Why startups are raising more venture debt as VC dollars near all-time records


This post is curated by Keith Teare. It was written by Alex Wilhelm. The original is [linked here]

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

As I write to you, SaaS and cloud stocks are busy setting fresh all-time highs and as we’ve seen, venture interest in modern software companies is pushing more money into the sector. But despite it appearing to be an incredibly good time to raise equity funding, venture debt and revenue-based financing appear to be having a moment.

So why are more folks talking about and raising debt to help power their startups, even when valuations are high and there is a lot of venture capital to be raised?

As with all explorations of complex, evolving trends, there’s no one answer. But, some data from a 2019-era survey on venture debt and a conversation I had with equity-free SaaS finance shop Element Finance’s John Gallagher (Element is a Scaleworks spinout) help explain what’s going on. Let’s start with how big the venture debt world is and how fast it is growing and then turn to what’s powering its expansion.

Rising debt

The data we’re going to discuss is directional and probably pretty accurate, which is just fine for what we want to do today: detail a general trend of rising venture debt volume over the past few years to confirm what we’ve presumed to be a trend for some time.

Thanks to a report from last year undertaken by Kruze (a startup accounting and HR consultancy), what the firm Continue reading “Why startups are raising more venture debt as VC dollars near all-time records”

As 5 more startups join the $100M club, are we just making a pre-IPO list?


This post is curated by Keith Teare. It was written by Alex Wilhelm. The original is [linked here]

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

Today we’re adding five names to the $100 million annual recurring revenue (ARR) club and listing all preceding members in a single post. This series, which was a bit of an accident, if I’m being honest, has included more than a dozen companies that have reached $100 million ARR, along with a handful more that are close.

Today we’re adding Seismic, ThoughtSpot, Noom, Riskified and Moveable Ink to the list. As always, we have funding histories, growth metrics and interviews below on the new group. But at this juncture, as we head toward the two-dozen company mark, it’s a good time to ask, what is this list that we’re compiling?

At first, the goal of the jokingly-named “$100 million ARR club” was to highlight companies that were of real scale, an idea designed to gently push back against the “unicorn” moniker. As more and more unicorns were born and the private-capital world became adept at getting startups of all maturity levels over the requisite $1 billion valuation threshold, the term began to feel too diluted to have much signaling value.

While, in contrast, $100 million in ARR felt much more “hard” to the valuation metric’s comparable squishiness. But, since that first post, more and more companies have written in, sharing hard metrics and the series has continued. Perhaps we’re really just compiling an IPO watchlist, a grouping Continue reading “As 5 more startups join the $100M club, are we just making a pre-IPO list?”

Unicorn fever as One Medical’s IPO pops 40% after conservative pricing


This post is curated by Keith Teare. It was written by Alex Wilhelm. The original is [linked here]

Shares of One Medical are worth $19.50 this morning after the venture-backed unicorn priced its IPO at $14 per share last night. The company opened at $18 before rising further, according to Yahoo Finance data. At its current price, One Medical is worth about 40% more than its IPO price, a strong debut for the company.

The result is a boon for One Medical, which raised $532.1 million during its time as a private company. At $14 per share, the company was worth $1.71 billion. At 19.50, One Medical is worth $2.38 billion, a winning result for a company said to be worth around $1.5 billion as a private company.

For investors The Carlyle Group, J.P. Morgan, Redmile Group, GV and Benchmark (among others), the debut is a success, pricing their stakes in the company higher once again. For other unicorns, the news is even better. One Medical, a company with gross margins under the 50% mark, deeply minority recurring revenue and 30% revenue growth in 2019 at best is now worth about 8.5x its trailing revenues.

That is about as good a signal as one could imagine for venture-backed companies that aren’t in as good shape as Slack or Zoom were letting them know that now is the time to go public.

Unicorn directions

It’s possible to read One Medical’s new revenue multiple in a few ways. You can be positive, saying that its valuation and resulting metrics are signs of Continue reading “Unicorn fever as One Medical’s IPO pops 40% after conservative pricing”

SoftBank wants its on-demand portfolio to stop losing so much money


This post is curated by Keith Teare. It was written by Alex Wilhelm. The original is [linked here]

SoftBank wants its competing portfolio companies to stop losing so much money and, in some cases, to merge.

That’s the news out from the Financial Times today, which reported that Uber and DoorDash discussed merging last year. The talks didn’t wind up in a deal.

The two companies, each heavily backed by SoftBank and its formerly active Vision Fund, compete in the food delivery space at great expense. Uber’s Eats business turned $392 million in adjusted net revenue in Q3 2019 into $316 million adjusted loss. That ocean of red ink actually makes DoorDash’s reported, projected $450 million 2019 operating loss look modest.

Perhaps by bringing the two companies together they would lose less money, and thus be in a better place to either return to their original IPO valuation or defend their existing private valuation.

Uber has famously struggled after its IPO to retain value, shedding worth during its public offering and since its debut. DoorDash, relatedly, was said to be in the market recently but unable to close a new, large funding round. And as the two companies compete a combination makes sense. Even more so when you consider their shared shareholder.

Other chaos

Uber and DoorDash aren’t the only examples of SoftBank-backed companies beating each other up with bricks of Vision Fund cash.

According to a report today in the Wall Street Journal, a fight in Latin America between several SoftBank-backed companies is raging:

Uber is under siege in Latin America amid a bruising price Continue reading “SoftBank wants its on-demand portfolio to stop losing so much money”

SoftBank wants its on-demand portfolio to stop losing so much money


This post is curated by Keith Teare. It was written by Alex Wilhelm. The original is [linked here]

SoftBank wants its competing portfolio companies to stop losing so much money and, in some cases, to merge.

That’s the news out from the Financial Times today, which reported that Uber and DoorDash discussed merging last year. The talks didn’t wind up in a deal.

The two companies, each heavily backed by SoftBank and its formerly active Vision Fund, compete in the food delivery space at great expense. Uber’s Eats business turned $392 million in adjusted net revenue in Q3 2019 into $316 million adjusted loss. That ocean of red ink actually makes DoorDash’s reported, projected $450 million 2019 operating loss look modest.

Perhaps by bringing the two companies together they would lose less money, and thus be in a better place to either return to their original IPO valuation or defend their existing private valuation.

Uber has famously struggled after its IPO to retain value, shedding worth during its public offering and since its debut. DoorDash, relatedly, was said to be in the market recently but unable to close a new, large funding round. And as the two companies compete a combination makes sense. Even more so when you consider their shared shareholder.

Other chaos

Uber and DoorDash aren’t the only examples of SoftBank-backed companies beating each other up with bricks of Vision Fund cash.

According to a report today in the Wall Street Journal, a fight in Latin America between several SoftBank-backed companies is raging:

Uber is under siege in Latin America amid a bruising price Continue reading “SoftBank wants its on-demand portfolio to stop losing so much money”

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


This post is curated by Keith Teare. It was written by Alex Wilhelm. The original is [linked here]

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

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

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

Retrenchment

OYO, the SoftBank-backed budget hotel

Continue reading “Are OYO’s deep cuts a reality check for unicorns?”

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

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

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

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

Retrenchment

OYO, the SoftBank-backed budget hotel

Continue reading “Are OYO’s deep cuts a reality check for unicorns?”

Cloudinary passes $60M ARR without VC money

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

Today we’re continuing our exploration of companies that have reached material scale, usually viewed through the lens of annual recurring revenue (ARR). We’ve looked at companies that have reached the $100 million ARR mark and a few that haven’t quite yet, but are on the way.

Today, a special entry. We’re looking at a company that isn’t yet at the $100 million ARR mark. It’s 60% of the way there, but with a twist. The company is bootstrapped. Yep, from pre-life as a consultancy that built a product to fit its own needs, Cloudinary is cruising toward nine-figure recurring revenue and an IPO under its own steam.

Insurify raises $23M Series A to add new coverage varietals, boost its marketing efforts

The venture-backed insurance world is more than the Lemonades and MetroMiles of the world. There’s more room in the industry for startups to shake things up. One such company, Cambridge-based Insurify, is out today with a new venture round that greatly expands its capital base.

The startup, which had accepted just $6.6 million over two rounds before its latest investment, has raised $23 million in a Series A led by MTECH Capital and VIOLA FinTech. Prior investors MassMutual Ventures and Nationwide took part in the new investment. (Update: Hearst Ventures also took part.)

TechCrunch hasn’t caught up with the company since our own Sarah Buhr covered its first $2 million deal back in early 2016. As you’d expect, a lot has changed in the last four years.

What’s Insurify?

To get under the skin of the new round, TechCrunch caught up with Insurify’s CEO and founder, Snejina

Continue reading “Insurify raises $23M Series A to add new coverage varietals, boost its marketing efforts”

A look inside Visa’s shareholder presentation for the $5.3B Plaid deal

Fresh off the news yesterday that Visa is buying fintech unicorn Plaid for $5.3 billion, the payments giant is making its case to its shareholders. Given the scale of the deal, and the implied bet that Visa is making on the future of its market, the company prepared a presentation, which means we get to peer into its thinking regarding Plaid itself and the fintech market as a whole.

In a short deck, Visa argues that buying Plaid will: 1) provide it with deep access to an exploding market (fintech), 2) help it boost growth (at a small hit to profits) and 3) provide a means to expand Visa’s total addressable market by building on Plaid’s small customer base, allowing for future growth.

Access to new markets, faster revenue expansion and larger total addressable market (TAM) are pretty good things for any business. Let’s see how Visa makes

Continue reading “A look inside Visa’s shareholder presentation for the $5.3B Plaid deal”

Seattle’s ExtraHop expects $100M ARR in 2020, IPO the following year

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

Today we’re continuing our series on companies that have reached the $100 million annual recurring revenue (ARR) threshold, or are about to. ExtraHop is the company of the day, a Seattle-based firm that deals with cloud analytics and a portion of the security world called “network detection and response.”

ExtraHop is interesting because of its scale, its IPO plans and its history of capital efficiency. Regular readers will recall that we’ve praised Braze and Egnyte in this series, noting that, compared to some unicorns and other members of the $100 million ARR club, they had raised modest sums. Both have raised a multiple of ExtraHop’s own known capital tally.

TechCrunch got on the phone yesterday with ExtraHop’s CEO Arif Kareem and CFO Bill Ruckelshaus to dig in more.

Continue reading “Seattle’s ExtraHop expects $100M ARR in 2020, IPO the following year”

Casper’s IPO could be a bellwether for unprofitable startups in the post-WeWork era

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

Today we’re working to figure something out, namely the tradeoffs that D2C unicorn (and soon to be public company) Casper faces as it seeks to balance growth and profitability. And then we’re going to stack it next to its most obvious public comp, Purple, to figure out what it might be worth.

This is going to be a little more wonky than usual, but I can’t help myself. Let’s go.

Profit v. Growth

Every growing company faces a tradeoff in growth and profitability. The faster a company grows, generally speaking, the lower its profitability. In reverse, companies that grow more slowly can focus on wringing profits from existing operations. Companies that grow quickly while generating profit are rare (the Zooms of the world).

The tension between

Continue reading “Casper’s IPO could be a bellwether for unprofitable startups in the post-WeWork era”

Equity Monday: Away’s CEO plans comeback while SaaS valuations rise and epiFI raises

Good morning friends, and welcome back to TechCrunch’s Equity Monday, a short-form audio hit to kickstart your week. Regular Equity episodes still drop Friday morning, so if you’ve listened to the show over the years don’t worry — we’re not changing the main show. (Here’s last week’s episode with Danny Crichton, which was a lot of fun.)

What was on our minds this morning? Brian Heater’s CES overview of sleeptech from the weekend, which made the argument that not all gadgets are bad for our sleep, even if there is some irony in using tech to help cure our tech-addled brains. Here’s to something a bit more substantial than blackout shades.

Also, Facebook closed out last week after setting some record valuations — so much for the techlash — and Casper’s IPO filing landed to much impact just as everyone was trying to get away from their

Continue reading “Equity Monday: Away’s CEO plans comeback while SaaS valuations rise and epiFI raises”

Casper files to go public, shows you can lose money selling mattresses

E-commerce phenom and D2C bright light Casper has filed to go public.

The New York-based company that raised nearly $340 million while private, according to Crunchbase data, expects to trade on the New York Stock Exchange under the ticker symbol “CSPR.” Its S-1 filing includes a $100 million placeholder figure for its possible capital raise.

The company will need the money, as it loses money and burns cash. Let’s explore just how a mattress company does that.

Growth, loss

In the full years of 2017 and 2018, Casper recorded revenue of $250.9 million (net of $45.7 million in “refunds, returns, and discounts”) and $357.9 million (net of $80.7 million in “refunds, returns, and discounts”). That worked out to growth of 42.6% in the year.

Over the same two periods, Casper lost $73.4 million and $92.1 million on a net basis, respectively.

Lucky coffee, unicorn stumbles and Sam Altman’s YC wager


This post is curated by Keith Teare. It was written by Alex Wilhelm. The original is [linked here]

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

This week we had TechCrunch’s Alex Wilhelm and Danny Crichton on hand to dig into the news, with Chris Gates on the dials and more news than we could possibly cram into 30 minutes. So we went a bit over; sorry about that.

We kicked off by running through a few short-forms to get things going, including:

  • Alex wanted to talk about his recent story on Lily AI’s $12.5 million Series A. Canaan led the round into the e-commerce-focused recommendation engine that has a cool take on what people care about.
  • Danny talked about the acquisition of Armis Security by Insight for $1.1 billion, the VC round for self-driving forklift startup Vecna and an outside-the-Valley round for Houston-based HighRadius.

Turning to longer cuts, the team dug into the latest

Continue reading “Lucky coffee, unicorn stumbles and Sam Altman’s YC wager”

Layoffs at Lime and Getaround herald rise of profit-hungry unicorns

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

A million dollars isn’t cool. You know what’s cool? Positive adjusted EBITDA, or something close to it.

That’s the message from scooter unicorn Lime, which announced this week that it was cutting about 14% of its staff and closing a dozen markets. The staff reductions, numbering about 100, come as the company has touted efforts to improve its profitability — going as far as setting targets for when it might reach capital freedom, as well as highlighting the matter in a recent corporate blog post.

(Bird, a Lime competitor, also underwent layoffs this year.)

What’s going on? Unicorns, once hungry for growth, are now hell-bent to show current (and future) investors that their businesses aren’t unprofitable quagmires. Profitability, or movement towards it, is hot, and Lime

Continue reading “Layoffs at Lime and Getaround herald rise of profit-hungry unicorns”

Sisense CEO Amir Orad explains why he raised $100M

Yesterday, Sisense, a player in the business intelligence space, announced a $100 million investment. As TechCrunch reported, the round pushed the company’s valuation north of the $1 billion mark, making Sisense the world’s newest unicorn.

That moniker will last a day, we’re sure.

TechCrunch caught up with Sisense CEO Amir Orad and CMO Harry Glaser to discuss the company’s business scale just a few days ago; Sisense is a member in our newly-created $100 million ARR club, having first surpassed the threshold after buying Periscope earlier in 2019 and later with its original operations. What follows is an edited transcript that we’ve shortened to the key bits regarding the round that gifted Sisense its horn.

Lucky coffee, unicorn stumbles, and Sam Altman’s YC wager

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

This week we had TechCrunch’s Alex Wilhelm and Danny Crichton on hand to dig into the news, with Chris Gates on the dials and more news than we could possibly cram into 30 minutes. So we went a bit over; sorry about that.

We kicked off by running through a few short-forms to get things going, including:

  • Alex wanted to talk about his recent story on Lily AI’s $12.5 million Series A. Canaan led the round into the ecommerce-focused recommendation engine that has a cool take on what people care about.
  • Danny talked about the acquisition of Armis Security to Insight for $1.1 billion, the VC round for self-driving forklift startup Vecna, and an outside-the-Valley round for Houston-based HighRadius.

Turning to longer cuts, the team dug into the latest

Continue reading “Lucky coffee, unicorn stumbles, and Sam Altman’s YC wager”

How some founders are raising capital outside of the VC world

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

Today, we’re exploring fundraising from outside the venture world.

Founders looking to raise capital to power their growing companies have more options than ever. Traditional bank loans are an option, of course. As is venture capital. But between the two exists a growing world of firms and funds looking to put capital to work in young companies that have growing revenues and predictable economics.

Firms like Clearbanc are rising to meet demand for capital with more risk appetite than a traditional bank looking for collateral, but less than an early-stage venture firm. Clearbanc offers growth-focused capital to ecommerce and consumer SaaS companies for a flat fee, repaid out of future revenues. Such revenue-based financing is becoming increasingly popular; you could say the category has roots in the sort of venture

Continue reading “How some founders are raising capital outside of the VC world”

Lily AI raises a $12.5M Series A led by Canaan to accelerate its e-commerce recommendation tech

Lily AI, a startup focused on using deep learning to help brands better convert customers through emotionally tailored recommendations, announced this morning that it has raised a $12.5 million Series A led by Canaan Partners. Prior investors NEA, Unshackled and Fernbrook Capital also took part in the funding event.

Prior to its Series A, Lily had raised just a few million, according to Crunchbase data.

The round caught our eye for a few reasons. First, the investor leading the round — Maha Ibrahim — also led The RealReal’s Series C back in 2014. That company, which also sports a focus on the sartorial, went public in 2019. (Ibrahim has also dropped by TechCrunch from time to time, including here.) To see the investor lead an early round in a company operating in a related space was notable.

And the technology that co-founders Purva Gupta (formerly Eko

Continue reading “Lily AI raises a $12.5M Series A led by Canaan to accelerate its e-commerce recommendation tech”