the company will go, however, in limiting access to certain financial tooling, will be interesting to see. The company generates lots of revenue from its order-flow business, and options are a key part of those incomes. Robinhood is therefore balancing the need to protect its users, and make money from their actions. How they thread this needle will be quite interesting.
All that we had a lot of fun. Thanks for tuning in, and follow the show on Twitter!
Storyblocks, the subscription-based stock media service, today announced that it has been acquired by private equity firm Great Hill Partners. The firm previously backed companies like Wayfair (and then exited that specific investment in 2017) and Custom Ink. Great Hill also acquired Gizmodo Media Group in 2019. Storyblocks and Great Hill did not disclose the price of the acquisition.
Storyblocks was founded in 2009 and raised about $18.5 million since its launch. Over the years, it went through a few changes. Its early focus was on video content and until 2017, it operated under the VideoBlocks moniker (before that, it was FootageFirm). The company’s focus was always on its buffet-style subscription service, though it also offered an “a la carte” marketplace for one-time purchases. Only a small fraction of users actually bought from the marketplace, so last year, it doubled down on its subscription library.
“Our mission was really all about this idea of affordability and access,” Storyblocks CEO TJ Leonard told me ahead of today’s announcement. “That’s core to our DNA. It always will be. But as we look to the future, we see ourselves supporting our customers across their entire workflow as they work to keep up with the content demand of their audience. You wrap all that together and it felt like the moment was right to take the next step. Update, North Atlantic Capital, QED [Investors] — all of our early investors — have done an awesome job supporting the business over the last eight years to help us get to this point. But Great Hill brings a track record — and I think an expertise — that is perfect for this next stage for us.”
Leonard, who just like the rest of the team is staying on, noted that Storyblocks is profitable and wasn’t actively trying to raise any capital to sustain its business or looking for an exit. Instead, he argued, this sale was simply a logical progression.
“We’ve long felt that even though the business is more than ten years old, there’s still a lot of chapters left in our story. We’re really excited to continue to chase them down,” he said. “And we’ve said all along that if we were going to find a new partner, our first criteria was that they needed to believe in the same mission and vision that we had, they needed to believe the same market opportunity that we saw — and they needed to feel like we had the right model and the right team to go take advantage of that opportunity. As we got to know Great Hill better, it was clear that we were really well aligned across all those important points.”
He also noted that he tends to think of Great Hill as “a growth-oriented private equity investor, almost a growth equity investor masquerading with a private equity structure” given that the firm tends to acquire companies but then also often spins them out again. “All of our conversations have been oriented around how do we change what’s working today and accelerate it. How do we take our long term strategic growth plan that sets certain goals over the next five years and accomplish them in three,” he said.
Storyblocks will continue to operate as usual and continue to invest in its content libraries, Leonard told me. COVID-19 only made the demand for stock footage go up (Storyblocks now sees twice as many downloads per week compared to the start of 2020), but the company was already seeing a growing demand for its service before the pandemic, in large parts because the demand for video content only continues to increase.
“This doesn’t feel like an ending. It feels like we have a lot of good work to do,” said Leonard. “It feels like in a lot of ways, the market is just kind of catching up to what we’ve believed since our founding, which is that if you can help people create more high-quality video content, do it at an affordable price, do it in a way that saves them time, then there’s a huge opportunity out there.”
Over the past few months, COVID-19 has brought much of the fundraising community to a standstill. However, amidst it all India’s hyper0growth telco Reliance Jio Platforms has put its fundraising efforts into full gear.
Over the past three months, Jio has raised over $15.5 billion from a cohort of investors that include prominent financial institutions like KKR and Silver Lake Partners, massive sovereign wealth funds like Saudi Arabia’s Public Investment Fund, and some of the biggest names in tech including Facebook.
The recent deals have cemented Mukesh Ambani’s ambition to make his oil-to-retails giant Reliance Industries (India’s most valuable firm) a top homegrown internet giant.
On Friday, he said he plans to publicly list Reliance Jio Platforms and Reliance Retail, the largest retail chain in the country — also controlled by him — in the next five years.
As Reliance Jio Platforms, which has become the India’s top telecom operator with over 388 million subscribers in less than four years, continues its funding spree, at Extra Crunch we are doubling down on our focus on covering everything Jio from here and out.
As we’ve attempted to get up to speed on the company, we’ve compiled a supplemental list of resources and readings that we believe are particularly helpful for learning the story of Jio, which remains a mysterious firm to many.
Building a business is hard; about 50% of businesses fail in the first five years. The early years of an entrepreneur’s journey can be difficult and lonely. When starting my digital services firm Fearless, I convinced my wife to rent out our home and move in with my mother so we could have an extra income while I built Fearless in my mother’s basement.
That was 10 years ago — Fearless now has over 115 employees.
That story of struggling to build a tech company and working out of a basement or garage until you “make it” is pretty common, but the barriers facing Black entrepreneurs make it harder to find success and support.
Research by the University of California, Santa Cruz states that minority-owned startups have access to less capital than their white counterparts. The right investors can offer more than just funding to early-stage companies; the connections those in the venture capitalist world have can bring an entrepreneur the new business, mentorship and employees needed to grow.
Venture capital firms like Harlem Capital and Black Angel Tech Fund are focused on changing the faces of entrepreneurship by diversifying their portfolio, but traditional venture capitalist funding is not the only way to grow your business.
There are other avenues and opportunities to get the support, financial and otherwise, to help build a successful company:
Equity crowdfunding: Similar to crowdfunding campaigns like GoFundMe or Kickstarter, equity crowdfunding allows nontraditional investors to support businesses and receive equity. Enabled through Title III of the 2012 JOBS Act’s Regulation CF, equity crowdfunding allows all companies to sell securities, whether in the form of equity in the company, debt, revenue shares, convertible notes and more. Equity crowdfunding platforms include WeFunder and LocalStake.
Mentor programs: Fearless was lucky enough to be accepted into the DoD Mentor-Protégé program early in our growth. As the oldest continuously operating federal mentor-protégé program in existence, the DoD program helped us establish and expand our footprint in the federal government contracting space. NewMe and Black Girl Ventures are two programs that specialize in mentorship for early-stage companies.
Become 8(a) certified: The federal government has a goal of awarding at least 5% of all federal contracting dollars to small, disadvantaged businesses each year. These businesses fall under the 8(a) classification. To qualify for the program, you must be a small business with 51% of ownership and control from U.S. citizens who are economically and socially disadvantaged and the owner’s adjusted gross income for three years is $250,000 or less.
The full definition of what counts as being economically and socially disadvantaged can be found in Title 13 Part 124 of the Code of Federal Regulations. Fearless has been classified as an 8(a) company for several years and we have been able to secure several contracts through the certification.
Tap into Small Business Administration resources: More than a million users visit SBA.gov to utilize tools like the SBA Business Guide and Lender Match site. By using the SBA website and reaching out to your local SBA office, you can make full use of the programs available and connect with business owners who can offer advice and mentorship.
Identify supportive bankers: Your business is your top priority and the people you engage with should view your company as a priority too. You need someone vested in your success who will advocate for you when you need them. If you meet with a banker and get a sense that you would be an account number instead of a person, then find another one. If you don’t have your banker’s personal cell phone number, and they aren’t willing to visit you at your business, then take a pass and find a true partner who supports you.
I am putting the call out to business owners and entrepreneurs who are further along in their journey to mentor and invest in Black-owned businesses. Think back on the support you received, and be that model for someone else. Or be the mentor that you wished you had when you were starting out. Take time to invest in other Black-owned tech companies or fund the programs that do. Share your knowledge and experience with Black tech leaders.
If there isn’t a resource hub for Black entrepreneurs in your city, create one. Fearless is a small company and we have still managed to help 13 new companies get off the ground through our accelerator program, Hutch.
Hutch is an intensive 12-month program that gives entrepreneurs a blueprint for building successful digital service firms, by empowering them with the tools, mentorship and peer support they need to have a lasting impact. We think of this program kind of like a home base for our entrepreneurs, providing them with a foundation of support so they can grow without getting lost amongst bigger companies in the industry.
Help create the spaces in your community that will foster innovation and business growth.
Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast, where we unpack the numbers behind the headlines.
Your humble Equity team is pretty tired but in good spirits, as there was a lot to talk about this week. But, first, three things to start us off:
All that said, here’s what we talked about on the show:
And that’s that. Have a lovely weekend and catch up on some sleep.
Over the past two decades, the venture capital industry has exploded beyond anyone’s wildest imaginations.
What began as a sleepy industry in Boston and Menlo Park has now expanded to dozens of cities the world over. The National Venture Capital Association estimates that VCs deployed more than $130 billion in 2018 and 2019, and thousands of new investors have joined the ranks in recent years to find the next great startups.
All that activity, though, poses a dilemma for founders: Who actively writes checks? Who is a leader in a specific market or vertical? Who has the conviction to underwrite pathbreaking investments? Who, ultimately, do you want to have by your side for the next decade as your startup grows?
There are lists that rank VCs by their exit returns. There are lists that rank young VCs by their potential. There are lists of VCs who claim investment interest in various sectors. There are lists that try to ferret out deal volume, impact and other quantitative metrics. There are internal lists at accelerators that share collective wisdom between founders.
Who actively writes checks? Who is a leader in a specific market or vertical? Who has the conviction to underwrite pathbreaking investments? Who, ultimately, do you want to have by your side for the next decade as your startup grows?
All those lists and rankings have an important function to serve, but for all the compilations of investors out there, we couldn’t find a single one that publicly answered a simple yet vital question: Who are the VC investors who are leaders in specific verticals who should be a founder’s first stop during a fundraise?
Today’s venture industry is made up of thousands of investors with varying specialties, and far too many passive investors that are willing to participate in rounds but don’t actively participate in deals unless other investors have committed. Many don’t actively push to get deals done or don’t actively lead the charge to build a syndicate of investors.
With all that in mind, we’re excited to launch a new initiative that we hope will help answer those questions and help founders find that first check — The TechCrunch List.
Over the next few weeks, we’re going to be collecting data around which individual investors are actually willing to write the proverbial “first check” into a startup’s fundraising round and help catalyze deals for founders — whether it be seed, Series A or otherwise (i.e. out of your Series A investors, the first person who was willing to write the check and get the ball rolling with other investors). Once we’ve collected, cleaned and analyzed the data, we’ll publish lists of the most recommended “first check” investors across different verticals, investment stages and geographies, so founders can see which investors are potentially the best fit for their company.
Founders are used to being specialized; after all, they have to live and breathe their startups every single day. So it can be jarring to start talking to generalist investors who know little about a category and ask shallow questions only to render a judgment with irrelevant advice. One of the greatest impetuses for us to put together The TechCrunch List is that like founders, we also struggle to cut through the noise around the interests of individual VCs.
We’d argue that’s close to impossible. There is more spend on technology than ever before in history. Verticals are getting more competitive — market maps that used to have 10 to 50 companies have expanded to hundreds. The only way to compete today is to specialize, and that has never been more true for VCs.
In all, The TechCrunch List will publish the most recommended “first check” writers across 22 different categories, ranging from D2C & e-commerce brands to space, and everything in between. Through some data analysis around total investments in each space, we believe our 22 categories should cover the entirety or majority of the venture activity today.
To make this project a success and create a useful resource for founders, we need your help. We want to hear from company builders and we want to hear from them directly.
To make this project a success and create a useful resource for founders, we need your help. We want to hear from company builders and we want to hear from them directly. We will be collecting endorsements submitted by founders through the form linked here.
Through the form, founders will be asked to submit their name, their startup, the stage of company, the name of the one “first check” investor they want to endorse and a couple of minor logistical items. We are asking founders here for their on-the-record endorsement. We ask that you limit your recommendations to one (1) person per fundraise round.
While many investors may have helped you in your journey, we are specifically interested in the person who most helped you get a round underway and closed. The one who catalyzed your round. The one who guided you through the fundraise process. The one investor you would ultimately recommend to other founders who are trying to find their VC champion.
Our main goal is to help founders, dreamers and company builders find investors who will invest in them today, and with your help, we think we can. The TechCrunch List is not meant to identify every possible investor under the sun who might make an investment within a space, nor just the big household-name VCs whose reputations can sometimes seem more linked to their follower counts on Twitter as opposed to their bold term sheets.
Our hope is that this can be a go-to resource for founders looking to fundraise going forward, and with that in mind, we are very determined to improve the glaring representation gaps in the venture industry. It’s no secret that the world of VC still looks like a country-club membership roster, dominated by white men with strong opinions and loud voices. Looking at the data, it’s clear that there are groups that are particularly underrepresented, with only a small portion of the industry made up of Black, Latinx and female investors, for example.
We want to amplify these voices and we want to hear particularly from founders of color, female founders and other underrepresented groups. We also want to make sure our recommended investor lists are sufficiently representative and highlight underrepresented investors who might not have had equal opportunities in the past.
We want to help builders wade through the BS politics and fundraising annoyances that founders complain to us about on a daily basis, and help them identify qualified leads that are actually active, engaged and specialized and are the best fit to help founders raise money and grow now.
Thank you for your support. We’re excited to build The TechCrunch List with you — and for you.
The venture capital industry is less transparent today than at any time in recent memory.
For all the talk about expanding access and improving its sordid record on diversity, in reality, it has never been harder for founders to figure out who can even write a check to their startups in the first place.
When I first returned to TechCrunch after my second stint in venture capital, my first piece was entitled “The loss of first check investors.” While working in the venture capital industry, it was maddening to see — particularly at the pre-seed and seed stages — how few investors were really willing to go out on a limb and invest in founders before another VC had committed a check.
It’s only gotten worse in the past two years since that article, and the complexity comes from a number of different places. As our investigation showed more than a year ago, fewer and fewer venture rounds are being announced through SEC Form D filings.
There are almost no publicly accountable datasets left indicating who is writing checks in the venture industry and which companies are receiving those checks. While stealthiness is valid in the early days of a startup, the excuse wears thin after years.
DroneBase, a Los Angeles-based provider of drone pilots for industrial services companies, has raised $7.5 million during the pandemic to double down on its work with renewable energy companies.
While chief executive Dan Burton acknowledged that the company was fundraising prior to the pandemic, the industrial lockdown actually accelerated demand for the company’s services.
Even with the increased demand, the company had to make some changes. It laid off six employees and refocused its business.
“In the past three months it’s become clear that this is a moment for drones as an industry,” Burton said. “We were really pushing hard as a company, certainly on revenue growth and harvesting all the investments we made in technology and having a clear, near-term view to profitability.”
The new round, which closed in May, was a slight down round, according to people familiar with the company’s business.
“We see raising a growth round later this year,” Burton said.
In all, DroneBase has raised nearly $32 million in financing, according to a company statement.
The new round will enable the company to focus on its data and analytics services that it has been developing around its core drone pilot provisioning technology — and gives DroneBase more financial wherewithal to expand its European operations under the DroneBase Europe, which operates out of Germany.
“DroneBase’s expansion into renewable energy reflects our belief in the growth potential of wind and solar energy industries,” said Burton in a statement. “Since many energy companies have both wind and solar assets, we are well positioned to leverage our DroneBase Insights platform to grow our global market share in renewable energy.”
The key application for DroneBase has been allowing wind power companies to monitor and manage their turbines, improving uptimes and spotting problems before they effect operations, the company said.
For solar power companies, DroneBase offers a network of pilots trained in infrared imaging to detect anomalies like defects or hot spots on solar panels, the company said.
“DroneBase has established themselves as the drone leader in the commercial market, and its new work in renewables will have a lasting impact on the future of energy by keeping infrastructure operational for generations,” says Sam Teller, Partner at Valor Equity Partners, in a statement. “We believe DroneBase will continue to be a valuable partner in drone operations and data analysis across a multitude of industries globally.”
BizCapital, an online lender based in Brazil, has raised $12 million from a clutch of investors including the German development finance institution, the corporate venture capital fund of MercadoLibre and existing investors Quona Capital, Monashees, Chromo INvest and 42K Investments.
“This latest round reinforces investors’ confidence in BizCapital’s ability to innovate in the Latin American credit market amid challenging circumstances caused by Covid-19,” said Francisco Ferreira, the company’s chief executive, in a statement. “We have seen four times as many business credit inquiries on our site year over year, and we are ready to serve them.”
Founded in 2016, the company pitches itself as a fast and reliable way to access financing for working capital. It already has more than 5,000 customers across 1,200 cities in Brazil, according to a statement.
The company said it would use the money to develop new products for Brazilian small and medium-sized businesses and will expand into new distribution channels.
“With this new round of capital, we will continue to widen our product lineup, helping entrepreneurs during the entire lifecycle of their companies,” said Ferreira, in a statement. “There’s never been a more important time for innovation.”
In a reflection of their American counterparts, Brazil’s venture capital firms had slowed down the pace of their investments, but now it seems like a slew of new deals are coming to market.
The investment reflects the longterm confidence that investors have in the increasingly central position e-commerce and technology-enabled services will have in the future of the Latin American economy.
African cross-border fintech startup Chipper Cash has closed a $13.8 million Series A funding round led by Deciens Capital and plans to hire 30 new staff globally.
The two came to America for academics, met in Iowa while studying at Grinnell College and ventured out to Silicon Valley for stints in big tech: Facebook for Serunjogi and Flickr and Yahoo! for Moujaled.
The startup call beckoned and after launching Chipper Cash in 2018, the duo convinced 500 Startups and and Liquid 2 Ventures — co-founded by American football legend Joe Montana — to back their company with seed funds.
Two years and $22 million in total capital raised later, Chipper Cash offers its mobile-based, no fee, P2P payment services in seven countries: Ghana, Uganda, Nigeria, Tanzania, Rwanda, South Africa and Kenya.
“We’re now at over one and a half million users and doing over a $100 million dollars a month in volume,” Serunjogi told TechCrunch on a call.
Chipper Cash does not release audited financial data, but does share internal performance accounting with investors. Deciens Capital and Raptor Group co-led the startup’s Series A financing, with repeat support from 500 Startups and Liquid 2 Ventures .
Deciens Capital founder Dan Kimmerling confirmed the fund’s lead on the investment and review of Chipper Cash’s payment value and volume metrics.
Parallel to its P2P app, the startup also runs Chipper Checkout: a merchant-focused, fee-based mobile payment product that generates the revenue to support Chipper Cash’s free mobile-money business.
The company will use its latest round to hire up to 30 people across operations in San Francisco, Lagos, London, Nairobi and New York — according to Serunjogi.
Image Credits: Chipper Cash
Chipper Cash has already brought on a new compliance officer, Lisa Dawson, whose background includes stints with the U.S. Department of Treasury’s Financial Crimes Enforcement Network and Citigroup’s anti-money laundering department.
“You know in the world we live in the AML side is very important so it’s an area that we want to invest in from the get go,” said Serunjogi.
He confirmed Dawson’s role aligned with getting Chipper Cash ready to meet regulatory requirements for new markets, but declined to name specific countries.
With the round announcement, Chipper Cash also revealed a corporate social responsibility component to its business. Related to current U.S. events, the startup has formed the Chipper Fund for Black Lives.
“We’ve been huge beneficiaries of the generosity and openness of this country and its entrepreneurial spirit,” explained Serunjogi. “But growing up in Africa, we’ve were able to navigate [the U.S.] without the traumas and baggage our African American friends have gone through living in America.”
The Chipper Fund for Black Lives will give 5 to 10 grants of $5,000 to $10,000. “The plan is to give that to…people or causes who are furthering social justice reforms,” said Serunjogi.
In Africa, Chipper Cash has placed itself in the continent’s major digital payments markets. As a sector, fintech has become Africa’s highest funded tech space, receiving the bulk of an estimated $2 billion in VC that went to startups in 2019.
Image Credits: TechCrunch
Those ventures, and a number of the continent’s established banks, are in a race to build market share through financial inclusion.
By several estimates — including The Global Findex Database — the continent is home to the largest percentage of the world’s unbanked population, with a sizable number of underbanked consumers and SMEs.
Increasingly, Nigeria has become the most significant fintech market in Africa, with the continent’s largest economy and population of 200 million.
Chipper Cash expanded there in 2019 and faces competition from a number of players, including local payments venture Paga. More recently, outside entrants have jumped into Nigeria’s fintech scene.
Over the next several years, expect to see market events — such as fails, acquisitions, or IPOs — determine how well funded fintech startups, including Chipper Cash, fare in Africa’s fintech arena.
Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast, where we unpack the numbers behind the headlines.
Here at Equity Monday we look at what happened over the weekend, what’s ahead, and a few recent funding rounds. As you’ll hear, we’re heading back into our normal cadence and topics, but if you do want to learn a bit more about what you can do to make your voice heard in opposition to racist policing, last week’s ep is worth listening to.
This is what we got up to this morning:
And, finally, we’re curious about what’s driving the bullish sentiment behind Vroom? It just raised its IPO price range, and we have questions.
A month after TechCrunch watched, discussed and parsed the startups from Techstars’ April batch of virtual demo days, we’re back with the handy May edition.
Over the past few days, TechCrunch has been catching up by watching the shared video pitches from the five presenting demo classes, including the Lisbon demo day, its Seattle batch, the Los Angeles-based music-focused group, the Air Force-sponsored accelerator and the Cox Enterprises Social Impact Accelerator Powered by Techstars .
We’ve also included links to the pitch pages themselves, so you can take a peek and vet the new companies for yourself. The categories are:
As before, we’re narrowing from a half dozen to around 10 companies in each group; what follows is our completely unscientific opinion.
“If you’re going to make a diverse world a better place, it starts with diverse innovators,” said Barry Givens, the managing director of the Cox Enterprises Social Impact Accelerator powered by Techstars, as he kicked off the new accelerator’s first demo day.
Launched in January 2020, the three-month-long program included a company creating supply chain management and distribution services for biomass-to-energy and waste-to-energy businesses; a company trying to create a better process for hiring diverse employees; and a virtual reality company giving kids access to exclusive content and tools to develop their own VR experiences. All of the companies had built interesting, early businesses, but our favorites were those providing college students with access and listings of available resources and a company that’s created an app for teaching math through music:
Raising capital from a corporate VC can bring many benefits beyond just money. Strategic CVCs, who measure ROI based on the strength of the strategic partnership with their portfolio companies as well as the financial return, will typically seek to maximize their relationships with startups for a long time after the investment is made.
Specifically, a CVC investor can offer the following to an entrepreneur:
Partnerships. CVCs can leverage their supply chain and operations to build new partnerships that otherwise may have taken months or years for startups to create.
Distribution. Strategic CVCs can become a distribution channel for a startup, connect that startup with their suppliers, or even use the startup to become a channel for the parent company.
Branding halo. If a large company is willing to invest in your startup, it’s a strong signal that your product is good and that your business has a bright future.
Acquisition. Many CVCs invest in startups that they may want to acquire down the line. A CVC may also endorse an exit-seeking portfolio company to their partner companies or suppliers.
Granted, seeing results from these benefits takes time, and even the best of intentions during a capital raise process may not always yield an optimal strategic relationship.
Here’s a list of factors to keep in mind for founders who want the best chances of a productive and successful relationship with their CVC.
Know which type of CVC you’re dealing with from the outset. In our previous posts, we outlined the three types of CVCs — experienced institutional investors, industry-specific strategics, and beginner or “tourist” CVCs. As we’ve discussed, be sure to spend time interviewing and building relationships with CVCs to determine which type they are, what kinds of benefits and resources they can offer and what their history looks like in terms of successfully partnering with startups over time. When in doubt, ask other founders who have done deals with them!
More than $50 billion of corporate venture capital (CVC) was deployed in 2018 and new data indicates that nearly half of all venture rounds will include a corporate investor. The CVC trend is heating up and the need for founders and startup executives to stay informed is higher than ever.
We’ve covered the basics in this series, including how to approach CVCs and what to know before the investment, what to look out for when negotiating, and getting the most out of a CVC partnership after the investment.
A great CVC investor can be the best of both worlds — a strong corporate champion who provides insights and connections to help your startup succeed and a committed financial partner who provides the capital you need to grow. But CVCs aren’t just VCs with different business cards. Finding the right CVC requires the right approach and strategy, and getting the right CVC on your cap table can bring unique and lasting value to your startup.
To wind down this series, here’s a list of the top 15 things every founder should know before signing a term sheet with a CVC.
Image credits: Orn/Growney
There are plenty of benefits to taking CVC investments. Many CVC investments lead to acquisitions, and even if the discussions with a CVC fall apart, your meeting can result in valuable introductions that yield new business relationships. The rising CVC trend offers a brave new world for entrepreneurs. If you know the ropes of CVC investing, you could be in for a partnership that benefits you both.
This week, however, the Equity crew (Danny, Natasha, Chris, and Alex) agreed it felt silly to drum up false enthusiasm for funding rounds and startups. Instead, we talked about a more critical topic: systemic racism in the United States. Venture firms and tech executives across the country are pledging to be better following the brutal murder of George Floyd and police brutality.
Better is long overdue.
What follows are the resources we mentioned — and a few more — on the show itself. We’ll be back. Now is the time for sustained momentum and change.
When Nigerian angel investor Tomi Davies backed his first company — Strika Entertainment in 2001 — he admits he wasn’t aware of his future role.
“I was just helping out friends. I didn’t know it was angel investing. I didn’t know there was a structure to it,” he said.
Seven years later, Davies received a 20x return on his first exit and a decade after that he’s recognized as an architect of early-stage investing across Africa.
Davies is President of The African Business Angel Network and continues to fund and mentor young tech entrepreneurs in multiple countries.
On a call with TechCrunch, he shared advice for startups on fundraising, surviving COVID-19 and suggestions for global investors on entering Africa.
Davies’ ascendance in fundraising runs parallel to the boom in startup formation and VC on the continent over the last decade.
When he began In 2001, there wasn’t much measurable venture or digital entrepreneurial activity in Sub-Saharan Africa, outside South Africa. In fact, there was limited data on VC investing on the continent until around five years ago.
An early Crunchbase assisted study estimated VC to African startups annually grew from $40 million in 2012 to $500 million by 2015. A recent assessment by investment firm Partech tallied $2 billion going to the continent’s digital entrepreneurs in 2019, across top markets Nigeria, South Africa and Kenya.
Image Credits: TechCrunch
There are now thousands of VC backed startup entrepreneurs across the continent descending on every conceivable use-case — from fintech to on demand electric motorcycle mobility.
Increasingly, Davies’ home country of Nigeria has become the continent’s unofficial capital for venture investment and startup formation, given its market thesis of having Africa’s largest economy and population of 200 million people.
Even with the boom in VC to the continent’s startups — which has drawn investors such as Goldman Sachs and Steve Case — for years panels at African tech conferences have echoed the need for more early-stage funding options.
Davies has worked to meet that. He came to investing at the friends and family level after receiving an MBA at the University of Miami and an earlier career that spanned roles in management consulting, telecoms and IT.
After emerging as one of the early angels to Africa’s startups, supporting the continent’s innovation ecosystem became a mission for the Nigerian investor.
“My raison d’etre became, and will remain until the day I die, tech in African,” Davies said on a call from Lagos.
In his role as President of The African Angel Business Network, or ABAN, Davies has worked with a team to build out a local investor web across the continent.
“ABAN is very simply a network of networks…we have 49 networks in 33 African countries,” he explained.
Those include Lagos Angel Network, which Davies co-founded, Cairo Angels and Angel Investor Ethiopia, announced in Addis Ababa in 2019.
Tomi Davies (L) judges pitches with Cellulant CEO Ken Njoroge at Startup Ethiopia 2019, Image Credits: Jake Bright
ABAN establishes certain guidelines and criteria for how member networks operate, but each chapter sets its own investment terms, according to Davies.
For example, ABAN affiliated Dakar Angel Network — founded in 2018 to support startups in French speaking Africa — offers seed investments of between $25,000 to $100,000 to early-stage ventures.
Where and how startups seek funds from ABAN’s family of networks depends on where they operate. “One thing I say to everybody, from presidents to business people to investors, is Africa is about cities,” Davies said.
“When you know which city your looking to invest in or seek investment in, automatically we’ll be in a position to say, ‘here’s your network.'”
For the Lagos Angel Network in Nigeria, the team has a pitch night the third Thursday of each month with a 30 day rule. “Before you leave, you’ll hear if we’re interested or not. If we’re interested, we’ve got 30 days to make you an offer,” explained Davies.
In addition to his work with ABAN, Davies continues to invest in his own portfolio of startups — now at 32 ventures — and is a regular judge on Africa’s tech competition circuit.
He’s developed a framework to assess companies and shared parts of it with TechCrunch.
Tomi Davies (center) at Startup Battlefield Africa 2017
“What I say to any startup raising is the first thing any investor is listening to is how do I get my money back. That’s question number one, ‘How do I get my exit?,'” he said.
Davies stressed three things to satisfy that question: “The product service offering that you have, the customers who see value in that product service offering and the nature of the relationship in terms of channel and price offering,” he said.
“That’s what you’re always tinkering with after you start with some kind of value proposition.”
Davies referenced the increased significance of referrals, given the coronavirus has cancelled a number of events and limited mobility to pitch in person in Africa’s top VC markets.
“Because of COVID-19, networks have become critically important. Because investors can’t touch, can’t feel, can’t see [founders] people are looking now for referential integrity, ‘Who sent me this deck?,'” Davies said.
On how a coronavirus induced Nigerian recession may impact startups, Davies flagged the country’s non-stop informal commercial activity — and the adaptability of Nigerian entrepreneurs — as factors that could carry ventures through.
“There’s a significant chunk of the economy that’s in the informal market. So even if you look back at the recessions we’ve had…it hasn’t been felt on the streets,” he said.
Davies is also collaborating with partners on creating working capital solutions for startups whose revenues have been impacted by slowdown.
Tomi Davies is direct about his desire to draw new partners from tech centers such as Silicon Valley, into early-stage investing in Africa.
“We are always looking for co-investors and I speak on behalf of all 49 networks in ABAN,” he said. Davies highlighted the local expertise each network brings to their market as a benefit to VCs looking to invest on the continent through an African Business Angel Network affiliate.
When Clearpath Robotics CEO and co-founder Matthew Rendall looks at the “miles” of roads inside industrial factories, he sees them filled with autonomous vehicles.
And in the past five years, the company has inched toward that goal through its industrial division OTTO Motors. The division, which launched in 2015, has landed a number of customer contracts to bring its autonomous mobile robot platform into factories, including GE, Toyota, Nestlé and Berry Global.
OTTO Motors is preparing to expand with a fresh injection of $29 million in funding. The Series C funding round announced this week was led by led by Kensington Private Equity Fund, with participation from Bank of Montreal Capital Partners, Export Development Canada (EDC) and previous investors iNovia Capital and RRE Ventures . To date, the company has raised $83 million in funding.
OTTO Motors’ autonomous mobile robot platform, or AMRs, are used to handle materials within warehouses and factories. These robots, which were once viewed as a luxury, are now a necessity, according to Rendall, who believes the COVID-19 pandemic and the need for companies to enhance work safety will only accelerate the trend toward robots.
Robots, and more broadly automation, are often viewed as job killers in manufacturing. But Rendall argues that AMRs help fill roles that are currently sitting vacant and allow humans to take on the higher-skilled and higher-paid jobs.
“We tend to see more situations where the operation is not at peak output, not operating peak performance because they just can’t find the people,” Rendall said in a recent interview, noting that one of its customer shut down an entire wing of its facility because they just can’t get people.
Factories are often located near smaller towns or sprawling communities with a limited labor pool, a shortfall that can be compounded when Amazon opens up a facility nearby.
“There’s a kind of vacuum that pulls qualified talent out of the established manufacturing or warehouse base,” he said.
A 2018 study by Deloitte and The Manufacturing Institute forecast that a skills gap is projected to leave 2.4 million positions unfilled between 2018 and 2028 in the United States. The skills gap has popped up in other countries where OTTO Motors is now focused, including Japan, where the aging population is larger than the younger generation. Even China, which has historically been viewed as a place with an expanding labor pool, now has a national robotics strategy, Rendall said.
The company developed its AMRs to help manufacturers outsource the lower-value tasks to robots. “One of the least valuable things you can pay your people to do is walk from Point A to Point B,” Rendall said. “If you’re strapped for talent you want to have that team focused on what is at Point A or at Point B, like assembling an automobile. Walking to a warehouse with a part is something that can be outsourced to a machine.”
OTTO Motors’ initial customer base grew out of the automotive and transportation industries. It now works with six of the 10 OEMs. But Rendall says it has also seen success in the medical device and healthcare sector, as well.
COVID-19 has spurred demand, Rendall said, as essential businesses in the food, beverage and medical device industries attempt to lessen risks associated with the disease.