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Yesterday — January 20th 2020Your RSS feeds

Open banking platform Tink raises €90M at a post-money valuation of €415M

By Steve O'Hear

Tink, the European open banking platform, is disclosing €90 million in new funding, just 11 months after the Sweden-headquartered company announced a €56 million round of funding.

Co-leading this new round is Dawn Capital, HMI Capital and Insight Partners. The round also includes the incumbent postal operator and Italy’s largest financial services network Poste Italiane as a new investor, along with existing investors Heartcore Capital, ABN AMRO Ventures and BNP Paribas’ venture arm, Opera Tech Ventures.

The injection of capital will enable Tink to accelerate its European expansion plans and further develop its product accordingly.

“During 2020, we are committed to building out our platform with more bank connections and, on top of that, expand our product offering,” Tink co-founder and CEO Daniel Kjellén tells me. “Our aim is to become the preferred pan-European provider of digital banking services and increase our local presence across the region”.

Originally launched in Sweden in 2013 as a consumer-facing finance app with bank account aggregation at its heart, Tink has long since repositioned its offering to become a fully-fledged open banking platform, requisite with developer APIs, to enable banks and other financial service providers to ride the open banking/PSD2 train.

Through its various APIs, Tink provides four pillars of technology: “Account Aggregation,” “Payment Initiation,” “Personal Finance Management” and “Data Enrichment.” These can be used by third parties to roll their own standalone apps or integrated into existing banking applications.

“We have grown significantly, both in terms of our platform’s connectivity and as an organisation,” says Kjellén, when asked what has changed in the last 11 months. “We have during the year launched our platform in Belgium, Austria, the U.K., Germany, Spain, the Netherlands, Portugal and Italy. In total, our open banking platform is right now live in twelve European markets and connects to more than 2,500 banks that reach more than 250 million bank customers across Europe”.

The company’s headcount has also grown a lot, too. In the beginning of 2019 it sat at around 120, but is now at 300 employees. Most but not all are based in its headquarters in Stockholm, alongside local offices including recently opened sites in Paris, Helsinki, Oslo, Madrid, Warsaw, Milan and Copenhagen.

Perhaps better positioned than most, I asked Kjellén what types of use cases are really resonating with open banking, given that many industry commentators don’t think it has quite yet lived up to the hype.

“Many of our customers are seeing the advantage of being able to build smart multi-banking products with the data that they are now able to fetch and use to add value for their end users,” he says. “The use cases that really show the potential of open banking that we see our customers thriving with are those that leverage the full value of the financial data to deliver truly personalised experiences at scale, or remove friction in the user journey to a minimum, such as proactive price comparison, enhanced credit scoring and onboarding. Use cases such as these show that the consumer’s data can really work for them and bring improvements to their everyday interactions”.

One example Kjellén gives me is Klarna, the checkout credit provider, which he says is using open banking to provide a “wonderful” in-app experience. “I love that I as a consumer can now choose to change my mind and slice up the payments for a purchase I have already paid in full with my bank card,” he explains. “This shows how the potential of open banking goes way beyond just accessing a transaction history and allows the most innovative players, such as Klarna, to create a new standard in consumer experience”.

Kjellén says another standout use-case is using PSD2 APIs to verify identity to complete any type of customer registration completely automatically. “[That is] something that I find very innovative. It automates the previously time-consuming administration on the business side and delivers a completely seamless digital service on the end user side,” he says.

Meanwhile, Tink says its customer numbers have “quadrupled” in the past year, and includes PayPal, Klarna, NatWest, ABN AMRO, BNP Paribas Fortis, Nordea and SEB. “More than 4,000 developers are currently using Tink to build and power new innovative financial services and products,” adds Kjellén.

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LaunchDarkly CEO Edith Harbaugh explains why her company raised another $54M

By Greg Kumparak

This week, LaunchDarkly announced that it has raised another $54 million. Led by Bessemer Venture Partners and backed by the company’s existing investors, it brings the company’s total funding up to $130 million.

For the unfamiliar, LaunchDarkly builds a platform that allows companies to easily roll out new features to only certain customers, providing a dashboard for things like “canary launches” (pushing new stuff to a small group of users to make sure nothing breaks) or launching a feature only in select countries or territories. By productizing an increasingly popular development concept (“feature flagging”) and making it easier to toggle new stuff across different platforms and languages, the company is quickly finding customers in companies that would rather not spend time rolling their own solutions.

I spoke with CEO and co-founder Edith Harbaugh, who filled me in on where the idea for LaunchDarkly came from, how their product is being embraced by product managers and marketing teams and the company’s plans to expand with offices around the world. Here’s our chat, edited lightly for brevity and clarity.

As Alphabet crests the $1T mark, SaaS stocks reach all-time highs of their own

By Alex Wilhelm

Continuing our irregular surveys of the public markets, two things happened this week that are worth our time. First, a third domestic technology company — Alphabet — passed the $1 trillion market capitalization threshold. And, second, software as a service (SaaS) stocks reached record highs on the public markets after retreating over last summer.

The two milestones, only modestly related events, indicate how temperate the public waters are for technology companies today, a fact that should extend warmth into the private market where startups, and their venture capital backers, work.

The happenings are good news for technology startups for a number of reasons, including that major tech players have never had as much wealth in hand with which to buy smaller companies, and strong SaaS valuations help both smaller startups fundraise, and their larger brethren possibly exit.

Indeed, the stridently good valuations that major tech companies and their smaller siblings enjoy today should be just the sort of market conditions under which unicorns want to debut. We’ll continue to make this point so long as the public markets continue to rise, pricing tech companies that have already floated higher like the cliche’s own tide.

But while Alphabet, Microsoft and Apple are worth $3.68 trillion as a trio, and SaaS stocks are now worth 12.3x times their revenue (using enterprise value instead of market cap, for those keeping score at home), not every private, venture-backed company will necessarily benefit from public investor largesse.

What about tech-ish startups?

How much the current public-market tech valuation expansion will help companies that are increasingly sorted into the tech-enabled bucket isn’t clear; some companies that went public in 2019 were quickly spit up by investors unwilling to support valuations that matched or rose above their final private valuations. SmileDirectClub was one such offering.

The dividing line between what counts as tech — often fuzzy — appears to be slicing along gross margin lines, and the repeatability of business. The higher margin, and more recurring a company is, the more it’s worth. This market reality is why SaaS stocks’ recent return to form is not a surprise.

For Casper and One Medical, the first two venture-backed IPO hopefuls of the year, the more tech-ish they can appear between now and pricing the better. Because technology companies today are valued so highly, perhaps even a faint dusting of tech will save their valuations as they cross the chasm between private and adult.

Eaze’s struggles reflect falling VC interest in cannabis startups

By Alex Wilhelm

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

Yesterday, TechCrunch reported that Eaze, a well-known cannabis-focused startup, is struggling to stay in business amidst a cash crunch, leadership turmoil, banking issues and a business model pivot. It’s a compelling, critical read.

The news, however, asks a question: How are other cannabis-focused startups faring? We’ll explore the question through the lens of fundraising and the public market results of public cannabis companies in Canada.

Fundraising

Harvestr gathers user feedback in one place

By Romain Dillet

Meet Harvestr, a software-as-a-service startup that wants to help product managers centralize customer feedback from various places. Product managers can then prioritize outstanding issues and feature requests. Finally, the platform helps you get back to your customers once changes have been implemented.

The company just raised a $650,000 funding round led by Bpifrance with various business angels also participating, such as 360Learning co-founders Nicolas Hernandez and Guillaume Alary as well as Station F director Roxanne Varza through the Atomico Angel Programme.

Harvestr integrates directly with Zendesk, Intercom, Salesforce, Freshdesk, Slack and Zapier. For instance, if a user opens a ticket on Zendesk and another user interacts with your support team through an Intercom chat widget, everything ends up in Harvestr.

Once you have everything in the system, Harvestr helps you prioritize tasks that seem more urgent or that are going to have a bigger impact.

When you start working on a feature or when you’re about to ship it, you can contact your users who originally reached out to talk to you about it.

Eventually, Harvestr should help you build a strong community of power users around your product. And there are many advantages in pursuing this strategy.

First, you reward your users by keeping them in the loop. It should lead to higher customer satisfaction and lower churn. Your most engaged customers could also become your best ambassadors to spread the word around.

Harvestr costs $49 per month for 5 seats and $99 per month for 20 seats. People working for 360Learning, HomeExchange, Dailymotion and other companies are currently using it.

LocalGlobe partner Julia Hawkins discusses femtech’s risks and rewards

By Natasha Lomas

London-based seed fund LocalGlobe is incredibly active at the early-stage end of the startup pipeline with a broad focus across multiple sectors and areas, including health.

We interviewed partner Julia Hawkins about the opportunities and risks related to femtech investing in light of the fund’s early backing for Ferly, a female-founded startup with a subscription app that describes itself as an audio guide to “mindful sex.”

The startup says its mission is to open up conversations around female sexual pleasure and create a place for self-discovery and empowering community — touting “sex-positive” content that it says is “backed by research, written by experts, and personalized to you.”

The interview has been edited for length and clarity.

Chinese podcasting and audio content app Lizhi debuts on Nasdaq

By Catherine Shu

Lizhi, one of China’s biggest audio content apps, is debuting on Nasdaq today under the ticker symbol LIZI. It is the first of its major competitors, Ximalaya and Dragonfly, to go public (though Ximalaya is expected to also list in the United States later this year). Lizhi is offering 4.1 million shares at an IPO price of $11 per share.

Though Lizhi, Ximalaya and Dragonfly each host podcasts, audiobooks and livestreams, Lizhi, whose investors include Xiaomi, TPG, Matrix Partners China, Morningside Venture Capital and Orchid Asia, has differentiated itself by focusing on user-generated content created with the app’s recording tools.

According to market research firm iResearch, it has the largest community of user-generated audio content in China. The company said that in the third quarter of 2019, it had a base of 46.6 million average monthly active users on mobile and 5.7 million average monthly active content creators. While podcasts in the U.S. typically use revenue models based on ads or subscriptions, creators on Lizhi and other Chinese podcasting apps monetize through virtual gifts, similar to the ones given by viewers during video livestreams.

In an interview with TechCrunch, Lizhi CEO Marco Lai said the company plans to use proceeds from the IPO to invest in product development and its AI technology. Lizhi uses AI tech to distribute podcasts, which it says results in a 31% click rate on content. AI is also used to monitor content, give creators instant user engagement data and provide features that allow them to fine-tune recordings, reduce noise and create 3D audio.

Despite its quick growth, Lai says online audio in China is still an emerging segment. About 45.5% of total mobile internet users in China listened to online audio content in 2018, but adoption is expected to increase as IoT devices like smart speakers become more popular, especially in smaller cities. Lizhi has a partnership with Baidu for its Xiaodu smart speakers, and develop new ways of distributing content for IoT devices, says Lai.

Cannabis marketing company Fyllo acquires CannaRegs for $10M

By Anthony Ha

Fyllo, a digital marketing company focused on the cannabis industry, has acquired CannaRegs, a website offering subscription access to state and municipal cannabis regulations. Fyllo founder and CEO Chad Bronstein (pictured above) said his company paid $10 million in cash and stock.

Bronstein previously served as chief revenue officer at digital marketing company Amobee, and he told me that the two companies are “very complementary,” particularly since regulations and compliance present “a unique technical challenge” when it comes to advertising cannabis products.

Ultimately, his goal is for Fyllo to offer “compliance as a service,” with artificial intelligence helping brands and publishers ensure that all their cannabis advertising follows local laws. At the same time, Bronstein said Fyllo will continue to support CannaRegs’ 150-plus customers (mostly law firms, real estate professionals and cannabis operators) and work to bring more automation to the platform.

In addition, CannaRegs founder and CEO Amanda Ostrowitz will become Fyllo’s chief strategy officer, with CannaRegs’ 30 employees continuing to work out of their Denver office. This brings Fyllo’s total headcount to around 70.

“In a short period of time, Fyllo has emerged as an essential platform for publishers and cannabis companies to build creative campaigns in a safe and compliant way,” Ostrowitz said in a statement. “By teaming up with Fyllo, we have the chance to build a truly remarkable brand that can disrupt the entire industry. We look forward to delivering our same quality of data to existing customers and incorporating that data into Fyllo’s platform to become a one-stop-shop for cannabis brands looking to grow their businesses.”

Chicago-based Fyllo raised $18 million in funding last year.

We’ve gone Plaid #

By Alex Wilhelm

Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast, where we unpack the numbers behind the headlines.

This week Danny and Alex were back together to riff over a the latest early-stage rounds, the latest on the late-stage front, and more. It was yet another stacked week, forcing us to pick and choose a bit.

Starting off, however, here’s the rounds that caught our eyes this past week:

Leaving the earlier stages and heading to the other end of the spectrum, we touched on Cloudinary passing the $60 million ARR mark, ExtraHop aiming for $100 million ARR mark in short order, and SiteMinder’s new $70 million round that gave it a $750 million valuation after crossing $70 million ARR last year.

Got all that? Like we said, it has been busy.

The two main stories this week on the show were the big Plaid deal, and what’s going on in the United States’s own venture market.

With Plaid, Visa spent more than $5 billion to acquire the financial data API service in one of the first blockbuster exits of the year, making some VCs at Spark Capital and other firms very happy.

Meanwhile, the U.S. venture capital landscape is changing rapidly as more and more regions outside of Silicon Valley bulk up on their startups. The Valley is barely a majority of VC dollars these days, while regions like the mid-Atlantic and the Southeast are raising their profiles quickly. We talk about that, plus the more than a dozen mega funds that launched last year.

Wrapping up, it appears that the venture capitalist classes are tired. Not that we feel too poorly for them, but it goes to show that there’s so much going on these days that no one is getting any rest. No matter how much money they have.

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

Caregiving startup Homage raises Series B to enter new Asian markets

By Catherine Shu

In many countries, an aging population coupled with a low birth rate is increasing the demand for qualified caregivers. In Asia, the need is especially urgent because rapid demographic shifts and changing social structures means family members who traditionally cared for relatives are unable to because they need to work, or live far away. Homage wants to help with a platform that not only matches pre-screened professionals and clients, but also enables caregiving organizations to scale up more quickly.

The startup announced this week that it has raised Series B funding, led by EV Growth, with new investors Alternate Ventures and KDV Capital. Returning investor HealthXCapital also participated. The amount of funding was undisclosed, but sources tell TechCrunch it was $10 million.

Launched in 2016 by Gillian Tee, Lily Phang and Tong Duong, Homage currently operates in Singapore and Malaysia, with plans to expand into five more countries over the next two years. Before Homage, Tee, its CEO, worked in the United States, where she co-founded Rocketrip, a business travel startup backed by Y Combinator. Tee tells TechCrunch she realized the need for a caregiving platform while looking for carers.

“We saw that in ASEAN and the Asia Pacific region, there is really a need to build long-term care infrastructure,” she says.

This includes increasing the pool of basic caregivers to reduce costs, and also making it easier for families to be matched with professionals. Homage’s platform currently includes about 2,000 caregivers and focuses on elderly care, but also provides services needed by a wide age range, including rehabilitation care, physiotherapy, speech therapy and occupational therapy.

The platform was also created to give caregiving organizations a tech platform that allows them to expand more quickly and cost efficiently, in turn reducing care expenses for families. Homage interviews caregivers before they are added to the platform and partners with health organizations to provide continuing education and training. On the enterprise side, it helps providers with administrative tasks like compliance and bookings.

Tee says Homage’s screening process goes beyond interviews and background checks.

“From solving my own caregiving problems, I believe that a platform is needed, a highly curated one, so that every single individual has to be fully competency assessed,” she says.

For caregivers, this means building a profile, and in addition to the information they provide, Homage also works with nurses to evaluate how they are able to perform important tasks like manual transfer techniques. That information is then used by its matching engine.

“The human mind can take in so many details at once, so we have an algorithm for manual transfer techniques, like bent pivot transfers or two-handed transfers, down to that granularity,” Tee says. “It is captured into the system and that translates into mobility, and gives categories of mobility, so it helps us shortlist much better than humans can.” Then final assessments and matches are done by one of Homage’s operators.

Homage also provides compliance tools that collect information about licenses, background and health checks, AED and CPR training and other documentation. On the bookings side, Homage helps organizations manage fluctuations in demand, since many families only need carers a few days a week. Caregivers on the platform range from full-time nurses to part-time carers. It also helps organizations plan breaks to prevent burnout.

Tee says many caregiving organizations put together their own system for administrative tasks, and Homage gives them an alternative that lets them set up operations or expand more quickly.

Homage’s funding will be used to expand its base of caregivers, provide training, and new services, including its medical delivery service.

In a press statement, EV Growth managing partner Willson Cuaca said, “Increasing aging population and low TFR (total fertility rate) are inevitable. Urbanization and a fast-paced working environment make caregiving service one of the key services in our daily life. Gillian and the team have been consistently trying to make the on-demand caregiving service as accessible as possible, fast and reliable. We are proud to be part of the Homage journey to bring back caregiving with control, grace, and dignity.”

Funnel closes $47M Series B to prepare marketing data for better reporting and analysis

By Steve O'Hear

Funnel, the Stockholm-based startup that offers technology to help businesses prepare — or make “business-ready” — their marketing data for better reporting and analysis, has closed $47 million in Series B funding.

Leading the round is Eight Roads Ventures and F-Prime Capital, with participation from existing investors Balderton Capital, Oxx, Zobito and Industrifonden, in addition to Kreos Capital.

Funnel says it will use the injection of capital to accelerate its plans in the U.S., where the company is seeing “strong demand” from enterprises. It also will invest in its technical teams to further its vision of “creating a single source of truth of marketing, sales and other commerce data.”

Founded in 2014 by Fredrik Skantze and Per Made, who are also behind Facebook advertising tool Qwaya, Funnel set out to let marketers automate their online marketing data from multiple platforms in real time, so that they can more accurately analyse their online marketing spend.

Initially that included visualising the marketing data, but now the company has decided to focus solely on collecting the data from all of the disparate marketing channels, and cleaning it up and normalizing it so that it can be imported into popular business intelligence tools to be analysed.

“[We have] shifted away from visualising the marketing data to ‘just’ collecting and making it business-ready as we have seen that to be the real pain point for customers,” Funnel co-founder and CEO Fredrik Skantze tells TechCrunch.

“Visualisation is done well in existing business intelligence tools once the data is properly prepared. Automating the collection and preparation of the data has proven to be a very hard thing to do right and we wanted to make sure we were the best at this which we now confidently can say we are as we hear that again and again from customers.”

To that end, Skantze explains that Funnel has direct connections to tools like Tableau and Google Data Studio. The idea is that customers can instantly visualize the data in the tools they are already familiar with.

Since we last covered Funnel mid 2017, the overarching trend has been an explosive growth in digital marketing. Skantze says that in 2017, 39% of worldwide marketing spend was digital and mostly e-commerce, gaming and app companies that were putting the majority of their budgets online. Since then, forecasts have been repeatedly adjusted upwards, and in 2020, leading markets like the U.K. are now approaching 70% for digital marketing.

“That means the big brands are putting their big budgets online,” he says. “These brands are moving their marketing online because of the performance promise of digital marketing. But delivering on that performance promise requires being data-driven. This is a huge shift for these organizations that they are gradually coming to grips with as they are traditionally more branding focused. It requires creating new roles like marketing analytics, marketing technologists and putting in place a data infrastructure. This is complex.”

That, of course, plays nicely into the hands of Funnel, which is seeing enterprises far beyond e-commerce and apps utilise its wares. “We have spent the last year building out the enterprise readiness of our product and offering [features] like security certifications and enterprise features to be ready to take on these customers,” adds Skantze.

Meanwhile, during the last year, the Funnel team has grown from 73 to 140, and the company signed new office space for a total of 400 people across Stockholm and Boston, ready for further expansion.

SpinLaunch spins up a $35M round to continue building its space catapult

By Devin Coldewey

SpinLaunch, a company that aims to turn the launch industry on its head with a wild new concept for getting to orbit, has raised a $35M round B to continue its quest. The team has yet to demonstrate their kinetic launch system, but this year will be the year that changes, they claim.

TechCrunch first reported on SpinLaunch’s ambitious plans in 2018, when the company raised its previous $35 million, which combined with $10M it raised prior to that and today’s round comes to a total of $80M. With that kind of money you might actually be able to build a space catapult.

The basic idea behind SpinLaunch’s approach is to get a craft out of the atmosphere using a “rotational acceleration method” that brings a craft to escape velocity without any rockets. While the company has been extremely tight-lipped about the details, one imagines a sort of giant rail gun curled into a spiral, from which payloads will emerge into the atmosphere at several thousand miles per hour — weather be damned.

Naturally there is no shortage of objections to this method, the most obvious of which is that going from an evacuated tube into the atmosphere at those speeds might be like firing the payload into a brick wall. It’s doubtful that SpinLaunch would have proceeded this far if it did not have a mitigation for this (such as the needle-like appearance of the concept craft) and other potential problems, but the secretive company has revealed little.

The time for broader publicity may soon be at hand, however: the funds will be used to build out its new headquarter and R&D facility in Long Beach, but also to complete its flight test facility at Spaceport America in New Mexico.

“Later this year, we aim to change the history of space launch with the completion of our first flight test mass accelerator at Spaceport America,” said founder and CEO Jonathan Yaney in a press release announcing the funding.

Lowering the cost of launch has been the focus of some of the most successful space startups out there, and SpinLaunch aims to leapfrog their cost savings by offering orbital access for under $500,000. First commercial launch is targeted for 2022, assuming the upcoming tests go well.

The funding round was led by previous investors Airbus Ventures, GV, and KPCB, as well as Catapult Ventures, Lauder Partners, John Doerr and Byers Family.

Copilot is a subscription personal finance tracker aiming to kill Mint

By Lucas Matney

When Intuit acquired Mint more than a decade ago, mobile was in a different place — as were tech-enabled financial services. There hasn’t been much progress for the personal finance tracker app category in the meantime. Mint has stumbled along with with integration issues and tiresome data misclassifications. For many, the best alternative has been firing up a spreadsheet.

Copilot is a new personal finance-tracking app from a former Googler that seems like it could garner a following based on its slick design and ease-of-use. The subscription iOS app lets you load your financial data, create custom categories for transactions and set budgets. It’s been invitation-only for the past several months, but is launching publicly today.

Founder Andrés Ugarte told TechCrunch that he started the effort after eight years at Google — most recently inside its Area 120 experimental products division — because of slow progress in the personal finance space since Mint’s acquisition.

“I’ve been trying to use personal finance apps for the last eight years, and I eventually ended up giving up on them,” Ugarte says. “I was willing to make them work, and create my own categories and fix the data so that stuff was all categorized correctly. But I was always disappointed because the apps never felt smart because they would make the same mistakes again.”

I spent a few hours poking around Copilot over the past couple of days and I like what I’ve seen. The design is friendlier than other options, but its major strengths are that you can easily re-categorize a transaction that didn’t automatically fall in the bucket that you wanted it to, mark internal transfers between accounts and exclude one-off purchases from your tracked budget. Other apps have also allowed these functionalities, but Copilot lets you denote whether you want every transaction with a particular vendor to route to a certain category or bypass your budget entirely, so it actually learns from your activity.

In some ways, the killer feature of Copilot is just how great Plaid is. The app relies heavily on the Visa-acquired financial services API startup and I can see why the startup was so successful. The integration’s intuitiveness alongside Copilot’s already-smooth on-boarding process gives users early indication for the app’s thoughtful design.

Copilot has its limitations, mainly in that the team is just two people right now, so those holding out for desktop or Android support might have to wait a bit. Some may be turned off by the app’s $2.99 monthly subscription price, though there are more than a few reasons to avoid free apps that have access to all of your financial info. Copilot maintains that users’ financial info will never be sold to or shared with third parties.

Ugarte has largely been self-funding the effort by selling off his Google shares, but the team just locked down a $250,000 angel round and is searching for more funding.

Visa’s Plaid acquisition shows a shifting financial services landscape

By Ron Miller

When Visa bought Plaid this week for $5.3 billion, a figure that was twice its private valuation, it was a clear signal that traditional financial services companies are looking for ways to modernize their approach to business.

With Plaid, Visa picks up a modern set of developer APIs that work behind the scenes to facilitate the movement of money. Those APIs should help Visa create more streamlined experiences (both at home and inside other companies’ offerings), build on its existing strengths and allow it to do more than it could have before, alone.

But don’t take our word for it. To get under the hood of the Visa-Plaid deal and understand it from a number of perspectives, TechCrunch got in touch with analysts focused on the space and investors who had put money into the erstwhile startup.

Marijuana delivery giant Eaze may go up in smoke

By Ingrid Lunden

The first cannabis startup to raise big money in Silicon Valley is in danger of burning out. TechCrunch has learned that pot delivery middleman Eaze has seen unannounced layoffs, and its depleted cash reserves threaten its ability to make payroll or settle its AWS bill. Eaze was forced to raise a bridge round to keep the lights on as it prepares to attempt major pivot to ‘touching the plant’ by selling its own marijuana brands through its own depots.

If Eaze fails, it could highlight serious growing pains amid the ‘green rush’ of startups into the marijuana business.

Eaze, the startup backed by some $166 million in funding that once positioned itself as the “Uber of pot” — a marketplace selling pot and other cannabis products from dispensaries and delivering it to customers — has recently closed a $15 million bridge round, according to multiple source. The fund was meant to keep the lights on as Eaze struggles to raise its next round of funding amid problems with making decent margins on its current business model, lawsuits, payment processing issues, and internal disorganization.

 

An Eaze spokesperson confirmed that the company is low on cash. Sources tell us that the company, which laid off some 30 people last summer, is preparing another round of cuts in the meantime. The spokesperson refused to discuss personnel issues but noted that there have been layoffs at many late stage startups as investors want to see companies cut costs and become more efficient.

From what we understand, Eaze is currently trying to raise a $35 million Series D round according to its pitch deck. The $15 million bridge round came from unnamed current investors. (Previous backers of the company include 500 Startups, DCM Ventures, Slow Ventures, Great Oaks, FJ Labs, the Winklevoss brothers, and a number of others.) Originally, Eaze had tried to raise a $50 million Series D, but the investor that was looking at the deal, Athos Capital, is said to have walked away at the eleventh hour.

Eaze is going into the fundraising with an enterprise value of $388 million, according to company documents reviewed by TechCrunch. It’s not clear what valuation it’s aiming for in the next round.

An Eaze spokesperson declined to discuss fundraising efforts but told TechCrunch, “The company is going through a very important transition right now, moving to becoming a plant-touching company through acquisitions of former retail partners that will hopefully allow us to more efficiently run the business and continue to provide good service to customers.

Desperate to grow margins

The news comes as Eaze is hoping to pull off a “verticalization” pivot, moving beyond online storefront and delivery of third-party products (rolled joints, flower, vaping products and edibles) and into sourcing, branding and dispensing the product directly. Instead of just moving other company’s marijuana brands between third-party dispensaries and customers, it wants to sell its own in-house brands through its own delivery depots to earn a higher margin. With a number of other cannabis companies struggling, the hope is that it will be able to acquire brands in areas like marijuana flower, pre-rolled joints, vaporizer cartridges, or edibles at low prices.

An Eaze spokesperson confirmed that the company plans to announce the pivot in the coming days, telling TechCrunch that it’s “a pretty significant change from provider of services to operating in that fashion but also operating a depot directly ourselves.”

The startup is already making moves in this direction, and is in the process of acquiring some of the assets of a bankrupt cannabis business out of Canada called Dionymed — which had initially been a partner of Eaze’s, then became a competitor, and then sued it over payment disputes, before finally selling part of its business. These assets are said to include Oakland dispensary Hometown Heart, which it acquired in an all-share transaction (“Eaze effectively bought the lawsuit,” is how one source described the sale). This will become Eaze’s first owned delivery depot.

In a recent presentation deck that Eaze has been using when pitching to investors — which has been obtained by TechCrunch — the company describes itself as the largest direct-to-consumer cannabis retailer in California. It has completed more than 5 million deliveries, served 600,000 customers and tallied up an average transaction value of $85. 

To date, Eaze has only expanded to one other state beyond California, Oregon. Its aim is to add five more states this year, and another three in 2021. But the company appears to have expected more states to legalize recreational marijuana sooner, which would have provided geographic expansion. Eaze seems to have overextended itself too early in hopes of capturing market share as soon as it became available.

An employee at the company tells us that on a good day Eaze can bring in between $800,000 and $1 million in net revenue, which sounds great, except that this is total merchandise value, before any cuts to suppliers and others are made. Eaze makes only a fraction of that amount, one reason why it’s now looking to verticatlize into more of a primary role in the ecosystem. And that’s before considering all of the costs associated with running the business. 

Eaze is suffering from a problem rampant in the marijuana industry: a lack of working capital. Since banks often won’t issue working capital loans to weed-related business, deliverers like Eaze can experience delays in paying back vendors. A source says late payments have pushed some brands to stop selling through Eaze.

Another drain on its finances have been its marketing efforts. A source said out-of-home ads (billboards and the like) allegedly were a significant expense at one point. It has to compete with other pot purchasing options like visiting retail stores in person, using dispensaries’ in-house delivery services, or buying via startups like Meadow that act as aggregated online points of sale for multiple dispensaries.

Indeed, Eaze claims that its pivot into verticalization will bring it $204 million in revenues on gross transactions of $300 million. It notes in the presentation that it makes $9.04 on an average sale of $85, which will go up to $18.31 if it successfully brings in ‘private label’ products and has more depot control.

Selling weed isn’t eazy

The poor margins are only one of the problems with Eaze’s current business model, which the company admits in its presentation have led to an inconsistent customer experience and poor customer affinity with its brand — especially in the face of competition from a number of other delivery businesses.  

Playing on the on-demand, delivery-of-everything theme, it connected with two customer bases. First, existing cannabis consumers already using some form of delivery service for their supply; and a newer, more mainstream audience with disposable income that had become more interested in cannabis-related products but might feel less comfortable walking into a dispensary, or buying from a black market dealer.

It is not the only startup that has been chasing that audience. Other competitors in the wider market for cannabis discovery, distribution and sales include Weedmaps, Puffy, Blackbird, Chill (a brand from Dionymed that it founded after ending its earlier relationship with Eaze), and Meadow, with the wider industry estimated to be worth some $11.9 billion in 2018 and projected to grow to $63 billion by 2025.

Eaze was founded on the premise that the gradual decriminalisation of pot — first making it legal to buy for medicinal use, and gradually for recreational use — would spread across the US and make the consumption of cannabis-related products much more ubiquitous, presenting a big opportunity for Eaze and other startups like it. 

It found a willing audience among consumers, but also tech workers in the Bay Area, a tight market for recruitment. 

“I was excited for the opportunity to join the cannabis industry,” one source said. “It has for the most part has gotten a bad rap, and I saw Eaze’s mission as a noble thing, and the team seemed like good people.”

Eaze CEO Ro Choy

That impression was not to last. The company, this employee was told when joining, had plenty of funding with more on the way. The newer funding never materialised, and as Eaze sought to figure out the best way forward, the company cycled through different ideas and leadership: former Yammer executive Keith McCarty, who cofounded the company with Roie Edery (both are now founders at another Cannabis startup, Wayv), left, and the CEO role was given to another ex-Yammer executive, Jim Patterson, who was then replaced by Ro Choy, who is the current CEO. 

“I personally lost trust in the ability to execute on some of the vision once I got there,” the ex-employee said. “I thought that on one hand a picture was painted that wasn’t the truth. As we got closer and as I’d been there longer and we had issues with funding, the story around why we were having issues kept changing.” Several sources familiar with its business performance and culture referred to Eaze as a “shitshow”.

No ‘Push For Kush’

The quick shifts in strategy were a recurring pattern that started well before the company got tight financial straits. 

One employee recalled an acquisition Eaze made several years ago of a startup called Push for Pizza. Founded by five young friends in Brooklyn, Push for Pizza had gone viral over a simple concept: you set up your favourite pizza order in the app, and when you want it, you pushed a single button to order it. (Does that sound silly? Don’t forget, this was also the era of Yo, which was either a low point for innovation, or a high point for cynicism when it came to average consumer intelligence… maybe both.)

Eaze’s idea, the employee said, was to take the basics of Push for Pizza and turn it into a weed app, Push for Kush. In it, customers could craft their favourite mix and, at the touch of a button, order it, lowering the procurement barrier even more.

The company was very excited about the deal and the prospect of the new app. They planned a big campaign to spread the word, and held an internal event to excite staff about the new app and business line. 

“They had even made a movie of some kind that they showed us, featuring a caricature of Jim” — the CEO at a the time — “hanging out of the sunroof of a limo.” (I’ve been able to find the opening segment of this video online, and the Twitter and Instagram accounts that had been created for Push for Kush, but no more than that.)

Then just one week later, the whole plan was scrapped, and the founders of Push for Pizza fired. “It was just brushed under the carpet,” the former employee said. “No one could get anything out of management about what had happened.”

Something had happened, though: the company had been taking payments by card when it made the acquisition, but the process was never stable and by then it had recently gone back to the cash-only model. Push for Kush by cash was less appealing. “They didn’t think it would work,” the person said, adding that this was the normal course of business at the startup. “Big initiatives would just die in favor of pushing out whatever new thing was on the product team’s radar.” 

Eaze’s spokesperson confirmed that “we did acquire Push For Pizza . . but ultimately didn’t choose to pursue [launching Push For Kush].”

Payments were a recurring issue for the startup. Eaze started out taking payments only in cash — but as the business grew, that became increasingly problematic. The company found itself kicked off the credit card networks and was stuck with a less traceable, more open to error (and theft) cash-only model at a time when one employee estimated it was bringing in between $800,000 and $1 million per day in sales. 

Eventually, it moved to cards, but not smoothly: Visa specifically did not want Eaze on its platform. Eaze found a workaround, employees say, but it was never above board, which became the subject of the lawsuit between Eaze and Dionymed. Currently the company appear to only take payments via debit cards, ACH transfer, and cash, not credit card.

Another incident sheds light on how the company viewed and handled security issues. 

Can Eaze rise from the ashes?

At one point, employees allegedly discovered that Eaze was essentially storing all of its customer data — including users’ signatures and other personal information — in an Azure bucket that was not secured, meaning that if anyone was nosing around, it could be easily discovered and exploited.

The vulnerability was brought to the company’s attention. It was something that was up to product to fix, but the job was pushed down the list. It ultimately took seven months to patch this up. “I just kept seeing things with all these huge holes in them, just not ready for prime time,” one ex-employee said of the state of products. “No one was listening to engineers, and no one seemed to be looking for viable products.” Eaze’s spokesperson confirms a vulnerability was discovered but claims it was promptly resolved.

Today, the issue is a more pressing financial one: the company is running out of money. Employees have been told the company may not make its next payroll, and AWS will shut down its servers in two days if it doesn’t pay up. 

Eaze’s spokesperson tried to remain optimistic while admitting the dire situation the company faces. “Eaze is going to continue doing everything we can to support customers and the overall legal cannabis industry. We’re excited about the future and acknowledge the challenges that the entire community is facing.”

As medicinal and recreational marijuana access became legal in some states in the latter 2010s, entrepreneurs and investors flocked to the market. They saw an opportunity to capitalize on the end of a major prohibition — a once in a lifetime event. But high government taxes, enduring black markets, intense competition, and a lack of financial infrastructure willing to deal with any legal haziness have caused major setbacks.

While the pot business might sound chill, operations like Eaze depend on coordinating high-stress logistics with thin margins and little room for error. Plenty of food delivery startups from Sprig to Munchery went under after running into similar struggles, and at least banks and payment processors would work with them. With the odds stacked against it, Eaze has a tough road ahead.

SiteMinder raises $70M at $750M valuation after cresting $70M ARR in 2019

By Alex Wilhelm

Today SiteMinder, an Australian software company focused on the hotel industry, announced a $70 million (USD) round that values the company at $750 million. That’s about $1.08 billion in Australian dollars, making the firm a Down Under Unicorn, even if it’s a bit shy here in America.

According to SiteMinder, the round was “led by equity funds managed by BlackRock.” The company has previously raised capital from TCV and Bailador.

TechCrunch discussed SiteMinder earlier this year as part of our running examination of companies that have reached certain annual recurring revenue (ARR) thresholds. At that time, we noted that the firm’s revenue was at AU$100 million ARR, while it was a bit light of the level in American dollars.

As we understand the company’s new valuation in both countries’ currencies, it is possible to calculate the company’s current ARR multiple. It’s about 11x. That price is similar to what public SaaS companies command in today’s market, according to Bessemer’s cloud index.

Growth

SiteMinder announced some time ago that it had surpassed the AU$100 million ARR mark in 2019. Software companies — SiteMinder appears to also generate service-oriented revenues from activities like website design — that reach similar scale tend to slow down in percentage growth terms.

To understand the company’s approach to growth, TechCrunch asked SiteMinder if its new capital would allow it to maintain its current pace of ARR growth. The firm had cited “accelerated go-to-market strategies” as a possible use for its new funds, helping frame the question.

According to SiteMinder CEO Sankar Narayan, the answer is “Yes, absolutely.” Narayan went on to say that the company has “the widest global footprint and the largest multilingual capability in our category, giving us pole position as technology adoption accelerates across the hotel industry.” Narayan also cited planned hiring and expanded distribution work in Europe and Asia as giving his company “even greater opportunities for growth.”

SiteMinder operates globally, providing it with a closer presence to some customers (80% of the firm’s revenue is international, it says). That distribution, however, raises a question. Quickly growing companies often struggled to hold their culture together when they are in a single office. SiteMinder operates in over a dozen countries, likely compounding the issue.

Narayan told TechCrunch that SiteMinder is “no stranger to the challenges that come with being a global business.” To combat cultural drift, the CEO says that he visits an overseas office every month, and that his company recently introduced “an all-staff shadow equity plan” to let everyone profit from the company’s progress.

With new capital, and presumably more staff and offices to come, it will be interesting to see what new things the company’s cultural integrity requires.

Regardless, SiteMinder is now the inaugural member of the AU$100 million ARR club, and is a local-currency unicorn to boot. And as it’s harder to reach that valuation outside of Silicon Valley than inside of it, neither of those honorifics should be viewed as dismissive; they’re compliments.

Matera raises $11.2 million to let you handle residential property management yourself

By Romain Dillet

Matera, the French startup formerly known as illiCopro, is raising an $11.2 million funding round (€10 million). The company has been building a SaaS platform to give you all the tools you need to handle property management for your residential building.

Index Ventures is leading the round, with existing investor Samaipata also participating. Business angels, such as Bertrand Jelensperger, Paulin Dementhon and Marc-David Choukroun are also participating.

In France, there are two ways to handle property management of residential buildings. Co-owners of the hallways, elevator and common space of the building can either hire a company to do it and handle all the pesky tasks, or you can do it yourself.

Matera wants to target the second category — co-owners who want to manage their building themselves. Other startups, such as Bellman, have chosen a different approach. Matera has built a web-based platform to view information, communicate with other co-owners and make sure everything is up-to-date.

Everybody has their own account and can access the platform. Co-owners meet regularly to handle outstanding issues. Matera centralizes all topics, helps you write a report and checks that it complies with legal requirements.

Matera then handles everything that involves money. You can collect money from co-owners every month and check how your money is spent. The platform tries to do the heavy lifting when it comes to accounting.

Finally, Matera helps you manage contracts with partners — elevator maintenance, heating maintenance, cleaning company, water, electricity, insurance, taking care of the garden, etc. You get an address book for your partners, and the company is working on a way to help you switch to another partner from the platform.

If there’s something you don’t feel comfortable doing yourself, Matera can help you work with legal, accounting, insurance and construction experts.

So far, Matera has managed to attract 1,000 residential buildings representing 25,000 users. The company plans to expand to other European countries in the future, starting with Belgium, Spain, Italy and Germany. With today’s funding round, the company plans to hire 100 persons.

Loliware’s kelp-based plastic alternatives snag $6M seed round from eco-conscious investors

By Devin Coldewey

The last few years have seen many cities ban plastic bags, plastic straws and other common forms of waste, giving environmentally conscious alternatives a huge boost — among them Loliware, purveyor of fine disposable goods created from kelp. Huge demand and smart sourcing has attracted a big first funding round.

I covered Loliware early on when it was one of the first companies to be invested in by the Ocean Solutions Accelerator, a program started in 2017 by the nonprofit Sustainable Ocean Alliance. Founder Chelsea “Sea” Briganti told me about the new funding on the SOA’s strange yet quite successful “Accelerator at Sea” program late last year.

The company makes straws primarily, with other products planned, out of kelp matter. Kelp, if you’re not familiar, is a common type of aquatic algae (also called seaweed) that can grow quite large and is known for its robustness. It also grows in vast, vast quantities in many coastal locations, creating “kelp forests” that sustain entire ecosystems. Intelligent stewardship of these fast-growing kelp stocks could make them a significantly better source than corn or paper, which are currently used to create most biodegradable straws.

A proprietary process turns the kelp into straws that feel plastic-like but degrade simply (and not in your hot drink — it can stand considerably more exposure than corn and paper-based straws). Naturally the taste, desirable in some circumstances but not when drinking a seltzer, is also removed.

It took a lot of R&D and fine-tuning, Briganti told me:

“None of this has ever been done before. We led all development from material technology to new-to-world engineering of machinery and manufacturing practices. This way we ensure all aspects of the product’s development are truly scalable.”

They’ve gone through more than a thousand prototypes and are continuing to iterate as advances make possible things like higher flexibility or different shapes.

“Ultimately our material is a massive departure from the paradigms with which other companies are approaching the development of biodegradable materials,” she said. “They start with a problematic, last-forever, fossil fuel-derived paradigm and try to make it not so bad — this is step-change development and too slow and frumpy to truly make an impact.”

Of course it doesn’t matter how good your process is if no one is buying it, a fact that plagues many ethics-first operations, but in fact demand has grown so fast that Loliware’s biggest challenge has been scaling to meet it. The company has gone from a few million to a hundred million in recent years to a projected billion straws shipping in 2020.

“It takes us about 12 months to get to full automation [from the lab],” she said. “Once we get to full automation, we license the tech to a strategic plastic or paper manufacturer. Meaning, we do not manufacture billions of straws, or anything, in-house.”

It makes sense, of course, just as contracting out your PCB or plastic mold or what have you. Briganti wanted to have global impact, and that requires taking advantage of global infrastructure that’s already there.

Lastly, the consideration of a sustainable ecosystem was always important to Briganti, as the whole company is founded on the idea of reducing waste and using fundamentally ethical processes.

“Our products utilize a super-sustainable supply of seaweed, a supply that is overseen and regulated by local governments,” Briganti said. “In 2020, Loliware will launch the first-ever Algae Sustainability Council (ASC), which allows us to be at the helm of the design of these new global seaweed supply chain systems as well as establishing the oversight, ensuring sustainable practices and equitability. We are also pioneering what we have coined the ‘Zero Waste Circular Extraction Methodology,’ which will be a new paradigm in seaweed processing, utilizing every component of the biomass as it suggests.”

The $5.9 million “super seed” round has many investors, including several who were on board the ship in Alaska for the Accelerator at Sea this past October (as SOA Seabird Ventures). The CEO of Blue Bottle Coffee has invested, as have New York Ventures, Magic Hour, For Good VC, Hatzimemos/Libby, Geekdom Fund, HUmanCo VC, CityRock and Closed Loop Partners.

The money will be used for scaling and further R&D; Loliware plans to launch several new straw types (like a bent straw for juice boxes), a cup and a new utensil. 2020 may be the year you start seeing the company’s straws in your favorite coffee shop rather than a few early adopters here and there. You can keep track of where they can be found here at the company’s website.

Are OYO’s deep cuts a reality check for unicorns?

By Alex Wilhelm

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

After a short pause, we’re back on the topic of unicorn layoffs. While it’s cheery that a number of companies are chugging ahead with ARR growth powered by efficient spend, not every company has taken a similar approach. As we’ve seen in the last six months, many companies that raised big checks wound up spending too much and are now reducing headcount and other costs.

Today I want to chew over the latest news from OYO, which is beating a retreat to reduce losses. And, I’m following recent notes from venture capitalist Bill Gurley about how much money a company should raise before an IPO without engendering market speculation that it’s a money bonfire, torching cash to cast itself in good light.

Retrenchment

OYO, the SoftBank-backed budget hotel startup, is releasing staff, reducing capacity and pulling out of some locations altogether. The firm, famous for its hyper-growth and aggressive capital raises, will cut 1,450 staff, including 1,000 in its home country of India. In fact, the company is leaving several hundred cities in India and has cut tens of thousands of rooms from its rolls, according to reports.

WorkBoard triples again in 2019, raises $30M from a16z to celebrate

By Alex Wilhelm

WorkBoard, a SaaS startup that provides goal setting and management software to other companies, announced today that it has closed a $30 million Series C. The new capital comes less than a year after the startup raised a $23 million Series B. WorkBoard has raised $66.6 million to date, according to Crunchbase.

Andreessen Horowitz’s David Ulevitch led the round, which saw participation from Microsoft’s M12, GGV and Workday Ventures, each of which had put money into the company in preceding rounds. 

Why did WorkBoard announce a Series C just 10 months after its Series B? That’s what we wanted to find out. As it turns out, the answer is growth. 

3x, twice

The company is growing quickly, making it an attractive investment for the venture class. However, it’s useless to explain its growth in numerical terms if we don’t understand why it is growing as quickly as it is. 

WorkBoard provides software and services to other companies relating to how they plan and track their progress against their plans. More simply, WorkBoard helps other companies set and leverage OKRs, an acronym that stands for “objectives and key results.”

If you’d like a longer-winded explanation of how the concept works, our notes on the company’s Series B are the jam. Briefly, OKRs are a planning framework that help companies set their course intelligently, and execute across smaller tasks that add up to the direction they want to go. You complete “key results” over a given period of time, which roll up into your “objectives.”

It’s a pretty okay way to set up a company’s planning system. OKRs are popular in Silicon Valley, where Google popularized the method. It was not clear, at least to your humble servant, how far the idea had spread when WorkBoard raised its Series B last year. What if the startup raised a bunch of money after selling into fertile ground (startups aware of OKRs), but struggled when it went after other, non-tech companies?

Whoops. After boosting its annual recurring revenue 3.5x in 2018, WorkBoard tripled its ARR again in 2019, according to CEO Deidre Paknad. Thinking out loud, WorkBoard raised its Series A in December of 2017. It probably had $1 million to $3 million ARR at the time, a wide but regular-ish range of ARR for a startup raising its first institutional (priced) round. Given its 3.5x and 3x results in 2018 and 2019, starting right after that Series A investment, the company’s ARR is now likely over $20 million and probably closer to $25 million. 

So if it can double this year, the startup may begin to approach IPO scale in 2021, provided that its growth can keep up.

On that point, I asked Paknad about her market, especially in regards to how much work she and her employees had to do in terms of market education; did they have to bring the gospel of OKRs to companies, sell them on the idea, and then sell its software? Or had the need to teach about OKRs themselves gone down?

She indicated that instead of needing to pull the market towards her firm, the trendlines are better than neutral. According to the CEO, it was harder to sell OKR software “five years ago” because “the need to educate” a half decade ago “was intense.” Companies were stuck on their love of PowerPoint and similar, dated tooling. However, that need for “education has declined rapidly” Paknad said. 

She says that in her company’s experience there is “ever broader recognition that if you want to drive smart growth — not growth at any cost but smart growth,” companies will need to have “everybody in the organization aligned, and you need to be able to see what they [are] aligned on.” 

OKRs are a natural and well-explored way to attempt to do so.

That market movement has helped the company have very efficient operations, in terms of the usual raft of SaaS metrics that we understand. Paknad told TechCrunch a few things that stuck out:

  • WorkBoard has a “hyper-efficient” enterprise sales cycle, closing new customers in “under 60 days” that are “several hundred thousand dollars in average deal size.”
  • That its “average deal size has more than doubled since the beginning” of 2019.
  • For every $1 that WorkBoard spends on sales and marketing costs, the company generates “about $2 in new ARR.” (That’s way better than the $0.86 in average ARR generated by $1 in new sales and marketing spend for SaaS companies more broadly.)
  • And, it didn’t need to raise this round, with Paknad telling TechCrunch that she hasn’t “spent the 23 [million dollars] from March yet,” but that it decided to add capital because that “opportunity really is unfolding in the way we would like,” and that her firm has an “opportunity to have really definitive enterprise leadership.”

The investor perspective

TechCrunch got Ulevitch, WorkBoard’s newest lead investor, on the phone. Ulevitch called Paknad “a force of nature” who “really connects to customers.” That was all well and good, but more fun were his notes on how the round came together.

Paknad told Ulevitch after WorkBoard’s March 2019 Series B that her company would triple in the year. When it did, Ulevitch said she didn’t want to wait any longer to put money into the firm. And the investment came together quickly, with the Andreessen Horowitz investor noting a roughly one-month timeframe for the deal’s lifecycle.

This round isn’t hard to figure out. Fast-growing, efficient SaaS companies make investors dream of the next Slack. Let’s see if WorkBoard can double or triple in 2020. If so, we’ll be chatting with Paknad about exits and IPOs, not middle-sized, middle-stage rounds.

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