The Exchange: Remote dealmaking, rapid-fire IPOs, and how much $250M buys you


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

Welcome to The Exchange, an upcoming weekly newsletter featuring TechCrunch and Extra Crunch reporting on startups, money, and markets. You can sign up for it here to receive it regularly when it launches on July 25th. You can email me about it here, or talk to me about it on Twitter. Let’s go!

Ahead of parsing Q2 venture capital data, we got a look this week into the VC world’s take on making deals over Zoom. A few months ago it was an open question whether VCs would simply stop making new investments if they couldn’t chop it up in person with founders. That, it turns out, was mostly wrong.

This week we learned that most VCs are open to making remote deals happen, even if 40% of VCs have actually done so. This raises a worrying question: If only 40% of VCs have actually made a fully remote deal, how many deals happened in Q2?

Judging from my inbox over the past few months, it’s been an active period. But we can’t lean on anecdata for this topic; The Exchange will parse Q2 VC data next week, hopefully, provided that we can scrape together the data points we need to feel confident in our take. More soon.

Private markets

As TechCrunch reported Friday, some startups are delaying raising capital for a few quarters. They can do this by limiting expenses. The question for startups that are doing this is what shape they’ll be in when they do surface to hunt for fresh funds; can they still grow at an attractive pace while trying to extend their runway through burn conservation?

But there’s another option besides waiting to raise a new round, and not raising at all. Startups can raise an extension to their preceding deal! Perhaps I am noticing something that isn’t a trend, or not a trend yet, but there have been a number of startups recently raised extensions lately that caught my eye. For example, this week MariaDB raised a $25 million Series C extension, for example. Also this week Sayari put together $2.5 million in a Series B extension. And CALA put together $3 million in a Seed extension. Finally, across the pond Machine Labs put together one million pounds in another Seed extension this week.

I don’t know yet how to numerically drill into the available venture data to tell if we’re really seeing an extension wave, but do let me know if you have any notes to share. And, to be completely clear, the above rounds could easily be merely random and un-thematic, so please don’t read into them more deeply than that they were announced in the last few days and match something that we’re watching.

Public markets

On the public markets front, the news is all good. Tech stocks are up in general, and software stocks set some new record highs this week. It’s nearly impossible to recall how scary the world was back in March and April in today’s halcyon stock market run, but it was only a few months back that stocks were falling sharply.

The return-to-form has helped a number of companies go public this year like Vroom, Accolade, Agora, and others. This week was another busy period for startups, former startups, and other companies looking to go out.

In quick fashion to save time, this week we got to see GoHealth’s first IPO range, nCino’s second (more on the two companies’ finances here), learned that Palantir is going public (it’s financial history as best we can tell is here), and even got an IPO filing (S-1) from Rackspace, as it looks towards the public markets yet again.


The Exchange explores startups, markets and money. You can read it every morning on Extra Crunch, and now you can receive it in your inbox. Sign up for The Exchange newsletter, which drops every Friday starting July 25.


The IPO waters are so warm that Lemonade is still up more than 100% from its IPO price. So long as growth companies that are miles from making money can command rich valuations, expect companies to keep running through the public market’s door.

There’s fun stuff on the horizon. Coinbase might file later this year, or in early 2021. And the Airbnb IPO is probably coming within four or five quarters. Gear up to read some SEC filings.

Funding rounds worth noting

The coolest funding round of the week was obviously the one that I wrote about, namely the $2.2 million that MonkeyLearn put together from a pair of lead investors. But other companies raised money, and among them the following investments stood out:

  • Sony poured a quarter of a billion dollars into the maker of Fortnite, for a 1.4% stake. This rounds stands out for how small a piece of Epic Games that Sony got its hands on. It feels reminiscent of the recent investment deluge into Jio.
  • TruePill raised $25 million in a Series B. In the modern world it seems batty to me that I have to get off my ass, go to Walgreens or CVS, wait in line, and then ask someone to please sell me Claritin D. What an enormous waste of time. TruePill, which does pharma delivery, can’t get here fast enough. Also, investors in TruePill are probably fully aware that Amazon spent $1 billion on PillPack just a few year ago.
  • From the slightly off-the-wall category, this headline from TechCrunch: UK’s Farewill raises $25M for its new-approach online will writing, funerals and other death services.” Farewill is a startup name that is so bad it probably works; I won’t forget it any time soon, even though I don’t live in the U.K.! And this deal goes to show how big the internet really is. There’s so much demand for digital services that a company with Farewill’s particular focus can put together enough revenue growth to command a $25 million Series B.
  • Finally, TechCrunch’s Ron Miller covered a $50 million investment into OwnBackup. What matters about this deal was how Ron spoke about it: “OwnBackup has made a name for itself primarily as a backup and disaster-recovery system for the Salesforce ecosystem, and today the company announced a $50 million investment.” What to take from that? That Salesforce’s ecosystem is maybe bigger than we thought.

That’s The Exchange for the week. Keep your eye on SaaS valuations, the latest S-1 filings, and the latest fundings. Chat Monday.

Butler Hospitality Secures $15M Series A To Provide Better In-room Hotel Experiences


This post is by Christine Hall from Crunchbase News

Butler Hospitality confirmed Friday that it raised a $15 million Series A round.

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The New York-based company is a “ghost kitchen” operator, which means it takes over a hotel kitchen on one property and uses it to provide meal delivery services to in-house guests there and in nearby hotels, Tim Gjonbalic said in an interview.

The Kraft Group, &vest, Scopus Ventures and Mousse Partners all participated. The new funding brings the 4-year-old company’s total amount raised to $20.2 million, which includes a seed round and bootstrapped funding from himself, Gjonbalic said.

The new investment will be used to increase the company’s hotel partnerships in new markets. Butler Hospitality already operates out of four New York hotel kitchens and plans to expand into Chicago, Miami, Washington, D.C., and San Francisco by the end of the year, Gjonbalic said. In addition, the company doubled its executive team and employs 250 people, all full-time employees—something he said he is excited to be able to do in this environment.

“It’s a tough time for the hospitality industry to recruit people when you don’t know what the market is going to do,” he said.

The timing of this investment is interesting because both the hospitality and hotel industries are not doing well as the COVID-19 pandemic has continued, a McKinsey report revealed Friday. The research firm estimates that it will take until 2023 to see the industry return to pre-COVID-19 levels.

One of the areas Gjonbalic sees as inhibiting the industry is that hotels were not able to figure out what to do. Many experimented with grab-and-go meals or changing its room service, but failed due to long wait times and costly service fees. In contrast, Butler Hospitality is providing a seamless experience, charging orders directly to the person’s hotel bill and delivering the food in under 30 minutes.

“We are coming in and showing what the experience should be,” Gjonbalic said. “You don’t need a cart in the room or a $20 service charge to deliver food. Guests want good packaging, a good menu, price transparency, and to be able to track their order. This should have been happening a long time ago.”

Meanwhile, Butler Hospitality’s revenue has doubled every year, and now that the company has figured out the integration, experience, packaging and menu design, it is ready to scale into new markets, he said.

The company’s next steps will be to deepen its customer experience. That includes tapping into frequent travelers’ food and beverage preferences so when they check into a hotel partner, Butler Hospitality can engage the customer with that knowledge.

“That is where we want to add value,” Gjonbalic said. “Let the hotels provide the room and the bed, and we will provide the food and beverage service from there. We want to control the in-room hospitality.”

Photo of Tim Gjonbalic courtesy of Butler Hospitality
Blogroll illustration: Li-Anne Dias

A recapitalization reckoning


This post is by Natasha Mascarenhas from Fundings & Exits – TechCrunch

If you’re an angel who invested in a startup that was meant to go public in 2014, you might be getting a little bit impatient. High-risk, high-reward investing has lost its shine in this environment: the stock market is a mess these days, and you want your cash back.

Enter recapitalization events, where startups restructure their entire cap table to squeeze out old investors, bring on new ones and shift the way equity and debt is managed. For investors, it’s a killer way to enter a company on friendlier terms than normal (read: desperation), and a nice way to get liquidity on a startup you’re betting on.

For founders, it’s rarely good news, as departing investors is not a metric they’re going to add to the pitch deck. As one investor said on background, the spur of coronavirus-related recapitalization events shows “hella dilution for desperate times.”

That’s what makes Workhuman’s transparency with its recent recapitalization event all the more enticing.

Last year, the human-resources platform brought in $580 million in revenue from customers like LinkedIn, Cisco, J&J and other clients. In April, business grew 40%. Co-founder and CEO Eric Mosley says business has grown five times in size since the company pulled back from its 2014 plans to IPO. Workhuman hasn’t raised a single venture round since 2004 (and doesn’t plan to any time soon).

Being conservative has paid off; although Workhuman has operated for nearly two decades, Mosley says he thinks the company is still at the “tip of the iceberg.” The company recently had a recapitalization event to sell the stakes of its earliest investors, who cut a $200,000 check more than 20 years ago.

Rackspace preps IPO after going private in 2016 for $4.3B


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

After going private in 2016 after accepting a $32 per share, or $4.3 billion, price from Apollo Global Management, Rackspace is looking once again to the public markets. First going public in 2008, Rackspace is taking second aim at a public offering around 12 years after its initial debut.

The company describes its business as a “multicloud technology services” vendor, helping its customers “design, build and operate” cloud environments. That Rackspace is highlighting a services focus is useful context to understand its financial profile, as we’ll see in a moment.

But first, some basics. The company’s S-1 filing denotes a $100 million placeholder figure for how much the company may raise in its public offering. That figure will change, but does tell us that firm is likely to target a share sale that will net it closer to $100 million than $500 million, another popular placeholder figure.

Rackspace will list on the Nasdaq with the ticker symbol “RXT.” Goldman, Citi, J.P. Morgan, RBC Capital Markets and other banks are helping underwrite its (second) debut.

Financial performance

Similar to other companies that went private, only later to debut once again as a public company, Rackspace has oceans of debt.

The company’s balance sheet reported cash and equivalents of $125.2 million as of March 31, 2020. On the other side of the ledger, Rackspace has debts of $3.99 billion, made up of a $2.82 billion term loan facility, and $1.12 billion in senior notes that cost the firm an 8.625% coupon, among other debts. The term loan costs a lower 4% rate, and stems from the initial transaction to take Rackspace private ($2 billion), and another $800 million that was later taken on “in connection with the Datapipe Acquisition.”

The senior notes, originally worth a total of $1,200 million or $1.20 billion, also came from the acquisition of the company during its 2016 transaction; private equity’s ability to buy companies with borrowed money, later taking them public again and using those proceeds to limit the resulting debt profile while maintaining financial control is lucrative, if a bit cheeky.

Rackspace intends to use IPO proceeds to lower its debt-load, including both its term loan and senior notes. Precisely how much Rackspace can put against its debts will depend on its IPO pricing.

Those debts take a company that is comfortably profitable on an operating basis and make it deeply unprofitable on a net basis. Observe:

Image Credits: SECLooking at the far-right column, we can see a company with material revenues, though slim gross margins for a putatively tech company. It generated $21.5 million in Q1 2020 operating profit from its $652.7 million in revenue from the quarter. However, interest expenses of $72 million in the quarter helped lead Rackspace to a deep $48.2 million net loss.

Not all is lost, however, as Rackspace does have positive operating cash flow in the same three-month period. Still, the company’s multi-billion-dollar debt load is still steep, and burdensome.

Returning to our discussion of Rackspace’s business, recall that it said that it sells “multicloud technology services,” which tells us that its gross margins will be service-focused, which is to say that they won’t be software-level. And they are not. In Q1 2020 Rackspace had gross margins of 38.2%, down from 41.3% in the year-ago Q1. That trend is worrisome.

The company’s growth profile is also slightly uneven. From 2017 to 2018, Rackspace saw its revenue expand from $2.14 billion to $2.45 billion, growth of 14.4%. The company shrank slightly in 2019, falling from $2.45 billion in revenue in 2018 to $2.44 billion the next year. Given the economy that year, and the importance of cloud in 2019, the results are a little surprising.

Rackspace did grow in Q1 2020, however. The firm’s $652.7 million in first-quarter top-line easily bested in its Q1 2019 result of $606.9 million. The company grew 7.6% in Q1 2020. That’s not much, especially during a period in which its gross margins eroded, but the return-to-growth is likely welcome all the same.

TechCrunch did not see Q2 2020 results in its S-1 today while reading the document, so we presume that the firm will re-file shortly to include more recent financial results; it would be hard for the company to debut at an attractive price in the COVID-19 era without sharing Q2 figures, we reckon.

How to value Rackspace is a puzzle. The company is tech-ish, which means it will find some interest. But its slow growth rate, heavy debts and lackluster margins make it hard to pin a fair multiple onto. More when we have it.

nCino sharply raises its IPO price range, boosting possible valuation to $2.6B


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

As expected, fintech company nCino has raised its IPO price range. The North Carolina-based banking software firm now expects to sell its shares for between $28 and $29 per share, far more than its initial price range of $22 to $24 per share.

At its $28 to $29 per-share price interval, nCino is worth $2.50 billion to $2.59 billion, sharply more than its preceding $1.96 billion to $2.14 billion range.

The valuation makes more sense for the company, given its growth rate, revenue scale and how the market is currently valuing similar companies. As TechCrunch wrote earlier this week, concerning the SaaS company’s scale and value (emphasis ours):

Annualizing the company’s Q1 (the April 30, 2020 period) revenue results, nCino’s $178.9 million run rate would give it a revenue multiple of 11x to 12x at its expected IPO prices, a somewhat modest result by current standards.

Indeed, as nCino grew about 50% from Q1 2019 to Q1 2020, it feels light. The firm’s GAAP losses are slim compared to revenue as well for a SaaS business, though the company’s operating cash burn did grow from $4.6 million in its fiscal year ending January 31, 2019 to $9 million in its next fiscal year. Its numbers are mostly good, with some less-than-perfect results. Still, given its growth rate, an 11x-12x revenue multiple feels modest; that figure rises, of course, if we use a trailing revenue figure instead of our annualized number.

It would not be a shock, then, if nCino targets a higher price interval for its shares before it formally prices.

With its new IPO price range, nCino’s implied revenue multiple is now 14x to 14.5x, figures that seem far closer to present-day norms.

Now the question for nCino, which is expected to price and trade next week, is whether it can price above its raised range. Given some recent historical precedent, a $1 per-share price beat above its raised interval would not be a shock.

nCino is one of two companies we’re currently tracking on its way to the public markets. The other is GoHealth, which is expected to go public around the same time. Expect next week to be chock-full of IPO news. Heading into earnings season no less!

Sony Invests $250M In ‘Fortnite’ Maker Epic Games


This post is by Sophia Kunthara from Crunchbase News

Sony has invested $250 million for a minority stake in Epic Games, the companies announced this week.

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This isn’t the first time Sony and Epic Games have worked together, but it certainly brings the two even closer together. Venture Beat reported that Sony’s new investment represents a 1.4 percent ownership stake in Epic Games, valuing the video game company at $17.86 billion.

In a statement announcing the news, the companies said the deal would let Sony and Epic Games collaborate more with Sony’s entertainment and tech portfolio, and Epic Games’ social entertainment platform and “digital ecosystem.”

“Through our investment, we will explore opportunities for further collaboration with Epic to delight and bring value to consumers and the industry at large, not only in games, but also across the rapidly evolving digital entertainment landscape,” Sony CEO Kenichiro Yoshida said in a statement.

Epic Games, which is based in Cary, North Carolina, counts firms like KKR, Vulcan Capital and Tencent Holdings as backers, according to Crunchbase. The company is perhaps best known for creating games like “Fortnite” and “Infinity Blade.” It also offers a product called Unreal Engine, a collection of tools for game development.

Epic Games, founded in 1991, has been on somewhat of an acquisition spree the last couple of years. It’s acquired nine companies since 2018, according to Crunchbase, with Cubic Motion as its most recent buy in March 2020.

Illustration: Li-Anne Dias

Silicon Valley is built on immigrant innovation


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

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

We wound up having more to talk about than we had time for but we packed as much as we could into 34 minutes. So, climb aboard with Danny, Natasha, and myself for another episode of Equity.

Before we get into topics, a reminder that if you are signing up for Extra Crunch and want to save some money, the code “equity” is your friend. Alright, let’s get into it:

Whew! Past all that we had some fun, and, hopefully, were of some use. Hugs and chat Monday!

Equity drops every Monday at 7:00 a.m. PT and Friday at 6:00 a.m. PT, so subscribe to us on Apple PodcastsOvercastSpotify and all the casts.

Startups to Watch: Parade, 3DLook, Hygenica, Joe Coffee


This post is by Christine Hall from Crunchbase News

Crunchbase News typically covers larger funding rounds, however we thought these startups were worth highlighting for their interesting approaches despite their smaller raises.

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Parade

For those worried about the fate of their local Victoria’s Secret, meet Parade. The 1-year-old company, started by Cami Tellez and Jack DeFuria, recently raised a $3 million seed round led by Vice Ventures.

The direct-to-consumer company offers four styles of underwear in diverse colors for $9 each. The startup boasts that it made more than $2.5 million in revenue over the past seven months.

Women spend more than $17 billion on underwear a year, with the majority—80 percent—spent in brick-and-mortar stores prior to COVID-19, according to Tellez.

“As an online brand creating a beautiful and sustainable product at a value $9 price point, our rate of growth increased during COVID-19,” Tellez said via email. “With this new capital injection from companies like Vice Ventures, at a crucial time in the market, Parade is focused on continuing to build their favorite full-stack underwear brand and accelerating our growth to take market share in the next 12 months.”

Vice Ventures is known for its seed-stage fund investing in good companies operating in “bad” industries. In February, Vice invested $10 million in Lucy Goods, operating as a nicotine alternative company.

Parade’s underwear packaging.

3DLook

Keeping with our clothing theme, everyone seeks the perfect pair of jeans. Startup 3DLook’s says it can make that possible. It combines computer vision, deep learning and 3D technology to digitize human body data to bring fit and sizing intelligence to the apparel industry.

The San Mateo, California-based company was founded in 2016 and recently closed on a $1 million pre-Series A round led by ICU Ventures. To date, the company said it has raised $4.2 million in several seed rounds.

More than 25 fashion and uniform companies are using 3DLook’s tool in the U.S., and the company said it will deploy in 1,000 stores within the month. The funding will be used to scale its research and development team and support customers that need contactless measurement tools to run their businesses.

3DLook’s body scanning process.

Hygenica

As we all figure out how to live in a world with COVID-19, startups like San Diego-based Hygenica are probably in the right business. The startup, which develops disinfecting technology has raised a $1 million seed round led by Impala Ventures.

The new investment will be used to grow its engineering, sales and marketing teams, as well as invest in new designs for its technology in the dental, medical and automotive industries.

They created a sprayer, the HX Pro, that can atomize a disinfectant to a really itty, bitty size, but uses an Ultra Low Volume airless platform instead of electrostatic and kills up to 99.99 percent of viruses, bacteria and pathogens. Hygenica’s HX Pro Plus Model is expected to come out later this month.

Joe Coffee

Coffee drinkers will like this next one. Seattle-based Joe Coffee brewed up another $1.3 million in seed funding led by Craft Ventures. The 6-year-old company provides mobile ordering and pay networks to independent coffee shops.

Joe Coffee’s mobile ordering app.

The new funding comes just months after securing $500,000 in a corporate round from Gravity Payments, according to Crunchbase data. This brings Joe Coffee’s total funding to date to $3.5 million.

With the new funding, the company said it will further invest in product and sales to enhance the user experience and drive increased revenue.

More than 1,000 shops are using its platform and many of them have seen a 50 percent increase in revenue and are now at or near pre-COVID-19 levels of revenue, according to a written statement.

Photos courtesy of Parade, 3DLook and Joe Coffee
Illustration: Dom Guzman

Creandum backs Amie, a new productivity app from ex-N26 product manager Dennis Müller


This post is by Steve O'Hear from Fundings & Exits – TechCrunch

Amie, a new productivity app from ex-N26 product manager Dennis Müller, has picked up $1.3 million in pre-seed funding to “kickstart” development and hiring.

Backing 23-year-old Müller is Creandum — the European VC best known for being an early investor in Spotify — along with Tiny.VC and a plethora of angels. They include Laura Grimmelmann (Ex-Accel), Nicolas Kopp (CEO, N26 U.S.), Roland Grenke (Dubsmash co-founder) and Zachary Smith (SVP of product at U.S. challenger bank Chime).

Founded early this year and with a planned launch in early 2021, Berlin-based Amie is developing a productivity app that combines a person’s calendar and to-dos in one place. Previously called coco, it promises to work across all devices, with an interface that “works just like you think.”

“Back in the day, you had a calendar on your office wall, and a to-do list on a notepad,” Müller tells me. “You could take your list with you elsewhere, but not your calendar. Those were digitized instead of rethinking the flow. Most productivity apps solve very specific problems, creating a new one, [and] users need too many tools.”

Amie pre-release app screenshot.

Müller says Amie is built on the principle that “to-dos, habits and events all take time, and all belong in the same place.” Many people already schedule to-dos and the startup wants to offer the fastest way to create to-dos, schedule events, check your calendar “and even jump into Zoom calls.”

As a glimpse of what’s to come, Amie promises to let you drag ‘n’ drop to-dos into your day, or turn links and screenshots into to-dos. “With Amie’s Alfred-like app, you can create an event and invite people in a different timezone, all while other apps are still loading,” says the young company.

More broadly, Amie wants to act as a central workspace, letting you also do things like join video calls, take notes and do email, without the need to open extra browser tabs and therefore avoid “context switching.”

“Amie will target professionals who are currently using Google Calendar, due to our integration,” adds Müller. “The waitlist already counts thousands of users, who are mostly professionals working in the tech industry (e.g., designers, developers, bizdevs, etc.”

Rethink Impact Closes Second Fund With $182M


This post is by Christine Hall from Crunchbase News

Venture firm Rethink Impact said Thursday it closed on its $182 million Fund II, which brings its total assets under management to $300 million.

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The 4-year-old firm, based in Washington, D.C., New York and San Francisco, was founded by Jenny Abramson and is dedicated to investing in female tech entrepreneurs who are tackling global challenges. Since then, it has backed more than 25 companies, the firm said in a written statement.

Abramson quoted PitchBook data, which shows a 40 percent year-over-year decrease in the percentage of female-led, VC-funded deals in the first quarter of 2020, calling it “an unfortunate side effect of the COVID-19 pandemic.”

“While admittedly, it’s hard to break into networks that make up the venture landscape during this quarantine environment, the result is that female founders are being left out at a time when their ideas are needed most,” she said in a written statement. “We believe there is tremendous opportunity to use private sector tools to drive positive, inclusive change and now is the time to address these market blind spots and double down, not lean out.”

The firm typically invests in Series A and B rounds. Most recently, Rethink participated in a startup fund raise we reported on Thursday for Icon Savings Plan, which raised a $3.2 million seed round to develop a portable retirement account. In June, we also reported on its participation in a $9.5 million Series A for CareAcademy, which provides ongoing online training programs for senior care professionals.

Rethink raised its first fund, a $110 million Social Impact Fund, in March 2017. FinSMEs reported at the time that more than half of the investment stemmed from UBS clients.

Backers for the new fund are 65 percent female and are based in nearly 40 states, the firm said. In addition to UBS and other financial institutions, the investor base includes Pivotal Ventures, the Ford Foundation, The W.K. Kellogg Foundation and university endowments.

Illustration: Dom Guzman

VCs are cutting checks remotely, but deal volume could be slowing


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

When COVID-19 began to shutter the United States economy, startups jumped into cost-cutting mode as expectations rose that venture capital was about to get a heck of a lot harder to raise. After all, prior downturns in the broader economy, and tech sector in particular, had taken a bite out of the ability for startups to attract new funds.

PitchBook research shows that, in the wake of the 2008 financial crisis, the amount of money venture capitalists invested fell, with early-stage deal and dollar volume enduring the largest cuts. Late-stage valuations during the same period came under steep pressure. The connection between a slipping economy and a rapidly deteriorating venture capital market, therefore, seems strong.


The Exchange explores startups, markets and money. You can read it every morning on Extra Crunch, and now you can receive it in your inbox. Sign up for The Exchange newsletter, which drops every Friday starting July 24.


The historically grounded feeling from startups in Q2, as the stock market sold off and unemployment rose, was one of concern: VCs were about to cut their deal pace, and the number of dollars that they were willing to put into each deal would likely fall as well. That investors would need to shake up their process and do deals remotely was not confidence inspiring.

We don’t have full Q2 VC numbers yet, so it’s too soon to say that Q2 was worse or better than expectations. But what we can say, thanks to a new survey from OMERS Ventures, is that VCs moved with reasonable speed to get over the technology and cultural hurdle of remote deal-making to keep the checks flowing. Indeed, according to OMERS Ventures’ research, 69% of the VCs it surveyed in June were willing to do fully remote deals; for startups worried that the venture class was simply going to pack up its checkbook and take an extended vacation, it’s good news.

But the news isn’t all rosy — most VC firms from the 150 in North America and Europe that the venture group surveyed have yet to actually execute a remote deal. And, there’s some indication that overall deal volume could be slowing, perhaps due to “dwindling supply of companies formally going to market,” according to OMERS Ventures’ Damien Steel, a managing partner.

This morning let’s examine which VCs have been the most active, and the least, to find out which types of firms are still investing, and where investors are seeing more deal flow, and less.

Remote deals, fewer deals

Most VCs have decided that remote deal-making is, at minimum, something that they need to become accustomed to. Only 4% of surveyed VCs said that they would not do remote deals, full-stop. Another 23% said that they were fine with remote deals, albeit with some ability to meet entrepreneurs in person.

VCs are cutting checks remotely, but deal volume could be slowing


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

When COVID-19 began to shutter the United States economy, startups jumped into cost-cutting mode as expectations rose that venture capital was about to get a heck of a lot harder to raise. After all, prior downturns in the broader economy, and tech sector in particular, had taken a bite out of the ability for startups to attract new funds.

PitchBook research shows that, in the wake of the 2008 financial crisis, the amount of money venture capitalists invested fell, with early-stage deal and dollar volume enduring the largest cuts. Late-stage valuations during the same period came under steep pressure. The connection between a slipping economy and a rapidly deteriorating venture capital market, therefore, seems strong.


The Exchange explores startups, markets and money. You can read it every morning on Extra Crunch, and now you can receive it in your inbox. Sign up for The Exchange newsletter, which drops every Friday starting July 24.


The historically grounded feeling from startups in Q2, as the stock market sold off and unemployment rose, was one of concern: VCs were about to cut their deal pace, and the number of dollars that they were willing to put into each deal would likely fall as well. That investors would need to shake up their process and do deals remotely was not confidence inspiring.

We don’t have full Q2 VC numbers yet, so it’s too soon to say that Q2 was worse or better than expectations. But what we can say, thanks to a new survey from OMERS Ventures, is that VCs moved with reasonable speed to get over the technology and cultural hurdle of remote deal-making to keep the checks flowing. Indeed, according to OMERS Ventures’ research, 69% of the VCs it surveyed in June were willing to do fully remote deals; for startups worried that the venture class was simply going to pack up its checkbook and take an extended vacation, it’s good news.

But the news isn’t all rosy — most VC firms from the 150 in North America and Europe that the venture group surveyed have yet to actually execute a remote deal. And, there’s some indication that overall deal volume could be slowing, perhaps due to “dwindling supply of companies formally going to market,” according to OMERS Ventures’ Damien Steel, a managing partner.

This morning let’s examine which VCs have been the most active, and the least, to find out which types of firms are still investing, and where investors are seeing more deal flow, and less.

Remote deals, fewer deals

Most VCs have decided that remote deal-making is, at minimum, something that they need to become accustomed to. Only 4% of surveyed VCs said that they would not do remote deals, full-stop. Another 23% said that they were fine with remote deals, albeit with some ability to meet entrepreneurs in person.

Coinbase reported to consider late 2020, early 2021 public debut


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

Coinbase is the latest mega-startup that may approach the public markets. The digital currency exchange company could follow Palantir, which is also nearing its IPO, after the secretive data-focused unicorn announced that it had filed privately.

Earlier today Reuters reported that Coinbase, a popular American-based cryptocurrency trading platform, could pursue a public debut later this year, or early next year. Plans remain fluid, according to the report, which went on to say that the crypto-focused fintech company “has been in talks to hire investment banks and law firms.”

Coinbase declined to comment, telling TechCrunch in an email that it cannot “comment on rumors or speculation.”

Even more, Reuters reported that Coinbase may pursue a direct listing for its shares, instead of a more traditional initial public offering. A direct listing allows a company to begin to trade publicly without formally pricing its equity through a bloc sale as happens in initial public offerings. Direct listings have become more popular as a concept in recent years as private companies became less dependent on IPOs as a fundraising mechanism, and some of Silicon Valley’s elite became disenchanted with what they consider to be regular underpricing of IPOs, forcing companies going public to leave tens, or hundreds of millions of dollars on the table.

Coinbase is perhaps archetypal for the sort of company that might consider a direct listing. It’s wealthy, having raised north of $500 million during its life as a private company, and highly valued. Coinbase’s most recent private financing of $300 million valued it at $8.0 billion, according to Crunchbase data. A high valuation and the possibility of ample cash reserves are what previous direct listings Slack, and Spotify had as well.

Most companies still tack towards the public markets through IPOs, as we’ve see in recent weeks with the traditional debuts of Accolade, Vroom, and others. Yesterday TechCrunch covered initial price ranges for two more IPOs, GoHealth and nCino, each of which have eschewed the direct listing model in favor of raising funds during their exit from the private markets.

Results

How big Coinbase is today is not clear. The company’s financial history is occluded — common with private companies — and a bit uneven. Media reports have pegged its 2017 revenue at around $1 billion, boosted by that year’s crypto-mania. Precisely how Coinbase performed in 2018 is less clear, though other media reports paint the picture of a smaller company.

Regardless of whether Coinbase direct lists or takes on a traditional IPO, we’ll get to see its S-1 filing. That document will provide good insight into the company’s historical financial performance, allowing us to see how Coinbase fared during various crypto-booms and busts.

With public markets at all-time highs and valuations for tech stocks far above historical norms, it’s not surprising that some highly-valued unicorns are gearing up for a run on the public markets. Let’s see how many pull it off.

MariaDB Raises $25M To Focus On Cloud Database


This post is by Sophia Kunthara from Crunchbase News

Enterprise open source database platform MariaDB has landed $25 million in new funding, bringing its total funding to $125 million.

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The funding, an extension of the company’s Series C round, was led by SmartFin Capital with participation from existing investors and new investor GP Bullhound, according to a statement from MariaDB.

MariaDB plans to use the money to focus on SkySQL, the company’s cloud database, CEO Michael Howard said in an interview with Crunchbase News. SkySQL, which was introduced at the end of March, has already become the fastest growing product MariaDB has ever had. Now, it’s time to put the spotlight on SkySQL.

“We have been taking a sort of back seat to the likes of Amazon and Google and Alibaba,” he said of MariaDB’s cloud offering.

The global nature of SkySQL has made it a success, Howard said, but it also requires a global structure for support. The new funding will help with that, and MariaDB plans on growing the SkySQL group two or three times over the next year to support the product.

The company now has $125 million in total funding. Howard declined to disclose the company’s valuation, but said it was two-times higher than its valuation after its previous round.

MariaDB initially raised $27 million for its Series C, which was led by Alibaba Group, in September 2017. Some of the company’s other backers include Intel Capital, European Investment Bank, ServiceNow and OnCorps, according to Crunchbase.

“I know that SkySQL is going to be the conduit to going IPO,” Howard said. “It’s going to be at least 25 percent of our business the next 16 to 18 months and it has all of the necessary business characteristics to make MariaDB one of the premiere databases and, for that matter, companies in the industry.”

Illustration: Li-Anne Dias

Singaporean startup Karana raises $1.7 million for meat substitutes made from jackfruit


This post is by Catherine Shu from Fundings & Exits – TechCrunch

Singaporeans have a growing appetite for plant-based meat substitutes. In fact, demand for products from companies like Beyond Meat, Impossible Foods and Quorn have grown during the pandemic, partly because consumers are making more health-conscious decisions, according to the Straits Time. Now there is a new entrant to the market. Headquartered in Singapore, Karana announced today it has raised $1.7 million in seed funding and plans to launch its first product, a pork substitute made from jackfruit, this year.

Karana’s seed investors include Henry Soesanto, the CEO of Monde Nissin Group, which acquired Quorn Foods in 2015; agtech investment firms Big Idea Ventures and Germi8; and angel investors Kevin Poon and Gerald Li, both Hong Kong entrepreneurs with experience in the food and beverage industry. Karana said the round also included participation from an undisclosed leading Asia-based FMCG (fast-moving consumer goods) distributor.

Karana’s jackfruit is sourced from Sri Lanka, where jackfruit is already a common meat substitute. What Karana’s processing method does is create a texture that replicates minced and shredded pork more closely, making it easier to use in dishes like dumplings, char siu bao or bahn mi.

Founded in 2018 by Dan Riegler and Blair Crichton, Karana turns organic jackfruit into a pork substitute by using a proprietary mechanical technique that the company says does not use any chemical processing. Its pork substitute will be available in restaurants this year, before arriving in retail stores at the beginning of next year.

Riegler and Crichton told TechCrunch in an email that Karana uses jackfruit because it not only has a “naturally meaty texture,” but is an environmentally-friendly crop. It is usually grown intercropped (or with other produce, in the same field), has a high yield and low water usage. But about 60% of jackfruit harvested currently goes to waste, they added. “There is a lot of room for further commercialization, which means additional income streams for farmers.”

Karana’s founders started with pork because it is the most frequently consumed meat in Asia. Its seed funding will be used on research and development to launch new products and the company currently talking to strategic partners in other Asian markets. Future Karana products will use other crops grown in Asia to create new meat substitutes.

“Karana is a whole-plant meat company, our focus is on leveraging what nature has given us and enhancing these amazing biodiverse ingredients to create delicious products. In the future, we will launch products using other regional ingredients that will enable us to expand beyond pork,” the founders said. “This is a real differentiator from other companies that are by-and-large relying on commodity crops in processed forms.”

Exclusive: $3.2M Seed Supports Icon Savings’ Mission To Modernize Retirement Savings


This post is by Christine Hall from Crunchbase News

Not every business can afford to offer employees a retirement savings plan. Icon Savings Plan, now armed with a $3.2 million seed round, is poised to close that gap.

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The San Francisco-based portable retirement savings plan company aims to simplify retirement benefits for employers by offering a no-cost alternative to 401(k) plans.

The seed round was led by Tom Blaisdell, with participation from Rethink Impact, TASC Ventures, Kelly Innovation Fund, Portland Seed Fund and Alumni Ventures Group.

Laurie Rowley, founder and CEO of Icon, told Crunchbase News that this was the first venture raise for the 2-year-old company, and some of the new investment will be used to hire engineering talent. Icon Savings has 10 employees and wants to bring on five more by the end of the year.

“We are a technology company, so the opportunity to have that funding support is critical,” Rowley said. “We need a huge capital investment to build something in a highly regulated industry. ‘Build fast and break things’ doesn’t work here. To be able to work within the $29 trillion retirement industry, you need a big investment to get opened and running.”

What you should know

In 2019, The Aspen Institute reported that nearly six in 10 Americans did not have a retirement account, while 55 million lacked access to an employer-sponsored retirement savings plan.

“This is a gnarly problem that has existed for a long time,” Rowley said. “Fewer employers are offering them because of the costs associated and the fiduciary risks.”

With Icon Savings, employers can set up a plan for free in minutes, while any employee—full-time, part-time, independent contractors and self-employed—pays a fixed fee of $4 per month. It works like a 401(k) plan with pre-tax payroll contributions, but removes the cost, plan administration, fiduciary responsibility and regulatory burden for employers. When employees leave, they can take their retirement account with them.

In addition, Icon Savings is an adviser, so rather than having to pick your own funds as you would with a traditional 401(k), the company tailors a portfolio to its clients using behavioral finance to understand their psychological and emotional drivers for saving.

Example of Icon Savings Plan’s mobile application.

What investors are saying

Blaisdell said in a written statement that he focuses his investments on entrepreneurs who are using technology to provide financial products and services to underserved populations.

“Having focused on shortfalls in the retirement industry for almost two decades, including co-founding and leading the nonprofit National Association of Retirement Plan Participants, Laurie simply won’t stop in her efforts to provide simple, inexpensive, portable retirement savings options for every employee in the workforce, and at Icon she is building the team to deliver on that promise,” he said.

Meanwhile, Heidi Patel of Rethink Impact said her firm is always looking for tools that support the modern workplace, “… we see a huge opportunity to improve the financial security of an entire generation while growing a significant business,” she said in a written statement.

Next steps for Icon Savings

Rowley said the company has been in beta testing and will do a larger roll out of its platform in the fall. It is focusing on working with channel partners and the retirement savings ecosystem, especially small employers who want to offer a no-cost plan for their employees.

“We want every working American to have access to a retirement plan because everyone deserves to have financial stability,” she added. “We will first drive coverage amongst groups that have not had access to retirement plans before.”

Who else is raising?

We’ve covered other companies that are making strides in the same area. In March, we reported on Human Interest, a retirement plan provider for SMBs, closing a $40 million Series C round just months after raising a $15.4 million Series B. And then three years ago, we took an in-depth look at apps helping younger workers save.

Photo of Icon Savings Plan CEO Laurie Rowley and technology courtesy of Icon Savings Plan
Blogroll illustration: Li-Anne Dias

General Catalyst-Backed Kernel Will Use $53M Series C To Tap Into The Human Mind


This post is by Christine Hall from Crunchbase News

Kernel, a Neuroscience-as-a-Service company developing brain-recording technologies, brought in its first outside investment Thursday–a $53 million Series C round of funding led by General Catalyst.

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The Los Angeles-based company has two technologies that help users observe the human mind in less costly and less invasive ways: Flux detects the magnetic fields generated by collective neural activity in the brain, while Flow detects cortical hemodynamics, such as blood flow. Customers use these technologies to gather, interpolate and correlate neurome data.

“We can objectively measure everything in our known universe, from our steps, to our heart rate, to the stars in the galaxy, but one of the only things we can’t yet quantify is our mind,” Kernel founder and CEO Bryan Johnson told Crunchbase News. “In 2016, I set off to find a way to build technology that would allow us to do high-fidelity imaging of the brain. What we’ve built is an order of magnitude change in cost, accessibility and size.”

Khosla Ventures, Eldridge, Manta Ray Ventures, Tiny Blue Dot and Johnson also participated in the round. Prior to this investment, Johnson had been bootstrapping the company with a $54 million cash infusion since it was founded in 2016. This Series C gives the company a total raise of $107 million.

As part of the investment, General Catalyst’s Quentin Clark joins Kernel’s board of directors.

“The vision fueling Kernel is one of the most audacious imaginable,” Clark said in a written statement. “But more practically speaking, Kernel’s engineering accomplishments have the potential to enable more neuroscience progress in the next few years than has been accomplished in the last few decades.”

The new capital will be used to further technology development, as well as sales, marketing and customer success, Johnson said. In May, the company announced the general commercial availability of its NaaS platform, enabling access to brain-imaging devices and the ability to perform experiments remotely.

Johnson said he used the initial $54 million to figure out if there was even anything they could do; there was. Customers are using Kernel’s tools in different ways, he said. One is trying to improve an image recognition algorithm with brain data, which was not previously possible due to limitations in incumbent brain-recording technology.

Now, Kernel is scaling its technology and looking at how to get it to more people.

“The investment from General Catalyst and Khosla signals that we are ready,” he added. “Kernel will allow for systematic quantification of the thing that makes us, ‘us,’ which is the brain. It’s the last thing that we haven’t been able to measure, and it’s the next major platform to emerge in the world.”

Illustration: Li-Anne Dias

LocalGlobe and TransferWise’s Taavet Hinrikus back ‘frictionless finance’ startup Radix


This post is curated by Keith Teare. It was written by Steve O'Hear. The original is [linked here]

Radix, a U.K. startup that’s building a decentralised finance protocol on which new financial apps can connect and be built on top of, has raised $4.1 million in new funding.

Backing the company, which counts the Ethereum network and a number of other “DeFi” projects as competitors, is London-based seed-stage VC LocalGlobe and TransferWise co-founder Taavet Hinrikus.

Radix DLT Ltd. — separate from the nonprofit Radix Foundation — had previously raised $1.9 million in equity funding in the form of a SAFE note and will be issued 2.4 billion tokens by the Radix Foundation (see below).

In its own words, Radix DLT is building a decentralised finance protocol that aims to provide “frictionless access, liquidity and programmability of any asset in the world.” The Radix team also claims it has overcome the scalability issue that typically plagues decentralised finance and blockchain-based ledgers.

In a public test of the Radix network last year, it claims to have achieved over 1 million transactions per second, a throughput over 5x higher than the Nasdaq at its peak.

It also positions itself as different from other distributed ledgers and decentralised protocols. Radix is “not trying to be a general purpose platform,” says CEO Piers Ridyard. “Decentralised finance, and by extension, the financial industry, is a highly specialised sector that requires a highly specialised set of tools and incentives. Unlike the general purpose protocols that came before it, such as Ethereum, Radix is building a layer 1 protocol specifically for decentralised finance.”

Benefiting from more than seven years of R&D carried out by founder Dan Hughes, a self-taught coder from the North of England, Ridyard says that Radix’s sole focus on DeFi from the get-go means Radix is lowering the barriers to adoption via integrations with payment rails and consumer applications, and increasing on-ledger liquidity by making it as easy as possible for developers to build new DeFi apps. The latter consists of the Radix Engine, a developer interface that claims to enable quick public ledger deployments using a “secure-by-design” environment.

But what’s the problem DeFi potentially solves?

At the highest level, proponents of so-called DeFi point to the fact that every system in finance is essentially built on its own, proprietary, non-compatible technology stack that still has far too many human processes behind it. For example, the London Stock Exchange, the U.S. Nasdaq and the Shanghai Stock Exchange are all built as “islands.” To trade across them requires centralised technology, protocol and legal integrations with each.

“That is because finance, lending, borrowing, swapping and issuance are all done in these little islands of technology that require legal contracts and Excel spreadsheets sent over email as the connective tissue,” says Ridyard. “APIs are improving this process, but there is no such thing as a standard API; Plaid became a $5.3 billion company for essentially this reason.”

By being decentralised and interoperable from day one, it’s this ability to trade across ledgers and asset classes programatically that DeFi systems such as Radix want to provide.

“This is the core and key difference for assets and services that are built on public ledgers,” explains Ridyard. “As soon as they are built on Radix, they become interoperable. I can seamlessly and programmatically move my assets from the services of one application, built by one company and team, to that of another, built by a different company and team, but issued and launched on the same decentralised public ledger. The public ledger acts as an interoperable platform for many startups to experiment and build better versions of existing products (such as stock exchanges) or entirely new products (such as continuous function market makers) that are just not possible with the current systems.”

Worth noting, Ridyard says that from a consumer point of view, the products and services aren’t likely to change much in their appearance — they’ll still be accessed via mobile apps and will probably be offered via regulated companies as they are today. Instead, he says the consumer-facing upsides will be speed, higher rates on deposits and the seamless ability to swap between asset types without needing to go into cash as the interim asset.

Adds the Radix CEO: “I should also stress that decentralised finance is not about moving existing banks onto public ledgers. It is about unbundling of banking services (borrowing, lending, investment) into applications that can all interoperate on a single public network. Banks are like newspapers coming into the internet age, some will make the transition, but not all.”

Cue statement from LocalGlobe’s Saul Klein (for posterity, if nothing else): “I see the same revolutionary potential in the Radix team as I did with the Skype and Netscape teams at the birth of the internet. We’re excited to join them at the start of a new decentralised network revolution.”

*Radix has two main legal entities: Radix DLT Ltd and the Radix Foundation. Since inception, both have received funding in different forms. The Radix Foundation is a not-for-profit company limited by guarantee, registered in the U.K., and was created to promote the long-term interests of the Radix Public Network as well as help manage the Radix community and ecosystem. Between 2013 and 2017, people from the Radix Community contributed 3,000 BTC in exchange for 3 billion RADIX tokens issued by the Radix Foundation. These tokens arguably have value as they’re needed to pay the transaction fees to use the Radix protocol.

LocalGlobe and TransferWise’s Taavet Hinrikus back ‘frictionless finance’ startup Radix


This post is by Steve O'Hear from Fundings & Exits – TechCrunch

Radix, a U.K. startup that’s building a decentralised finance protocol on which new financial apps can connect and be built on top of, has raised $4.1 million in new funding.

Backing the company, which counts the Ethereum network and a number of other “DeFi” projects as competitors, is London-based seed-stage VC LocalGlobe and TransferWise co-founder Taavet Hinrikus.

Radix DLT Ltd. — separate from the non-profit Radix Foundation — had previously raised $1.9 million in equity funding in the form of a SAFE note and will be issued 2.4 billion tokens by the Radix Foundation (see below).

In its own words, Radix DLT is building a decentralised finance protocol that aims to provide “frictionless access, liquidity and programmability of any asset in the world”. The Radix team also claims it has overcome the scalability issue that typically plagues decentralised finance and blockchain-based ledgers.

In a public test of the Radix network last year, it claims to have achieved over 1 million transactions per second, a throughput over 5x higher than the NASDAQ at its peak.

It also positions itself as different from other distributed ledgers and decentralised protocols. Radix is “not trying to be a general purpose platform,” says CEO Piers Ridyard. “Decentralised finance, and by extension, the financial industry is a highly specialised sector that requires a highly specialised set of tools and incentives. Unlike the general purpose protocols that came before it, such as Ethereum, Radix is building a layer 1 protocol specifically for decentralised finance”.

Benefiting from over 7 years of R&D carried out by founder Dan Hughes, a self taught coder from the North of England, Ridyard says that Radix’s sole focus on DeFi from the get-go means Radix is lowering the barriers to adoption via integrations with payment rails and consumer applications, and increasing on-ledger liquidity by making it as easy as possible for developers to build new DeFi apps. The latter consists of the Radix Engine, a developer interface that claims to enable quick public ledger deployments using a “secure-by-design” environment.

But what’s the problem DeFi potentially solves?

At the highest level, proponents of so-called DeFi point to the fact that every system in finance is essentially built on its own, proprietary, non-compatible technology stack that still has far too many human processes behind it. For example, the London Stock Exchange, the U.S. NASDAQ, the Shanghai Stock Exchange are all built as “islands”. To trade across them requires centralised technology, protocol and legal integrations with each.

“That is because finance, lending, borrowing, swapping, and issuance are all done in these little islands of technology that require legal contracts and excel spreadsheets sent over email as the connective tissue,” says Ridyard. “APIs are improving this process, but there is no such thing as a standard API; Plaid became a $5.3 billion company for essentially this reason”.

By being decentralised and interoperable from day one, it’s this ability to trade across ledgers and asset classes programatically that DeFi systems such as Radix want to provide.

“This is the core and key difference for assets and services that are built on public ledgers,” explains Ridyard. “As soon as they are built on Radix, they become interoperable. I can seamlessly and programmatically move my assets from the services of one application, built by one company and team, to that of another, built by a different company and team, but issued and launched on the same decentralised public ledger. The public ledger acts as an interoperable platform for many startups to experiment and build better versions of existing products (such as stock exchanges) or entirely new products (such as continuous function market makers) that are just not possible with the current systems”.

Worth noting, Ridyard says that from a consumer point of view, the products and services aren’t likely to change much in their appearance — they’ll still be accessed via mobile apps and will probably be offered via regulated companies as they are today. Instead, he says the consumer-facing upsides will be speed, higher rates on deposits and the seamless ability to swap between asset types without needing to go into cash as the interim asset.

Adds the Radix CEO: “I should also stress that decentralised finance is not about moving existing banks onto public ledgers. It is about unbundling of banking services (borrowing, lending, investment) into applications that can all interoperate on a single public network. Banks are like newspapers coming into the internet age, some will make the transition, but not all”.

Cue statement from LocalGlobe’s Saul Klein (for posterity, if nothing else): “I see the same revolutionary potential in the Radix team as I did with the Skype and Netscape teams at the birth of the internet. We’re excited to join them at the start of a new decentralised network revolution”.

*Radix has two main legal entities: Radix DLT Ltd and the Radix Foundation. Since inception, both have received funding in different forms. The Radix Foundation is a not-for-profit company limited by guarantee, registered in the U.K., and was created to promote the long term interests of the Radix Public Network as well as help manage the Radix community and ecosystem. Between 2013 and 2017, people from the Radix Community contributed 3,000 BTC in exchange for 3 billion RADIX tokens issued by the Radix Foundation. These tokens arguably have value as they’re needed to pay the transaction fees to use the Radix protocol.

Senso Lands $3M Pre-Series A Round To Strengthen Banking Client Relationships


This post is by Christine Hall from Crunchbase News

Toronto-based Senso, a fintech startup using artificial intelligence to provide financial institutions with recommendations on how to strengthen client relationships, raised $3 million in a pre-Series A round led by Mendoza Ventures and BreakawayGrowth.

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Luge Capital, Rising Tide, Inovia Capital and BDC also participated in the round, which brings the 3-year-old company’s total funding to $4 million, Saroop Bharwani, co-founder and CEO, told Crunchbase News. Senso previously raised approximately $1.1 million in seed rounds in both 2018 and 2019 after being a part of TechStars.

The company, which analyzes first- and third-party data to generate predictive insights about consumers, intends to use the new capital to accelerate the expansion of Senso’s operations and product offerings into the U.S. market.

“We’ve proved out the concept in Canada in the mortgage asset class space, and we are ready to replicate that in the U.S. market and then the Latin American market will follow,” Bharwani said.

What you should know

A banking relationship is often one-sided, meaning consumers initiate the relationship and go to the bank only when they need services. Senso aims to help financial institutions identify what customers need and proactively help them by creating personalized services.

Mortgage retention rates in the U.S. average less than 20 percent, according to a Black Knight report. By embedding Senso’s technology into a financial institutions’ marketing and sales workflows and broadly applying it across lending products, clients can get that average up to 80 percent retention, Bharwani said.

“You can unlock millions of dollars in value, create a competitive advantage and retain the customer over their lifetime,” he added. “For every mortgage you retain, the better it is and easier it is to reduce costs for customers.”

Bharwani did not disclose revenue growth, but said Senso is covering more than 20 percent of the mortgage market in Canada and is growing.

What investors are saying

Mendoza Ventures general partner Adrian Mendoza said in a written statement: “The Senso team is redefining how the financial services industry leverages predictive intelligence at a crucial moment in history when it needs it most. Financial institutions, globally, require a competitive advantage to deliver delightful experiences, and the ones who adopt Senso’s data-driven strategy will be able to confidently build loyalty and lifetime value.”

Next steps for Senso

The company will focus on building better models, which are constantly adapting and getting better over time with artificial intelligence and data science, Bharwani said. In addition to mortgage products, Senso is also looking at the consumer credit space.

“We will be dedicating resources on expanding into credit cards and other products,” he said. “We will also be looking at other verticals that need these tools.”

Illustration: Li-Anne Dias