The pandemic has hastened a shift of most commerce becoming e-commerce in the last year, and that has brought a new focus on startups that are helping to enable that process.
In the latest development, PPRO, a London-based startup that has built a platform to make it easier for marketplaces, payment providers and other e-commerce players to enable localised payments — that is, make and take payments in whatever form local customers prefer to use, which extend well beyond basic payment cards — has closed a round of $180 million, funding that catapults PPRO’s valuation to over $1 billion.
PPRO (pronounced “P-pro”, as in payments professionals) plans to use the funding to continue expanding in newer markets.
Simon Black, PPRO’s CEO, said in an interview that two particular areas of focus in the coming year will be more activity in Asian countries like Singapore and Indonesia, as well as Latin America, where the company acquired a local player, allpago, back in 2019.
In both cases, the opportunity comes in the form of high growth stemming from more transactions moving online, as well as the chaos that is the fragmented payments market.
The capital is coming from a group of investors that includes Eurazeo Growth, Sprints Capital, and Wellington Management. It comes on the heels of a $50 million round the company raised last August from Sprints, along with Citi and HPE Growth; and a further $50 million it picked up in 2018 led by strategic investor PayPal.
PayPal, alongside Citi, Mastercard Payment Gateway Services, Mollie, and Worldpay are among PPRO’s 100 large global customers, which use the company’s APIs for a variety of functions, including localised gateway, processing and merchant acquirer services.
The flood of activity coming from consumers and businesses buying more online — a by-product of the pandemic leading to many businesses shutting down physical operations for the moment — has seen the company double transaction volumes between Q4 2020 and the same quarter in 2019.
PPRO is not the only company to be targeting that opportunity.
The fragmentation of financial services overall — where realistically, there is only handful of types of transactions that might be made (usually: deposits, payments, credit), but quite literally thousands of permutations and methods to make them, with specific markets and their populations typically coalescing around their own localised selections.
That has led to the rise of a number of companies providing what has come to be called “banking as a service” or “fintech as a service,” where a tech provider stitches together in the background a number of services, sometimes thousands, and makes it easier for their customers, by way of an API, to plug those services in for their own customers to use more easily, most often connected to a range of other services provided to them like money management.
Others in this wider space that includes payments and other fintech services include the likes of Rapyd, Mambu, Thought Machine, Temenos, Edera, Adyen, Stripe and newer players like Unit, with many of these raising large amounts of money in recent times in particular to double down on what is currently a rapidly expanding market.
The unique aspect of PPRO is that it was an early mover in the area of identifying the conundrum of fragmentation in payments for companies that operate in more than one country or region, and that it has continued to play only in payments, without a jump to adjacent services.
“We’re ultra focused because the local payments problem is actually growing,” said Black, who believes that “the disconnect between what a consumer wants to use, but also their appetite and the proliferation of payment options” all contribute to more complexity (with the trade-off being more choices for consumers, but equally possibly too much choice?).
As Black sees it, the company’s focus on payments has given it more momentum to build better tech specifically to address that globally.
“PPRO is building solutions for performance in industrial strength. It’s growing rapidly because there are no other players that are truly global. We are globalizing to support the needs of customers who want to nationalize, so we have an opportunity to focus on payments, to be a strategic outsource partner.”
This doesn’t mean that there isn’t room for product expansion: alongside payments, Black highlighted product compliance and providing better analytics as two areas where the company is already active and will be doing more for customers.
“Where we partner and provide value is in anticipating changes in consumer demand,” he noted. “We monitor how customers are using those methods and — whether you are are service provider or furniture or travel company — determine which are the best relevant payment methods.” Services like open banking, tools for banks to enable allowing payments directly from customers’ accounts, or buy-now-pay-later payments, are examples, he said, of areas that speak of further opportunities.
“We are delighted to support Simon and the team at PPRO as they continue to develop best-in-class local payment solutions,” commented Nathalie Kornhoff-Brüls, Managing Director at Eurazeo Growth, in a statement. “All signs for the future indicate that digital commerce, and even more so cross-border commerce, will continue to grow exponentially while innovation in payment methods remains strong. As a result, facilitating local payments is becoming increasingly complex. Payment service providers, however, no longer have a choice as merchants and their customers are pushing for the adoption.”
“PPRO has proven to be the go-to problem solver in this area, providing the local payments technology and expertise that the world’s biggest payment players rely on. Our investment reflects our confidence in the growth potential for PPRO and we’re excited to support PPRO and its team on their journey,” added Voria Fattahi, a partner at Sprints Capital, in a separate statement.
French startup LeoCare has raised a €15 million funding round. Felix Capital, Ventech and Daphni are participating in today’s funding round. The company is selling a portfolio of insurance products with a focus on the signup process and user experience. You can control your insurance products from a mobile app.
Chances are you already pay for multiple insurance products. But when is the last time you checked your coverage and adjusted your contract? When people sign up to a new insurance product, they tend to set it and forget it.
That’s why insurance companies don’t invest a ton of money on mobile apps, control panels and user-facing features. LeoCare believes there’s room for a player that does the opposite.
LeoCare can insure your home, your car, your motorbike and your smartphone. You can sign up from the company’s website or install a mobile app. The company has tried to optimize the onboarding process with easy-to-understand questions and an indicator that tells you if you’re going to pay a bit more or a lot more if you choose one option or another.
When you sign up, you get your insurance contract right away. This way, you can send it to a landlord a few minutes later. But LeoCare also helps you manage your contract later down the road. For instance, many LeoCare customers chose to lower their car insurance premiums during lockdown. You can also add another driver for a couple of weeks.
Behind the scenes, LeoCare acts as a managing general agent. The startup partners with several insurance companies and sells its insurance products under its own brand. The company currently charges €1 million in premiums per month and has 20,000 customers.
63% of contracts cover a car, 26% of contracts cover a home, 7% of contracts are for motorcyclists and 4% of contracts focus on smartphones. And LeoCare is growing rapidly with a current month-over-month growth rate of 38%.
Up next, the company wants to launch new features, such as a bot that lets you check the status of your case. LeoCare is also working on a feature that lets you receive a notification when you’re driving and there are usually a lot of road accidents in the area.
Finally, the startup wants to launch a marketplace of professionals. This could be helpful if you’re looking for a plumber for instance. And it could represent a new revenue stream for the startup.
LeoCare plans to grow its insurance portfolio sevenfold by the end of 2021. The team will also grow from 35 to 80 people.
TechCrunch is embarking on a major project to survey the venture capital investors of Europe, and their cities.
Our <a href=”https://forms.gle/k4Ji2Ch7zdrn7o2p6”>survey of VCs in Bucharest and Romania will capture how the country is faring, and what changes are being wrought amongst investors by the coronavirus pandemic.
We’d like to know how Romania’s startup scene is evolving, how the tech sector is being impacted by COVID-19, and, generally, how your thinking will evolve from here.
Our survey will only be about investors, and only the contributions of VC investors will be included. More than one partner is welcome to fill out the survey. (Please note, if you have filled the survey out already, there is no need to do it again).
The shortlist of questions will require only brief responses, but the more you can add, the better.
The deadline is January 22, 2021.
Obviously, investors who contribute will be featured in the final surveys, with links to their companies and profiles.
What kinds of things do we want to know? Questions include: Which trends are you most excited by? What startup do you wish someone would create? Where are the overlooked opportunities? What are you looking for in your next investment, in general? How is your local ecosystem going? And how has COVID-19 impacted your investment strategy?
This survey is part of a broader series of surveys we’re doing to help founders find the right investors.
For example, here is the recent survey of London.
You are not in Romania, but would like to take part? That’s fine! Any European VC investor can STILL fill out the survey, as we probably will be putting a call out to your country next anyway! And we will use the data for future surveys on vertical topics.
Thank you for participating. If you have questions you can email firstname.lastname@example.org
(Please note: Filling out the survey is not a guarantee of inclusion in the final published piece).
Some time ago, I gave up on the idea of finding a thread that connects each story in the weekly Extra Crunch roundup; there are no unified theories of technology news.
The stories that left the deepest impression were related to two news pegs that dominated the week — Visa and Plaid calling off their $5.3 billion acquisition agreement, and sizzling-hot IPOs for Affirm and Poshmark.
Watching Plaid and Visa sing “Let’s Call The Whole Thing Off” in harmony after the U.S. Department of Justice filed a lawsuit to block their deal wasn’t shocking. But I was surprised to find myself editing an interview Alex Wilhelm conducted with Plaid CEO Zach Perret the next day in which the executive said growing the company on its own is “once again” the correct strategy.
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In an analysis for Extra Crunch, Managing Editor Danny Crichton suggested that federal regulators’ new interest in antitrust enforcement will affect valuations going forward. For example, Procter & Gamble and women’s beauty D2C brand Billie also called off their planned merger last week after the Federal Trade Commission raised objections in December.
Given the FTC’s moves last year to prevent Billie and Harry’s from being acquired, “it seems clear that U.S. antitrust authorities want broad competition for consumers in household goods,” Danny concluded, and I suspect that applies to Plaid as well.
In December, C3.ai, Doordash and Airbnb burst into the public markets to much acclaim. This week, used clothing marketplace Poshmark saw a 140% pop in its first day of trading and consumer-financing company Affirm “priced its IPO above its raised range at $49 per share,” reported Alex.
In a post titled “A theory about the current IPO market”, he identified eight key ingredients for brewing a debut with a big first-day pop, which includes “exist in a climate of near-zero interest rates” and “keep companies private longer.” Truly, words to live by!
Come back next week for more coverage of the public markets in The Exchange, an interview with Bustle CEO Bryan Goldberg where he shares his plans for taking the company public, a comprehensive post that will unpack the regulatory hurdles facing D2C consumer brands, and much more.
If you live in the U.S., enjoy your MLK Day holiday weekend, and wherever you are: Thanks very much for reading Extra Crunch.
Senior Editor, TechCrunch
I'm taking the credit/blame for this headline https://t.co/2KYLsTxeHq
— Walter Thompson (@YourProtagonist) January 12, 2021
After spending much of the week covering 2021’s frothy IPO market, Alex Wilhelm devoted this morning’s column to studying the OKR-focused software sector.
Measuring objectives and key results are core to every enterprise, perhaps more so these days since knowledge workers began working remotely in greater numbers last year.
A sign of the times: This week, enterprise orchestration SaaS platform Gtmhub announced that it raised a $30 million Series B.
To get a sense of how large the TAM is for OKR, Alex reached out to several companies and asked them to share new and historical growth metrics:
“Some OKR-focused startups didn’t get back to us, and some leaders wanted to share the best stuff off the record, which we grant at times for candor amongst startup executives,” he wrote.
Image Credits: Ezra Shaw (opens in a new window)
For our latest investor survey, Matt Burns interviewed five VCs who actively fund consumer electronics startups:
“Consumer hardware has always been a tough market to crack, but the COVID-19 crisis made it even harder,” says Matt, noting that the pandemic fueled wide interest in fitness startups like Mirror, Peloton and Tonal.
Bonus: Many VCs listed the founders, investors and companies that are taking the lead in consumer hardware innovation.
Image Credits: Getty Images/Andriy Onufriyenko
If you’re looking for insight into “why everything feels so damn silly this year” in the public markets, a post Alex wrote Thursday afternoon might offer some perspective.
As someone who pays close attention to late-stage venture markets, he’s identified eight factors that are pushing debuts for unicorns like Affirm and Poshmark into the stratosphere.
TL;DR? “Lots of demand, little supply, boom goes the price.”
Clothing resale marketplace Poshmark closed up more than 140% on its first trading day yesterday.
In Thursday’s edition of The Exchange, Alex noted that Poshmark boosted its valuation by selling 6.6 million shares at its IPO price, scooping up $277.2 million in the process.
Poshmark’s surge in trading is good news for its employees and stockholders, but it reflects poorly on “the venture-focused money people who we suppose know what they are talking about when it comes to equity in private companies,” he says.
Image Credits: monsitj/Getty Images
This week, Visa announced it would drop its planned acquisition of Plaid after the U.S. Department of Justice filed suit to block it last fall.
Last week, Procter & Gamble called off its purchase of Billie, a women’s beauty products startup — in December, the U.S. Federal Trade Commission sued to block that deal, too.
Once upon a time, the U.S. government took an arm’s-length approach to enforcing antitrust laws, but the tide has turned, says Managing Editor Danny Crichton.
Going forward, “antitrust won’t kill acquisitions in general, but it could prevent the buyers with the highest reserve prices from entering the fray.”
Image Credits: Sophie Alcorn
I’m a grad student currently working on F-1 STEM OPT. The company I work for has indicated it will sponsor me for an H-1B visa this year.
I hear the random H-1B lottery will be replaced with a new system that selects H-1B candidates based on their salaries.
How will this new process work?
— Positive in Palo Alto
Image Credits: Ana Maria Serrano/Getty Images
After news broke that Visa’s $5.3 billion purchase of API startup Plaid fell apart, Alex Wilhelm and Ron Miller interviewed several investors to get their reactions:
Image Credits: George Frey/Bloomberg/Getty Images
Alex Wilhelm interviewed Plaid CEO Zach Perret after the Visa acquisition was called off to learn more about his mindset and the company’s short-term plans.
Perret, who noted that the last few years have been a “roller coaster,” said the Visa deal was the right decision at the time, but going it alone is “once again” Plaid’s best way forward.
In Tuesday’s edition of The Exchange, Alex Wilhelm took a closer look at blank-check offerings for digital asset marketplace Bakkt and personal finance platform SoFi.
To create a detailed analysis of the investor presentations for both offerings, he tried to answer two questions:
Image Credits: MirageC/Getty Images
Growth-stage startups in search of funding have a new option: “flexible VC” investors.
An amalgam of revenue-based investment and traditional VC, investors who fall into this category let entrepreneurs “access immediate risk capital while preserving exit, growth trajectory and ownership optionality.”
In a comprehensive explainer, fund managers David Teten and Jamie Finney present different investment structures so founders can get a clear sense of how flexible VC compares to other venture capital models. In a follow-up post, they share a list of a dozen active investors who offer funding via these nontraditional routes.
Image Credits: Anton Petrus (opens in a new window)/Getty Images
For some consumers, “cannabis has always been essential,” writes Matt Burns, but once local governments allowed dispensaries to remain open during the pandemic, it signaled a shift in the regulatory environment and investors took notice.
Matt asked five VCs about where they think the industry is heading in 2021 and what advice they’re offering their portfolio companies:
Only a few weeks after its SPAC IPO, Porch today announced that it has made four acquisitions, worth a total of $122 million. The most important here is probably the acquisition of Homeowners of America for $100 million, which gets Porch deeper into the home insurance space. In addition, Porch is also acquiring mover marketing and data platform V12 for $22 million, as well as home inspection service Palm-Tech and iRoofing, a SaaS application for roofing contractors. Porch did not disclose the acquisition prices for the latter two companies.
You may still think of Porch as a marketplace for home improvement and repair services — and that’s what it started out as when it launched about seven years ago. Yet while it still offers those services, a couple of years after its 2013 launch, the company pivoted to building what it now calls a “vertical software platform for the home.” Through a number of acquisitions, the Porch Group now includes Porch.com, as well as services like HireAHelper, Inspection Support Network for home inspectors, Kandela for providing services around moving and an insurance broker in the form of the Elite Insurance Group. In some form or another, Porch’s tools are now used — either directly or indirectly — by two-thirds of U.S. homebuyers every month.
As Porch founder and CEO Matt Ehrlichman told me, he had originally planned to take his company public through a traditional IPO. He noted that going the increasingly popular SPAC route, though, allowed him to push his timeline up by a year, which in turn now enables the company to make the acquisitions it announced today.
“In total, we had a $323 million fundraise that allows us now to not only be a public company with public currency, but to be very well capitalized. And picking up that year allows us to be able to go and pursue acquisitions that we think make really good fits for Porch,” Ehrlichman told me. While Porch’s guidance for its 2021 revenue was previously $120 million, it’s now updating that guidance to $170 million based on these acquisitions. That would mean Porch would grow its revenue by about 134% year-over-year between 2020 and 2021.
As the company had previously laid out in its public documents, the plan for 2021 was always to get deeper into insurance. Indeed, as Ehrlichman noted, Porch these days tends to think of itself as a vertical software company that layers insurtech on top of its services in order to be able to create a recurring revenue stream. And because Porch offers such a wide range of services already, its customer acquisition costs are essentially zero for these services.
Porch was already a licensed insurance brokerage. With Homeowners of America, it is acquiring a company that is both an insurance carrier as well as a managing general agent..
“We’re able to capture all of the economic value from the consumer as we help them get insurance set up with their new home and we can really control that experience to delight them. As we wrap all the technology we’ve invested in around that experience we can make it super simple and instant to be able to get the right insurance at the right price for your new home. And because we have all of this data about the home that nobody else has — from the inspection we know if the roof is old, we know if the hot water system is gonna break soon and all the appliances — we know all of this data and so it just gives us a really big advantage in insurance.”
Data, indeed, is what a lot of these acquisitions are about. Because Porch knows so much about so many customers, it is able to provide the companies it acquires with access to relevant data, which in turn helps them offer additional services and make smarter decisions.
Homeowners of America is currently operating in six states (Texas, Arizona, North Carolina, South Carolina, Virginia and Georgia) and licensed in 31. It has a network of more than 800 agencies so far and Porch expects to expand the company’s network and geographic reach in the coming months. “Because we have [customer acquisition cost]-free demand all across the country, one of the opportunities for us is simply just to expand that across the nation,” Ehrlichman explained.
As for V12, Porch’s focus is on that company’s mover marketing and data platform. The acquisition should help it reach its medium-term goal of building a $200 million revenue stream in this area. V12 offers services across multiple verticals, though, including in the automotive space, and will continue to do so. The platform’s overall focus is to help brands identify the right time to reach out to a given consumer — maybe before they decide to buy a new car or move. With Porch’s existing data layered on top of V12’s existing capabilities, the company expects that it will be able to expand these features and it will also allow Porch to not offer mover marketing but what Ehrlichman called “pro-mover” services, as well.
“V12 anchors what we call our marketing software division. A key focus of that is mover marketing. That’s where it’s going to have, long term, tremendous differentiation. But there are a number of other things that they’re working on that are going to have really nice growth vectors, and they’ll continue to push those,” said Ehrlichman.
As for the two smaller acquisitions of iRoofing and Palm-Tech, these are more akin to some of the previous acquisitions the company made in the contractor and inspection verticals. Like with those previous acquisitions, the plan is to help them grow faster, in part through integrating them into the overall Porch group’s family of products.
“Our business is and continues to be highly recurring or reoccurring in nature,” said Porch CFO Marty Heimbigner. “Nearly all of our revenues, including that of these new acquisitions, is consistent and predictable. This repeat revenue is also high margin with less than 20% cost of revenue and is expected to grow more than 30% per year on our platform. So, we believe these deals are highly accretive for our shareholders.”
CFOs are the supposed omniscient owners of a company. While the CEO sets strategy, messages and builds culture, the CFO needs to know everything that it is going on in an organization. Where is revenue coming from, and when will it arrive? How much will new headcount cost, and when do those expenses need to be paid? How can cash flows be managed, and what debt products might help smooth out any discontinuities?
As companies have migrated to the cloud, these questions have gotten harder to answer as other departments started avoiding the ERP as a centralized system-of-record. Worse, CFOs are expected to be more strategic than ever about finance, but can struggle to deliver important forecasts and projections given the lack of availability of key data. CMOs have gotten a whole new software stack to run marketing in the past decade, so why not CFOs?
For three Palantir alums, the hope is that CFOs will turn to their new startup called Mosaic. Mosaic is a “strategic finance platform” that is designed to ingest data from all sorts of systems in the alphabet soup of enterprise IT — ERPs, HRISs, CRMs, etc. — and then provide CFOs and their teams with strategic planning tools to be able to predict and forecast with better accuracy and with speed.
The company was founded in April 2019 by Bijan Moallemi, Brian Campbell and Joe Garafalo, who worked together at Palantir in the company’s finance team for more than 15 years collectively. While there, they saw the company grow from a small organization with a bit more than one hundred people to an organization with thousands of employees, more than one hundred customers as we saw last year with Palantir’s IPO and incoming revenue from more than a dozen countries.
Mosaic founders Bijan Moallemi, Brian Campbell and Joseph Garafalo. Photo via Mosaic.
Strategically handling finance was critical for Palantir’s success, but the existing tools in its stack couldn’t keep up with the company’s needs. So Palantir ended up building its own. We were “not just cranking away in Excel, which is really the default tool in the toolkit for CFOs, but actually building a technical team that was writing code, [and] building tools to really give speed, access, trust and visibility across the organization,” Moallemi, who is CEO of Mosaic, described.
Most organizations can’t spare their technical talent to the CFO’s office, and so as the three co-founders left Palantir to other pastures as heads of finance — Moallemi to edtech startup Piazza, Campbell to litigation management startup Everlaw and Garafalo to blockchain startup Axoni — they continued to percolate on how finance could be improved. They came together to do for all companies what they saw at Palantir: build a great software foundation for the CFO’s office. “Probably the biggest advancements to the office of the CFO over the last 10 years has been moving from kind of desktop-based Excel to cloud-based Google Sheets,” Moallemi said.
So what is Mosaic trying to do to rebuild the CFO software stack? It wants to build a platform that is a gateway to connecting the entire company to discuss finance in a more collaborative fashion. So while Mosaic focuses on reporting and planning, the mainstays of the finance office, it wants to open those dashboards and forecasts wider into the company so more people can have insight into what’s going on and also give feedback to the CFO.
Screenshot of Mosaic’s planning function. Photo via Mosaic.
There are a handful of companies like publicly-traded Anaplan that have entered this space in the last decade. Moallemi says incumbents have a couple of key challenges that Mosaic hopes to overcome. First is onboarding, which can take months for some of these companies as consultants integrate the software into a company’s workflow. Second is that these tools often require dedicated, full-time staff to stay operational. Third is that these tools are basically non-visible to anyone outside the CFO office. Mosaic wants to be ready to integrate immediately, widely distributed within orgs, and require minimal upkeep to be useful.
“Everyone wants to be strategic, but it’s so tough to do because 80% of your time is pulling data from these disparate systems, cleaning it, mapping it, updating your Excel files, and maybe 20% of [your time] is actually taking a step back and understanding what the data is telling you,” Moallemi said.
That’s perhaps why it’s target customers are Series B and C-funded companies, who no doubt have much of their data already located in easily-accessible databases. The company started with smaller companies and Moallemi said “We’ve been slowly inching our way up there over the last 12 months or so working with larger, more complex customers.” The company has grown to 30 employees and has revenues in the seven figures (without a sales org according to Moallemi), although the startup didn’t want to be more specific than that.
With all that growth and excitement, the company is attracting investor attention. Today, the company announced that it raised $18.5 million of Series A financing led by Trevor Oelschig of General Catalyst, who has led other enterprise SaaS deals into startups like Fivetran, Contentful, and Loom. That round closed at the end of last year.
Mosaic previously raised a $2.5 million seed investment led by Ross Fubini of XYZ Ventures in mid-2019, who was formerly an investor at Village Global. Fubini said by email that he was intrigued by the company because the founders had a “shared pain” at Palantir over the state of software for CFOs, and “they had all experienced this deep frustration with the tools they needed to do their jobs.”
Other investors in the Series A included Felicis Ventures, plus XYZ and Village Global.
Along with the financing, the company also announced the creation of an advisory board that includes the current or former CFOs from nine tech companies, including Palantir, Dropbox, and Shopify.
Many functions of business have had a complete transformation in software. Now, Mosaic hopes, it’s the CFO’s time.
Yesterday, we spoke with Plaid CEO and co-founder Zach Perret after news broke that Visa no longer plans to buy his company for $5.3 billion.
The deal was heralded in early 2020 as a sign of the growing importance of fintech startups. Then it failed to close, eventually running into a lawsuit from the U.S. Department of Justice. A few months later, the acquisition was dropped.
Sentiment in the market changed since the transaction was announced. As TechCrunch reported yesterday, there’s a good deal of optimism to be found amongst investors and others that Plaid will eventually be worth more than the price at which the Visa deal valued it.
What follows is a summary of our conversation with Perret, digging into a number of topics we felt most were pressing in the wake of Plaid’s unshackling.
First and upfront: it does not appear that Plaid is racing to the public markets via a blank-check company, or SPAC, a question several readers asked on Twitter. Our impression from our chat regarding near-term liquidity via the public markets is that those with their hopes up have them up a few years too early.
TechCrunch asked Perret how it feels to be free from his erstwhile corporate boss.
He said that the last few years have been a “rollercoaster,” adding that when they made the choice to sell, it made sense at the time from mission, and delivery perspectives — Visa wanted to accomplish similar things and could give his company access to a wide network of potential customers.
X1 Card is raising a $12 million funding round. The company is building a credit card that sets limits based on your current and future income, not your credit score.
Spark Capital is leading the round with Jared Leto, Aaron Levie, Jeremy Stoppelman, Max Levchin and Ali Rowghani also participating. American Express veteran Ash Gupta is also joining the company as an advisor — he was the chief risk officer of American Express.
The company says that it has attracted nearly 300,000 signups on its waitlist. I covered X1 Card back in September and it attracted a lot of readers, so that number doesn’t surprise me.
The X1 Card is a stainless steel Visa credit card with a different origin story. When you apply for a card, instead of determining your limits based on your credit score, the company wants to see your current and future income.
The startup believes the credit score system is outdated and doesn’t reflect your creditworthiness. That’s why it doesn’t use it to calculate limits. Your credit score still affects your variable APR (from 12.9% to 19.9%), but that’s it.
There are also a lot of software features that work with the credit card. For instance, you can track your subscriptions from the X1 app, you can also generate an auto-expiring virtual card for free trials that require a credit card. You also get notifications for refunds.
As for rewards, you get 2X points on all purchases. If you’re a heavy user and you spend more than $15,000 on your card per year, you’re upgraded to a new tier and earn 3X points. There’s also a viral element as you get a boosted reward level when you refer a friend — you get 4X points for a month. You can then spend your points with retail partners.
The company has promised a lot of features and now has enough cash in its bank account to deliver. Let’s see if the company can live up to the hype once the first customers get their cards. But it’s clear that the credit score system is outdated.
Fintech startup Upgrade has been positioning itself as a neobank. And yet, the company has mostly been focused on personal loans and more recently credit cards. You couldn’t just replace your bank account with Upgrade. Upgrade is adding two important missing pieces of the puzzle with checking accounts and debit cards.
With today’s launch, Upgrade competes more directly with other challenger banks, such as Chime, N26 and others. You can open a checking account, control it from a mobile app, send and receive money from that account.
There are no monthly fees and no minimum account balance. Under the hood, Cross River Bank provides FDIC-insured checking accounts.
You also get a debit card with your checking account. When it comes to ATM withdrawals, Upgrade will reimburse ATM fees for its most loyal customers up to five times a month. You need to maintain a minimum balance or set up direct payroll deposit for that feature.
Debit card payments on subscriptions and common everyday expenses let you earn 2% cash back. Eligible purchases include convenience stores, gas stations, restaurants, food deliveries, etc. Your earn 1% on other debit charges.
Rewards on debit card transactions are somewhat uncommon. Most financial companies focus on credit card rewards as the interchange fees on credit card transactions are much higher. Debit cards don’t generate as much interchange revenue.
“Neobanks in particular cannot pay high rewards (or any rewards at all) on debit cards because the interchange fee is often their only source of revenue,” Upgrade CEO Renaud Laplanche told me in an email.
And interchange fees can add up if you manage to attract millions of customers. According to The Information, Chime generated more than $600 million in revenue last year thanks to interchange fees.
The company still plans to generate the vast majority of its revenue from credit products. “Our strategy is to monetize our base through credit,” Laplanche said.
Upgrade also offers a credit card with 1.5% cash back on all purchases. If, for one reason or another, you can’t pay your monthly balance payment, the company helps you combine monthly charges into installment plans that you can pay back over 24 to 60 months. You pay down your balance at a fixed rate with equal monthly payments. Upgrade customers who use the company’s checking account will get lower rates on Upgrade loans.
You can also get a personal loan from Upgrade without a credit card or a checking account. And maybe you’ll end up discovering Upgrade’s other products after signing up to a personal loan.
Image Credits: Upgrade
With the proliferation of subscription services, combined with our lives becoming almost 100% digital, there’s a rising need to be able to manage these services. But most banks don’t have much of an answer. Step in Minna Technologies, which sells in its subscription management services into banking apps.
It’s now raised $18.8 million (€15.5m / £14m) in Series B fundraising from Element Ventures, MiddleGame Ventures, Nineyards Equity and Visa, to expand its open banking technology to banks globally.
Founded in Gothenburg, Sweden in 2016, Minna enables customers to manage subscription services via their existing bank’s app. Using Minna, customers can terminate subscriptions just from their banking app, automatically, cutting the data and financial ties between the merchant and customer. The platform can also notify customers when a free trial is about to end and facilitates utilities switching allowing them to find better deals. So far, Minna has partnerships with Lloyds Banking Group, Swedbank and ING.
Minna’s technology reduces the burden on a bank’s call centers, plus banks can also benefit financially from Minna’s role in facilitating utility switching, raising the prospect of banks becoming marketplaces.
The appearance of Minna suggests that the first wave of neo-banks is about to be accompanied by a second wave of overlayed services such as this. The average European is spending £301 (€333) a month on 11 subscriptions, which is predicted to increase to £459 (€508) a month on 17 subscriptions by 2025. IDC predicts that by 2050, 50% of the world’s largest enterprises will focus the majority of their businesses on digitally enhanced products, services, and experiences. Subscriptions are even coming from car makers such as Volvo.
Joakim Sjöblom, CEO and co-founder of Minna Technologies, said: “Over the past four years the subscription economy has exploded from Spotify and Netflix to even iPhones and cars. It’s becoming increasingly difficult for consumers to keep track of the payments and harder for banks to handle inquiries to shut them down. Minna’s tech improves the procedure for banks by simplifying the process, as well as providing an in-demand digital product that consumers are starting to expect from their financial institutions.”
Sjöblom told me that by largely working with incumbent banks, Minna is providing them with a way to fight back against challenger banks.
Pascal Bouvier, Managing Partner, MiddleGame Ventures said: “We strongly believe in a vision where banks develop their checking account offerings into “connected and intelligent” platforms and where retail clients are able to interact in many more ways than in the recent past.”
Sennder, a large digital road freight forwarder based out of Germany, has raised $160m in Series D financing. The round was led by an unnamed party, but round participants included Accel, Lakestar, HV Capital, Project A and Scania. To date, Sennder has raised more than $260m, allowing it to lay claim to a potential $1bn valuation.
Sennder directly connects enterprise shippers with trucking companies, thus disintermediating the traditional freight model. It says it will move over 1 million truckloads this year. So far it’s concentrated on the lucrative European market. In June 2020 it merged with French competitor Everoad and acquired Uber Freight’s European business last September. The European logistics and freight sector has a market size of $427bn.
Sennder competes with large incumbents like Wincanton and CH Robinson as well as other startups such as OnTrac in Spin, and Instafreight.
The whole digital freight forwarding market is booming. Only last November, Germany’s Forto, a digital freight forwarder raised another $50 million in funding taking its total raised to $103 million. And in 2018 FreightHub, another European digital freight forwarder, raised $30 million in Series B financing.
Sennder’s new investment will mean it can expand in European markets. It already partners with Poste Italiane in Italy, as well as Scania and Siemens, and is now supplying transport services to over 10 organizations listed in the German DAX 30, and 11 companies comprising the Euro Stoxx 50.
Since its founding in 2015 by David Nothacker, Julius Köhler and Nicolaus Schefenacker, the company has grown to 800 employees and seven international offices.
David Nothacker, CEO and Co-Founder of Sennder, said: “We are now an established industry player on equal terms with other more traditional sector pioneers, but have maintained our founding spirit. As a data-driven company, we contribute to making the logistics industry fit for a sustainable future; ensuring transparency, flexibility and efficiency in the distribution of goods. The COVID-19 pandemic has demonstrated the importance of a digitalized logistics industry.
Sonali De Rycker, Partner at Accel commented: “It is always fantastic to see a portfolio company reach such a significant milestone. 2020 highlighted the value that Sennder’s innovative digital offering brings to the freight industry.”
Fresh off the announcement of more than $500 million in new capital across two new funds, Seattle-based Madrona Venture Group has announced that they’re adding Anu Sharma and Daniel Li to the team’s list of Partners.
The firm, which in recent years has paid particularly close attention to enterprise software bets, invests heavily in the early-stage Pacific Northwest startup scene.
Both Li and Sharma are stepping into the Partner role after some time at the firm. Li has been with Madrona for five years while Sharma joined the team in 2020. Prior to joining Madrona, Sharma led product management teams at Amazon Web Services, worked as a software developer at Oracle and had a stint in VC as an associate at SoftBank China & India. Li previously worked at the Boston Consulting Group.
I got the chance to catch up with Li who notes that the promotion won’t necessarily mean a big shift in his day-to-day responsibilities — “At Madrona, you’re not promoted until you’re working in the next role anyway,” he says — but that he appreciates “how much trust the firm places in junior investors.”
Asked about leveling up his venture career during a time when public and private markets seem particularly flush with cash, Li acknowledges some looming challenges.
“On one hand, it’s just been an amazing five years to join venture capital because things have just been up and to the right with lots of things that work; it’s just a super exciting time,” Li says. “On the other hand, from a macro perspective, you know that there’s more capital flowing into VC as an asset class than ever before. And just from that pure macro perspective, you know that that means returns are going to be lower in the next 10 years as valuations are higher.”
Nevertheless, Li is plenty bullish on internet companies claiming larger swaths of the global GDP and hopes to invest specifically in “low code platforms, next-gen productivity, and online communities,” Madrona notes in their announcement, while Sharma plans to continue looking at to “distributed systems, data infrastructure, machine learning, and security.”
TechCrunch recently talked to Li and his Madrona colleague Hope Cochran about some of the top trends in social gaming and how investors were approaching new opportunities across the gaming industry.
Congratulations, you’re no longer selling your company for billions of dollars!
As strange as it sounds, that’s the leading perspective from venture capitalists concerning Plaid, now that its much-touted sale to Visa has fallen apart.
The $5.3 billion deal would have seen banking API startup Plaid join consumer payments and credit giant Visa. But the American government took a dim view of the deal, and according to Axios reporting, Plaid felt like it could be worth more money in time.
The TechCrunch team has collected views from venture capitalists, analysts and Anshu Sharma, CEO of another API-powered startup and a former VC to get a better view on the perspectives in the market concerning the blockbuster breakup.
From the venture capital side of things, most takes we received were bullish regarding Plaid’s chances now that it’s no longer being taken over by Visa. Amy Cheetham, for example, of Costanoa Ventures, said that the result is “good for the company, ultimately.” She added that Plaid may now see better “talent acquisition,” faster product decisions and a better eventual valuation.
“There is so much left for them to build in fintech infrastructure,” Cheetham said in an email, adding that she sees “Stripe-like scale potential” in Plaid. Stripe is reportedly raising capital at a valuation that could reach $100 billion.
Cheetham is not alone in her bullish perspective. Nico Berandi of Animo Ventures wrote to TechCrunch to say that he “still wishes” that his firm had been “around back then to have invested” in Plaid, adding a smiley face at the end of his missive.
And we’re off to the races!
Last night, Affirm priced its IPO above its raised range at $49 per share, a sign that the public markets remain hungry for new listings. Provided that Affirm today trades similarly to how it priced, we could be looking at a 2021 IPO market that resembles last year’s heated results.
That’s good news for a host of companies looking to follow in the financial technology unicorn’s footsteps.
Poshmark prices tonight and trades tomorrow. And with Qualtrics in the wings along with Coinbase, Roblox set to direct list, and Bumble said to file as well, we’re heading into another busy IPO quarter. Affirm’s first-day trading results will therefore hold extra importance, even if its pricing augurs well for IPOs more generally.
What does Affirm sell? First, per its S-1 filings, it charges merchants a fee to “convert a sale and power a payment.” That sounds like software revenues, albeit not in the recurring manner of a SaaS company.
Second, Affirm earns from “interest income [from] the simple interest loans that we purchase from our originating bank partners.” And, it offers virtual cards to consumers via its app, allowing it to generate interchange revenues.
We care about all of that as it’s important to realize that Affirm is not a software company in the context that we usually think about them, namely software as a service, or SaaS.
This matters when we consider how the market values Affirm; the more richly Affirm is valued in revenue-multiple terms by its new, $39 per-share IPO price, the more bullish we can presume the IPO market is.
What are Affirm’s gross margins? A great question, and one that is surprisingly hard to answer. If you read its final S-1 filing, you’ll find that all its chatter concerning “contribution profit” has been removed. This is a shame to some degree as contribution profit — and margin — were Affirm’s closest shared cognate to gross margin.
Car auto-insurance from legacy providers has structural bias built into it. It uses metrics such as credit score, income, marital status and education to figure out insurance rates, which eventually disproportionately hurts low-income individuals through high rates and low protection.
Loop, co-founded by John Henry and Carey Anne Nadeau, hopes to launch an alternative model that is equitable for all communities.
“Structural bias is baked into financial services and institutions that perpetuate and reinforce [it],” said Nadeau, who has worked at Brookings Institute and studied at MIT around topics of mobility. “We can’t just focus on banking, [and] insurance is sort of the overlooked ugly stepchild in the world view of financial services.”
Loop is a managing general agent (MGA) business so it can act as a broker and a vendor in the insurance space. It markets, acquires and services customers, instead of serving simply as a vendor built atop an existing insurance provider. The startup, also a B corp, is prioritizing profit alongside the environment and social dynamics.
The startup is trying to rewrite the rules of auto insurance by using two key metrics to track, create and charge insurance rates: state of roads and driver behavior. Loop bases rates off of usage, while a legacy provider might base rates off of demographics.
Loop is a mobile-only product that vertically integrates with insurance carriers.
Once a user downloads an app, Loop will find a quote for the user based on their location. The secret sauce is Loop’s tech: Using a database of over 100 million car crashes in 27 states, Loop creates a quote for a user based on their location. Henry, who co-founded Harlem Capital, describes Loop’s data is “almost a God-level understanding of crashes that have occurred on each, individual road.”
The startup also uses data around traffic volume, roadway infrastructure and weather data to set rates. The artificial intelligence capabilities could allow Loop to, say, steer a driver off of a road that has high-risk for crashes. Or it could simply reward them for clearing the road without a bumper scratch.
Image Credits: Loop
The other part of its business is based on telematics technology, which allows Loop to understand how and where a driver is going at all times. While legacy carriers might use lack of accidents to incentivize lower rates, Loop is using data to both set the rate and lower it.
Exchanging data for more flexibility could raise some eyebrows, but the co-founders think their customer-base, largely millennials and Gen Z, are comfortable with the model as it promises fairer prices. Loop makes a gross commission on every policy it sells.
Loop also pointed to Ohio-based Root Insurance as an example of how consumers are growing more comfortable with sharing location data. The car insurance startup went public in what many saw as a successful IPO for a midwestern high-growth tech company. Root similarly uses metrics like driver performance and history with telematics technology.
“They use telematics but they still are largely using legacy insurance models,” says Henry. “We’re kind of replacing that with our own AI based approach.”
Root might be the most obvious competitor, but usage-based pricing has been a rising dynamic in insurance for over a decade through various forms. Flexible insurtech has been on a tear recently, with MetroMile’s SPAC, Lemonade’s IPO and, on the early-stage front, Marshmallow, a U.K. based auto insurance startup last valued at $130 million.
The co-founders are confident that their technology is differentiated enough to survive the hot competition.
The idea for the startup began in July 2020, when George Floyd, a Black man, was murdered by police. Protests erupted across the world, rallying for change and solutions to address systemic racism. VC firms rushed to support Black founders, and Henry saw a gap in solutions committed to change.
Henry tweeted in reaction:
“It occurred to me that the change that we’re looking for was not gonna just bring itself about,” Henry said. “It takes intentional tackling of systemic issues.” He knew Nadeau had focused on transportation and mobility, and the duo eventually decided that they would “swing big.”
Carey Anne Nadeau and John Henry, the co-founders of Loop. Image Credits: Loop
While the co-founders admit the goal is ambitious, they have secured investors that think Loop could be a big business one day. The startup tells TechCrunch that it has raised a $3.25 million seed round led by Freestyle VC, with participation from Blue Fog Capital, Fontinalis Capital Partners, Concrete Rose, Uprising Ventures and Backstage Capital. Participating angel investors include Kristen Dickey, Steve Schlafman, Songe LaRon, Craig J. Lewis, Gerard Adams and Joshua Dorkin.
The money will be used for hiring and developing its data science infrastructure. It’s not live in the market yet, but is launching in Ohio, Illinois, Pennsylvania and New York (pending regulatory approval, of course).
The team met up with 77 investors, 25% of which were female investors, to get the funding needed to start Loop.
“It was more difficult than we thought,” said Henry. “We knew from the jump that we wanted to raise a larger seed round to signal to the market that we were looking to grow big.”
Loop eventually closed the goal round and valuation. As for the tipping point that got investors to back a company disrupting a $256 million industry with around $3 million in seed financing?
Mission, Henry says.
“I literally have goosebumps right now because the mission will open doors that profit cannot,” he said.
A wave of organizations — propelled by global Covid-19 pandemic circumstances — are moving their commercial and financial interactions online, and today one of the big players helping to enable that shift is announcing a significant round of growth funding to expand the tools and services that it provides to them.
Rapyd, which provides an API-based “fintech-as-a-service” platform covering payments, banking services, fraud protection and more, has raised $300 million, funding that CEO and co-founder Arik Shtilman said in an interview will be used to expand its team, build out more technology (next up: expanded fraud ID services and a wider marketplace), and to make selected acquisitions.
Rapyd’s customer base now numbers about 5,000 businesses, which includes marketplaces (labor marketplaces, and marketplaces for goods), e-commerce businesses, other kinds of lenders, and any business that might want to incorporate transactions or new financial services into their wider offerings. Shtilman said that at the moment, Rapyd is seeing its strongest growth yet, onboarding about 500 new customers each week.
The funding is coming at a $2.5 billion post-money valuation, Shtilman confirmed. (For some context on that, Rapyd was last valued at $1.2 billion in December 2019.)
The round is a Series D and is being led by prolific growth-round VC Coatue, with Spark Capital, Avid Ventures, FJ Labs, and Latitude (all new backers) and General Catalyst, Oak FT, Tiger Global, Target Global, Durable Capital, Tal Capital, and Entrée Capital (all previous backers) also participating. Other past investors, notably, include another major player in the world of API-based financial services, Stripe.
As with other companies in categories that have seen a huge surge of demand in the last year, financial services — and in particular those providing services to be able to carry out transactions online via the internet or phone — have proven to be some of the most mandatory and most used. (And no wonder, since bills still need paying, food and other items still need to be purchased, loans very much still need to be made, and so on.)
This was what many would call an “opportunistic” raise, made not to keep the lights on or to extend runway, but because the money was being offered to Rapyd at good terms, and there were smart places where it could be put to use to grow the business.
“We didn’t plan to raise money when we raised this round, but when the pandemic came in our business started to boom,” Shtilman said. “We were approached by existing investors to scale beyond our original business plans after we completed our 2021 growth plans in three months in 2020. So we thought the timing was probably right for world domination.”
Shtilman was partly (only partly) joking — he has a sort of deadpan delivery that I can’t quite capture here — but it’s a far cry from the startup’s early days, when “no one wanted to invest because everyone thought it would be too hard to execute. Even our early investors advised us to focus on a smaller concept. But we thought building globally doesn’t work. To start small is against the idea. Over the last several years, the need to explain what we do [has] almost vanished.”
The challenge (and opportunity) that Rapyd identified back in 2017 when it first opened for business is that the global commerce and financial markets are very highly fragmented: consumers and businesses in individual markets have their own preferred payment methods and demands, regulations differ, and the key companies involved vary from country to country.
Meanwhile, APIs have long been a great instrument for integration and connection: using a few lines of code — and presuming your own services are built on code too — you can knit together services, and bring in commoditized functionality that would take ages to build from the ground up, cutting down the effort and work needed, to focus on making your core business more unique.
While companies like Stripe, Twilio and many others had identified the opportunity of leveraging APIs to scale out a world of functionality to a wider set of would-be customers, what Rapyd really identified and built out was the idea of loading not just one, two, or three services, but hundreds (even thousands) of features into that proposition. In fintech, where those services are complex, there is a big array of them from which to choose what to build, and also a big pool of would-be customers to use them, if you are aiming wide.
The idea is smart and, as Shtilman noted, very much in keeping with the economies of scale that exist in e-commerce and fintech: individual transactions are at the end of the day very incremental, so services that bring many together can finally start to conceive of interesting returns.
That, of course, is not just something Rapyd has identified and run with. That is to say, the company has a number of competitors now in the market.
Just last week, Germany-based Mambu, which also provides an API-based suite of services (7,000 at last count) under the idea of “banking as a service” raised $135 million at a valuation of over $2 billion. Stripe, a backer of Rapyd, also has continued to expand and add in a number of services well beyond payments. Thought Machine also raised a big round last year; Temenos and Italy’s Edera are also strong players here.
And the field has so much opportunity that it’s even attracting a lot of newer entrants: witness Unit, another interesting player that came out of stealth in the U.S. in December with an interesting list of backers of its own.
“To build financial infrastructure, it doesn’t matter whether you are a small mom and pop or something bigger, you need many things, and if you want to sell in more than one jurisdiction you need a lot of those services,” Shtilman noted about the need for scale and breadth in a fintech platform proposition. He’s also very sanguine about competition.
“They have emerged like mushrooms after the rain,” he said. “But if you don’t have competition it means you don’t have a business, so this is good. It means there is a lot of demand. But for now we are the market leader. We think we will become the AWS of this space.”
That’s where investors like Coatue are also landing for now.
“The payment landscape varies dramatically across countries. A company doing business globally might need to accept hundreds of local payment methods. Rapyd’s API, which abstracts away this complexity, is currently powering what we think are many of the world’s most exciting companies,” said Kris Fredrickson, Managing Partner at Coatue, in a statement. “We are honored to partner with Arik and team for the next phase of the Rapyd journey.”
Regulatory action prompts Visa to back off a fintech acquisition, Uber and Moderna partner and Checkout.com is valued at $15 billion. This is your Daily Crunch for January 12, 2021.
The big story: Visa calls off Plaid acquisition
The deal, valued at $5.3 billion, was first announced just over a year ago. However, the Department of Justice filed suit to block the acquisition in November, arguing that it would “eliminate a nascent competitive threat.”
In today’s announcement, Visa said it could still have made things work, but the threat of “protracted and complex litigation” ultimately prompted it to call things off.
What remains to be seen, however, is whether this might cool financial giants’ interest in acquiring fintech startups and unicorns.
The tech giants
Uber and Moderna partner on COVID-19 vaccine access and information — The only confirmed component involves providing users with credible, factual information about COVID-19 vaccine safety through Uber’s consumer app.
Facebook revamps ‘Access Your Information’ tool to better break down, explain data usage — The new version of the tool has been visually redesigned, and now further breaks down the viewable information across eight categories instead of just two.
GM targets delivery companies with new EV business unit BrightDrop — GM has launched a new business unit to offer commercial customers an ecosystem of electric and connected products.
Startups, funding and venture capital
Checkout.com raises $450M and reaches $15B valuation — Checkout.com wants to build a one-stop shop for all things related to payments.
Cockroach Labs scores $160M Series E on $2B valuation — Co-founder and CEO Spencer Kimball says the company’s revenue more than doubled in 2020 in spite of COVID.
Weber acquires smart cooking startup June — June will continue to operate as its own brand.
Advice and analysis from Extra Crunch
These five VCs have high hopes for cannabis in 2021 — Despite remaining headwinds, the future is looking up for most cannabis businesses.
Is there still room in the cloud-security market? — While the initial shock of the COVID-19 pandemic has subsided for businesses, one of its main legacies is how it ushered in a tidal wave of accelerated digital transformation.
2021: A SPAC odyssey — A closer look at blank-check offerings for Bakkt and SoFi.
(Extra Crunch is our membership program, which aims to democratize information about startups. You can sign up here.)
Rollables are the new foldables — On day one of CES, both LG and TCL have offered their take on yet another form factor designed to offer more screen real estate.
Nielsen says ‘The Office’ was the most popular streaming series of 2020 — Netflix and Disney+ dominated the rankings.
The Daily Crunch is TechCrunch’s roundup of our biggest and most important stories. If you’d like to get this delivered to your inbox every day at around 3pm Pacific, you can subscribe here.
No one likes dilution, and that’s why every founder is looking for alternatives to traditional equity investing by venture capitalists. Financial entrepreneurs have launched a number of products, from SaaS securitization to debt-based financing, to help founders avoid that dilution, particularly when they have recurring revenues clocked on the books.
Capchase is one of this new crop of startup-focused fintech companies. It allows startups to receive their future recurring revenue today in the form of debt, allowing founders to spend future money earlier and potentially avoid at least some of those expensive, dilutive rounds of venture capital, particularly when they are just getting started. I profiled the Boston-based company a few months ago, when they had raised a $4.6 million seed led by Caffeinated Capital.
Now, the company is swimming in new funds, and it’s ready to start lending out to even more startups. This morning, the company announced that it has raised $60 million in an “asset-backed credit facility” from i80 Group. That should allow Capchase to expand the number of startups it works with, as well as the amount of revenue prepayment it could potentially extend to each startup as well.
i80 itself has built an investment firm based around credit underwriting just these sorts of projects for startups. In addition to this facility for Capchase and similar fintech underwriting, the group also backs real estate underwriting projects like for Properly, where it co-led a $100 million facility with Silicon Valley Bank.
Capchase, which was founded in early 2020, claims that its initial customers have delayed fundraises by an average of 8 months and saved about 16% in overall dilution. Of course, those number will vary widely depending on the startup, its growth, its recurring revenues and other variables.
Capchase’s goal isn’t just to extend revenue prepayment to startups, but to do it fast, sometimes in just days or even hours depending on the complexity of the recurring revenues of its clients. With $60 million more, it’s hungry to lend even faster.
There are a number of ways to take a private company public: You can pursue a traditional IPO, sell a chunk of shares at a set price and start trading. You can direct list, and merely start to trade. You can host a hybrid auction-offering, like what Unity did.
Hell, Google showed us back in the day that a reverse-Dutch auction is possible, after which no one else deigned to try it.
And then there’s the blank-check method: Instead of taking your company private, some rich people list a pile of hungry money instead, and then go hunting for a private company to merge with. If you consent, the money bucket and your actual company merge, renaming themselves after your operating entity. This is a SPAC-led debut.
And it’s what we’re discussing today, because there are a few upstarts going public via special purpose acquisition companies (SPACs, or blank-check companies) worth checking out.
One deals with bitcoin, and one is a huge consumer-facing fintech that has a stadium named after itself. In the case of Bakkt, the cryptocurrency-powering entity, a SPAC made some sense at first blush. SoFi, on the surface, seemed less obvious. (Bakkt is owned by Intercontinental Exchange, an exchange-focused, public company. It has raised money from Microsoft as well.)
This morning I want to dig through the two offerings’ investor presentations to see what we can learn. After viewing the Opendoor-SPAC presentation, I had a few questions heading into the new deals. The first of which was whether SPACs were going to be used again to lift potentially-promising companies that lacked obvious, near-term growth stories to the public markets? If so, perhaps SPACs would wind up helping get more total companies public, which would not be a bad thing.
We’ll start with Bakkt. You can read its release, including all the messy details of a SPAC-led combination here. The piece you need to know is that the resulting, combined company will have an enterprise value of around $2.1 billion and more than $500 million in cash after all elements of the deal are closed.
So the market should soon have a publicly-traded, cryptocurrency-focused business that is loaded with cash. Fun!
Next we want to know how healthy Bakkt is as a business, which brings us to its investor presentation, which you can read here. The presentation stresses that Bakkt is backed by major companies, a plus for public investors who might still be skittish about bitcoin. It also stresses that Bakkt will handle a host of digital tokens instead of just cryptocurrencies.
Bakkt’s point that airline miles and other non-monetary rewards are related to decentralized cryptocurrencies in that they are digital tokens is worth considering. Bakkt views the breadth of its supported asset classes as both an advantage over its competitors, and something that it is expanding; equities trading is coming soon, which will users to view even more of their digitally-held assets in one place.
Then we get to the results section of the presentation, which includes what I think is the most egregious chart of all time:
Akin to calling One America News Network “conservative,” this chart stretches the word’s definition somewhat.
Observe how competitors are denoted with actual data, while Bakkt bests them all with projections. Oof. So when it comes to what we can learn today from Bakkt about the impending Coinbase IPO I think that the answer is “not much.” Oh well.
We raise the above chart not merely to gently mock some of its embedded optimism, but also to note how nascent Bakkt’s consumer app really is. Per the company itself, it has yet to really launch:
This leads to the “results” shared being pretty heavy on speculation. Indeed, they are nearly all speculation. Check it out:
LAUNCHub Ventures, an early-stage European VC which concentrates mainly on Central Eastern (CEE) and South-Eastern Europe (SEE), has completed the first closing of its new fund at €44 million ($53.5M), with an aspiration to reach a target size of €70 million. A final close is expected by Q2 2021.
Its principal backer is the European Investment Fund, corporates and a number of Bulgarian tech founders and investors.
With this new fund, LAUNCHub aims to invest in 25 startups in the next 4 years. The initial investment range will be between €500K and €2M in verticals such as B2B SaaS, Fintech, Proptech, Big Data, AI, Marketplaces, Digital Health. The fund will also actively invest in the Web 3.0 / Blockchain space, as it has done so since 2014.
LAUNCHub has also achieved a 50:50 gender split in its team, with Irina Dimitrova being promoted to operating partner while Raya Yunakova who joins as an Investor, previously working for PiLabs in London and Mirela Yordanova joins as an Associate, previously leading the startup community at Google for Startups Campus in London.
The investor is mining a rich view of highly skilled developers in the CEE countries where there are approximately 1.3 developers for every 100 people in the workforce. “Central and Eastern Europe’s rapid economic growth has caught the attention of Western investors searching for the next unicorn. The region has huge and still untapped potential with more and more local success stories, paving the way for the next generation of CEE tech founders.” said Todor Breshkov, Founding Partner at LAUNCHub Ventures .
LAUNCHub Ventures competes with other investors like Earlybird in the region, but they tend to invest at a later stage and is more typically a co-investor with LAUNCHub. Nearby Greece also features Greek funds such as Venture Friends and Marathon, but these tend to focus on their core country and diaspora entrepreneurs. Others include Speedinvest (usually focused on DACH) and Credo Ventures, more focused on the Czech Republic and CEE.
LAUNCHub partner and cofounder Stefan Grantchev told me: “Our strategy is to be regional, not to focus specifically on Bulgaria – but to look at all the opportunities in the region of South-Eastern Europe.”
LAUNCHub Ventures has backed companies including:
Giraffe360 (Robotic camera for real estate listing automation, co-investment with Hoxton Ventures and HCVC)
Fite (Premium direct to consumer digital live streaming for sports, followed-on by Earlybird)
GTMHub (The world’s leading and most intuitive OKR software, followed-on by CRV)
FintechOS (Banking and Insurance middleware for automation and digital innovation acceleration, followed-on by Earlybird and OTB)
Cleanshelf (Enterprise SaaS management and optimization platform, followed-on by Dawn Capital)
Office RnD (Co-working and flexible office space management, followed-on by Flashpoint Ventures)
Ferryhopper (Ferry ticketing platform for Southern Europe, co-investment with Metavallon)