E-commerce is booming, but among the biggest challenges for entrepreneurs of online businesses are finding a place to store the items they are selling and dealing with the logistics of operating.
Tyler Scriven, Maxwell Bonnie and Paul D’Arrigo co-founded Saltbox in an effort to solve that problem.
The trio came up with a unique “co-warehousing” model that provides space for small businesses and e-commerce merchants to operate as well as store and ship goods, all under one roof. Beyond the physical offering, Saltbox offers integrated logistics services as well as amenities such as the rental of equipment and packing stations and access to items such as forklifts. There are no leases and tenants have the flexibility to scale up or down based on their needs.
“We’re in that sweet spot between co-working and raw warehouse space,” said CEO Scriven, a former Palantir executive and Techstars managing director.
Saltbox opened its first facility — a 27,000-square-foot location — in its home base of Atlanta in late 2019, filling it within two months. It recently opened its second facility, a 66,000-square-foot location, in the Dallas-Fort Worth area that is currently about 40% occupied. The company plans to end 2021 with eight locations, in particular eyeing the Denver, Seattle and Los Angeles markets. Saltbox has locations slated to come online as large as 110,000 square feet, according to Scriven.
The startup was founded on the premise that the need for “co-warehousing and SMB-centric logistics enablement solutions” has become a major problem for many new businesses that rely on online retail platforms to sell their goods, noted Scriven. Many of those companies are limited to self-storage and mini-warehouse facilities for storing their inventory, which can be expensive and inconvenient.
Scriven personally met with challenges when starting his own e-commerce business, True Glory Brands, a retailer of multicultural hair and beauty products.
“We became aware of the lack of physical workspace for SMBs engaged in commerce,” Scriven told TechCrunch. “If you are in the market looking for 10,000 square feet of industrial warehouse space, you are effectively pushed to the fringes of the real estate ecosystem and then the entrepreneurial ecosystem at large. This is costing companies in significant but untold ways.”
Now, Saltbox has completed a $10.6 million Series A round of financing led by Palo Alto-based Playground Global that included participation from XYZ Venture Capital and proptech-focused Wilshire Lane Partners in addition to existing backers Village Capital and MetaProp. The company plans to use its new capital primarily to expand into new markets.
The company’s customers are typically SMB e-commerce merchants “generating anywhere from $50,000 to $10 million a year in revenue,” according to Scriven.
He emphasizes that the company’s value prop is “quite different” from a traditional flex office/co-working space.
“Our members are reliant upon us to support critical workflows,” Scriven said.
Besides e-commerce occupants, many service-based businesses are users of Saltbox’s offering, he said, such as those providing janitorial services or that need space for physical equipment. The company offers all-inclusive pricing models that include access to loading docks and a photography studio, for example, in addition to utilities and Wi-Fi.
Image Credits: Saltbox
Image Credits: Saltbox
The company secures its properties with a mix of buying and leasing by partnering with institutional real estate investors.
“These partners are acquiring assets and in most cases, are funding the entirety of capital improvements by entering into management or revenue share agreements to operate those properties,” Scriven said. He said the model is intentionally different from that of “notable flex space operators.”
“We have obviously followed those stories very closely and done our best to learn from their experiences,” he added.
Investor Adam Demuyakor, co-founder and managing partner of Wilshire Lane Partners, said his firm was impressed with the company’s ability to “structure excellent real estate deals” to help them continue to expand nationally.
He also believes Saltbox is “extremely well-positioned to help power and enable the next generation of great direct to consumer brands.”
Playground Global General Partner Laurie Yoler said the startup provides a “purpose-built alternative” for small businesses that have been fulfilling orders out of garages and self-storage units.
Saltbox recently hired Zubin Canteenwalla to serve as its chief operating offer. He joined Saltbox from Industrious, an operator co-working spaces, where he was SVP of Real Estate. Prior to Industrious, he was EVP of Operations at Common, a flexible residential living brand, where he led the property management and community engagement teams.
Olist, a Brazilian e-commerce marketplace integrator, has raised $23 million in a Series D round extension led by new investor Goldman Sachs Asset Management that brings its total Series D financing to $80 million.
Existing backer Redpoint Ventures, which first put money in Olist in 2015, also participated in the latest round. With this latest infusion, Olist has now raised over $126 million since its 2015 inception. This round is reportedly its last before the company plans to go public, according to Bloomberg.
SoftBank led the first tranch of Olist’s Series D in November as well as the company’s $46 million Series C in 2019. Valor Capital, Velt Partners, FJ Labs, Península and angel Kevin Efrusy had previously invested in the first tranche of the Series D.
Olist connects small businesses to larger product marketplaces to help entrepreneurs sell their products to a larger customer base. The company was founded with the mission of helping small merchants gain market share across the country through a SaaS licensing model to small brick and mortar businesses.
As of October 2019, Olist had more than 7,000 customers and used a drop-shipping model to send products directly from stores to clients around the country, allowing them to grow with a capital-light model.
Today, Olist says its platform provides tools that support “all the stages of an e-commerce operation” with the goal of helping merchants see “rapid increases in sales volume.” It currently has about 25,000 merchants on its platform.
The startup is no doubt benefiting from the pandemic-fueled e-commerce boom taking place all over the world as more people have turned to online shopping. Latin America, in general, has been home to increased e-commerce adoption.
Olist says its revenue tripled to a record number in the first quarter of 2021 compared to the previous year, although it did not provide hard figures. It also reportedly doubled revenue in 2020, according to Bloomberg.
Olist Store, the company’s flagship product, gives merchants a way to manage product listings, logistics and store payments. It also offers “a unique sales experience” through channels such as Mercado Livre, B2W and Via Varejo. The product saw a record GMV in the first half of the year, which was up 2.5 times over the same period in the prior year, the company said.
Last year, Olist launched a new product, Olist Shops, giving users the ability to create a virtual showcase “in less than 3 minutes” that also offers payment checkout tools and integration with logistics operators. Shops has interfaces in Portuguese, English, and Spanish, and since its launch, it has attracted more than 200,000 users in 180 countries, according to Olist.
“The pandemic has accelerated digitalizing business processes around the world, thus spurring e-commerce growth in a surprising way,” said Tiago Dalvi, Olist’s founder and CEO, in a written statement.
The company plans to use its new capital to invest in technology and products, pursuing new mergers and acquisitions and boosting its internationalization process. This is on top of two acquisitions Olist made last year — Clickspace and Pax Logistica, which gave Olist entry into the heated logistics space with more than 4,000 registered drivers.
Specifically, CFO Eduardo Ferraz said the company is in preliminary discussions with ERPs, retailers, and companies with complementary solutions to its own.
“That is why we also decided to expand the investment in our Series D and bring Goldman Sachs as another relevant investor to our cap table,” he said.
David Castelblanco, managing director and head of Latin America Corporate and Growth Equity Investing for the Goldman Sachs Asset Management, said his firm was impressed with how Olist empowers SMBs to generate more revenue.
“Tiago and the Olist team are incredibly customer oriented and have created an innovative technological solution for their e-commerce clients,” he added.
Olist is operating in an increasingly crowded space. In March, we covered São Paulo-based Nuvemshop’s $90 million raise that was led by Silicon Valley venture firm Accel. That company has developed an e-commerce platform that aims to allow SMBs and merchants to connect more directly with their consumers.
A month ago, Coupang arrived on Wall Street with a bang. The South Korean e-commerce giant — buoyed by $12 billion in 2020 revenue — raised $4.55 billion in its IPO and hit a valuation as high as $109 billion. It is the biggest U.S. IPO of the year so far, and the largest from an Asian company since Alibaba’s.
But long before founder Bom Kim rang the bell, I knew him as a fellow founder on the hunt for a good idea. We stayed in touch as he formed his vision for what would become Coupang, and I built it alongside him as an investor and board member.
As a board member, I’ve observed a brief quiet period following the IPO. But now I want to share how exactly our paths intersected, largely because Bom exemplifies what founders should aspire to and should seek: big risks, dogged determination, and obsessive responsiveness to the market.
Bom fearlessly turned down an acquisition offer from then-market-leader Groupon, ferociously learned what he didn’t know, made a daring pivot even after becoming a billion-dollar company, and iteratively built a vision for end-to-end market dominance.
In 2008, I met Bom while playing a weekend game of pickup basketball at Stuyvesant High School. We realized we had a mutual acquaintance through my recently-sold startup, Community Connect Inc. He told me about the magazine he had sold and his search for a next move. So we agreed to meet up for lunch and go over some of his ideas.
To be honest, I don’t remember any of those early ideas, probably because they weren’t very good. But I really liked Bom. Even as I was crapping on his ideas, I could tell he was sharp from how he processed my feedback. It was obvious he was super smart and definitely worth keeping in touch with, which we continued to do even after he relocated to go to HBS.
I soon began investing in and incubating businesses, starting mostly with my own capital. When I got a call from an executive recruiter working for a company in Chicago called Groupon — who told me they were at a $50 million run rate in only a few months — I became fascinated with their model and started talking to some of the investors, former employees, and merchants.
Inspired, and as a new parent, I decided to launch a similar daily-deal business for families: Instead of skydiving and go-kart racing, we offered deals on kids’ music classes and birthday party venues. While I was working on this idea, John Ason, an angel investor in Diapers.com, said I should meet with the founder and CEO Marc Lore. By the end of the meeting, Marc and I etched a partnership to launch DoodleDeals.com co-branded with Diapers.com. The first deal did over $70,000 — great start.
I’ve observed a brief quiet period following the IPO. But now I want to share how exactly our paths intersected, largely because Bom exemplifies what founders should aspire to and should seek: big risks, dogged determination, and obsessive responsiveness to the market.
All that time, I kept in touch with Bom. In February 2010, we were catching up over lunch at the Union Square Ippudo, and he asked if I had heard of Buywithme, a Boston-based Groupon clone. He hadn’t yet heard about Groupon, so I explained the business model and shared the numbers. He thought something similar might transfer well to South Korea, where he was born and his parents still lived.
This kind of conversation is exactly why I love working with founders early, even before the idea forms: You learn a lot about them as they explore, wrestle with uncertainty, and eventually build conviction on a business they plan to spend the next decade-plus building. Ultimately, success comes down to founders’ belief in themselves; when you develop the same belief in them as an investor, it is pretty magical. I was starting to really believe in Bom.
I’m not Korean — I am ethnically Chinese — so Bom put together slides on the Korean market and why it was perfect for the daily-deal model. In short: a very dense population that’s incredibly online. Image Credits: Ben Sun
I told Bom he should drop out of business school and do this. He said, “You don’t think I can wait until I graduate?” I responded, “No way! It will be over by then!”
First-mover advantage is real in a business like this, and it didn’t take Bom long to see that. He raised a small $1.3 million seed round. I invested, joined the board. Because of my knowledge of the deals market and my entrepreneurial experience, Bom asked me to get hands-on in Korea — not at all typical for an investor or even a board member, but I think of myself as a builder and not just a backer, and this is how I wanted to operate as an investor.
Once he realized time was of the essence, Bom was heads down. For context, he was engaged to his longtime girlfriend, Nancy, who also went to Harvard undergrad and was a successful lawyer. Imagine telling your fiancée, “Honey, I am dropping out of business school, moving to Korea to start a company. I will be back for the wedding. Not sure if I will ever be coming back to the U.S.”
I emailed Bom, saying: “Bom — honestly as a friend. Enjoy your wedding. It is a real blessing that your fiancée is being so supportive of you doing this. Launching a site a few weeks before the wedding is going to be way too distracting and she won’t feel like your heart is in it. Launching a few weeks later is not going to make or break this business. Trust me.”
Bom didn’t listen. He launched Coupang in August 2010, two weeks before the wedding. He flew back to Boston, got married, and — running on basically no sleep — sneaked out for a 20-minute nap in the middle of his reception. Right after the wedding, he flew back to Seoul. Nancy has to be one of the most supportive and understanding partners I have ever seen. They are now married and have two kids.
Hello friends, and welcome back to Week in Review!
Last week, I talked about Clubhouse’s slowing user growth. Well, this week news broke that they had been in talks with Twitter for a $4 billion acquisition, so it looks like they’re still pretty desirable. This week, I’m talking about a story I published a couple days ago that highlights pretty much everything that’s wild about the alternative asset world right now.
If you successfully avoided all mentions of NFTs until now, I congratulate you, because it certainly does seem like the broader NFT market is seeing some major pullback after a very frothy February and March. You’ll still be seeing plenty of late-to-the-game C-list celebrities debuting NFT art in the coming weeks, but a more sober pullback in prices will probably give some of the NFT platforms that are serious about longevity a better chance to focus on the future and find out how they truly matter.
I spent the last couple weeks, chatting with a bunch of people in one particular community — one of the oldest active NFT communities on the web called CryptoPunks. It’s a platform with 10,000 unique 24×24 pixel portraits and they trade at truly wild prices.
I wrote about the history and legacy of CryptoPunks, a vibrant $200 million NFT marketplace built around trading pixelated characters. There are only 10,000 of them and owning the cheapest one will cost you about $30k. https://t.co/X4iTSl6FjC
— Lucas Matney (@lucasmtny) April 8, 2021
This picture sold for a $1.05 million.
I talked to a dozen or so people (including the guy who sold that one ^^) that had spent between tens of thousands and millions of dollars on these pixelated portraits, my goal being to tap into the psyche of what the hell is happening here. The takeaway is that these folks don’t see these assets as any more non-sensical than what’s going on in more traditional “old world” markets like public stock exchanges.
A telling quote from my reporting:
“Obviously this is a very speculative market… but it’s almost more honest than the stock market,” user Max Orgeldinger tells TechCrunch. “Kudos to Elon Musk — and I’m a big Tesla fan — but there are no fundamentals that support that stock price. It’s the same when you look at GameStop. With the whole NFT community, it’s almost more honest because nobody’s getting tricked into thinking there’s some very complicated math that no one can figure out. This is just people making up prices and if you want to pay it, that’s the price and if you don’t want to pay it, that’s not the price.”
Shortly after I published my piece, Christie’s announced that they were auctioning off nine of the CryptoPunks in an auction likely to fetch at least $10 million at current prices. The market surged in the aftermath and many millions worth of volume quickly moved through the marketplace minting more NFT millionaires.
Is this all just absolutely nuts? Sure.
Is it also a poignant picture of where alternative asset investing is at in 2021? You bet.
Here are the TechCrunch news stories that especially caught my eye this week:
Amazon workers vote down union organization attempt
Amazon is breathing a sigh of relief after workers at their Bessemer, Alabama warehouse opted out of joining a union, lending a crushing defeat to labor activists who hoped that the high-profile moment would lead more Amazon workers to organize. The vote has been challenged, but the margin of victory seems fairly decisive.
Supreme court sides with Google in Oracle case
If any singular event impacted the web the most this week, it was the Supreme Court siding with Google in a very controversial lawsuit by Oracle that could’ve fundamentally shifted the future of software development.
Coinbase is making waves
The Coinbase direct listing is just around the corner and they’re showing off some of their financials. Turns out crypto has been kind of hot lately and they’re raking in the dough, with revenue of $1.8 billion this past quarter.
Apple share more about the future of user tracking
Apple is about to upend the ad-tracking market and they published some more details on what exactly their App Tracking Transparency feature is going to look like. Hint: more user control.
Consumers are spending lots of time in apps
A new report from mobile analytics firm App Annie suggests that we’re dumping more of our time into smartphone apps, with the average users spending 4.2 hours a day doing so, a 30 percent increase over two years.
Sonos perfects the bluetooth speaker
I’m a bit of an audio lover, which made my colleague Darrell’s review of the new Sonos Roam bluetooth speaker a must-read for me. He’s pretty psyched about it, even though it comes in at the higher-end of pricing for these devices, still I’m looking forward to hearing one with my own ears.
Image Credits: Nigel Sussman
Some of my favorite reads from our Extra Crunch subscription service this week:
The StockX EC-1
“StockX is a unique company at the nexus of two radical transitions that isn’t just redefining markets, but our culture as well. E-commerce upended markets, diminishing the physical experience by intermediating and aggregating buyers and sellers through digital platforms. At the same time, the internet created rapid new communication channels, allowing euphoria and desire to ricochet across society in a matter of seconds. In a world of plenty, some things are rare, and the hype around that rarity has never been greater. Together, these two trends demanded a stock market of hype, an opportunity that StockX has aggressively pursued.”
Building the right team for a billion-dollar startup
“I would really encourage you to take some time to think about what kind of company you want to make first before you go out and start interviewing people. So that really is going to be about understanding and defining your culture. And then the second thing I’d be thinking about when you’re scaling from, you know, five people up to, you know, 50 and beyond is that managers really are the key to your success as a company. It’s hard to overstate how important managers, great managers, are to the success of your company.
So you want to raise a Series A
“More companies will raise seed rounds than Series A rounds, simply due to the fact that many startups fail, and venture only makes sense for a small fraction of businesses out there. Every check is a new cycle of convincing and proving that you, as a startup, will have venture-scale returns. Moore explained that startups looking to move to their next round need to explain to investors why now is their moment.”
Until next week,
The pandemic upended the way people shop for their everyday needs, including groceries. Online grocery sales in the U.S. are expected to reach 21.5% of the total grocery sales by 2025, after leaping from 3.4% pre-pandemic to 10.2% as of 2020. One business riding this wave is Mercato, an online grocery platform that helps smaller grocers and speciality food stores get online quickly. After helping grow its merchant sales by 1,300% in 2020, Mercato has now closed on $26 million in Series A funding, the company tells TechCrunch.
The round was led by Velvet Sea Ventures with participation from Team Europe, the investing arm of Lukasz Gadowski, co-founder of Delivery Hero. Seed investors Greycroft and Loeb.nyc also returned for the new round Gadowski and Mike Lazerow of Velvet Sea Ventures have also now joined Mercato’s board.
Mercato itself was founded in 2015 by Bobby Brannigan, who had grown up helping at his family’s grocery store in Brooklyn. But instead of taking over the business, as his Dad had hoped, Brannigan left for college and eventually went on to bootstrap a college textbook marketplace, Valore Books, to $100 million in sales. After selling the business, he returned his focus to the family’s store and found that everything was still operating the way it had been decades ago.
Image Credits: Bobby Brannigan of Mercato
“He had a very basic website, no e-commerce, no social media, and no point-of-sale system,” explains Brannigan. “I said, ‘I’m going to build what you need.’ This was my opportunity to help my dad in an area that I knew about,” he adds.
Brannigan recruited some engineers from his last company to help him build the software systems to modernize his dad’s store, including Mercato’s co-founders Dave Bateman, Michael Mason, and Matthew Alarie. But the team soon realized could do more than help just Brannigan’s dad — they could also help the 40,000 independent grocery stores just like him better compete with the Amazon’s of the world.
The result was Mercato, a platform-as-a-service that makes it easier for smaller grocers and speciality food shops to go online to offer their inventory for pickup or delivery, without having to partner with a grocery delivery service like Instacart, AmazonFresh or Shipt.
The solution today includes an e-commerce website and data analytics platform that helps stores understand what their customers are looking for, where customers are located, how to price their products, and other insights that help them to better run their store. And Mercato is now working on adding on a supply platform to help the stores buy inventory through their system, Brannigan notes.
“Basically, the vision of it is to give them the tech, the systems, and the platform they need to be successful in this day and age,” notes Brannigan.
He likens Mercato as a sort of “Shopify for groceries,” as it gives stores their own page on Mercato where they can reach customers. When the customer visits Mercato on the web or via its app, they can enter in their zip code to see which local stores offer online shopping. Some stores simply redirect their existing websites to their Mercato page, as they can continue to offer other basic information, like address, hours, and other details about their stores on the Mercato-provided site, while gaining access to Mercato’s over 1 million customers.
However, merchants can also opt for a white-label solution that they can plug into their own website, which uses their own branding.
The stores can further customize the experience they want to offer customers, in terms of pickup and delivery, and the time frames for both they want to commit to. If they want to ease into online grocery, for example, they can start with next-day delivery services, then speed thing up to same-day when they’re ready. They can also set limits on how many time slots they offer per hour, based on staffing levels.
Image Credits: Mercato
Unlike Instacart and others which send shoppers to stores to fill the orders, Mercato allows the merchants themselves to maintain the customer relationship by handling the orders themselves, which they can receive via email, text or even robo-phone calls.
“They’re maintaining that relationship,” says Brannigan. “Usually, it’s a lot better if it’s somebody from the store [doing the shopping] because they might know the customer; they know the kind of product they’re looking for. And if they don’t have it, they know something else they can recommend — so they’re like a really efficient recommendation engine.”
“The big difference between an Instacart shopper and the worker in the store is that the worker in the store understands that somebody is trying to put a meal on the table, and certain items could be an important ingredient,” he notes. “For the shoppers at Instacart, it’s about a time clock: how quickly can they pick an order to make the most money.”
The company contracts with both national and regional couriers to handle the delivery portion, once orders are ready.
Mercato’s system was put to test during the pandemic, when demand for online grocery skyrocketed.
This is where Mercato’s ability to rapidly onboard merchants came in handy. The company says it can take stores online in just 24 hours, as it has built out a centralized product catalog of over a million items. It then connects with the store’s point-of-sale system, and uploads and matches the store’s products to their own database. This allows Mercato to map around 95% of the store’s products in a matter of minutes, with the last bit being added manually — which helps to build out Mercato’s catalog even further. Today, Mercato can integrate with virtually all point-of-sale (POS) solutions in the grocery market, which is more than 30 different systems.
As customers shop, Mercato’s system uses machine learning to help determine if a product is likely in stock by examining movement data.
“One of the challenges in grocery is that most stores actually don’t know how many quantities they have in stock of a product,” explains Brannigan. “So we launch a store, we integrate with the POS. And with the POS we can see how quickly a product is moving in-store and online. Based on movement, we can calculate what is in stock.”
This system, he says, continues to get smarter over time, too.
“We’re certainly three to five years ahead, and we’re not going back,” says Brannigan of the COVID impacts to the online grocery business. “It’s very plentiful now in many places, in terms of e-commerce offerings. And the nature of retail businesses is competitive. So if 1% of people are online, it might not drive other people. But if you have 15% of stores online, then other stores have to get online or they won’t be able to compete,” he notes.
Mercato generates revenue both from its consumer-facing membership program, with plans that range from $96/year – $228/year, depending on distance, and from the merchants themselves, who pay a single digit percentage transaction fee on orders — a lower percentage than what restaurant delivery companies charge.
The company has now scaled its service to over 1,000 merchants across 45 U.S. states, including big cities like New York, Chicago, L.A. D.C., Boston, Philadelphia, and others.
With the additional funding, Mercato aims to expand its remotely distributed team of now 80 employees, as well as its data analytics platform, which will help merchants make better decisions that impact their business. It also plans to refresh the consumer subscription to add more benefits and perks that make it more compelling.
Mercato declined to share its valuation or revenue, but as of the start of the pandemic last year, the company had said it was reaching a billion in sales and a $700 million run rate.
Digital House, a Buenos Aires-based edtech focused on developing tech talent through immersive remote courses, announced today it has raised more than $50 million in new funding.
Notably, two of the main investors are not venture capital firms but instead are two large tech companies: Latin American e-commerce giant Mercado Libre and San Francisco-based software developer Globant. Riverwood Capital, a Menlo Park-based private equity firm, and existing backer early-stage Argentina-based venture firm Kaszek also participated in the financing.
The raise brings Digital House’s total funding raised to more than $80 million since its 2016 inception. The Rise Fund led a $20 million Series B for Digital House in December 2017, marking the San Francisco-based firm’s investment in Latin America.
Nelson Duboscq, CEO and co-founder of Digital House, said that accelerating demand for tech talent in Latin America has fueled demand for the startup’s online courses. Since it first launched its classes in March 2016, the company has seen a 118% CAGR in revenues and a 145% CAGR in students. The 350-person company expects “and is on track” to be profitable this year, according to Duboscq.
Digital House CEO and co-founder Nelson Duboscq. Image Credits: Digital House
In 2020, 28,000 students across Latin America used its platform. The company projects that more than 43,000 will take courses via its platform in 2021. Fifty percent of its business comes out of Brazil, 30% from Argentina and the remaining 20% in the rest of Latin America.
Specifically, Digital House offers courses aimed at teaching “the most in-demand digital skills” to people who either want to work in the digital industry or for companies that need to train their employees on digital skills. Emphasizing practice, Digital House offers courses — that range from six months to two years — teaching skills such as web and mobile development, data analytics, user experience design, digital marketing and product development.
The courses are fully accessible online and combine live online classes led by in-house professors, with content delivered through Digital House’s platform via videos, quizzes and exercises “that can be consumed at any time.”
Digital House also links its graduates to company jobs, claiming an employability rate of over 95%.
Looking ahead, Digital House says it will use its new capital toward continuing to evolve its digital training platforms, as well as launching a two-year tech training program — dubbed the the “Certified Tech Developer” initiative — jointly designed with Mercado Libre and Globant. The program aims to train thousands of students through full-time two-year courses and connect them with tech companies globally.
Specifically, the company says it will also continue to expand its portfolio of careers beyond software development and include specialization in e-commerce, digital marketing, data science and cybersecurity. Digital House also plans to expand its partnerships with technology employers and companies in Brazil and the rest of Latin America. It also is planning some “strategic M&A,” according to Duboscq.
Francisco Alvarez-Demalde, co-founder & co-managing partner of Riverwood Capital, noted that his firm has observed an accelerating digitization of the economy across all sectors in Latin America, which naturally creates demand for tech-savvy talent. (Riverwood has an office in São Paulo).
For example, in addition to web developers, there’s been increased demand for data scientists, digital marketing and cybersecurity specialists.
“In Brazil alone, over 70,000 new IT professionals are needed each year and only about 45,000 are trained annually,” Alvarez-Demalde said. “As a result of such a talent crunch, salaries for IT professionals in the region increased 20% to 30% last year. In this context, Digital House has a large opportunity ahead of them and is positioned strategically as the gatekeeper of new digital talent in Latin America, preparing workers for the jobs of the future.”
André Chaves, senior VP of Strategy at Mercado Libre, said the company saw in Digital House a track record of “understanding closely” what Mercado Libre and other tech companies need.
“They move as fast as we do and adapt quickly to what the job market needs,” he said. “A very important asset for us is their presence and understanding of Latin America, its risks and entrepreneurial environment. Global players have succeeded for many years in our region. But things are shifting gradually, and local knowledge of risks and opportunities can make a great difference.”
The pandemic-induced growth of e-commerce is, by now, now well documented.
What is happening in the app ecosystem that supports e-commerce? Is it growing? Are we likely to see consolidations or IPOs? Are there superapps that will emerge?
This post is less about conclusions and more about taking you along while I go through the rabbit hole to satiate my own curiosity.
I see all three trends forming:
The closest match to the growing e-commerce stack is the marketing automation stack. While there are significant overlaps, it’s fascinating to compare and contrast the growth of these ecosystems and what drives consolidation.
The closest match to the growing e-commerce stack is the marketing automation stack. While there are significant overlaps, it’s fascinating to compare and contrast the growth of these ecosystems and what drives consolidation.
Between 2015 and 2021, the martech stack grew from 1,800 to 8,000, meaning it roughly doubles every three years.
The explosion of the martech stack is common knowledge and is well documented by Scott Brinker and his famous supergraphics. What’s worth noting is that the consolidation we expected to happen is happening, and yet the pace of new companies coming up in the space makes up for the consolidation — and some more.
According to Brinker, the martech landscape grew 5,233% between 2011 and 2020. The fastest-growing category within martech in 2020 is data and governance, which grew in numbers by 25%. The martech app ecosystem more than tripled between 2015 to 2018, powered by the growth of SaaS and e-commerce industries.
I am an avid tracker of this space, but I am also interested in how we can apply martech’s evolution to the e-commerce stack. The e-commerce stack also grew 3.5 times between 2017 and 2020. But much of the growth is ahead, and so is the upcoming consolidation.
The COVID-19 pandemic has led to people everywhere shopping more online and Latin America is no exception.
São Paulo-based Nuvemshop has developed an e-commerce platform that aims to allow SMBs and merchants to connect more directly with their consumers. With more people in Latin America getting used to making purchases digitally, the company has experienced a major surge in business over the past year.
Demand for Nuvemshop’s offering was already heating up prior to the pandemic. But over the past 12 months, that demand has skyrocketed as more merchants have been seeking greater control over their brands.
Rather than selling their goods on existing marketplaces (such as Mercado Libre, the Brazilian equivalent of Amazon), many merchants and entrepreneurs are opting to start and grow their own online businesses, according to Nuvemshop co-founder and CEO Santiago Sosa.
“Most merchants have entered the internet by selling on marketplaces but we are hearing from newer generations of merchants and SMBs that they don’t want to be intermediated anymore,” he said. “They want to connect more directly with consumers and convey their own brand, image and voice.”
The proof is in the numbers.
Nuvemshop has seen the number of merchants on its platform surge to nearly 80,000 across Brazil, Argentina and Mexico compared to 20,000 at the start of 2020. These businesses range from direct-to-consumer (DTC) upstarts to larger brands such as PlayMobil, Billabong and Luigi Bosca. Virtually every KPI tripled in the company in 2020 as the world saw a massive transition to online, and Nuvemshop’s platform was home to 14 million transactions last year, according to Sosa.
“With us, businesses can find a more comprehensive ecosystem around payments, logistics, shipping and catalogue/inventory management,” he said.
Nuvemshop’s rapid growth caught the attention of Silicon Valley-based Accel. Having just raised $30 million in a Series C round in October and achieving profitability in 2020, the Nuvemshop team was not looking for more capital.
But Ethan Choi, a partner at Accel, said his firm saw in Nuvemshop the potential to be the market leader, or the “de facto” e-commerce platform, in Latin America.
“Accel has been investing in e-commerce for a very long time. It’s a very important area for us,” Choi said. “We saw what they were building and all their potential. So we pre-emptively asked them to let us invest.”
Today, Nuvemshop is announcing that it has closed on a $90 million Series D funding led by Accel. ThornTree Capital and returning backers Kaszek, Qualcomm Ventures and others also put money in the round, which brings Nuvemshop’s total funding raised since its 2011 inception to nearly $130 million. The company declined to reveal at what valuation this latest round was raised but it is notable that its Series D is triple the size of its Series C, raised just over six months prior. Sosa said only that there was a “substantial increase” in valuation since its Series C.
Nuvemshop is banking on the fact that the density of SMBs in Latin America is higher in most Latin American countries compared to the U.S. On top of that, the $85 billion e-commerce market in Latin America is growing rapidly with projections of it reaching $116.2 billion in 2023.
“In Brazil, it grew 40% last year but is still underpenetrated, representing less than 10% of retail sales. In Latin America as a whole, penetration is somewhere between 5 and 10%,” Sosa said.
Nuvemshop co-founder and CEO Santiago Sosa;
Image courtesy of Nuvemshop
Last year, the company transitioned from a closed product to a platform that is open to everyone from third parties, developers, agencies and other SaaS vendors. Through Nuvemshop’s APIs, all those third parties can connect their apps into Nuvemshop’s platform.
“Our platform becomes much more powerful, vendors are generating more revenue and merchants have more options,” Sosa told TechCrunch. “So everyone wins.” Currently, Nuvemshop has about 150 applications publishing on its ecosystem, which he projects will more than triple over the next 12 to 18 months.
As for comparisons to Shopify, Sosa said the company doesn’t necessarily make them but believes they are “fair.”
To Choi, there are many similarities.
“We saw Amazon get to really big scale in the U.S.. Merchants also found tools to build their own presence. This birthed Shopify, which today is worth $160 billion. Both companies saw their market caps quadruple during the pandemic,” he said. “Now we’re seeing the same dynamics in LatAm…Our bet here is that this company and business has all the same dynamics and the same really powerful tailwinds.”
For Accel partner Andrew Braccia, Nuvemshop has a clear first mover advantage.
“Over the past decade, direct-to-consumer has become one of the most important drivers of entrepreneurship globally,” he said. “Latin America is no exception to this trend, and we believe that Nuvemshop has the level of sophistication and ability to understand all that change and fuel the continued transformation of commerce from offline to online.”
Looking ahead, Sosa expects Nuvemshop will use its new capital to significantly invest in: continuing to open its APIs; payments processing and financial services; “everything related to logistics and logistics management” and attracting smaller merchants. It also plans to expand into other markets such as Colombia, Chile and Peru over the next 18-24 months. Nuvemshop currently operates in Mexico, Brazil and Argentina.
“While the countries share the same secular trends and product experience, they have very different market dynamics,” Sosa said. “This requires an on the ground local knowledge to make it all work. Separate markets require distinct knowledge. That makes this a more complicated opportunity, but one that enables a long-term competitive advantage.”
Squarespace has raised $300 million in a round of funding that values the company at a staggering $10 billion valuation.
New backers include Dragoneer, Tiger Global, D1 Capital Partners, Fidelity Management & Research Company, funds and accounts advised by T. Rowe Price Associates, Inc. and Spruce House. Existing backers Accel and General Atlantic also participated.
Squarespace founder & CEO Anthony Casalena said the fresh capital will advance the company’s growth initiatives and help it scale its product suite.
The move comes less than two months after the company filed confidentiality to go public via a direct listing or initial public offering.
Squarespace, which has helped millions create their own websites, was founded in 2003 and bootstrapped until a $38.5 million Series A in 2010 that was co-led by Accel and Index Ventures.
The online website creation and hosting service — which has now expanded into e-commerce by hosting online stores — then raised another $40 million round in 2014. But it is perhaps best known for its epic 2017-era $200 million secondary round that General Atlantic financed. That round was raised at a $1.5 billion pre-money valuation.
At that time, TechCrunch reported that Squarespace was a profitable company, with revenues increasing 50% in the prior year, to about $300 million. Execs are declining to comment on the company’s latest funding round beyond a post on its website.
New York City-based Squarespace has over 1,200 employees spread across its headquarters and offices in Dublin, Ireland; Portland, Oregon; and Los Angeles, California.
Noogata, a startup that offers a no-code AI solution for enterprises, today announced that it has raised a $12 million seed round led by Team8, with participation from Skylake Capital. The company, which was founded in 2019 and counts Colgate and PepsiCo among its customers, currently focuses on e-commerce, retail and financial services, but it notes that it will use the new funding to power its product development and expand into new industries.
The company’s platform offers a collection of what are essentially pre-built AI building blocks that enterprises can then connect to third-party tools like their data warehouse, Salesforce, Stripe and other data sources. An e-commerce retailer could use this to optimize its pricing, for example, thanks to recommendations from the Noogata platform, while a brick-and-mortar retailer could use it to plan which assortment to allocate to a given location.
“We believe data teams are at the epicenter of digital transformation and that to drive impact, they need to be able to unlock the value of data. They need access to relevant, continuous and explainable insights and predictions that are reliable and up-to-date,” said Noogata co-founder and CEO Assaf Egozi. “Noogata unlocks the value of data by providing contextual, business-focused blocks that integrate seamlessly into enterprise data environments to generate actionable insights, predictions and recommendations. This empowers users to go far beyond traditional business intelligence by leveraging AI in their self-serve analytics as well as in their data solutions.”
We’ve obviously seen a plethora of startups in this space lately. The proliferation of data — and the advent of data warehousing — means that most businesses now have the fuel to create machine learning-based predictions. What’s often lacking, though, is the talent. There’s still a shortage of data scientists and developers who can build these models from scratch, so it’s no surprise that we’re seeing more startups that are creating no-code/low-code services in this space. The well-funded Abacus.ai, for example, targets about the same market as Noogata.
“Noogata is perfectly positioned to address the significant market need for a best-in-class, no-code data analytics platform to drive decision-making,” writes Team8 managing partner Yuval Shachar. “The innovative platform replaces the need for internal build, which is complex and costly, or the use of out-of-the-box vendor solutions which are limited. The company’s ability to unlock the value of data through AI is a game-changer. Add to that a stellar founding team, and there is no doubt in my mind that Noogata will be enormously successful.”
It is nearly impossible for businesses in some African countries to receive money from PayPal. While the payments giant has not given reasons why this is so, speculation hints at factors like insufficient regulation and poor banking security in said countries.
That might be a thing of the past for some businesses as African payments company Flutterwave today is announcing a collaboration with PayPal to allow PayPal customers globally to pay African merchants through its platform.
Via this partnership, businesses can connect with the more than 377 million PayPal accounts globally and overcome the challenges presented by the highly fragmented and complex payment and banking infrastructure on the continent.
According to CEO Olugbenga ‘GB’ Agboola, this will happen via a Flutterwave integration with PayPal so merchants can add PayPal as a payment option when receiving money outside the continent. The service, which is already available for merchants with registered business accounts on Flutterwave, will be operational across 50 African countries and worldwide, the company claims. Flutterwave hopes to roll out this service to individual merchants on the platform as well.
“In a nutshell, we’re bringing more than 300 million PayPal users to African businesses so they can accept payments across the continent,” he said to TechCrunch. “Our mission at the company has always been to simplify payments for endless possibilities, and from when we started, it has always been about global payments. So despite having the largest payment infrastructure in Africa, we want to have arguably all the important payments systems in the world on our platform.”
A PayPal spokesperson confirmed the Flutterwave collaboration with TechCrunch.
Since the company’s expansion to Africa, it has maintained a one-sided relationship with most countries on the continent, allowing them only to send money. And according to its website, only 12 African countries can send and receive money on the platform, but to varying degrees. They include Algeria, Botswana, Egypt, Kenya, Lesotho, Malawi, Mauritius, Morocco, Mozambique, Senegal, Seychelles and South Africa.
Users in countries who are not afforded the luxury to do so have to rely on using the PayPal account of a friend or family, based in countries where payments can be received. Next, they request the funds via bank transfer, leading to more incurred costs or use other cross-border money platforms like WorldRemit.
This is a pain point for these businesses, particularly in Nigeria. PayPal finally arrived Africa’s most populous country in 2014 and a year later, it became the company’s second-biggest market on the continent.
But despite its fast adoption rate and large fintech appetite, merchants cannot still receive payments from other countries on the platform with various sources alluding PayPal’s decision to the country’s history with internet fraud.
Fraud or not, Nigeria’s e-commerce and that of the continent at large continues to grow at a breathtaking pace. In 2017, Africa generated $16.5 billion in revenue, and by 2022, it is expected to reach $29 billion. With numbers like this, it isn’t hard to see why PayPal wants to get in on the action, albeit not completely. Hence, the partnership with Flutterwave.
The company, via its APIs, offer payment services to individuals and businesses across the continent. Since launching in 2019, the African payments company has partnered with Visa to launch Barter; Alipay to offer digital payments between Africa and China; and Worldpay FIS for payments in Africa.
But this one with PayPal is arguably its biggest partnership yet. Now, African businesses have more access to sell to global customers using PayPal to receive and send payments online.
In a way, Flutterwave absorbs most of the risk PayPal thinks it will incur if it makes its platform more open to merchants in these countries. But at the same time, it solidifies Flutterwave’s position in the eyes of multinationals looking to enter the African market.
Like when its partnership with Worldpay FIS coincided with its Series B funding, this announcement is also coming on the back of a raise. Last week, the payments company closed a $170 million Series C led by Avenir Growth Capital and Tiger Global, becoming a billion-dollar company in the process.
In hindsight, the mammoth raise suggests that there are a couple of projects in the company’s pipeline. Going by this partnership, we can expect the majority of them to be global plays.
Yet, these questions remain top of mind — What happens when PayPal automatically allows businesses from these neglected African countries to start receiving payments? Will both services continue to coexist if that happens? We’ve reached out to PayPal for comment.
However that plays out, this is a step forward in the right direction for Flutterwave, which has shown time and time again the length it is willing to go for its 290,000 merchants and the ongoing quest to become a global payments company.
“By working with PayPal, we can further strengthen our commitment to our customers and service users as we will be enabling them to transact and expand their business operations to reach new markets. PayPal’s global reach is unrivalled, and collaborating with them allows our customers to explore new markets where PayPal is embedded,” the CEO said.
This morning Pipe17, a software startup focused on the e-commerce market, announced that it has closed $8 million in funding.
Pipe17’s service helps smaller e-commerce merchants connect their digital tools, without the need to code. With the startup’s service, e-commerce operations that may lack an in-house IT function can quickly connect their selling platform to shipping, or point-of-sale data to their ERP.
The venture arm of a large logistics investor GLP, GLP Capital Partners led the round.
Pipe17 co-founders Mo Afshar and Dave Shaffer told TechCrunch in an interview that the idea for their startup came from examining the e-commerce market, noting the energy to be found concerning selling platforms, and the comparative dearth of software to help get e-commerce tools to work together; Shopify and BigCommerce and Shippo are just fine, but if you can’t code you might wind up schlepping data from one platform to the next to keep your e-commerce operation humming.
So they built Pipe17 to fill in the gap.
According to Afshar, Pipe17 wants to simplify operations for e-commerce merchants through the lens of connection; the pair of co-founders believe that easy cross-compatibility is the key missing ingredient in the modern-day e-commerce software stack, likening the current e-commerce maket to the IT and datacenter worlds before the advent of Splunk and Datadog.
The prevailing view in the e-commerce industry, the co-founders explained, is that to fix a problem e-commerce players should purchase another application. Pipe17 thinks that most ecommerce companies probably have enough tooling, and that they instead need to get their existing tooling to communicate.
What’s neat about the startup is that it’s building something that we might call no-code-no-code, or no-code to a higher degree. Instead of offering a interface for non-developers to visually map out connections between different software services, it has pre-built what might need to be mapped. Just pick the two e-commerce services you want to link, and Pipe17 will connect them for you in an intelligent manner. For folks who find any sort of coding hard (which probably describes a lot of indie online store operators), the method could be an attractive pitch.
The startup’s customer target are sellers doing single-digit millions to nine-figures in year sales.
Why did Pipe17 raise capital now? The co-founders said that there are only so many chances to simplify a large market, akin to what Plaid and Twilio did for their own niches, so taking on funds now made sense. In Afshar’s view, e-commerce operations is going to be simply massive. Given the growth in digital selling that we saw last year, it’s a perspective that is hard to dispute.
The niche that Pipe17 wants to fill has more than one player. While the startups themselves might quibble about just how much competitive space they share, Y Combinator-backed Alloy recently raised $4 million to build a no-code e-commerce automation service. Which is related to what Pipe17 does. It will be interesting to see if they wind up in competition, and, if so, who comes out on top.
A new breed of startups is acquiring and growing small but promising third-party merchants, and building out their own economies of scale.
And while there are a number of such startups based in the U.S. and Europe, none had emerged in the Latin American market. Until now.
Valoreo, a Mexico City-based acquirer of e-commerce businesses, announced Tuesday that it has raised $50 million of equity and debt financing in a seed funding round.
The dollar amount is large for a seed round by any standards, but most certainly ranks among the highest ever raised by a Latin American startup — further evidence of increased investor interest in the region’s burgeoning venture scene.
Upper90, FJ Labs, Angel Ventures, Presight Capital and a slew of angel investors participated in the round. Those angels included David Geisen, head of Mercado Libre Mexico; BEA Systems’ co-founder Alfred Chuang; and Tushar Ahluwalia, founder of Razor Group, a European marketplace aggregator, among others.
Founded in late 2020, Valoreo aims to invest in, operate and scale e-commerce brands as part of its self-described mission “to bring better products at more affordable prices” to the Latin American consumer.
“We were substantially oversubscribed and were therefore able to select investors that not only provide capital, but also additional know-how in key areas,” said co-founder Alex Gruell.
Valoreo joins the growing number of startups focused on rolling up e-commerce brands.
The company’s model is similar to that of Thrasio — which just raised another $750 million –– and Perch in the U.S. But Valoreo says its approach has been tailored to “the specific needs of the Latin American market and is specifically focused on the Latin American end customer.”
Another new company in the space called Branded recently launched its own roll-up business on $150 million in funding. Others in the space include Berlin Brands Group, SellerX, Heyday and Heroes.
But as my colleague Ingrid Lunden points out, “the feverish pace of fundraising in the area of FBA roll-ups feels very much like a bubble in the market — not least because none of these still-young companies have yet to prove that the strategy to buy up and consolidate these sellers is a useful and profitable one.”
Valoreo (which the company says is an extension of the Spanish word “valor,” meaning to add value), acquires merchants that operate their own brands and primarily sell on online marketplaces such as Mercado Libre, Amazon and Linio. The company targets brands that offer “category-leading products” and which it believes have “significant growth potential.” It also develops brands in-house to offer a broader selection of products to the end customer.
Like Thrasio, Valoreo says it’s able to help entrepreneurs who may lack the resources and access to capital to take their businesses to the next level.
Co-founder and co-CEO Stefan Florea says the company takes less than five weeks typically from its initial contact with a seller to a final payout.
Then, the acquired and developed brands are integrated into the company’s consolidated holding. By tapping its team of “specialists” in areas such as digital marketing and supply chain management, it claims to be able to help these brands “reach new heights” while giving the entrepreneurs behind the companies “an attractive exit,” or partial exit in some cases.
“We have different structures, always taking into account the personal objectives of the seller,” Stefan Florea added.
Generally Valoreo acquires the majority of the business, with the purchase price typically being a combination of an upfront cash payment and a profit share component so sellers can still earn money.
Looking ahead, Valoreo plans to use its new capital mostly to acquire and develop “interesting” brands, as well as build out its current team of 10 while expanding its infrastructure and operations.
The company is currently focused on the Mexican and Brazilian markets, but is planning its expansion into other Latin American countries where it has strong local support systems, such as Colombia, according to co-founder Martin Florea.
“Our mission is to be a pan-Latin American player providing value to the entire region,” Martin Florea said. “Latin America in general and Mexico in particular are in a distinct situation which provides phenomenal opportunities for e-commerce merchants on the one hand but also presents particular challenges on the other hand.”
Those challenges, according to Martin Florea, include limited access to growth capital, a lack of specialized expertise in certain areas (such as supply chain management), limited opportunities to sell their business and pursue new ventures, as well as operational burdens and the lack of capacities to expand into new countries and marketplaces.
Valoreo emphasizes it is not out to compete with Mercado Libre, Amazon and other regional marketplaces but instead wants to partner with them.
“Without these platforms, this opportunity would not exist,” Martin Florea said.
Hernán Fernández, founder and managing partner of Angel Ventures, believes Valoreo “will add a lot of value” to the Latin American e-commerce landscape, which is experiencing both market growth and the fragmentation of the seller space.
Jüsto co-founder and CEO (and Valoreo investor) Ricardo Weder notes that the e-commerce market is at an inflection point in Latin America. According to eMarketer, the region was the fastest-growing e-commerce market in the world in 2020, with 37% year over year growth. However, it is a much more fragmented and crowded market compared to other regions, such as the United States.
This, Valoreo believes, provides an opportunity for consolidation.
“There are still many consumers that are not aware of the great variety of outstanding local brands that sell innovative products on marketplaces online,” Stefan Florea said. “In the U.S. or Europe e-commerce is the new way of shopping, offering an even greater range of products and brands than offline shopping. We firmly believe it will not take long until end-customers in Mexico and across Latin America discover all the benefits that e-commerce offers.”
Released in 2011 “Start-up Nation: The Story of Israel’s Economic Miracle” was a book that laid claim to the idea that Israel was an unusual type of country. It had produced and was poised to produce, an enormous number of technology startups, given its relatively small size. The moniker became so ubiquitous, both at home and abroad, that “Israel Startup Nation” is now the name of the country’s professional cycling team.
But it’s been hard to argue against this position in the last ten years, as the country powered ahead, famously producing ground-breaking startups like Waze, which was eventually picked up by Google for over $1 billion in 2013. Waze’s 100 employees received about $1.2 million on average, the largest payout to employees in Israeli high tech at the time, and the exit created a pool of new entrepreneurs and angel investors ever since.
Israel’s heady mix of questioning culture, tradition of national military service, higher education, the widespread use of English, appetite for risk and team spirit makes for a fertile place for fast-moving companies to appear.
And while Israel doesn’t have a Silicon Valley, it named its high-tech cluster “Silicon Wadi” (‘wadi’ means dry desert river bed in Arabic and colloquial Hebrew).
Much of Israel’s high-tech industry has emerged from former members of the country’s elite military intelligence units such as the Unit 8200 Intelligence division. From age 13 Israel’s students are exposed to advanced computing studies, and the cultural push to go into tech is strong. Traditional professions attract low salaries compared to software professionals.
Israel’s startups industry began emerging in the late 19080s and early 1990s. A significant event came with acquisitor by AOL of the the ICQ messaging system developed by Mirabilis. The Yozma Programme (Hebrew for “initiative”) from the government, in 1993, was seminal: It offered attractive tax incentives to foreign VCs in Israel and promised to double any investment with funds from the government. This came decades ahead of most western governments.
It wasn’t long before venture capital firms started up and major tech companies like Microsoft, Google and Samsung have R&D centers and accelerators located in the country.
So how are they doing?
At the start of 2020, Israeli startups and technology companies were looking back on a good 2019. Over the last decade, startup funding for Israeli entrepreneurs had increased by 400%. In 2019 there was a 30% increase in startup funding and a 102% increase in M&A activity. The country was experiencing a 6-year upward funding trend. And in 2019 Bay Area investors put $1.4 billion into Israeli companies.
By the end of last year, the annual Israeli Tech Review 2020 showed that Israeli tech firms had raised a record $9.93 billion in 2020, up 27% year on year, in 578 transactions – but M&A deals had plunged.
Israeli startups closed out December 2020 by raising $768 million in funding. In December 2018 that figure was $230 million, in 2019 it was just under $200 million.
Late-stage companies drew in $8.33 billion, from $6.51 billion in 2019, and there were 20 deals over $100 million totaling $3.26 billion, compared to 18 totaling $2.62 billion in 2019.
Top IPOs among startups were Lemonade, an AI-based insurance firm, on the New York Stock Exchange; and life sciences firm Nanox which raised $165 million on the Nasdaq.
The winners in 2020 were cybersecurity, fintech and internet of things, with food tech cooing on strong. But while the country has become famous for its cybersecurity startups, AI now accounts for nearly half of all investments into Israeli startups. That said, every sector is experiencing growth. Investors are also now favoring companies that speak to the Covid-era, such as cybersecurity, ecommerce and remote technologies for work and healthcare.
There are currently over 30 tech companies in Israel that are valued over $1 Billion. And four startups passed the $1 billion valuation just last year: mobile game developer Moon Active; Cato Networks, a cloud-based enterprise security platform; Ride-hailing app developer Gett got $100 million ahead of its rumored IPO; and behavioral biometrics startup BioCatch.
And there was a reminder that Israel can produce truly ‘magical’ tech: Tel Aviv battery storage firm StorDot raised money from Samsung Ventures and Russian billionaire Roman Abramovich for its battery which can fully charge a motor scooter in five minutes.
Unfortunately, the coronavirus pandemic put a break on mergers and acquisitions in 2020, as the world economy closed down.
M&A was just $7.8 billion in 93 deals, compared to over $14.2 billion in 143 M&A deals in 2019. RestAR was acquired by American giant Unity; CloudEssence was acquired by a U.S. cyber company; and Kenshoo acquired Signals Analytics.
And in 2020, Israeli companies made 121 funding deals on the Tel Aviv Stock Exchange and global capital markets, raising a total of $6.55 billion, compared to $1.95 billion raised in capital markets in Israel and abroad in 2019, as IPOs became an attractive exit alternative.
However, early-round investments (Seed + A Rounds) slowed due to pandemic uncertainty, but picked-up again towards the end of the year. As in other countries in ‘Covid 2020’, VC tended to focus on existing portfolio companies.
Covid brought unexpected upsides: Israeli startups, usually facing longs flight to Europe or the US to raise larger rounds of funding, suddenly found that Zoom was bringing investors to them.
Israeli startups adapted extremely well in the Covid era and that doesn’t look like changing. Startup Snapshot found that 55% startups profiled had changed (or considered changing) their product due to Covid-19. Meanwhile, remote-working – which comes naturally to Israeli entrepreneurs – is ‘flattening’ the world, giving a great advantage to normally distant startup ecosystems like Israel’s.
Via Transportation raised $400 million in Q1. Next Insurance raised $250 million in Q3. Seven exit transactions with over the $500 million mark happened in Q1–Q3/2020, compared to 10 for all of 2019. These included Checkmarx for $1.1 billion and Moovit, also for a billion.
There are three main hubs for the Israeli tech scene, in order of size: Tel Aviv, Herzliya and Jerusalem.
Jerusalem’s economy and therefore startup scene suffered after the second Intifada (the Palestinian uprising that began in late September 2000 and ended around 2005). But today the city is far more stable, and is therefore attracting an increasing number of startups. And let’s not forget visual recognition company Mobileye, now worth $9.11 billion (£7 billion), came from Jerusalem.
Israel’s government is very supportive of it’s high-tech economy. When it noticed seed-stage startups were flagging, the Israel Innovation Authority (IIA) announced the launch of a new funding program to help seed-stage and early-stage startups, earmarking NIS 80 million ($25 million) for the project.
This will offer participating companies grants worth 40 percent of an investment round up to $1.1 million and 50 percent of a total investment round for startups in the country or whose founders come from under-represented communities – Arab-Israeli, ultra-Orthodox, and women – in the high-tech industry.
Investments in Israeli seed-stage startups decreased both absolutely and as a percentage of total investments in Israeli startups (to 6% from 11%). However, the decline may also be a function of large tech firms setting up incubation hubs to cut up and absorb talent.
Another notable aspect of Israel’s startups scene is its, sometimes halting, attempt to engage with its Arab Israeli population. Arab Israelis account for 20% of Israel’s population but are hugely underrepresented in the tech sector. The Hybrid Programme is designed to address this disparity.
It, and others like it, this are a reminder that Israel is geographically in the Middle East. Since the recent normalization pact between Israel and the UAE, relations with Arab states have begun to thaw. Indeed, Over 50,000 Israelis have visited the United Arab Emirates since the agreement.
In late November, Dubai-based DIFC FinTech Hive—the biggest financial innovation hub in the Middle East—signed a milestone agreement with Israel’s Fintech-Aviv. Both entities will now work together to facilitate the cross-border exchange of knowledge and business between Israel and the United Arab Emirates.
Perhaps it’s a sign that Israel is becoming more at ease with its place in the region? Certainly, both Israel’s tech scene and the Arab world’s is set to benefit from these more cordial relations.
Our Israel survey is here.
Alibaba’s billionaire founder resurfaced as he spoke to 100 rural teachers through a video, three months after his last public appearance in October, sending the e-commerce firm’s shares up more than 8% in Hong Kong.
The video was first posted on a news portal backed by the government of Zhejiang, the eastern province where Alibaba is headquartered, and the clip was verified by an Alibaba spokesperson.
Speculations swirled around Ma’s whereabouts after media reported in December that he skipped the taping of a TV program he created. Ma, known for his love for the limelight, has seen his e-commerce empire Alibaba and fintech giant Ant Group increasingly in the crosshairs of the Chinese authorities in recent months.
Ma last appeared publicly at a conference where he castigated China’s financial regulatory system in front of a room of high-ranked officials. His controversial remark, according to reports, prompted the Chinese regulator to abruptly halt Ant’s initial public offering, which would have been the biggest public share sale of all time.
Ant has since been working on corporate restructuring and regulatory compliance under the directions of the government. Alibaba, China’s largest e-commerce platform, also came under scrutiny as market regulators opened an investigation into its alleged monopolistic practices.
Some argue that the recent clampdown on Jack Ma’s internet empire signals Beijing’s growing unease with the super-rich and private-sector power brokers.
“Today, Alibaba and its archrival, Tencent, control more personal data and are more intimately involved in everyday life in China than Google, Facebook and other American tech titans are in the United States. And just like their American counterparts, the Chinese giants sometimes bully smaller competitors and kill innovation,” wrote Li Yuan for the New York Times.
“You don’t have to be a member of the Communist Party to see reasons to rein them in.”
In the 50-second video, Ma talked directly into the camera against what appears to be decorative paintings depicting a water town typical of Zhejiang. An art history book is shown amid a stack of books, alongside a vase of fresh flowers and a ceramic figurine of a stout, reclining man, looking relaxed and content.
Ma addressed the 100 teachers receiving the Jack Ma Rural Teachers Award, which was set up by the Jack Ma Foundation to identify outstanding rural teachers every year. The video also briefly shows Ma visiting a rural boarding school in Zhejiang on January 10. The award ceremony was moved online this year due to the pandemic, Ma told the teachers.
When Ma announced his retirement plan, he pledged to return to his teaching roots and devote more time to education philanthropy, though the founder still holds considerable sway over Alibaba. The legendary billionaire began his career as an English teacher in Hangzhou, and on Weibo, China’s Twitter equivalent, he nicknames himself the “ambassador for rural teachers.”
Marc Lore, the executive vice president, president and CEO of U.S. e-commerce for Walmart, is stepping down a little over four years after selling his e-commerce company Jet.com to the country’s largest retailer for $3 billion.
Lore’s tenure at the company was a mixed bag. Walmart instituted several new technology initiatives under Lore’s tenure, but the Jet.com service was shuttered last May and other initiatives from Lore, like an option to have customers order items via text, was also a money-loser for the Bentonville, Arkansas-based company.
“After Mr. Lore retires on January 31, 2021, the U.S. business, including all the aspects of US retail eCommerce, will continue to report to John Furner, Executive Vice President, President and Chief Executive Officer, Walmart U.S., beginning on February 1, 2021,” Walmart said in a filing.
Walmart has continued to push ahead with a number of tech-related initiatives, including the launch of a new business that will focus on developing financial services.
That initiative is being undertaken through a strategic partnership with the fintech investment firm, Ribbit Capital and adds to a startup tech portfolio that also includes the incubator Store N⁰8, which launched in 2018.
“Reflecting on the past few years with so much pride – Walmart changed my life and the work we did together will keep changing the lives of customers for years to come. It has been an honor to be a part of the Walmart family and I look forward to providing advice and ideas in the future,” Lore said in a statement posted to Linkedin. “Looking forward, I’ll be taking some time off and plan to continue working with several startups. Excited to keep you all up to date on what’s next.”