The Peloton effect


This post is by Alex Wilhelm from Fundings & Exits – TechCrunch

During the most recent quarter, only a few earnings reports stood out from the rest. Zoom’s set of results were one of them, with the video-communications company showing enormous acceleration as the world replaced in-person contact with remote chat.

Another was Peloton’s earnings from the fourth quarter of its fiscal 2020, which it reported September 10th. The company’s revenue and profitability spiked as folks stuck at home turned to the connected fitness company’s wares.


The Exchange explores startups, markets and money. Read it every morning on Extra Crunch, or get The Exchange newsletter every Saturday.


Shares of Peloton have rallied around 4x since March, roughly the start of when the COVID-19 pandemic began to impact life in the United States, driving demand for the company’s at-home workout equipment. In late June, the leisure company Lululemon bought Mirror, another connected fitness company aimed at the home market for around $500 million.

With Peloton’s 2019 IPO and its growth along with Mirror’s exit in 2020, connected fitness is demonstrably hot, and private-market investors are taking notice. A recent Tweet from fitness tech watcher Joe Vennare detailing a host of recent funding rounds raised by “digital fitness” companies made the point last week, piquing our curiosity at the same time.

Is there really some sort of Peloton effect driving private investment into lots of connected fitness startups? How hot is the more nascent side of connected fitness?

This morning let’s take a look through some recent funding rounds in the space to get a feel for what’s going on. (If you’re a VC who cares about the sector, feel free to email in your own notes, subject line “connected fitness” please.) We’ll then execute the same search for Q3 2019 and see how the data compares.

Hot Wheels

To start with the current market I pulled a Crunchbase query for all Q3 funding rounds for companies tagged as “fitness” and then filtered out the cruft to get a look at the most pertinent funding events.

Here’s what I came up for for Q3 2020, to date:

Equity Monday: The TikTok mess, and a grip of neat European VC activity


This post is by Alex Wilhelm from Fundings & Exits – TechCrunch

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

This is Equity Monday, our weekly kickoff that tracks the latest big news, chats about the coming week, digs into some recent funding rounds and mulls over a larger theme or narrative from the private markets. You can follow the show on Twitter here and myself here — and don’t forget to check out last Friday’s episode.

What a busy morning. We had to cover TikTok . We had to talk VC rounds. So, this is what we got up to:

  • US tech stocks are poised to sell off further this morning.
  • The Oracle-TikTok-Walmart-ByteDance deal is either coming into focus, or a period of even less clarity. It’s hard to tell.
  • Nikola founder Trevor Milton is leaving the board of his own company in the wake of fraud allegations. Shares of the company are sharply lower in pre-market trading.
  • Turning to TikTok, this primer represents the best over-the-weekend roundup that we could find. But, of course, things are still breaking as we come to print.
  • Since recording, Oracle has said that “upon creation of TikTok Global, Oracle/Walmart will make their investment and the TikTok Global shares will be distributed to their owners, Americans will be the majority and ByteDance will have no ownership in TikTok Global.” And, President Trump said this morning that China has to give up control of TikTok or the deal is off. ByteDance has said that it will retain control. You figure that out.
  • But there was some good stuff to chat about. Including the super-neat Mobile Premier League round worth $90 million, growth news from EU-based Babbel, a new London-based Seed fund that got raised, and a Swedish healthtech Series B.
  • As you guessed from today’s title, it was fun to see such a concentration of EU VC activity.
  • Finally, will the Nikola mess discourage more SPACs from taking companies public? If the rest of the stock market wasn’t selling off, we would have said no. But today? Is the answer maybe?

Equity drops every Monday at 7:00 a.m. PT and Thursday afternoon as fast as we can get it out, so subscribe to us on Apple PodcastsOvercastSpotify and all the casts.

Was Snowflake’s IPO mispriced or just misunderstood?


This post is by Alex Wilhelm from Fundings & Exits – TechCrunch

Welcome back to The TechCrunch Exchange, a weekly startups-and-markets newsletter. It’s broadly based on the daily column that appears on Extra Crunch, but free, and made for your weekend reading. 

Ready? Let’s talk money, startups and spicy IPO rumors.

Was Snowflake’s IPO mispriced or just misunderstood?

With an ocean of neat stuff to get through below, we’ll be quick today on our thought bubble focused on Snowflake’s IPO. Up front it was a huge success as a fundraising event for the data-focused unicorn.

At issue is the mismatch between the company’s final IPO price of $120 and where it opened, which was around $245 per share. The usual forces were out on Twitter arguing that billions were left on the table, with commentary on the question of a mispriced IPO even reaching our friends at CNBC.

A good question given the controversy is how the company itself felt about its IPO price given that it was the party that, theoretically, left a few billion on some metaphorical table. As it turns out, the CEO does not give a shit.

Alex Konrad at Forbes — a good chap, follow him on Twitter here — caught up with Snowflake CEO Frank Slootman about the matter. He called the “chatter” that his company left money on the table “nonsense,” adding that he could have priced higher but that he “wanted to bring along the group of investors that [Snowflake] wanted, and [he] didn’t want to push them past the point where they really started to squeal.”

So Slootman found a new, higher price at which to value his company during its debut. He got the investors he wanted. He got Berkshire and Salesforce in on the deal. And the company roared out of the gate. What an awful, terrible, no-good, mess of an IPO.

Adding to the mix, I was chatting with a few SaaS VCs earlier this week, and they largely didn’t buy into the money-left-on-the-table argument, as presuming that a whole block of shares could be sold at the opening trade price is silly. Are IPOs perfect? Hell no. Are bankers out for their own good? Yes. But that doesn’t mean that Snowflake screwed up.

Market Notes

No time to waste at all, let’s get into it:

  • Lots of IPOs this week, and everyone did well. Snowflake was explosive while JFrog was merely amazing. Sumo Logic and Unity had more modest debuts, but good results all the same. Notes from JFrog and Sumo execs in a moment.
  • Disrupt was a big damn deal this week, with tech’s famous and its up and coming leaders showing up to chatter with TechCrunch about what’s going on today, and what’s going on tomorrow. You can catch up on the sessions here, which I recommend. But I wanted to take a moment and thank the TechCrunch sales, partnership, and events teams. They killed it and get 0.1% of the love that they deserve. Thank you.
  • Why is Snowflake special? This tweet by GGV’s Jeff Richards has the story in one chart.
  • What are the hottest categories for SaaS startups in 2020? We got you.
  • There’s a new VC metric in town for startups to follow. Folks will recall the infamous T2D3 model, where startups should triple twice, and then double three times. That five-year plan got most companies to $100M in ARR. Now Shasta Ventures’ Issac Roth has a new model for contention, what he’s calling “C170R,” and according to a piece from his firm, he reckons it could be the “new post-COVID SaaS standard.” (We spoke with Roth about API-focused startups the other day.)
  • So what is it? Per his own notes: “If a startup entering COVID season with $2-20M in revenue is on track for 170% of their 2019 revenue AND is aligned with the new normal of remote, they will be able to raise new capital on good terms and are set up for future venture success.” He goes to note that there’s less of a need to double or treble this year.
  • Our thought bubble: If this catches on, a lot more SaaS startups would prove eligible for new rounds than we’d thought. And as Shasta is all-in on SaaS, perhaps this metric is a welcome mat of sorts. I wonder what portion of VCs agree with Shasta’s new model?
  • And, closing, our dive into no-code and low-code startups continues.

Various and Sundry

Again, there’s so much to get to that there is no space to waste words. Onward:

  • Chime raised an ocean of capital, which is notable for a few reasons. First, a new $14.5B valuation, which is up a zillion percent from their early 2019 round, and up around 3x from its late 2019 round. And it claims real EBITDA profitability. And with the company claiming it will be IPO ready in 12 months I am hype about the company. Because not every company that manages a big fintech valuation is in great shape.
  • I got on the phone with the CEO and CFO of JFrog after their IPO this week to chat about the offering. The pair looked at every IPO that happened during COVID, they said, to try to get their company to a “fair price,” adding that from here out the market will decide what’s the right number. The CEO Shlomi Ben Haim also made a fun allusion to a tweet comparing JFrog’s opening valuation to the price that Microsoft paid for GitHub. I think that this is the tweet.
  • JFrog’s pricing came on the back of it making money, i.e. real GAAP net income in its most recent quarter. According to JFrog’s CFO Jacob Shulman “investors were impressed with the numbers,” and were also impressed by its “efficient market model” that allowed it find “viral adoption inside the enterprise.”
  • That last phrase sounds to us like efficient sales and marketing spend.
  • Moving to Sumo Logic, which also went out this week (S-1 notes here). I caught up with the company’s CTO Christian Beedgen.
  • Beedgen, I just want to say, is a delight to chat with. But more on topic, the company’s IPO went well and I wanted to dig into more of the nitty-gritty of the market that Sumo is seeing. After Beedgen walked me through how he views his company’s TAM ($50 billion) and market dynamics (not winner-takes-all), I asked about sales friction amongst enterprise customers that Slack had mentioned in its most recent earnings report. Beedgen said:
  • “I don’t see that as a systemic problem personally. […] I think people in economies are very flexible, and you know the new normal is what it is now. And you know these other guys on the other side [of the phone], these businesses they also need to continue to run their stuff and so they’re gonna continue to figure out how we can help. And they will find us, we will find them. I really don’t see that as a systemic problem.”
  • So, good news for enterprise startups everywhere!
  • Wix launched a non-VC fund that looks a bit like a VC fund. Called Wix Capital, the group will “invest in technology innovators that are focused on the future of the web and that look to accelerate how businesses operate in today’s evolving digital landscape,” per the company.
  • Wix is a big public shop these days, with elements of low and no-code to its core. (The Exchange talked to the company not too long ago.)
  • And, finally my friends, I call this the Peloton Effect, and am going to write about it if I can find the time.

I am chatting with a Unity exec this evening, but too late to make it into this newsletter. Perhaps next week. Hugs until then, and stay safe.

Alex

Chime adds $485M at a $14.5B valuation, claims EBITDA profitability


This post is by Alex Wilhelm from Fundings & Exits – TechCrunch

In the midst of IPO week we have to add another name to our future debuts’ list, namely Chime, which announced a huge new round of capital today. The $485 million Series F values the consumer fintech giant at $14.5 billion, a huge figure given that Chime was most recently worth $5.8 billion after raising $700 million last December.

Even more stark is the company’s $1.5 billion valuation set in early 2019. From $1.5 billion to $14.5 billion in less than two years is quite a run for any startup. Powering the latest round there were a host of familiar names, including Tiger, ICONIQ and General Atlantic, along with Dragoneer and DST Global. Names I’m less familiar with like Whale Rock Capital and Access Technology Ventures also took part.

Tucked inside a CNBC article that broke the story was news that Chime is now EBITDA profitable and could be “IPO-ready” in its CEO’s eyes in around a year’s time.

TechCrunch reached out to Chime for clarification on the EBITDA point, asking if the figure is adjusted or not, as many EBTIDA metrics remove the cost of share-based compensation given to their employees. According to Chime, the metric is “true EBITDA,” to which we award an extra five points. In response to a growth question, Chime said that its “transaction and top-line” has tripled compared to the year ago period.

The Chime round and news of its nascent, non-GAAP profitability comes on the heels of a grip of reports on the financial health of a number of European neobanks, or challenger banks as they are often called. The numbers showed huge growth, and steep losses. If Chime’s numbers hold up when we get its eventual S-1 — start your countdowns — it will be among the healthiest of the startups in its cohort in financial terms, we reckon.

Finally, the company is trying to paint itself as something of a software company, and not a fintech company. This is a move to attract better revenue multiples when it comes time to defend its new $14.5 billion valuation. Software companies have flat-out bonkers multiples these days, as evinced by the blockbuster Snowflake debut.

Here’s how Chime thinks of itself, via CNBC:

“We’re more like a consumer software company than a bank,” Britt said. “It’s more a transaction-based, processing-based business model that is highly predictable, highly recurring and highly profitable.”

The key phrases there are “software company” and “highly predictable, highly recurring and highly profitable.” In effect Chime will argue that interchange revenues should fit under the SaaS umbrella given their regularity. Investors will decide how to view that pitch. If it works, maybe fintechs are more valuable than expected. And those fintechs with obvious SaaS components, like Acorns, could be sitting pretty when it comes to making the fintech v. SaaS argument.

Regardless, it’s another huge round for Chime, which makes it a good day for the highly-valued fintech sector.

3 VCs discuss the state of SaaS investing in 2020


This post is by Alex Wilhelm from Fundings & Exits – TechCrunch

Yesterday during Disrupt 2020 I sat down with three investors who know the SaaS startup market very well, hoping to get my head around how hot things are today. Coming on the heels of the epic Snowflake IPO (more to come on that in this weekend’s newsletter), it was a great time for a chat.


The Exchange explores startups, markets and money. Read it every morning on Extra Crunch, or get The Exchange newsletter every Saturday.


I’ve boiled our 40-minute discussion down to my favorite parts, getting you the goods in quick fashion.

What follows are notes on:

  • how fast the SaaS investing market is today
  • why Snowflake priced where it did and what that tells us about today’s market
  • how SaaS companies are seeing different growth results based on their sales motion
  • why some private-market SaaS multiples can get so high
  • which software sectors are accelerating
  • and what I learned about international SaaS.

There are more things to pull out later, like the investors’ thoughts regarding diversity in their part of the venture world and SaaS startups, but I want to give that topic its own space.

So, into today’s SaaS market with an eye on the future, guided by commentary from Canaan’s Maha Ibrahim, Andreessen Horowitz’s David Ulevitch and Bessemer’s Mary D’Onofrio.

Inside SaaS

To help us get through a good bit of the written word without slowing down, I’ll introduce an idea, share a quote and provide a little commentary. This should be good fun.

Schools are closing their doors, but Opendoor isn’t


This post is by Alex Wilhelm from Fundings & Exits – TechCrunch

Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast (now on Twitter!), where we unpack the numbers behind the headlines.

This week Natasha Mascarenhas, Danny Crichton and myself hosted a live taping at Disrupt for a digital reception. It was good fun, though of course we’re looking forward to bringing the live show back to the conference next year, vaccine allowing.

Thankfully we had Chris Gates behind the scenes tweaking the dials, Alexandra Ames fitting us into the program and some folks to watch live.

What did we talk about? All of this (and some very, very bad jokes):

And then we tried to play a game that may or may not make it into the final cut. Either way, it was great to have Equity back at Disrupt. More to come. Hugs from us!

Equity drops every Monday at 7:00 a.m. PT and Thursday afternoon as fast as we can get it out, so subscribe to us on Apple PodcastsOvercastSpotify and all the casts.

Which 5 cloud startup categories are the hottest?


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

Hello from the midst of Disrupt 2020: after this short piece for you I am wrapping my prep for a panel with investors from Bessemer, a16z and Canaan about the future of SaaS. Luckily, The Exchange this morning is on a very similar topic.


The Exchange explores startups, markets and money. Read it every morning on Extra Crunch, or get The Exchange newsletter every Saturday.


Today we’re parsing some data that Bessemer and Forbes shared regarding their yearly Cloud 100 list. It’s a grouping of private cloud and SaaS companies, giving us a good look into valuation trends over time and also where the most valuable startups are focusing their efforts.

The data show a changing focus from the biggest and most impressive private SaaS and cloud companies. And the valuation trends show how growing private valuations could limit future returns, given historical results.

Of course, modern cloud valuations make it hard to be bearish on SaaS revenue multiples, but all the same, how much higher can they go? Every startup looks cheap when money is cheap. Let’s get into the numbers.

A changing sector focus

The Cloud 100 cycles companies in and out as time passes. As the list is focused on private companies, cloud and SaaS firms that sell to another company or go public leave the cohort. And new companies join, keeping the total group at precisely 100 companies.

Here are the top five sectors those 100 companies are focused on, in order of popularity:

Which 5 cloud startup categories are the hottest?


This post is by Alex Wilhelm from Fundings & Exits – TechCrunch

Hello from the midst of Disrupt 2020: after this short piece for you I am wrapping my prep for a panel with investors from Bessemer, a16z and Canaan about the future of SaaS. Luckily, The Exchange this morning is on a very similar topic.


The Exchange explores startups, markets and money. Read it every morning on Extra Crunch, or get The Exchange newsletter every Saturday.


Today we’re parsing some data that Bessemer and Forbes shared regarding their yearly Cloud 100 list. It’s a grouping of private cloud and SaaS companies, giving us a good look into valuation trends over time and also where the most valuable startups are focusing their efforts.

The data show a changing focus from the biggest and most impressive private SaaS and cloud companies. And the valuation trends show how growing private valuations could limit future returns, given historical results.

Of course, modern cloud valuations make it hard to be bearish on SaaS revenue multiples, but all the same, how much higher can they go? Every startup looks cheap when money is cheap. Let’s get into the numbers.

A changing sector focus

The Cloud 100 cycles companies in and out as time passes. As the list is focused on private companies, cloud and SaaS firms that sell to another company, or go public leave the cohort. And new companies join, keeping the total group at precisely 100 companies.

And here are the top five sectors those 100 companies are focused on, in order of popularity:

Join Accel’s Andrew Braccia and Sonali De Rycker for a live Q&A on September 22 at 2 pm EDT/11 am PDT


This post is by Alex Wilhelm from Fundings & Exits – TechCrunch

In the midst of Disrupt 2020, we’re busy keeping tabs on all the panels, chats, demos and battling startups, but we’re also prepping for what comes next. Next Tuesday, the Extra Crunch Live series of Q&As with founders and investors resumes, this time with guests Andrew Braccia and Sonali De Rycker from Accel.

If you are just catching up to Extra Crunch Live, we’ve been hosting live discussions since the early COVID-19 days here in the United States with folks like Mark Cuban, Plaid founder Zach Perret and Sequoia’s Roelof Botha taking part.

The Accel chat is going to be interesting for a few reasons, one of which is that Braccia is the opposite of loud — TechCrunch has noted his general reticence to public comment in prior reporting. But Braccia was early money into Slack, which means he’ll have good perspective into the direct listing market, the IPO market writ large, SaaS and the remote-work boom. We’ll make sure to get the latest.

De Rycker is a bit more active in the public sphere and has lead deals into companies like Sennder (which recently did a deal with Uber), Shift Technology and Avito, which sold to Naspers for north of $1 billion last year. As you can tell from that string of deals, De Rycker will be able to give us a working dig into what’s up in the European startup scene.

And as De Rycker worked as an investment banker before VC, we’ll see what she has to say regarding today’s M&A and IPO climes.

All in all, it’s going to be a good time that I am looking forward to hosting. Login details follow for Extra Crunch folks, and you can snag a cheap trial here if you need access.

Until then, enjoy Disrupt and we’ll see you on Tuesday. Don’t forget to bring your best questions, and we might get to one of them!

Details

Go public now while software valuations make no sense, Part II


This post is by Alex Wilhelm from Fundings & Exits – TechCrunch

On August 5th, TechCrunch wrote that startups should “go public while software valuations make no sense.” What came next was a happy coincidence. Just a few weeks after that post, Unity, JFrog, Asana, Snowflake and Sumo Logic all filed to go public.

Today we’re seeing some data from those debuts, most notably the incredibly strong pricing runs from both JFrog and Snowflake. But even more, Snowflake just opened at either $245 or $269.50, depending on your data source. Regardless, the company’s stock is currently worth $276.2 per share, some 130% higher than its IPO price. Which, as we noted earlier, was already pretty high, given the company’s most recent revenue results.

Adding to the Snowflake example, JFrog opened worth around $71.30 today, sharply higher than its above-an-already-raised-range IPO price of $44. That’s wild! JFrog is now worth around $7 billion, despite having posted revenue in its last quarter of just $36.4 million.

The message from today’s debuts appears to be that valuations are unmoored from old rules — for the moment, that is — and thus companies that can post 100% growth or greater have little in the way of a cap on their upper limit.

Our takeaway: Go public now.

Adding to the good news is that some of the valuations we’ve understood less than others are holding up. First-day pop-and-drop today’s market isn’t. For example, Lemonade is still up about 50% from its IPO price, and OneMedical is up 100% from its own. So, software valuations are so wild that even software-adjacent companies are benefiting!

This is excellent news for a great number of unicorns. The good times are still here, amazingly, while the economy is still pretty bad and the election looms. All those old rules about having successive quarters of profitability and not going public during more turbulent years is, for now, bullshit.

Normalcy will re-emerge at some point. Things will eventually quiet down. But not yet, so get that S-1 out and take advantage of the good times while they last.

Unity raises IPO price range after JFrog, Snowflake target steep debut valuations


This post is by Alex Wilhelm from Fundings & Exits – TechCrunch

On the heels of two IPOs pricing above raised ranges, Unity boosted the value of its own impending debut this morning. The well-known unicorn is currently set to begin trading this Friday, pricing after the bell Thursday.

If that happens, the gaming platform company expects to be worth between $44 and $48 per share, up from its preceding $34 to $42 per-share IPO price range that it initially set.

Unity raising its price range for its IPO is not a surprise, given that software companies have been on a strong run lately. Just last night developer-focused software concern JFrog and data-focused cloud operation Snowflake each priced their public debuts above raised price intervals.

There’s plenty of demand for growth-oriented software equities on today’s public markets. And Unity has what investors are generally looking for inside that sector: greater than 40% revenue growth, gross margins in the high-70s to low-80s, and falling losses in both percent-of-revenue and gross dollar terms.

At $48 per share, Unity would sell $1.20 billion in stock, and be valued at around $12.6 billion. Given its most recent quarter’s revenue ($184.3 million) and annualized run-rate ($737.4 million), Unity is valued at around 17.1x revenues. (You can make that multiple larger by using a trailing revenue metric instead of an annualized run-rate statistic, or lower it by using a forward revenue estimate.)

We’ll have a better feel for how hot the public markets are later today when Snowflake and JFrog start, but Unity’s upward pricing bodes well for all three firms. Unity investors are set to do well, regardless of its final price. The company last raised $125 million in mid-2019 at a valuation of around $6.0 billion. Earlier shareholders will do even better in the transaction.

Sumo Logic is also expected to debut this week. More on that IPO here, if you are so inclined.

JFrog and Snowflake’s aggressive IPO pricing point to strong demand for cloud shares


This post is by Alex Wilhelm from Fundings & Exits – TechCrunch

After raising their IPO price ranges, both JFrog and Snowflake priced above their refreshed intervals last night. At their final IPO prices, the two debuts are aggressively valued, showing continued optimism amongst public investors that cloud shares are an attractive bet, even if their growth is financed through a history of steep losses, as in the case of Snowflake .


The Exchange explores startups, markets and money. Read it every morning on Extra Crunch, or get The Exchange newsletter every Saturday.


The JFrog IPO pricing is notable because it shows how much public investors are willing to pay for 50% growth and recent profits from a SaaS company. And Snowflake’s pricing is noteworthy for showing the value of huge growth and improving economics.

This morning we’ll explore the two companies’ final values, compare those results to their initial IPO price ranges and calculate their current revenue multiples based on last-quarter’s annual run rates. This is going to be fun.

Later today we’ll have updates on how they open to trade. For now, let’s get into the math and valuation nuance you and I both need to understand just where the public market is today as so many unicorns are either en route towards an IPO, or are standing just outside the pool with a single hoof dipped to check the temperature.

Price this, you filthy animal

JFrog priced its IPO at $44 per share, above its raised range of $39 to $41 per share and comically higher than its first price interval of $33 to $37 per share. Indeed, the company’s final IPO price was 33.3% higher than the lowend of its first proposed pricing range.

Though I doubt anyone expected the company to go for so little as $33 per share, JFrog’s pricing run shows strong demand even before it began to float.

What’s ahead in IPO land for JFrog, Snowflake, Sumo Logic and Unity


This post is by Alex Wilhelm from Fundings & Exits – TechCrunch

Welcome to Tuesday of TechCrunch Disrupt week. In a few hours, I’m hosting a panel about how startups can reach $100 million in annual recurring revenue (ARR) with the CEOs of Egnyte, GitLab and the President of Kaltura. It’s going to be a jam. Bring your questions!

Right now, however, let’s talk about some bigger companies, namely all the unicorns that are going public this week. We can set aside Corsair Gaming, Palantir and Asana, as they debut next week. This morning let’s get settled on what’s ahead for JFrog, Snowflake, Sumo Logic and Unity.


The Exchange explores startups, markets and money. Read it every morning on Extra Crunch, or get The Exchange newsletter every Saturday.


We explored the most recent pricing ranges for Snowflake and JFrog yesterday, helping set the stage. With both companies setting new, richer price targets for their debuts, the technology market looks hot. That’s good news for Sumo Logic and Unity, which should also begin trading this week.

Read on for your cheat sheet on all things upcoming from the realm of IPOs, and, in response to Twitter kerfuffle, notes on why Snowflake is seeing such investor demand despite a history of losses. It’s a good day to remind ourselves why some losses are very bad and others are pretty OK, given a certain set of circumstances.

Big-ass IPO week

After trading today we expect to see JFrog and Snowflake price their IPOs. As a quick reminder, this is what the two companies are expecting, starting with developer-focused service provider JFrog:

Snowflake and JFrog raise IPO ranges as tech markets stay hot


This post is by Alex Wilhelm from Fundings & Exits – TechCrunch

What market selloff?

Despite last week’s market declines, two big IPOs are rolling ahead this week, with Snowflake and JFrog both boosting their IPO price ranges this morning. The jump in expected pricing means each IPO will likely raise more capital, valuing the firms more richly than their initial ranges made clear.

Snowflake’s first IPO range valued it comfortably north of $24 billion and its IPO detailed that both Berkshire Hathaway and Salesforce Ventures were going to pour capital into the big-data company. JFrog’s developer-derived profits and strong growth gave it a valuation of around $3 billion, far above its final private price.

Those figures are are now passé. This morning, let’s quickly calculate new valuations for both companies and dig into why they are managing to attract such strong investor demand.

JFrog and Snowflake’s new IPO price intervals

Starting with JFrog, the company’s preceding IPO price interval of $33 to $37 per share valued it between $2.92 billion to $3.28 billion, not counting equity reserved for its underwriting banks. The company is now targeting a $39 to $41 per-share price range, a steep gain from its preceding target.

JFrog still intends to sell eight million shares, giving the company a $312 million to $328 million gross raise, before counting other shares that are being sold by existing shareholders and reserved equity for underwriters.

As low-code startups continue to attract VC interest, what’s driving customer demand?


This post is by Alex Wilhelm from Fundings & Exits – TechCrunch

Investor interest in no-code, low-code apps and services advanced another step this morning with Airtable raising an outsized round. The $185 million investment into the popular database-and-spreadsheet service comes as it adds “new low-code and automation features,” per our own reporting.

The round comes after we’ve seen several VCs describe no- and low-code startups as part of their core investing theses, and observed how the same investors appear to be accelerating their investing pace into upstart companies that follow the ethos.


The Exchange explores startups, markets and money. You can read it every morning on Extra Crunch, or get The Exchange newsletter every Saturday.


Undergirding much of the hype around apps that allow users to connect services, mix data sources and commit visual programming is the expectation that businesses will require more customized software than today’s developers will be able to supply. Low-code solutions could limit required developer inputs, while no-code services could obviate some need for developer time altogether. Both no- and low-code solutions could help alleviate the global developer shortage.

But underneath the view that there is a market mismatch between developer supply and demand is the anticipation that businesses will need more apps today than before, and even more in the future. This rising need for more business applications is key to today’s growing divergence between the availability and demand for software engineers.

The issue is something we explored talking with Appian, a public company that provides a low-code service that helps companies build apps.

Today we’re digging a little deeper into the topic, chatting with Mendix CEO Derek Roos. Mendix has reached nine-figure revenues with its low-code platform that helps other companies build apps, meaning that it has good perspective into what the market is actually demanding of itself and its low-code competition.

We want to learn a bit more about why business need so many apps, how COVID-19 has changed the low-code market and if Mendix is accelerating in 2020. If we can get all of that in hand, we’ll be better equipped to understand the growing no- and low-code startup realm.

A growing market

Mendix, based in Boston, raised around $38 million in known venture capital across a few rounds, including a $25 million Series B back in 2014. In 2018, Mendix partnered up with IBM to bring its service to their cloud, and later sold to Siemens for around $700 million the same year.

Is the vaunted cloud acceleration falling flat?


This post is by Alex Wilhelm from Fundings & Exits – TechCrunch

Welcome back to The TechCrunch Exchange, a weekly startups-and-markets newsletter. It’s broadly based on the daily column that appears on Extra Crunch, but free, and made for your weekend reading. 

Ready? Let’s talk money, startups and spicy IPO rumors.

Is the vaunted cloud acceleration falling flat?

This week we’re taking a look at the bad side of the cloud software market. In case you were avoiding the news over the last week, tech and software stocks are struggling. Not much compared to their 2020 gains, mind, but after months of only going up their recent declines have been notable. (As I write to you, the tech-heavy Nasdaq is headed for its worst week since March.)

The pullback makes some sense. Having watched SaaS and cloud valuations get stretched to historical highs, Slack’s earnings were an endcap on a good, but not-quite-as-good-as-expected set of results from public cloud and SaaS companies. 

As we’ve noted, most public software companies are not seeing their revenue growth accelerate. Some public software companies may be seeing their growth deceleration slow, but the number of public software companies actually accelerating in 2020 is tiny. The actually-accelerating group is Zoom, and maybe one or two other companies. 

Why is that, given all that we’ve heard about the presumably accelerating digital transformation? Slack earnings are a good explainer. The enterprise communications company’s recent filings explain that its COVID-bump has somewhat dissipated, while a number of COVID-related problems are persisting. 

Seeing recently risen valuations slip in the face of a lack of materially accelerated growth and some churn issues is reasonable. 

Does this matter for startups? Some. Public software valuations are still elevated compared to historical norms, which helps software startups defend their valuations and raise well. And there are plenty of startup hotspots as we’ve noted, including API-delivered startups enjoying time in the sun, as well as edtech startups that caught a COVID-related tailwind.

I am chatting with investors from a16z, Bessemer, and Canaan next week at Disrupt about the future of SaaS, collecting notes on the private-market side of this particular issue. So, more to come. But for now, I think we’ve seen the top of the peak and are now dealing more with reality than hype. Or, as public investors might say, the COVID trade has run its course and earnings will set the tone moving forward.

Market Notes

Moving on to market notes, a fintech stat, and some other bits of data for your consumption and edification:

A brief interlude: Disrupt is next week, you should come. You can enjoy it from the comfort of your couch. 

Various and Sundry

SaaS and cloud earnings continue to trickle in, which means I spent a good portion of my week talking to more execs at public companies. Short notes from Smartsheet, nCino and BigCommerce to follow, along with some final thoughts for your weekend.

  • On the valuations front, Smartsheet CEO Mark Mader told TechCrunch that “investors are thinking about how to balance historically high multiples with historically high potential returns in the space that’s still very young.” 
  • He added that no one doubts that cloud “is going to be the answer” to a lot of stuff, or that “people are [going to] change how they work,” but did note that cloud companies are not impervious to macro headwinds, because “cloud companies serve non-cloud companies,” and not merely companies in sectors that are excelling.
  • This fits neatly into our notes on Slack above. More on Smartsheet’s earnings here.
  • nCino had a good quarter, beating expectations and guiding well during its first public earnings report. However, like many other SaaS and cloud companies, it has lost some valuation altitude in recent weeks. It’s still miles above its IPO price, however.
  • I was curious about how the post-IPO period has been for the company’s CEO, Pierre Naudé, and his response was fun. Like all new public company CEOs, he made sure to note how quickly his team got back to work after the debut, but he also told The Exchange that he does now spend time that he used to invest in customers and “innovation” talking to analysts and investors. 
  • Being a public company, therefore, has time and focus costs that are worth considering, as we see so many tech shops approach the public markets.
  • And then there was BigCommerce, which went public quite recently. I got back on the horn with CEO Brent Bellm, wanting to learn a bit more about the current state of the e-commerce market. 
  • Here’s what the CEO had to say, lightly edited and condensed for clarity:

“I think it’s staying pretty hot. The surprising thing in the post-pandemic weeks was just how rapidly growth accelerated, and consumer and business adoption grew. We all kept saying ‘well at some point stores will reopen, and the growth rates will come back down.’ But the growth rates for actual sales running through stores continued to be very strong. You know, whether you look at our customer set, or [at] credit card data from Bank of America or others […] you can see quite clearly that e-commerce remains very, very hot. It’s a permanent change in behavior. Consumers have found a lot more places where they now like to buy online and reasons to like to buy online, and companies have found new and more effective ways to sell.”

  • This is probably a good reminder to turn our attention back to e-commerce when we get a chance post-Disrupt. 
  • And, finally, read Natasha on why rolling funds are blowing up, something that we talked about on the podcast this week.

That’s all the room we have. Hugs, fist bumps, and good luck.

Alex

China may kill TikTok’s U.S. operations rather than see them sold


This post is by Alex Wilhelm from Fundings & Exits – TechCrunch

The controversial push to force Chinese tech unicorn ByteDance to divest part or all of its smash-hit TikTok social media service to a US-based company could be in doubt after a report today indicated that China’s government may oppose the transaction. According to reporting by Reuters, the Chinese government may prefer TikTok to simply shutter its U.S. operations instead of allowing it to be sold to an American company.

The potential divestment of TikTok is not a regular business transaction. Instead, the deal is being demanded by the U.S. government, as President Donald Trump directs foreign and economic policymaking via executive fiat. Leaning on his own fabled business acumen, the American premier has also demanded that his government receive a portion of any final sale price. It is not clear if that concept is legal.

As the U.S. and China spar around the globe for both economic and political supremacy, the deal is a flashpoint between the countries with a muddle of companies stuck in the middle. ByteDance is in the mix, along with Microsoft, Walmart and other companies to a lesser degree, like Oracle. The Trump administration has set a mid-September timeline for a deal being struck, though as the month burns away it is not clear if that timeline could be met.

The United States is not alone in taking steps to curb Chinese influence inside its borders, as the TikTok sale comes after India banned the app, along with dozens of other China-based applications.

The deal is also under pressure from a changing regulatory environment in China, with the country’s autocratic leadership changing its export rules to possibly include elements of TikTok that could limit a transaction, and perhaps scuttle its sale.

For ByteDance, the situation is a nightmare. For lead-suitor Microsoft, the transaction is a shotgun marriage that it might not be entirely enthused about. For the Trump administration, it’s an attempt at a power play. And for China’s increasingly authoritarian government, the deal could feel like submission. So, if the deal does manage to come together it will be more surprise than eventuality.

Warren Buffett invests in an unprofitable business


This post is by Alex Wilhelm from Fundings & Exits – TechCrunch

Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast (now on Twitter!), where we unpack the numbers behind the headlines.

The whole crew was back, with Natasha Mascarenhas and Danny Crichton and myself chattering, and Chris Gates behind the scenes tweaking the dials as always. This week was a real team effort as we are heading into the maw of Disrupt — more here, see you there — but there was a lot of news all the same.

So, here’s what we got to:

We wrapped with whatever this is, which was at least good for a laugh. We are back next week at Disrupt, so see you all there!

Equity drops every Monday at 7:00 a.m. PT and Thursday afternoon as fast as we can get it out, so subscribe to us on Apple PodcastsOvercastSpotify and all the casts.

What’s driving API-powered startups forward in 2020?


This post is by Alex Wilhelm from Fundings & Exits – TechCrunch

Startups that deliver products via an API are seeing momentum in 2020, as their method of serving customers becomes increasingly mainstream. And investors are taking note.

It’s not hard to find a startup with an API-based delivery model that is doing well this year. This column noted a grip of recently funded API-focused startups in May, for example, underscoring how attractive they are to venture capitalists today.

Yesterday, I caught up with Alpaca, a startup whose API allows other companies to add equities-trading capabilities to their own services. The company’s business is skyrocketing this year. According to data it provided to TechCrunch, Alpaca’s trading volume, processed for its developer users and customers, has grown from $388.1 million in January to nearly $1.6 billion in both June and July. Volume fell some in August, but according to CEO Yoshi Yokokawa, September’s trading volume could see Alpaca surpass its summer records.

Alpaca announced a $6 million round from Spark Capital last November that TechCrunch covered, with Social Leverage, Portag3, Fathom Capital and Zillionize helping boost its total capital raised to nearly $12 million. We confirmed with Yokokawa that his startup’s revenue scales with volume, meaning that the company’s top line has exploded this year, with trading volumes up 10x from July 2019 to July 2020.

Alpaca is a good example of what to think of when we consider an API-powered company versus something more more traditional, like Robinhood, which provides services to end users. Alpaca considers developers as its users, and those developers bring Alpaca to market in their own fashion.

The developer-first model can lead to efficiencies. As Twilio CEO Jeff Lawson told TechCrunch regarding new software products: “I don’t want to go through a sales process,” he said, adding that he also doesn’t want to wait “a week to get a call back” but would rather “start exploring now.” With many API companies offering a free tier or low-cost options for tinkering, lowering sales and marketing costs in certain instances when developers sell themselves on an API-delivered service.

So what?

What’s driving the API-delivered model forward in 2020? Or, more simply, why do I keep hearing from API-powered startups that are either raising money, or are seeing rapid growth?

Alpaca’s Yokokawa has a theory. According to the startup exec, two macro trends are coming together to push API startups forward. The first is a simple evolution of the tech industry towards a new software delivery model. Yokokawa drew a timeline for TechCrunch, from legacy IT systems to on-prem software, through SaaS to API-delivered services today, the last in the bunch offering what he views as the most flexibility. That trend has combined with more folks becoming developers, in his view, through traditional education, coding schools, and even no-code’s growth.

An industry shift towards software and services in an increasingly on-demand model (SaaS is more on-demand than on-prem software, and API-delivered tools are even more on-demand than SaaS) and more developers to help plug APIs into other apps could make for a nice tailwind for companies employing the business model.

To get a bit more on the where we stand today, The Exchange chatted with Shasta’s Isaac Roth and collected notes from two Mayfield investors, Patrick Salyer and Rajeev Batra. There’s a general air of bullishness around startups selling APIs. Let’s learn how it is impacting venture interest.

The investor perspective

Slack’s earnings detail how COVID-19 is both a help and a hindrance to cloud growth


This post is by Alex Wilhelm from Fundings & Exits – TechCrunch

Slack’s shares are set to fall sharply this morning, down around 16% in pre-market trading. As the company beat analyst expectations last quarter and guided within range, the selloff might feel a little surprising.

Perhaps it shouldn’t.

I spoke with a VC last week about what the new benchmark results are for private SaaS companies, and to my surprise, he said software startups don’t have to grow at 100% to be fundable in today’s market. Given what I’d heard from other venture capitalists about how so much of their portfolios had found a COVID-19 growth bump, the perspectives felt incongruous.


The Exchange explores startups, markets and money. You can read it every morning on Extra Crunch, or get The Exchange newsletter every Saturday.


Startups wanted to grow at a pace of more than 100% pre-pandemic, and some have accelerated since. So how could a startup growing less than three figures yearly be attractive? Throw in Zoom’s impressive earnings results and some warning signs from earlier this earnings cycle that cloud growth hasn’t wound up being quite as fast as expected felt diminished.

Slack’s earnings help sort out what’s going on.

Reading the company’s SEC filing related to earnings this morning, it’s hard to miss Slack’s notes about COVID-19. The enterprise communications company describes early benefits from the pandemic, along with lingering pain associated with its economic impacts. In short, the software-related COVID-bump could wind up leaving a hangover in the short- to medium-term.

This helps us understand why a software startup could be VC-attractive in 2020 without a 100% growth rate. Perhaps more SaaS and cloud startups than have been generally told are struggling, which means slower revenue expansion is palatable provided that other indicators are flashing green.

To understand what could be happening to your favorite startup, let’s tease apart Slack’s COVID-19-related business notes, starting with the good news, before turning to what I’ve penciled in as the bad news — and the even badder tidings.