Category: EC News Analysis

Inside GitLab’s IPO filing



While the technology and business world worked towards the weekend, developer operations (DevOps) firm GitLab filed to go public. Before we get into our time off, we need to pause, digest the company’s S-1 filing, and come to some early conclusions.

GitLab competes with GitHub, which Microsoft purchased for $7.5 billion back in 2018.

The company is notable for its long-held, remote-first stance, and for being more public with its metrics than most unicorns — for some time, GitLab had a November 18, 2020 IPO target in its public plans, to pick an example. We also knew when it crossed the $100 million recurring revenue threshold.

Considering GitLab’s more recent results, a narrowing operating loss in the last two quarters is good news for the company.

The company’s IPO has therefore been long expected. In its last primary transaction, GitLab raised $286 million at a post-money valuation of $2.75 billion, per Pitchbook data. The same information source also notes that GitLab executed a secondary transaction earlier this year worth $195 million, which gave the company a $6 billion valuation.

Let’s parse GitLab’s growth rate, its final pre-IPO scale, its SaaS metrics, and then ask if we think it can surpass its most recent private-market price. Sound good? Let’s rock.

The GitLab S-1

GitLab intends to list on the Nasdaq under the symbol “GTLB.” Its IPO filing lists a placeholder $100 million raise estimate, though that figure will change when the company sets an initial price range for its (Read more...)

Ramp and Brex draw diverging market plans with M&A strategies



Earlier today, spend management startup Ramp said it has raised a $300 million Series C that valued it $3.9 billion. It also said it was acquiring Buyer, a “negotiation-as-a-service” platform that it believes will help customers save money on purchases and SaaS products.

The round and deal were announced just a week after competitor Brex shared news of its own acquisition — the $50 million purchase of Israeli fintech startup Weav. That deal was made after Brex’s founders invested in Weav, which offers a “universal API for commerce platforms”.

From a high level, all of the recent deal-making in corporate cards and spend management shows that it’s not enough to just help companies track what employees are expensing these days. As the market matures and feature sets begin to converge, the players are seeking to differentiate themselves from the competition.

But the point of interest here is these deals can tell us where both companies think they can provide and extract the most value from the market.

These differences come atop another layer of divergence between the two companies: While Brex has instituted a paid software tier of its service, Ramp has not.

Earning more by spending less

Let’s start with Ramp. Launched in 2019, the company is a relative newcomer in the spend management category. But by all accounts, it’s producing some impressive growth numbers. As our colleague Mary Ann Azevedo wrote this morning:

Since the beginning of 2021, the company says it has seen its number (Read more...)

ServiceMax promises accelerating growth as key to $1.4B SPAC deal



ServiceMax, a company that builds software for the field-service industry, announced yesterday that it will go public via a special purpose acquisition company, or SPAC, in a deal valued at $1.4 billion. The transaction comes after ServiceMax was sold to GE for $915 million in 2016, before being spun out in late 2018. The company most recently raised $80 million from Salesforce Ventures, a key partner.

Broadly, ServiceMax’s business has a history of modest growth and cash consumption.

ServiceMax competes in the growing field-service industry primarily with ServiceNow, and interestingly enough given Salesforce Ventures’ recent investment, Salesforce Service Cloud. Other large enterprise vendors like Microsoft, SAP and Oracle also have similar products. The market looks at helping digitize traditional field service, but also touches on in-house service like IT and HR giving it a broader market in which to play.

GE originally bought the company as part of a growing industrial Internet of Things (IoT) strategy at the time, hoping to have a software service that could work hand in glove with the automated machine maintenance it was looking to implement. When that strategy failed to materialize, the company spun out ServiceMax and until now it remained part of Silver Lake Partners thanks to a deal that was finalized in 2019.

TechCrunch was curious why that was the case, so we dug into the company’s investor presentation for more hints about its financial performance. Broadly, ServiceMax’s business has a history of modest growth and cash consumption. It promises a (Read more...)

Duolingo’s S-1 depicts heady growth, monetization, new focus on English certification



Duolingo filed to go public yesterday, giving the world a deep look inside its business results and how the pandemic impacted the edtech unicorn’s performance. TechCrunch’s initial read of the company’s filing was generally positive, noting that its growth was impressive and its losses modest; Duolingo recently began making money on an adjusted basis.

While the company’s top-level numbers are impressive, we want to go one level deeper to grow our understanding of the company beyond our EC-1.

Duolingo is likely entering a period in which it will have to invest heavily in features like pronunciation, efficacy and new apps — which could come at a steep upfront cost.

First, we’ll explore the growth of Duolingo’s total user base, how much money it makes per active user, and how effectively the company has managed to convert free users to paid products over time. The numbers will set us up to understand what else can be learned about Duolingo’s business beyond our original deep dive into the company’s finances — specifically underscoring the pressure cooker it finds itself in when looking for new revenue sources.

Starting with Duolingo’s growth in total active users, guess how fast they rose from 2019 to 2020. Hold that number in your head.

The actual numbers are as follows: In 2019, Duolingo closed the year with 27.3 million monthly active users (MAUs); it wrapped 2020 with 36.7 million MAUs. That’s a gain of 34%. If we narrow our gaze to Q1 2021 numbers (Read more...)

Why is Didi worth so much less than Uber?



Years ago, U.S. ride-hailing giant Uber and its Chinese rival Didi were locked in an expensive rivalry in the Asian nation. After a financially bruising competition, Uber sold its China-based business to Didi, focusing instead on other markets.

The two companies are coming head-to-head again, however, as Didi looks to list in the United States. The company’s IPO filing was big news for the SoftBank Vision Fund, Tencent and Uber, thanks to its stake in Didi from its earlier transaction.

Uber is more diversified both geographically and in terms of its revenue mix. Didi is larger, more profitable and more concentrated.

But Didi appears set to be valued at a discount to Uber. By several tens of billions of dollars, it turns out. And we can’t quite figure out why.

This week, Didi indicated that it will target a $13 to $14 per-share IPO price, with each share on the U.S. markets worth one-fourth of a Class A share in the company. In more technical language, each ADR is 25% of a Class A ordinary share in Didi, if you prefer it put like that.

With 288 million shares to be sold in its U.S. IPO, Didi could raise as much as $4.03 billion, a huge sum.

What’s Didi worth at $13 to $14 per ADR? Using a nondiluted share count, Didi is valued between $62.3 billion and $67.1 billion. Inclusive of shares that may be issued thanks to vested options and the like, Didi could be worth (Read more...)

Despite flat growth, ride-hailing colossus Didi’s US IPO could reach $70B



Didi filed to go public in the United States last night, providing a look into the Chinese ride-hailing company’s business. This morning, we’re extending our earlier reporting on the company to dive into its numerical performance, economic health and possible valuation.

Didi is approaching the American public markets at a fortuitous moment. While the late-2020 IPO fervor, which sent offerings from DoorDash and others skyrocketing after their debuts, has cooled, valuations for public companies remain high compared to historical norms. And Uber and Lyft, two American ride-hailing companies, have been posting numbers that point to at least a modest recovery in the ride-hailing industry as COVID-19 abates in many parts of the world.

As further grounding, recall that Didi has raised tens of billions worth of private capital from venture capitalists, private equity firms, corporations and other sources. The size of the bet riding on Didi is simply massive. As we explore the company’s finances, then, we’re more than vetting a single company’s performance; we’re examining what sort of returns an ocean of capital may be able to derive from its exit.

In that vein, we’ll consider GMV results, revenue growth, historical profitability, present-day profitability, and what Didi may be worth on the American markets, given current comps. Sound good? Into the breach!

Inside Didi’s IPO filing

Starting at the highest level, how quickly has gross transaction volume (GTV) scaled at the company?

GTV

Didi is historically a business that operates in China but has operations today in more (Read more...)

Xometry is taking its excess manufacturing capacity business public



Xometry, a Maryland-based service that connects companies with manufacturers with excess production capacity around the world, filed an S-1 form with the U.S. Securities and Exchange Commission announcing its intent to become a public company.

Growth aside, it’s clear that Xometry is no modern software business, at least from a revenue-quality profile.

As the global supply chain tightened during the pandemic in 2020, a company that helped find excess manufacturing capacity was likely in high demand. CEO and co-founder Randy Altschuler described his company to TechCrunch this way last September upon the announcement of a $75 million Series E investment:

“We’ve created a marketplace using artificial intelligence to power it, and provide an e-commerce experience for buyers of custom manufacturing and for suppliers to deliver that manufacturing,” Altschuler said at the time. Xometry raised nearly $200 million while private, per Crunchbase data.

With Xometry, companies looking to build custom parts now have the ability to do so in a digital way. Rather than working the phones or starting an email chain, they can go into the Xometery marketplace, define parameters for their project and find a qualified manufacturer who can handle the job at the best price.

As of last September, the company had built relationships with 5,000 manufacturers around the world and had 30,000 customers using the platform.

At the time of that funding round, perhaps it wasn’t a coincidence that the company’s lead investor was T. Rowe Price. When an institutional investor is involved in a (Read more...)

What Vimeo’s growth, profits and value tell us about the online video market



The spinout of video platform Vimeo from IAC completed today, with the smaller company now trading as an independent entity under the ticker symbol VMEO.

If you missed the news that the internet conglomerate was spinning out the video service, don’t feel bad; it slipped past many radars. But with the company now trading, with our access to its historical results, and with our minds still enthralled by YouTube’s recent financial performance for Alphabet, it’s worth taking a moment to digest the company’s health.

Let’s answer a few questions: How quickly is Vimeo growing, how profitable is its business, and what can its spinout tell us about the larger video market? Recall that Kaltura, another video-powering company, recently put its IPO back into the pipeline after a small delay during what felt like a snap-freeze of the public markets toward the start of the second quarter.

So the Vimeo debut could impact a possible forthcoming unicorn IPO. With that in mind, let’s dig into the numbers.

Growth

From Q1 2020 to Q1 2021, Vimeo’s revenues expanded from $57 million to $89.4 million, a gain of around 57%. That’s a solid pace of expansion, but not a surprising one considering how much digital video the world consumed during the COVID-19 pandemic, a fact that could have bolstered the company’s recent performance.

Over the same time frame, Vimeo’s gross profit grew from $38.6 million to $64.5 million, a gain of around 67%. As you can infer from faster-rising gross profit (Read more...)