AvePoint to go public via SPAC valued at $2B


This post is by Ron Miller from Fundings & Exits – TechCrunch

AvePoint, a company that gives enterprises using Microsoft Office 365, SharePoint and Teams a control layer on top of these tools, announced today that it would be going public via a SPAC merger with Apex Technology Acquisition Corporation in a deal that values AvePoint at around $2 billion.

The acquisition brings together some powerful technology executives with Apex run by former Oracle CFO Jeff Epstein and former Goldman Sachs head of technology investment banking Brad Koenig, who will now be working closely with AvePoint’s CEO Tianyi Jiang. Apex filed for a $305 million SPAC in September 2019.

Under the terms of the transaction, Apex’s balance of $352 million plus a $140 million additional private investment will be handed over to AvePoint. Once transaction fees and other considerations are paid for, AvePoint is expected to have $252 million on its balance sheet. Existing AvePoint shareholders will own approximately 72% of the combined entity, with the balance held by the Apex SPAC and the private investment owners.

Jiang sees this is a way to keep growing the company. “Going public now gives us the ability to meet this demand and scale up faster across product innovation, channel marketing, international markets and customer success initiatives,” he said in a statement.

AvePoint was founded in 2001 as a company to help ease the complexity of SharePoint installations, which at the time were all on-premise. Today, it has adapted to the shift to the cloud as a SaaS tool and primarily acts as a policy layer enabling companies to make sure employees are using these tools in a compliant way.

The company raised $200 million in January this year led by TPG Sixth Street Partners, with additional participation from prior investor Goldman Sachs, meaning that Koenig was probably familiar with the company based on his previous role.

The company has raised a total of $294 million in capital before today’s announcement. It expects to generate almost $150 million in revenue by the end of this year with ARR growing at over 30%. It’s worth noting that the company’s ARR and revenue has been growing steadily since Q12019. The company is projecting significant growth for the next two years with revenue estimates of $257 million and ARR of $220 million by the end of 2022.

Graph of revenue and projected revenue

Image Credits: AvePoint

The deal is expected to close in the first quarter of next year. Upon close the company will continue to be known as AvePoint and be publicly traded on NASDAQ under the new ticker symbol AVPT.

Join us for a live Q&A with Bessemer’s Byron Deeter next Tuesday at 3 p.m ET, noon PT


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

The Extra Crunch Live series rolls along with a big new installment next week as Jordan Crook and Alex Wilhelm will welcome Bessemer Venture PartnersByron Deeter to the conversation.

Deeter is an obvious addition to the collection of investors, founders and tech luminaries that TechCrunch has interviewed so far in the Live series — for a taste, here’s a look at our discussion with Unusual Ventures’ John Vrionis and Sarah Leary, and our chat with Plaid co-founder Zach Perret.

Why talk to a Bessemer partner in the current moment? The firm is well-known for its investments into SaaS and cloud companies, a key startup cohort that has performed well. Recent days have shaken that narrative as Q4 races to the halfway mark, with public investors seeming to rotate into other equities, punishing software firms that had been the market’s favored bet for most of the year.

We’ll dig into what’s changing on the private side of that coin, looking to understand today’s software venture capital dynamics, and what Deeter sees happening in 2021.

But there’s more to Bessemer’s active portfolio than SaaS. The venture group has also dropped dollars into Discord, which is seeing both revenue and usage explode, and Betterment, which plays in the active fintech savings and investing space. There’s lots to get into.

If you are an Extra Crunch Live veteran — you rock star, you! — or a brand-new participant — make sure your Extra Crunch membership is live! — bring a question or two as we’ll try to work in a few from the audience as we go.

Chat with you next Tuesday afternoon! (Oh, and you can now pre-submit questions down below, which is a great improvement over the old system which only allowed for live submissions!)

Details

Why your LTV might be higher (or lower) than you think


This post is by Christoph Janz from Point Nine Land - Medium

If you’re an early-stage SaaS startup, still in the process of getting to Product/Market Fit, or doing your first experiments to attract and convert leads, you shouldn’t worry too much about customer lifetime value (LTV or CLTV) and related metrics. Sooner or later, you have to develop a good understanding of your LTV, though, since your LTV determines how much you can spend on acquiring a customer. In this post, I’ll look at a few different ways to estimate LTV and will try to explain why your LTV might be higher (or lower) than you think.

The simple LTV formula

The simplest formula to calculate LTV in a subscription business is (Customer Lifetime x Gross Profit), where customer lifetime is (1 / Customer Churn Rate) and gross profit is (Average Revenue per Account (ARPA) x Gross Margin). So you get this:

The math behind the customer lifetime formula is explained here. If your customer churn rate is, say, 2% per month, your ARPA is $100 per month, and your gross margin is 80%, you get to a customer lifetime of 50 months and an LTV of $4000.

If you want to get a bit more advanced, you can replace customer churn rate with revenue churn rate, so the formula becomes (Gross Profit / Revenue Churn Rate). This way the formula factors in account expansions and contractions (e.g. due to upgrades and downgrades), which gives you a better approximation of LTV. In this formula, gross profit should be based on the ARPA of your new customers (AKA “Average Sales Price” or ASP), since account expansions are already factored in in your revenue churn rate.

These formulas are a good start, at least if you keep in mind a few basics:

  1. I’ve seen many LTV calculations that were based on revenue instead of gross profit. That makes no sense. Use gross profit.
  2. If most of your customers are on a monthly plan and some are on an annual plan (typical for SMB SaaS), don’t mix them together when you determine your churn rate. This is particularly important if you’re early and/or growing fast. In this case, the number of annual plan customers you’re adding is much larger than the number of annual plan customers coming up for renewal, so your monthly churn rate across the entire customer base is deflated by all those customers that cannot cancel ⁽¹⁾. So if you have a mix of monthly and annual plans, calculate the LTV for each of these two segments separately.
  3. If you have a very wide ACV range — let’s say some customers pay you around $3000 per month and others pay you around $100 a month — it doesn’t make much sense to calculate the average LTV across the entire customer base. Instead, try to estimate your LTV for each of your customer segments.

Negative churn leads to a (luxury) problem

The simple LTV formulas have serious limitations, though. One of them relates to negative churn. If your revenue churn rate is negative, first and foremost, congrats! Second, ping me if you’re pre-Series A. Third, you will have noticed that the simple (Gross Profit / Revenue Churn Rate) formula breaks down for negative revenue churn values.

The underlying issue is that with perpetual negative revenue churn, the revenue stream of a customer cohort would keep getting bigger and bigger forever, which is obviously not realistic. In his excellent article “What’s your TRUE customer lifetime value”, David Skok explains how the formula needs to be extended for negative churn values. I highly recommend reading the full article, but the TL;DR is that if you have a negative revenue churn rate of, say, 12%, you should look at it as the result of two variables:

  • Customer churn of, say, 10% annually
  • Growth of your remaining customers’ spend by, say, 22% of the original contract amount every year

The “trick” is to (a) assume a positive customer churn rate (which makes sense, because customer churn can’t be below zero and is almost always above zero) and (b) assume that remaining customers will increase their spending by a certain % of the original contract value. This way, revenue lost from churned customers will eventually offset account expansions from remaining customers. That solves the problem of the simple formula, where negative revenue churn meant infinite, exponential revenue growth.

David also suggests that you should apply a discount rate to future revenues, which makes sense, arguably even in the no-interest world we’re living in, since future revenues are associated with uncertainty.

Smiling cohort charts?

Another scenario in which the classical formulas can be inadequate is if churn isn’t spread linearly over the customer lifetime. In other (simpler) words, let‘s say that within the first lifetime month of a customer cohort, you lose 5% of MRR to churn; in month 2 another 5%; in month 3 another 3%; and from month 4 onwards, your churn rate drops to 1.5% per month. A high churn rate in the first months of a customer cohort can be the result of factors like poor onboarding, signing up of non-ICP customers, or customers who view the first months as an extended (paid) trial. This is not an unusual pattern in SMB SaaS.

In consumer subscription businesses, the effect tends to be even more pronounced. As Mr. Consumer Sub Nico Wittenborn pointed out here, consumer subscription companies typically lose 50–60% of their subscribers in the first year and another 10–15% in the second year. What can make these companies great businesses nonetheless is if most of the 30–35% of subscribers who “survive” the first two years remain customers for a very long time. If some of these loyal users upgrade to a more expensive plan over time (or you’re good at re-activating/winning-back customers that churned), you’ll get one of those nice smiling MRR cohort graphs.

If you look at the monthly churn rate of a business like this and use it to calculate LTV, the result can be way too low or too high depending on the size of the business, the speed at which it’s growing, and the resulting mix of older and younger cohorts. How can you estimate LTV in this case?

One quite simple option is to restrict your definition of „customer“ to include only those customers who survived the initial drop-off and calculate LTV using the post-drop-off churn rate. As a consequence, you will have fewer customers according to the new, tighter definition, but those customers have a higher LTV. Since you care much more about those customers than about the ones that leave within a few months, looking at it this way can make a lot of sense. A corollary of a tightened customer definition is that your CACs will be higher because you’ll divide your sales and marketing spend by a smaller denominator, but again, it may well be a better reflection of the reality of your business.⁽²⁾

This solution works really well if you have a steep initial drop-off during the first few months, followed by a relatively constant churn rate over the rest of the customer lifetime. If your churn rate decreases more gradually, it doesn’t work well, since it would be hard to decide where to draw the line for your restricted customer definition.

The ultimate way to estimate LTV 🙂

What you can do in this case is to take the revenue retention data of your existing cohorts, extrapolate each cohort’s future revenue development, and calculate LTV based on the NPV of the projected revenue streams:⁽³⁾

In fact, this is my favorite way of approaching LTV in almost all cases.

Here’s a Google Sheet with some sample data and a cohort-based LTV projection. I’ve recorded a Loom to explain in some more detail how the calculations work:

If you’d like to use the template, create a copy or download the sheet and replace the sample revenue retention data (first tab, rows 82–99) with your own data. If you’re a ChartMogul customer, all you have to do is go to Reports > Cohorts > Net MRR retention, select “MRR” from the “Show” dropdown, export the numbers to a CSV file, and import them into the template.

A mouse hunter, a rabbit hunter, and an elephant hunter

Let’s look at three fictional companies and the LTV estimates produced by the different approaches:

Fit.ly

Fit.ly (data) is a mobile fitness app that charges end consumers $10 per month, making the company a mice hunter.⁽⁴⁾ Fit.ly loses lots of customers in the first lifetime months, but its churn rate stabilizes after around nine months. What’s more, over time more and more of the remaining customers upgrade to a more expensive premium plan. The result is what I’ve mentioned above, a smiling cohort MRR chart:

What you can see in Fit.ly’s KPI sheet is that if you had calculated the company’s LTV in September 2019 using the simple formula, you would have gotten $41. Nine months later, in June 2020, you would have gotten $56. Not because anything fundamentally improved in terms of retention or ARPA — it did not –, but just because of the different mix of older and newer cohorts. The cohort-based LTV forecast, on the other hand, gives you an estimate of $217, which I think is much closer to the truth. Remarkably, if you had looked at the cohort-based LTV forecast in September 2019, the model would have calculated an LTV of about $137, again much closer to the truth than the $41 produced by the simple formula.

Cario

Cario (data) is a SaaS solution for car repair shops. The company is an example of a rabbit hunter. Customers pay around $100 per month, customer churn is at 3% per month, and there’s some expansion revenue when customers subscribe for extra features.

In the case of Cario, there’s not a big difference between the simple (LTV = Gross Profit / Customer Churn Rate) formula and the cohort-based LTV forecasts. The reason is that at Cario churn happens almost linearly over the customer lifetime, and that’s exactly the scenario in which the simple formula works well. Note that the formula based on revenue churn rate produces a number that’s too high, though.⁽⁵⁾

Acmentir

Acmentir (data) is a business intelligence solution for enterprises (AKA elephants) with an initial ACV of $72,000. All of Acmentir’s customers are on annual plans, so there’s no churn within the first 12 months. After the initial contract period of one year, 90% of Acmentir’s customers renew. Acmentir’s customers increase their spend over time, in particular when contracts are renewed.

Note: The chart on the left is not the best way to visualize customer churn for annual plans. If you’re looking at customers on annual plans, I’d recommend showing churn on an annual basis as well.

Acmentir’s case shows one of the limitations of the simple revenue churn rate based formula that I’ve mentioned at the beginning of this post: Since Acmentir’s revenue churn rate is negative, the formula produces a negative value LTV, which obviously doesn’t make any sense. Using the cohort-based approach, and assuming a 101.5% m/m revenue retention rate from month 18 onwards, you get an approximation of $1.26 million. Note that in contrast to Fit.ly and Cario, it’s hard to estimate Acmentir’s LTV within the first twelve months because you don’t have much data on your renewal rate and contract expansions until a few cohorts have come up for renewal.

All right, this has been quite a lot to process, so let me try to summarize the key takeaways:

  1. Don’t use revenue instead of gross profit to calculate LTV, and don’t mix monthly and annual churn rates (AKA avoid the LTV rookie mistakes 😜).
  2. If your churn doesn’t happen linearly over the customer lifetime, the simple customer churn rate based LTV formula doesn’t work well.
  3. If you have negative revenue churn, the simple revenue churn based LTV formula doesn’t work.
  4. If your churn is heavily skewed towards the first few lifetime months, consider removing customers that canceled within the first few months from your customer definition.
  5. The best way to approximate LTV is to take a close look at your cohorts. In the beginning, this might feel like an overkill, but cohort data can give you lots of insights, so you’ll need that data anyway.
  6. Don’t forget that all LTV calculations, no matter what formula you use, are always just approximations. You won’t know the precise LTV of a customer cohort until the last customer of that cohort has left. 🙂

Any feedback, let me know!

(1) For customers on an annual plan, you calculate the annual churn rate by taking the number of customers that didn’t renew in any given month and dividing it by the number of customers that were up for renewal in that month. If you want to make the annual churn rate of your annual plan customers comparable with the monthly churn rate of your monthly plan customers, you can convert a monthly churn rate to an annual churn rate using this formula: Annual Churn Rate % = 1-((1 -Monthly Churn Rate %)¹²). If you want to predict the churn rate of annual plan cohorts before they’ve come up for renewal, see you can identify at-risk customers by looking at their usage activity.

(2) What about the gross profit generated by the (non)-customers who fell out of your customer definition? I like to think of these gross profits as a positive side effect of your sales and marketing spend and would therefore recommend that you consider them as a contribution to (i.e. a reduction of) your CACs.

(3) NPV = Net Present Value. If you’re not familiar with this, here’s a primer on DCF (discounted cash flow) calculations.

(4) If you’re wondering what kind of mice I’m talking about, have a look at this post.

(5) If you’re curious, the reason is that the revenue churn rate based formula implies a revenue churn rate that is constant over the customer lifetime. That is not the case for Cario: While the company’s customer churn happens linearly over the customer lifetime, its revenue churn increases slightly over time.

Thank you for reading a draft of this post and for providing valuable feedback, Nick Franklin, Nicolas Wittenborn, and Louis Coppey!

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Why your LTV might be higher (or lower) than you think was originally published in Point Nine Land on Medium, where people are continuing the conversation by highlighting and responding to this story.

Software companies are reporting a pretty good third quarter


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

What a difference a week makes.

This time last week, in the wake of earnings from tech’s five largest American companies and early results from other software companies, it appeared that tech shares were in danger of losing their mojo.


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


But then, this week’s rally launched, and more earnings results came in. Generally speaking, the Q3 numbers from SaaS and cloud companies have been medium-good, or at least good enough to protect historically stretched valuations when comparing present-day revenue multiples to historical norms.

This is great news for yet-private startups that have had to deal with a recession, an uneven and at-times uncertain funding market, an election cycle and other unknowns this year. Wrapping 2020 with a market rally and strong earnings from public comps should give private software companies a halo heading into the new year, assisting them with both fundraising and valuation defense.

Of course, there’s still a lot more data to come in, markets are fickle and many SaaS companies will report next month, having a fiscal calendar offset by a month from how you and I track the year. But after spending time on the phone this week with JFrog’s CEO, BigCommerce’s CEO and Ping Identity’s CFO, I think things are turning out just fine.

Let’s get into what we’ve learned.

Growth and expectations

Kicking off, Redpoint’s Jamin Ball, a venture capitalist who unconsciously moonlights as the research desk for the The Exchange during earnings season, has a roundup of earnings results from this week’s set of SaaS and cloud stocks that reported. As you will recall, last week we were slightly unimpressed by its cohort of results.

Here’s this week’s tally:

As we can see, there was a single miss amongst the group in Q3. Unsurprisingly, that company, SurveyMonkey, was also one of three SaaS companies to project Q4 revenue under street expectations. My read of that chart is seeing a little less than 80% of the group that did project Q4 guidance that bests expectations is bullish, as were the Q3 results, which included a good number of companies that topped targets by at least 10%.

Inside of the data are two narratives that I want to explore. The first is about COVID-related friction, and the second is about COVID-related acceleration. Every company in the world is experiencing at least some of the former. For example, even companies that are seeing a boom in demand for their products during the pandemic must still deal with a sales market in which they cannot operate as they would like to.

For software companies, reportedly in the midst of a hastening digital transformation, the question becomes whether or not the COVID’s minuses are outweighing its pluses. We’ll explore the matter through the lens of three companies that The Exchange spoke with this week after they reported their Q3 results.

Ping Identity

Of our three companies this week, Ping Identity had the hardest go of it; its stock fell sharply after it dropped its Q3 numbers, despite beating earnings expectations for the period.

The company’s revenue fell 3%, while its annual recurring revenue (ARR) rose by 17%. Why did its stock fall if it came in ahead of expectations? You could read its Q4 guidance as slightly soft. In the above chart it’s marked as a slight beat, but its low-end came in under analyst expectations, creating the possibility of a projected miss.

Investors, betting on Ping’s move to SaaS being accretive both now and in the long-term, were not stoked by its Q4 forecast.

How Yonas Beshawred Built StackShare into a Critical Tool for Developers


This post is by Jenna Birch from 500 Insights

When Stackshare founder Yonas Beshawred first graduated from college, he joined one of the world’s largest consulting firms, Accenture, and quickly discovered the surprising way Fortune 500 companies were making tech decisions at-scale. They’d enlist a research firm called Gartner, Inc., which issued high-level PDF reports covering all the potential technologies you could choose from […]

The post How Yonas Beshawred Built StackShare into a Critical Tool for Developers appeared first on 500 Insights.

Is the Great 2020 Tech Rally slowing?


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

Yesterday’s earnings deluge made plain that tech shares are not rocketing higher as 2020 comes to a close. Indeed, in pre-market trading this morning, Microsoft, Apple, Facebook and Amazon are all down.

Alphabet is the only member of the Big Five that is worth more today than yesterday. Strong advertising and cloud results helped the search giant post a return-to-form quarter. But in most other reports there were signs of weakness or underperformance compared to expectations that could undermine the relentlessly bullish attitude tech shares have enjoyed for several months.


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


The tailwinds that lifted much of tech this year remain. Every CEO I speak to still thinks that the COVID-19 bump to digital services demand has room to run, and that the digital transformation’s acceleration that has been a regular point of optimism for VCs, founders and public company leaders, will continue.

But that doesn’t mean all tech companies will benefit or post outsize results. Those facts don’t imply that pandemic-induced friction won’t add up.

It’s not only the biggest companies that are treading water. We’re seeing valuations pause in tech’s hottest category — SaaS and cloud — despite continued growth in its constituent companies. The combined sentiment-and-share change could dampen enthusiasm for startup shares, perhaps undercutting some of the hype and FOMO that we keep hearing is driving private valuations higher.

Are we seeing a change in tech’s temperature while the weather changes? Let’s take a look.

Good news, bad news

Starting with the biggest tech companies, Alphabet’s results were pretty good. The company’s YouTube and cloud segments outperformed expectations, helping the company best expectations.

From there, things get choppier. Apple beat expectations, but its shares fell after investors were less than impressed with its aggregate results. Microsoft posted good calendar Q3 earnings, including strong Azure performance, but its guidance left investors underwhelmed and its shares also fell. Facebook beat expectations in the quarter, but rising costs seemed to dampen investor sentiment. It lost a little ground after earnings. Amazon’s Q3 was hot, but its Q4 should reduce operating income due to COVID-19 costs. It also lost ground after reporting.

From that malaise we turn to the SaaS and cloud world. Redpoint’s Jamin Ball is doing his usual roundups, one of which we’re borrowing this morning. Here’s his digest of SaaS and cloud earnings thus far:

Takeaways? Every SaaS and cloud company crushed Q3, but Q4 is looking a bit more dicey. Beats look slim, some companies are declining to project and aside from an outlier or two, the numbers look slimmer overall.

Lightyear scores $3.7M seed to digitize networking infrastructure procurement


This post is by Ron Miller from Fundings & Exits – TechCrunch

Lightyear, a New York City startup that wants to make it easier for large companies to procure networking infrastructure like internet and SD-WAN, announced a $3.7 million seed round today. While it was at it, the company announced that it was emerging from stealth and offering its solution in public beta.

Amplo led the round with help from Susa Ventures, Ludlow Ventures, Mark Cuban, David Adelman and Operator Partners.

Company CEO and co-founder Dennis Thankachan says that while so much technology buying has moved online, networking technology procurement still involves phone calls for price quotes that could sometimes take weeks to get. Thankachan says that when he was working at a hedge fund specializing in telecommunications he witnessed this first hand and saw an opportunity for a startup to fill the void.

“Our objective is to make the process of buying telecom infrastructure, kind of like buying socks on Amazon, providing a real consumer-like experience to the enterprise and empowering buyers with data because information asymmetry and a lack of transparent data on what things should cost, where providers are available, and even what’s existing already in your network is really at the core of the problem for why this is frustrating for enterprise buyers,” Thankachan explained.

The company offers the ability to simply select a service and find providers in your area with costs and contract terms if it’s a simple purchase, but he recognizes that not all enterprise purchases will be that simple and the startup is working to digitize the corporate buying process into the Lightyear platform.

To provide the data that he spoke of, the company has already formed relationships with over 400 networking providers worldwide. The pricing model is in flux, but could involve a monthly subscription or a percentage of the sale. That is something they are working out, but they are using the latter during Beta testing to keep the product free for now.

The company already has 10 employees and flush with the new investment, it plans to double that in the next year. Thankachan says as he builds the company, particularly as a person of color himself, he takes diversity and inclusion extremely seriously and sees it as part of the company’s core values.

“Trying to enable people from non-traditional backgrounds to succeed will be really important to us, and I think providing economic opportunity to people that traditionally would not have been afforded several aspects of economic opportunity is the biggest ways to fix the opportunity gap in this country,” he said.

The company, which launched a year ago has basically grown up during the pandemic. That means he has yet to meet any of his customers or investors in person, but he says he has learned to adapt to that approach. While he is based in NYC, his investors are are in the Bay Area and so that remote approach will remain in place for the time being.

As he makes his way from seed to a Series A, he says that it’s up to him to stay focused and execute with the goal of showing product-market fit across a variety of company types. He believes if the startup can do this, it will have the data to take to investors when it’s time to take the next step.

Here’s how fast a few dozen startups grew in Q3 2020


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

Earlier this week I asked startups to share their Q3 growth metrics and whether they were performing ahead or behind of their yearly goals.

Lots of companies responded. More than I could have anticipated, frankly. Instead of merely giving me a few data points to learn from, The Exchange wound up collecting sheafs of interesting data from upstart companies with big Q3 performance.


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


Naturally, the startups that reached out were the companies doing the best. I did not receive a single reply that described no growth, though a handful of respondents noted that they were behind in their plans.

Regardless, the data set that came together felt worthy of sharing for its specificity and breadth — and so other startup founders can learn from how some of their peer group are performing. (Kidding.)

Let’s get into the data, which has been segmented into buckets covering fintech, software and SaaS, startups focused on developers or security and a final group that includes D2C and fertility startups, among others.

Q3 performance

Obviously, some of the following startups could land in several different groups. Don’t worry about it! The categories are relaxed. We’re here to have fun, not split hairs!

Fintech

  • Numerated: According to Numerated CEO Dan O’Malley, his startup that helps companies more quickly access banking products had a big Q3. “Revenue for the first three quarters of 2020 is 11X our origination 2020 plan, and 18X versus the same period in 2019,” he said in an email. What’s driving growth? Bank digitization, O’Malley says, which has “been forced to happen rapidly and dramatically” in 2020.
  • BlueVineBlueVine does banking services for SMBs; think things like checking accounts, loans and payments. The company is having a big year, sharing with TechCrunch via email that it has expanded its customer base “by 660% from Q1 2020 to” this week. That’s not a revenue metric, and it’s not Q3-specific, but as both Numerated and BlueVine cited the PPP program as a growth driver, it felt worthy of inclusion.
  • Harvest Platform: A consumer-focused fintech, Harvest helps folks recover fees, track their net worth and bank. In an email, Harvest said it “grew well over 1000%+” in the third quarter and is “ahead of its 2020 plan” thanks to more folks signing up for its service and what a representative described as “economic tailwinds.” The savings and investing boom continues, it appears.

Software/SaaS

  • Uniphore: Uniphore provides AI-based conversational software products to other companies used for chatting to customers and security purposes. According to Uniphore CEO Umesh Sachdev, the company grew “320% [year-over-year] in our Q2 FY21 (July-sept 2020),” or a period that matches the calendar Q3 2020. Per the executive, that result was “on par with [its] plan.” Given that growth rate, is Uniphore a seed-stage upstart? Er, no, it raised a $51 million Series C in 2019. That makes its growth metrics rather impressive as its implied revenue base from which it grew so quickly this year is larger than we’d expect from younger companies.
  • Text Request: An SMS service for SMBs, Text Request grew loads in Q3, telling TechCrunch that it “billed 6x more than we did in 2019’s Q3,” far ahead of its target for doubling billings. A company director said that while “customer acquisition was roughly on par with expectations,” the value of those customers greatly expanded. I dug into the numbers and was told that the 6x figure is for total dollars billed in Q3 2020 inclusive of recurring and non-recurring incomes. For just the company’s recurring software product, growth was a healthy 56% in Q3.
  • Notarize: Digital notarization startup Notarize — Boston-based, which most recently raised a $35 million Series C — is way ahead of where it expected to be, with a VP at the company telling TechCrunch that during “the first week of lockdowns, Notarize’s sales team got 3,000+ inquiries,” which it managed to turn into revenues. The same person added that the startup is “probably 5x ahead of [its] original 2020 plan,” with the substance measured being annual recurring revenue, or ARR. We’d love some hard numbers as well, but that growth pace is spicy. (Notarize also announced it grew 400% from March to July, earlier this year.)
  • BurnRate.io: Acceleprise-backed Burnrate.io hasn’t raised a lot of money, but that hasn’t stopped it from growing quickly. According to co-founder and CEO Robert McLaws, BurnRate “started selling in Q4 of last year” so it did not have a pure Q3 2019 versus Q3 2020 metric to share. But the company managed to grow 3.3x from Q4 2019 to Q3 2020 per the executive, which is still great. BurnRate provides software that helps startups plan and forecast, with the company telling TechCrunch with yearly planning season coming up, it expects sales to keep growing.
  • Gravy AnalyticsLocation data as a service! That’s what Gravy Analytics appears to do, and apparently it’s been a good run thus far in 2020. The company told TechCrunch that it has seen sales rise 80% year-to-date over 2019. This is a bit outside our Q3 scope as it’s more 2020 data, but we can be generous and still include it.
  • ChartHopTechCrunch covered ChartHop earlier this year when it raised $5 million in a round led by Andreessen Horowitz. A number of other investors took part, including Cowboy Ventures and Flybridge Capital. Per our coverage, ChartHop is a “new type of HR software that brings all the different people data together in one place.” The model is working well, with the startup reporting that since its February seed round — that $5 million event — it has grown 10x. The company recently raised a Series A. Per a rep via email, ChartHop is “on-target” for its pre-pandemic business plan, but “far ahead” of what it expected at the start of the pandemic.
  • Credo: Credo is a marketplace for digital marketing talent. It’s actually a company I’ve known for a long-time, thanks to founder John Doherty. According to Doherty, Credo has “grown revenue 50% since June, while only minimally increasing burn.” Very good.
  • Canva: Breaking my own rules about only including financial data, I’m including Canva because it sent over strong product data that implies strong revenue growth. Per the company, Canva’s online design service has seen “increased growth over both Q2 and Q3, with an increase of 10 million users in Q3 alone (up from 30 million users in June).” Thirty-three percent user growth, from 30 to 40 million, is impressive. And, the company added that it saw more team-based usage since the start of the pandemic, which we presume implies the buying of more expensive, group subscriptions. Next time real revenue, please, but this was still interesting.

Developer/Security

Here’s how fast a few dozen startups grew in Q3 2020


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

Earlier this week I asked startups to share their Q3 growth metrics and whether they were performing ahead of behind of their yearly goals.

Lots of companies responded. More than I could have anticipated, frankly. Instead of merely giving me a few data points to learn from, The Exchange wound up collecting sheafs of interesting data from upstart companies with big Q3 performance.


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


Naturally, the startups that reached out were the companies doing the best. I did not receive a single reply that described no growth, though a handful of respondents noted that they were behind in their plans.

Regardless, the dataset that came together felt worthy of sharing for its specificity and breadth. And so other startup founders can learn from how some of their peer group are performing. (Kidding.)

Let’s get into the data, which has been segmented into buckets covering fintech, software and SaaS, startups focused on developers or security and a final group that includes D2C and fertility startups, among others.

Q3 performance

Obviously, some of the following startups could land in several different groups. Don’t worry about it! The categories are relaxed. We’re here to have fun, not split hairs!

Fintech

  • Numerated: According to Numerated CEO Dan O’Malley, his startup that helps companies more quickly access banking products had a big Q3. “Revenue for the first three quarters of 2020 is 11X our origination 2020 plan, and 18X versus the same period in 2019,” he said in an email. What’s driving growth? Bank digitization, O’Malley says, which has “been forced to happen rapidly and dramatically” in 2020.
  • BlueVineBlueVine does banking services for SMBs; think things like checking accounts, loans and payments. The company is having a big year, sharing with TechCrunch via email that has expanded its customer base “by 660% from Q1 2020 to” this week. That’s not a revenue metric, and it’s not Q3 specific, but as both Numerated and BlueVine cited the PPP program as a growth driver, it felt worthy of inclusion.
  • Harvest Platform: A consumer-focused fintech, Harvest helps folks recover fees, track their net worth and bank. In an email, Harvest said it “grew well over 1000%+” in the third quarter and is “ahead of its 2020 plan” thanks to more folks signing up for its service and what a representative described as “economic tailwinds.” The savings and investing boom continues, it appears.

Software/SaaS

  • Uniphore: Uniphore provides AI-based conversational software products to other companies used for chatting to customers and security purposes. According to Uniphore CEO Umesh Sachdev, the company grew “320% [year-over-year] in our Q2 FY21 (July-sept 2020),” or a period that matches the calendar Q3 2020. Per the executive, that result was “on par with [its] plan.” Given that growth rate, is Uniphore a seed-stage upstart? Er, no, it raised a $51 million Series C in 2019. That makes its growth metrics rather impressive as its implied revenue base from which it grew so quickly this year is larger than we’d expect from younger companies.
  • Text Request: A SMS service for SMBs, Text Request grew loads in Q3, telling TechCrunch that it “billed 6x more than we did in 2019’s Q3,” far ahead of its target for doubling billings. A company director said that while “customer acquisition was roughly on par with expectations,” the value of those customers greatly expanded. I dug into the numbers and was told that the 6x figure is for total dollars billed in Q3 2020 inclusive of recurring and non-recurring incomes. For just the company’s recurring software product, growth was a healthy 56% in Q3.
  • Notarize: Digital notarization startup Notarize — Boston-based, most recently raised a $35 million Series C — is way ahead of where it expected to be, with a VP at the company telling TechCrunch that during “the first week of lockdowns, Notarize’s sales team got 3,000+ inquiries,” which it managed to turn into revenues. The same person added that the startup is “probably 5x ahead of [its] original 2020 plan,” with the substance measured being annual recurring revenue, or ARR. We’d love some hard numbers as well, but that growth pace is spicy. (Notarize also announced it grew 400% from March to July, earlier this year.)
  • BurnRate.io: Acceleprise-backed Burnrate.io hasn’t raised a lot of money, but that hasn’t stopped it from growing quickly. According to co-founder and CEO Robert McLaws, BurnRate “started selling in Q4 of last year” so it did not have a pure Q3 2019 v. Q3 2020 metric to share. But the company managed to grow 3.3x from Q4 2019 to Q3 2020 per the executive, which is still great. BurnRate provides software that helps startups plan and forecast, with the company telling TechCrunch with yearly planning season coming up, it expects sales to keep growing.
  • Gravy AnalyticsLocation data as a service! That’s what Gravy Analytics appears to do and apparently it’s been a good run thus far in 2020. The company told TechCrunch that it has seen sales rise 80% year-to-date over 2019. This is a bit outside our Q3 scope as it’s more 2020 data, but we can be generous and still include it.
  • ChartHopTechCrunch covered ChartHop earlier this year when it raised $5 million in a round led by Andreessen Horowitz. A number of other investors took part, including Cowboy Ventures and Flybridge Capital. Per our coverage, ChartHop is a “new type of HR software that brings all the different people data together in one place.” The model is working well, with the startup reporting that since its February seed round — that $5 million event — it has grown 10x. The company recently raised a Series A. Per a rep via email, ChartHop is “on-target” for its pre-pandemic business plan, but “far ahead” of what it expected at the start of the pandemic.
  • Credo: Credo is a marketplace for digital marketing talent. It’s actually a company I’ve known for a long-time, thanks to founder John Doherty. According to Doherty, Credo has “grown revenue 50% since June, while only minimally increasing burn.” Very good.
  • Canva: Breaking my own rules about only including financial data, I’m including Canva because it sent over strong product data that implies strong revenue growth. Per the company, Canva’s online design service has seen “increased growth over both Q2 and Q3, with an increase of 10 million users in Q3 alone (up from 30 million users in June).” 33% user growth from 30 to 40 million is impressive. And, the company added that it saw more team-based usage since the start of the pandemic, which we presume implies the buying of more expensive, group subscriptions. Next time real revenue, please, but this was still interesting.

Developer/Security

Here’s how fast a few dozen startups grew in Q3 2020


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

Earlier this week I asked startups to share their Q3 growth metrics and whether they were performing ahead or behind of their yearly goals.

Lots of companies responded. More than I could have anticipated, frankly. Instead of merely giving me a few data points to learn from, The Exchange wound up collecting sheafs of interesting data from upstart companies with big Q3 performance.


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


Naturally, the startups that reached out were the companies doing the best. I did not receive a single reply that described no growth, though a handful of respondents noted that they were behind in their plans.

Regardless, the data set that came together felt worthy of sharing for its specificity and breadth — and so other startup founders can learn from how some of their peer group are performing. (Kidding.)

Let’s get into the data, which has been segmented into buckets covering fintech, software and SaaS, startups focused on developers or security and a final group that includes D2C and fertility startups, among others.

Q3 performance

Obviously, some of the following startups could land in several different groups. Don’t worry about it! The categories are relaxed. We’re here to have fun, not split hairs!

Fintech

  • Numerated: According to Numerated CEO Dan O’Malley, his startup that helps companies more quickly access banking products had a big Q3. “Revenue for the first three quarters of 2020 is 11X our origination 2020 plan, and 18X versus the same period in 2019,” he said in an email. What’s driving growth? Bank digitization, O’Malley says, which has “been forced to happen rapidly and dramatically” in 2020.
  • BlueVineBlueVine does banking services for SMBs; think things like checking accounts, loans and payments. The company is having a big year, sharing with TechCrunch via email that it has expanded its customer base “by 660% from Q1 2020 to” this week. That’s not a revenue metric, and it’s not Q3-specific, but as both Numerated and BlueVine cited the PPP program as a growth driver, it felt worthy of inclusion.
  • Harvest Platform: A consumer-focused fintech, Harvest helps folks recover fees, track their net worth and bank. In an email, Harvest said it “grew well over 1000%+” in the third quarter and is “ahead of its 2020 plan” thanks to more folks signing up for its service and what a representative described as “economic tailwinds.” The savings and investing boom continues, it appears.

Software/SaaS

  • Uniphore: Uniphore provides AI-based conversational software products to other companies used for chatting to customers and security purposes. According to Uniphore CEO Umesh Sachdev, the company grew “320% [year-over-year] in our Q2 FY21 (July-sept 2020),” or a period that matches the calendar Q3 2020. Per the executive, that result was “on par with [its] plan.” Given that growth rate, is Uniphore a seed-stage upstart? Er, no, it raised a $51 million Series C in 2019. That makes its growth metrics rather impressive as its implied revenue base from which it grew so quickly this year is larger than we’d expect from younger companies.
  • Text Request: An SMS service for SMBs, Text Request grew loads in Q3, telling TechCrunch that it “billed 6x more than we did in 2019’s Q3,” far ahead of its target for doubling billings. A company director said that while “customer acquisition was roughly on par with expectations,” the value of those customers greatly expanded. I dug into the numbers and was told that the 6x figure is for total dollars billed in Q3 2020 inclusive of recurring and non-recurring incomes. For just the company’s recurring software product, growth was a healthy 56% in Q3.
  • Notarize: Digital notarization startup Notarize — Boston-based, which most recently raised a $35 million Series C — is way ahead of where it expected to be, with a VP at the company telling TechCrunch that during “the first week of lockdowns, Notarize’s sales team got 3,000+ inquiries,” which it managed to turn into revenues. The same person added that the startup is “probably 5x ahead of [its] original 2020 plan,” with the substance measured being annual recurring revenue, or ARR. We’d love some hard numbers as well, but that growth pace is spicy. (Notarize also announced it grew 400% from March to July, earlier this year.)
  • BurnRate.io: Acceleprise-backed Burnrate.io hasn’t raised a lot of money, but that hasn’t stopped it from growing quickly. According to co-founder and CEO Robert McLaws, BurnRate “started selling in Q4 of last year” so it did not have a pure Q3 2019 versus Q3 2020 metric to share. But the company managed to grow 3.3x from Q4 2019 to Q3 2020 per the executive, which is still great. BurnRate provides software that helps startups plan and forecast, with the company telling TechCrunch with yearly planning season coming up, it expects sales to keep growing.
  • Gravy AnalyticsLocation data as a service! That’s what Gravy Analytics appears to do, and apparently it’s been a good run thus far in 2020. The company told TechCrunch that it has seen sales rise 80% year-to-date over 2019. This is a bit outside our Q3 scope as it’s more 2020 data, but we can be generous and still include it.
  • ChartHopTechCrunch covered ChartHop earlier this year when it raised $5 million in a round led by Andreessen Horowitz. A number of other investors took part, including Cowboy Ventures and Flybridge Capital. Per our coverage, ChartHop is a “new type of HR software that brings all the different people data together in one place.” The model is working well, with the startup reporting that since its February seed round — that $5 million event — it has grown 10x. The company recently raised a Series A. Per a rep via email, ChartHop is “on-target” for its pre-pandemic business plan, but “far ahead” of what it expected at the start of the pandemic.
  • Credo: Credo is a marketplace for digital marketing talent. It’s actually a company I’ve known for a long-time, thanks to founder John Doherty. According to Doherty, Credo has “grown revenue 50% since June, while only minimally increasing burn.” Very good.
  • Canva: Breaking my own rules about only including financial data, I’m including Canva because it sent over strong product data that implies strong revenue growth. Per the company, Canva’s online design service has seen “increased growth over both Q2 and Q3, with an increase of 10 million users in Q3 alone (up from 30 million users in June).” Thirty-three percent user growth, from 30 to 40 million, is impressive. And, the company added that it saw more team-based usage since the start of the pandemic, which we presume implies the buying of more expensive, group subscriptions. Next time real revenue, please, but this was still interesting.

Developer/Security

This former Tesla CIO just raised $150 million more to pull car dealers into the 21st century


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

“I have to choose my words carefully,” says Joe Castelino of Stevens Creek Volkswagen in San Jose, Ca., when asked about the software on which most car dealerships rely for inventory information, to manage marketing, to handle customer relationships and to otherwise help sell cars.

Castelino, the dealership’s service director, laughs as he says this. But the joke has apparently been on car dealers, most of whom have largely relied on a few frustratingly antiquated vendors for their dealer management systems over the years — along with many more sophisticated point solutions.

It’s the precise opportunity that former Tesla CIO, Jay Vijayan, concluded he was well-positioned to address while still in the employ of the electric vehicle giant.

As Vijayan tells it, he knew nothing about cars until joining Tesla in 2011, following a dozen years of working in product development at Oracle, then VMWare. Yet he learned plenty over the subsequent four years. Specifically, he says he helped to build with Elon Musk a central analysis system inside Tesla, a kind of brain that could see all of the company’s internal systems, from what was happening in the supply chain to its factory systems to its retail platform.

Tesla had to build it itself, says Vijayan; after evaluating the existing software of third company providers, the team “realized that none of them had anything close to what we needed to provide a frictionless modern consumer experience.”

It was around then that a lightbulb turned on. If Tesla could transform the experience for its own customers, maybe Vijayan could transform the buying and selling experience for the much bigger, broader automotive industry. Enter Tekion, a now four-year-old, San Carlos, Ca., company that now employs 470 people and has come far enough along that just attracted $150 million in fresh funding led by the private equity investor Advent International.

With the Series C round — which also included checks from Index Ventures, Airbus Ventures, FM Capital and Exor, the holding company of Fiat-Chrysler and Ferrari — the company has now raised $185 million altogether. It’s also valued at north of $1 billion. (The automakers General Motors, BMW, and the Nissan-Renault-Mitsubishi Alliance are also investors.)

Eric Wei, a managing director at Advent, says that over the last decade, his team had been eager to seize on what’s approaching a $10 billion market annually. Instead, they found themselves tracking incumbents Reynolds & Reynolds, CDKGlobal and Dealertrack, which is owned by Cox Automotive, and waiting for a better player to emerge.

Then Wei was connected to Tekion through Jon McNeill, a former Tesla president and an advisory partner to Advent.

Says Wei of seeing its tech compared with its more established rivals: “It was like comparing a flip phone to an iPhone.”

Perhaps unsurprisingly, McNeill, who worked at Tesla with Vijayan, also sings the company’s praises, noting that Tekion even bought a dealership in Gilroy — the “garlic capital” of California — to use as a kind of lab while it was building its technology from scratch.

Such praise is nice, but more importantly, Tekion is attracting the attention of dealers. Though citing competitive reasons, Vijayan declined to share how many have bought its cloud software —  which connects dealers with both manufacturers and car buyers and is powered by machine learning algorithms — he says it’s already being used across 28 states.

One of these dealerships is the national chain Serra Automotive, whose founder, Joseph Serra, is now an investor in Tekion.

Another is that Volkswagen dealership in San Jose, where Castelino — who doesn’t have a financial interest in Tekion — speaks enthusiastically about the time and expenses his team is saving because of Tekion’s platform.

For example, he says a customers need only log-in now to flag a particular issue. After that, with the help of an RFID tag, Stevens Creek knows exactly when that customer pulls into the dealership and what kind of help they need, enabling people to greet him or her on arrival. Tekion can also make recommendations based on a car’s history. It might, for instance, suggest to a customer a brake fluid flush “without an advisor having to look through a customer’s history,” he says.

As important, he says, the dealership has been able to cut ties with a lot of other software vendors, while also making more productive use of its time. Says Castelino, “As soon as a [repair order] is live, it’s in a dispatcher’s hand and a technician can grab the car.”

It’s like that with every step, he insists. “You’re saving 15 minutes again and again, and suddenly, you have three hours where your intake can be higher.”

Databricks crossed $350M run rate in Q3, up from $200M one year ago


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

The Exchange regularly covers companies as they approach and crest the $100 million revenue mark. Our goal in tracking startups growing at scale is to scout future IPO candidates and better understand the late-stage financing market.

Today we’re digging into a company that is a little bit bigger than that. Namely Databricks, a data analytics company that was most recently valued at around $6.2 billion in its October, 2019 Series F when it raised $400 million.


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


The former startup reached a run rate of around $350 million at the end of Q3 2020, up from $200 million in revenue in Q3 2019, putting it on a rapid growth pace for a former startup of its size.

To better dig into the company’s performance, I got on the phone with its CEO, Ali Ghodsi, hoping to better understand how Databricks has managed to grow as much as it has in recent years. Ghodsi took over as CEO in 2016 after serving as the company’s VP of engineering. He’s also a co-founder.

Databricks is an obvious IPO candidate, but it’s also a company with broad private-market options, given its revenue expansion and attractive economics. Today, let’s talk about Databricks’ growth history, how it changed its sales process, and what’s ahead for the unicorn more than six times over.

What does Databricks do?

What does Databricks actually do? Normally I’d be content to wave my hands at data analytics and call it a day. Chatting with Ghodsi, however, clarified the matter, so let me help.

Let’s say that a company has a lot of data on its machinery and wants to know when different pieces are going to fail. Or, perhaps a company wants find patterns in some economic data. How do they find that information?

Ghodsi reckons you need three things: First, data engineering, or getting customer data “massaged into the right forms so that you can actually start using it.” Second, data science, which Ghodsi describes as “the machine learning algorithms, the predictive algorithms that you need to have.” And third, on top, companies “more and more” also want data warehousing and some “basic analytics,” he added.

Is the Twilio-Segment deal expensive?


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

The Twilio-Segment acquisition was the biggest story of the weekend, and in our current IPO lull, it is the most-discussed deal of the moment.

So it hasn’t been a surprise to see folks working to figure out if the $3.2 billion price tag Twilio expects to pay for Segment is cheap, reasonable or expensive.


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


We had the same question.

The all-stock transaction is another big deal from Twilio, which previously scooped up SendGrid. Some expected Twilio to be picked up by a larger company after it went public, I’ve been told. Instead, Twilio has become the acquiring entity, boosting its size and adding to its total addressable market (TAM) through dealmaking.

But a smart company can still overpay while executing a generally intelligent strategy. So, does the Segment deal look cheap, or expensive? While we don’t have all the data we’d like, a few useful VCs dropped hints about the size of Segment in my DMs.

Our hunt begins with Twilio’s own release on the matter. From there, we’ll bring in some historical data from the deal that Twilio compares the Segment transaction to, compare the resulting multiples to today’s market norms and close with a discussion of the acquiring company’s rising share price. The synthesis of all the elements will give us an answer. And we’ll have some fun at the same time.

The deal

A quick refresher on the deal: Twilio will spend $3.2 billion in shares of itself to purchase Segment. Per the company, the transaction is worth about 6% of the combined entity.

2020 Accel Euroscape: Decacorn Unleashed


This post is by Philippe Botteri from Cracking The Code

– This article was co-authored with my colleagues Varun Purandare and Candice du Fretay and published initially on Tech.eu. The 2020 Accel Euroscape was unveiled earlier today at SaaStockEMEA. You’ll also find the video recording of the presentation at the end of this article and the slides are available here. We’d like to thank KeyBank and G2 for providing some of the data used in the report –


**********************

 

It’s an amazing time to be a cloud entrepreneur in Europe. It reminds me of living in Silicon Valley 10 years ago when so many foundational SaaS companies were started. The European cloud ecosystem is growing much faster than anyone could have anticipated: last year, we predicted that it would take another three years for Europe to generate its first decacorn. UiPath broke that milestone this summer, in just nine months, establishing Europe as a major global center for software innovation.

 

This year, in addition to unveiling the Euroscape, our list of top 100 Cloud companies started in Europe and Israel; and our Champions League, the high-growth unicorns from the region; we’ll also unveil the Accel Euroscape Public Index, the index of the European and Israeli-born public cloud companies, and its performance.

 

Before jumping into the list, let’s have a quick look at what’s been a very special year in many ways for the cloud ecosystem globally and in Europe. 

 

A New Software Era: The Rise of the Giants


Software has been eating the world for 30 years now, but looking at the acceleration we have seen in the past decade, software has entered a new era: “the rise of the giants”. There are now eight software companies north of a $100 billion market cap, representing $2.7 trillion of market value. This is a big jump vs. 2010 when we only had three companies (Microsoft, Oracle and IBM) valued just over $550 billion. What’s even more impressive is the new generation, with 75 public cloud companies valued above $1 billion vs eight companies in 2010 and 26 of these companies are already above $10 billion.

 

 

If we zoom out and look at the overall cloud market, we can see momentum building. The Cloud market tripled in the past five years to reach $100 billion today and if its growth continues at a similar pace, we estimate that Cloud will overtake on-premise software by 2025, when the entire software market should be worth around $1 trillion.

 

Europe has also joined the race with its first Cloud giants. This summer saw two record transactions within a month, as UiPath became the first European Cloud decacorn in July and Visma, a Norwegian company, became the world’s largest ever software buyout with a $12B+ valuation. Big milestones for the old continent!

 

Cloud Entrepreneurs: Embracing the “Silicon Valley State of Mind”


Accel has been a big believer in cloud since the early days of this secular shift. We’ve invested $5B+ in more than 250 companies and feel privileged to have partnered with category-defining companies such as Atlassian, Crowdstrike, Docusign, Dropbox, Slack and UiPath. And Europe has shown even greater acceleration. We’ve increased our investments five-fold in the last five years, backing close to 50 cloud companies of which seven have already become unicorns.

 

 

Looking at the map above, it’s so inspiring to see Cloud entrepreneurs across the globe. The one thing that unites them all is their ambition to make a global impact and change the world – the “Silicon Valley state of mind”.

 

2020 Cloud Market: Is The Sky the Limit?


The momentum of Cloud companies is also seen in the public markets. It seems unstoppable with around $1 trillion of value created in the past 12 months and the Cloud Index massively outperforming the Nasdaq. This unprecedented growth is driven by the acceleration of digital transformation and an increase in valuation multiples which have reached historic heights. The average revenue multiple is now 17x+, close to 10 times higher than during the 2008 crisis! Is the sky the limit for Cloud public stocks? 

 

On the IPO front, the one word that comes to mind is “supersize”. While the number of IPOs in 2020 is close to 2019, the average valuation has doubled  compared to last year, driven in particular by the massive IPO of Snowflake, which reached a $70 billion market cap on its first trading day. And public companies have also taken advantage of the favourable market environment to raise 2x more capital than they did last year through secondary offerings and convertible bonds.

 

And what about Europe?

 

When I started in venture, I was fortunate to witness the birth of the first generation of cloud companies in the US. This led me to launch the SaaS 13 Index in February 2008 while I was at Bessemer. It consisted  of 13 companies and in 12 years has evolved into a massive Index representing $1.7 trillion in market cap. Today, we’ve reached the point where Europe deserves its own Index, and we’re very happy to announce the creation of the Accel Euroscape Public Index, the Index of public cloud companies born in Europe and Israel. It’s composed of 10 flagship companies with  a combined value close to $100 billion: Elastic, Dynatrace, JFrog, Mimecast, Talend, TeamViewer, Unity, Varonis, Wix and Zendesk. Since 2013, when Wix, the first of these companies went public, the Euroscape Public Index has outpaced the Nasdaq by 2.5x, achieving more than 500% growth in seven years.

 


 

We expect the growth of the Index to only accelerate as Europe generates more unicorns. In 2020, Europe and Israel minted seven new unicorns, taking the total number to 25. 


This growth has been fuelled by much larger private investment rounds. In 2016-17, the five largest rounds had an average size of $100 million. In 2019-20, this number has grown to $330 million. Europe is catching up with the US, which is very exciting!

 


However, it’s not only about a few large rounds. The entire amount invested in private cloud companies in Europe and Israel in 2020 has grown close to 30% so far to $9-9.5 billion, which is nearly half the c. $20 billion invested in US-born cloud companies. 

 

2020 Accel 2020 Euroscape and Champions League 


Before unveiling the Euroscape and Champions League, we wanted to highlight a couple of facts showing how far the EU cloud ecosystem has come. First, from a funding perspective, the 2020 Euroscape winners, including the Champions League, have raised a whopping $14 billion. That’s close to 6x more than in 2016. Secondly, these companies have created more than 70,000 jobs, and the unicorns emerging represent around $60 billion of market cap, which is half of the value of the Euroscape Public Index!

To develop the list, we surveyed more than 1,500 European and Israeli private SaaS companies across 20 countries and a number of categories. We’ve made a couple of changes to the list this year as well, adding payments as a new category and only including unicorns in the Champions League.

 

2020 Accel Champions League

 

 

This year, the list is comprised of 19 category-defining companies from 12 cities and nine countries. Their average employee growth in the past 12 months was north of 40% and they’ve raised $6.7 billion of combined funding. An impressive list! It’s incredible to see what Europe has been able to generate.

 

And now, for the Accel Euroscape 2020! We must say that it was incredibly hard to put the list together this year as we had so many great applicants. As you can see, both the data and security categories are booming, and we welcome the addition of payments and banking infrastructure fueled by the expansion of a new generation of financial services.

 

2020 Accel Euroscape


 

What’s very exciting for us is that these 100 companies come from 34 cities and 21 countries, showing that success can come from anywhere in Europe.

 

With $7.4 billion in funding raised by the winners, it’s interesting to look at where the money has been directed. We can see ecommerce/marketing has been boosted by COVID and security is in second place, with cyber criminality not slowing down. The data analytics category is showing early promise with many companies in the space.

 

 

You’ll find more analyses on the 2020 winners in the full presentation

 

A strange year: It was the best of times, it was the worst of times…

While many lights are green, it’s hard to ignore the fact that COVID-19 has changed the lives of billions of people. In 2000 and 2008, the economic crises had a dramatic impact on the tech ecosystem, but 2020 seems to be very different. Let’s take a look at how cloud companies have been impacted by the pandemic.

 

The first impact of COVID has been to radically transform the work from home paradigm and massively accelerate digital transformation – by at least two years. Ten public cloud companies have hugely benefited from this acceleration, Zoom being the first. Together, these ten companies have seen an increase of their market value by close to $0.5 trillion, representing half of the increase in value of the global cloud Index in just nine months.

 

 

That said, this impact has been fairly concentrated. Overall, cloud spending growth in Q2 was in line or even slightly below the historical average.

 

On the private company side, the impact of COVID falls into three buckets: 

  • Roughly 20% of the companies have seen strong acceleration, particularly companies in collaboration, ecommerce, automation and security 

  • Most companies saw a moderate to limited impact

  • A few companies selling into distressed sectors like travel or hospitality have been severely impacted

 

If we look at the survey performed by KeyBank, it’s very much in line with what we have observed in our portfolio. Overall, COVID prompted people to revise their growth forecast slightly downward and be more conservative on their cash burn, but so far, the impact hasn’t been dramatic. Interestingly, companies have adapted very similarly in Europe and the US, except on the cash front, where EU companies have been more conservative.



This crisis is very different from what we’ve seen in the past, as there are as many opportunities for cloud companies as there are risks. Navigating this crisis is not about cutting back: it’s about taking advantage of the opportunities while not leaning too far over your ski tips to avoid a catastrophic fall.

I’m sure everyone remembers how hectic March and April were this year. It was frantic but also inspiring as many cloud companies looked beyond their internal challenges and did everything they could to help. For example, I can’t forget the call I had with Stan, Founder and CEO of Doctolib, when he announced that he was shifting the company’s focus to telemedicine to help the French and German healthcare systems during the lockdown. In two weeks, Doctolib made the product self-serve and extensively deployed the solution, which you can hear more about in the short video below.


UiPath was another inspiring company. The founders refocused their foundation to help fight COVID in Romania, achieving a massive impact. I will let Alexandra Dines, Chair of the foundation, tell you more about their story. 

 

What’s Next?

 

To conclude, let’s have a look at what’s ahead for the cloud ecosystem in Europe. We see five defining trends:

 

Work coming home: No surprise here. The world of work has changed dramatically, with entire companies moving fully remote as countries were shutting down. With work moving into the home, the need to stay connected dramatically accelerated the need for collaboration tools like Miro, Slack and Zoom. For example, the number of daily meeting participants grew from 10 million in December 2019 to 300 million in April 2020. In addition, entirely new software categories are being created in a record time, like virtual events, a market created by Hopin.


Doctors now online: COVID put the healthcare system under immense pressure in many countries. When physically meeting a medical practitioner became difficult, telemedicine services exploded. In France, Doctolib saw the number of video conferences on their platform grow from 100,000 in the 13 months before lockdown to 4.6 million today. As doctors are embracing new technologies, we think this is only the beginning of the digital transformation of medical practices and hospitals, and we expect a lot more innovation in this vertical in the coming years.


Hyperautomation – Bots and citizen developers transforming the Enterprise: Most people in the world use software, but fewer than one percent can code. It is as if 99% of the world could read but only 1% could write. The emergence of low code/no code platforms is changing this paradigm, enabling a growing number of employees to automate their business processes. Combined with the rapid rise of RPA automating the data and intelligence layers, we expect Enterprise to hyper-automate in the coming years, leading to the rise of a new generation of cloud services.


Fintech stack moving to the cloud: In the past, the complexity of monolithic banking and payment infrastructure made it difficult for non-financial institutions to develop new services. Today, modern API-first platforms are making it possible for many cloud companies to integrate payments and banking services. We expect this trend to disrupt banks and insurance and to give rise to a new generation of Fintech infrastructure companies.


Cybercriminals feasting on Covid: Hackers took advantage of the disruption generated by COVID and made the need for security even more acute. As their environments get more distributed and the notion of perimeter disappears, we are seeing enterprises moving to zero trust architectures, placing more focus on secure code development and securing their data and communication with privacy and encryption tools. With more funding going into the category, we expect to see the momentum continue.

 

We predict these trends may well produce the next generation of the Champions League. 


Video of the presentation at SaaStockEMEA



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The European ecosystem has grown so much over the past five years, and it’s been a privilege to be part of it. On behalf of the Accel team, we’d like to congratulate all the champions and top 100 winners and to thank all the cloud founders who have worked hard and had the vision and ambition to make this happen.

 

As Thomas Edison said, ‘Genius is 1% inspiration and 99% perspiration’. We’ve been very impressed by both the creativity and resilience of the European cloud founders and look forward to meeting a lot more of you in the future!

 

Feel free to reach out, we’d be happy to hear your story.


Six favorite Techstars startups ahead of its next rush of demo days


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

With TechCrunch Disrupt happening last month, I fell behind on watching accelerator demo days. It’s time to correct that oversight.

In August and September, the Techstars network of startup accelerators held demo days for various classes of startups, grouped by either geographic location or focus. Kansas City, for example, or space.


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


With October upon us, there’s another crop of Techstars demo days around the corner. To prevent falling further behind, let’s take a look at a few startups from Techstars’ September cohorts (and two from August) this morning to get primed for what the accelerator collective and venture fund will get up to next.

To find six favorites to share today, I dug through startups from Techstars’ Kansas City accelerator (full class here), its SportsTech Melbourne accelerator (full class here), its Toronto cohort (full class here), and its Tel Aviv location (full class here). You can find TechCrunch coverage of Techstars’ two space accelerators here, and their full classes here and here.

Before we jump in, this month Techstars has cohorts graduating from another five accelerators, including groups from LA, NYC, Atlanta, and more. So, there will be no shortage of startups to look at in short order. With that, let’s get into some favorites from the the past groups.

Favorites and standouts

We’ll start with the Kansas City accelerator. Kansas City, where my parents are from, incidentally, is a locale best known for its culinary magic and musical history, not to mention a famous sports team or two. I was pleasantly surprised to find out that Techstars also had a foothold in the city.

Snyk: How Freemium Can Help Your Start-up Grow from Series A to $2.6B in 30 Months


This post is by Philippe Botteri from Cracking The Code

Snyk was founded with the mission to help developers make their code secure, providing a platform to automatically assess and remediate open source vulnerabilities.  The company’s success has been largely driven by its developer-led freemium model, going from Series A funding to a valuation of $2.6B in just 30 months.

Accel had the chance to lead Snyk’s Series A 30 months ago and then the Series B a year later, before the company reached unicorn status with its $150m Series C in late 2019. It recently announced the closing of a $200m round at $2.6B.

Earlier this year, I was on a panel with Guy Podjarny, Snyk’s founder, at SaaStock Remote to discuss how the team’s community-driven freemium approach led to the company’s stellar growth. Here’s a short summary of the discussion:


Guy, you launched Snyk in 2015, and a large part of your success was driven by your freemium model. With COVID, we’re getting into a world with tighter budgets and likely longer sales cycles. How can a product-led sales motion help in the current environment, and how important is a freemium model to drive product-led growth?

Guy: To give you more context, at Snyk, we have this interesting combination of user and buyer. The two aren’t the same. The most important user of our product is the developer. However, the entity in the organization with the job of keeping the organization secure and the budget to accommodate for that is the security team. As we wanted a direct path to the user to ensure we would be providing the best user experience, we decided to go for a freemium model to lower the bar for developers to get started. Today, we have around 1.5 million developers using our product.

Developers have no barrier to getting started with Snyk. By the time it gets to a purchase, there’s already some kind of conviction. Once we had the user (developer) and the buyer (security team) on board, the freemium model really accelerated and made it quite resilient to this crisis. It took us longer to get into revenue, but the freemium was a real accelerator for us.


What made you consider a freemium model rather than offering free trials? To some extent, we could argue that if you had set up a free trial, you could have gotten into revenue much sooner than you actually did. How did you think about this trade-off in the early days of Snyk?

Guy: This is a very important point, and we did spend a lot of time thinking about it at the beginning. Freemium implies you’re supporting certain use cases in the free tier in perpetuity. People who fit that use case don’t need to pay you. With a free trial, you’re giving somebody the ability to use the product, but you’re not really satisfying their needs.

It boils down to the use-case decision. The value of a free trial is that it’s a quick and easy way to see your product and get a feel for it. It removes friction. The value of freemium is that you want that use case to generate a community. So you have to ask yourself if your free use case targets an audience large enough to create such a community.

We have two kinds of users at Snyk: the open source developers, who are never going to pay but will help build the community. They advertise to the world that this problem matters and that we’re a potential solution to it and they help us make the product better. Then, they tell their friends.  Then,we have the developers in commercial entities, who see how our product can help make their organization more secure and will expand the service to their team and eventually become paying users.

The mistake  I often see is a freemium tier based on technical capabilities, which ends up not supporting any specific use case. This makes it hard to build a community of users and advocates. So, if you want to launch a freemium product, you have to ask yourself if there’s a large enough audience who can use the product for free for a long time.

We took advantage of the difference between our buyers and users to build our model and it’s worked out well so far.


To double click on your last point, in the freemium model, you have to accept that some users are just going to be a cost center for the company and never generate any revenue. The tricky question is how do you define the threshold of value you provide? I see a lot of early-stage companies struggling with this. Either they offer too much and never convert, or they don’t satisfy any free use case and can’t build a community. How did you define this threshold for Snyk?

Guy: You see this challenge all the timeOne of our key findings was that we wanted to appeal to developers, so we modelled our product based on the developer’s playbook. We built a company and product that looked like the ones other developers look up to and have earned their trust, like Atlassian, Twilio or GitHub.

The idea was that you get a free tier, then at some point, you start paying for a certain volume of usage. We tried that at first. It failed spectacularly. What we learned is that you need to come back to the core use case. In the world of security, there’s a certain threshold you have to reach to get the development team to use the product. When you want them to buy, they need a certain breadth. We needed to broaden the offering before we could sell it by adding the main languages and platforms support. We ended up collapsing our first paid tier into free and focused on the larger tier for monetization but at a much higher price by offering a much deeper offering.


In this journey, was there a point where you thought that freemium might not be the right way to go?

Guy: We set out to do something that really hadn’t happened yet. Developers usually don’t embrace security solutions. So, we focused all of our efforts on this issue. A year in, we had great usage and no revenue. We were very fortunate to have very supportive investors. We had tens of thousands of users, but investors had to take a leap of faith before we monetized. Once we hit that curve, it helped us fuel that growth.

In the developer world, it’s “Go Big or Go Home.” You have to think about the use case, nurture the right community, provide the right functionality, and delineate from the premium elements. If you get it right, you can really go big.


If you put yourself in the shoes of the early-stage founder who is seeing their pipeline slowing down or their conversion rate going down because of the crisis we’re facing, how should they think about it? How do you know if your product or use case can be a good fit to support a free product?

Guy: You’ve got to focus on the audience that’s likely to convert. If the audience isn’t big enough to support conversions, you’re probably better off offering a free trial. Freemium needs a substantial audience.

If your challenge at the moment is lead generation, I’d suggest building side tools that are in your space and that would draw in the right type of people. You’re asking the same type of questions about the use case but you don’t have to bet the entire business model on it. Providing free tools allows you to provide value and strike up a conversation.


A lot of Snyk’s success was based on the developer community that you have built. What’s your top tip for building a high-value developer community?

Guy: The developer community has a very low tolerance for hype of vaporware, so you have to be authentic. When you work with developers, you have to provide true value.

Weaving yourself into the daily lives of your developers is very important. But you have to understand how you fit into this world. If you’re coming into their ecosystem and you’re running it down, you’re going to have a very short shelf life.

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I hope this will help you better design your own model for success. If you want to go deeper in some of the areas highlighted in the post, you can see the full fireside chat below


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Dustin Moskovitz discusses Asana’s first trading day


This post is by Danny Crichton from Fundings & Exits – TechCrunch

It’s a big day for Asana, the work management tool that debuted on the NYSE this morning in a direct listing. Founded back in 2009 by Dustin Moskovitz and Justin Rosenstein, the company has assiduously grown over the years, taking in about $213 million in venture capital the past decade and reaching almost $100 million in subscription revenue for the first six months of 2020.

TechCrunch sat down this afternoon with CEO Moskovitz and Asana’s head of product Alex Hood at the tail end of the company’s first trading day to talk about its early success, its future and how it feels to go public in a direct listing.

This Q&A has been edited and condensed for clarity.

TechCrunch: Tell me how you’re feeling today — it’s been 10, 11 years since the company’s founding, what are your emotions on this first day?

Dustin Moskovitz: It’s been an exciting morning, but ultimately it’s just one step in a much longer journey towards fulfilling our mission and so, you know, we’re definitely pausing to celebrate but also looking ahead to what comes next because there’s going to be a lot more stuff to come after this.

What’s next?

Alex Hood: We really just feel like we’re getting started. The way that a billion and a quarter information workers work together really hasn’t changed all that much in the last 25 years — it’s really kind of based on the Microsoft Office suite form factor. We think that there’s a collaboration piece that really helps teams know who’s doing what by when and reduce the back and forth required to get work done.

Selling a startup can come with an emotional cost


This post is by Ron Miller from Fundings & Exits – TechCrunch

Every founder dreams of building a substantial company. For those who make it through the myriad challenges, it typically results in an exit. If it’s through an acquisition, that can mean cashing in your equity, paying back investors and rewarding long-time employees, but it also usually results in a loss of power and a substantially reduced role.

Some founders hang around for a while before leaving after an agreed-upon time period, while others depart right away because there is simply no role left for them. However it plays out, being acquired can be an emotional shock: The company you spent years building is no longer under your control,

We spoke to a couple of startup founders who went through this experience to learn what the acquisition process was like, and how it feels to give up something after pouring your heart and soul into building it.

Knowing when it’s time to sell

There has to be some impetus to think about selling: Perhaps you’ve reached a point where growth stalls, or where you need to raise a substantial amount of cash to take you to the next level.

For Tracy Young, co-founder and former CEO at PlanGrid, the forcing event was reaching a point where she needed to raise funds to continue.

After growing a company that helped digitize building plans into a $100 million business, Young ended up selling it to Autodesk for $875 million in 2018. It was a substantial exit, but Young said it was more of a practical matter because the path to further growth was going to be an arduous one.

“When we got the offer from Autodesk, literally we would have had to execute flawlessly and the world had to stay good for the next three years for us to have the same outcome,” she said at a panel on exiting at TechCrunch Disrupt last week.

“As CEO, [my] job is to choose the best path forward for all stakeholders of the company — for our investors, for our team members, for our customers — and that was the path we chose.”

For Rami Essaid, who founded bot mitigation platform Distil Networks in 2011, slowing growth encouraged him to consider an exit. The company had reached around $25 million run rate, but a lack of momentum meant that shifting to a broader product portfolio would have been too heavy a lift.

How has Corsair Gaming posted such impressive pre-IPO numbers?


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

After the last few weeks of IPOs, you’d be forgiven if you missed Corsair Gaming’s own public offering.

The company is not our usual fare. Here at TechCrunch, we care a lot of about startups, usually technology startups, which often collect capital from private sources on their way to either the bin, an IPO, or a buyout.

Corsair is some of those things. It is a private company that builds technology products and it has raised some money while private. But from there it’s a slim list. The company was founded in 1994, making it more a mature business than a startup. And it sold a majority of itself to a private equity group in 2017, valued at $525 million at the time.


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


Fair enough. But flipping through the company’s S-1 filings this morning over coffee, I was impressed all the same and want to walk you through a few of the company’s numbers.

If you care about the impending public debuts of Asana (more here) and Palantir (more here) that we expect next week, Corsair will not provide much directional guidance. But its IPO will be a fascinating debut all the same.

Corsair has managed to stay in the gaming hardware world since I was in short pants, and, even better, has managed to turn the streaming boom into material profit. Its S-1 is an interesting document to read. So let’s get into it, because Corsair Gaming is expected to price later today and trade tomorrow morning.

A gaming giant

As with any private-equity-backed IPO, the company’s SEC filings are a mess of predecessor and successor companies, along with long sections that, once you boil them down, ensure that the private equity firm will retain control.

But once you parse the firm’s numbers, here’s the gist from the first six months of 2020:

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.