Mental health startups are raising spirits and venture capital


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

A spate of startups focused on mental health recently made enough noise as a group that they caught the eye of the Equity podcast crew. Sadly, the segment we’d planned to discuss this topic was swept away by a blizzard of IPO filings that piled up like fresh snow.

But in preparation, I reached out to CB Insights for new data on the mental health startup space that they were kind enough to supply. So this morning we’re going to dig into it.

Regular readers of The Exchange will recall that we last dug into overall wellness venture capital investment in August, noting that it was mental health startups inside the vertical that were seeing the most impressive results.


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


I wanted to know what had happened even more recently.

After all, Spring Health recently raised $76 million for its service that helps companies offer their workers mental health benefits, Mantra Health disclosed that it has raised $3.2 million to help with college-age mental health issues and Joon Care announced $3.5 million in new capital to “grow its remote therapy service for teens and young adults,” per GeekWire.

Sticking to theme, Headway just raised $32 million to build a platform that “helps people search for and engage therapists who accept insurance for payments,” according to our own reporting, and online therapy provider Talkspace is pursuing a sale — it looks like an active time in the mental health startup realm.

So, let’s shovel into the latest data and see if the signals that we are seeing really do reflect more total investment into mental health startups, or if we’re over-indexing off a few news items.

The state of mental health venture investing

To prepare the ground, let’s talk about the general state of healthcare investing in the venture capital world. Per CB Insights’ Q3 healthcare VC report, venture capital deal volume and venture capital dollar volume reached new record highs in the sector during Q3 2020.

The quarter’s 1,539 rounds and $21.8 billion in invested capital were each comfortably ahead of prior records set in Q2 2018 for round volume (1,431) and Q2 2020 for dollar volume ($18.4 billion) for healthcare startups.

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.

Cure Hydration raises $2.6M for its healthy sports drink alternative


This post is by Anthony Ha from Fundings & Exits – TechCrunch

Cure Hydration is announcing that it has raised $2.6 million in seed funding as it brings a healthier approach to the sports beverage market.

Founder and CEO Lauren Picasso, whose past roles include serving as director of marketing at Jet.com, told me that she became interested in the market after training for a triathlon — she’d often feel dehydrated even after drinking lots of water. (This is also something I also struggled with last year while training for a marathon, and yes, I’m only mentioning this because I really want you to know that I ran a marathon.)

The obvious solution was to drink Gatorade or something similar to replenish her electrolytes, but Picasso said, “When I started looking for electrolyte products that healthy and effective, I realized everything on the market still uses a base of sugar.” In fact the average sports drink contains 36 grams of sugar.

So Picasso and the Cure team developed a new beverage based on the World Health Organization’s Oral Rehydration Solution, which Picasso said is “primarily used to help people suffering from diseases like cholera,” and which has saved “millions of lives and is proven to hydrate as effectively as an IV drip.”

Cure uses the ORS as a foundation to create a range of flavored beverages (it’s adding the new flavors Ruby Riot Grapefruit and Laser Focus Matcha). The core ingredients include coconut water and pink Himalayan salt, while everything is organic and vegan, with no added sugars.

Cure Hydration

Image Credits: Cure Hydration

The startup sells these drinks in the form of powders that you mix with water. On its website, they cost $24.99 for a pack of 14, or $19.99 of you subscribe. (The company donates 1% of proceeds to the women’s sports nonprofit SheIS.) Picasso said early consumers have tended to be amateur athletes and customers who need help staying hydrated due to chronic illnesses and other health conditions.

The product is also rolling out in stores like CVS, Walmart and Whole Foods. In fact, Picasso said that one of her goals with the funding is to bring Cure to 4,200 retail locations across the United States.

She also plans to develop new products beyond hydration, though she said they will stay true to the company’s “guiding principles” that all its products are “backed by science” and “taste delicious.” (The company has a medical advisory board that includes Dr. Roshini Rajapaksa, a gastroenterologist; Dr. Dana Cohen, the author of “Quench”; and nutritionist Brooke Alpert, author of “The Sugar Detox.”

The round was led by Lerer Hippeau, with participation from M3 Ventures, Litani Ventures, Andy Roddick, Nas, Matthew Dellavedova, Casper CEO Philip Krim, mParticle CEO Michael Katz, Thrive Market CEO Nick Green and others.

“Now, more than ever, consumers are prioritizing health in their daily lives and looking for products that are not only effective, but better-for-you,” said Lerer Hippeau Principal Caitlin Strandberg in a statement. “Lauren is an exceptional operator and we’ve been impressed with her ability to bring a WHO-approved formulation to market without compromising on product quality or efficacy. With this cash infusion and retail expansion, we’re excited to see Cure get into even more hands.”

Former Sequoia Partner Amy Sun has already raised millions for her stealthy startup


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

Former Sequoia partner Amy Sun, who left the famed venture capital firm just months ago, has already raised $3.8 million for her new startup, Daylight Labs, SEC filings show.

Daylight Labs will be creating a solution to help gig economy workers make more money, Sun hints to TechCrunch. Still in the early product development stages, the startup began during the pandemic when Sun noticed how many industries were “completely decimated” by the crisis.

“How can you leverage technology to create new ways for people to earn to make a living,” she said. “We’re innovating on the actual format and product.”

There is no site or information available online about Daylight Labs, and Sun declined to comment on more specifics of the business, saying that the company is still iterating on its final product. What we do know, however, is that the company is a combination of all of Sun’s experiences in her career so far, from product management at Uber, to working on the Stories team at Facebook, to, most recently, investing in consumer companies on behalf of Sequoia Capital, which she joined in 2018.

Image Credits: Amy Sun

The Harvard grad started her career in product marketing at Microsoft, where she helped launch the Surface tablet. Sun then spent more than three years at Uber as a founding member of the ride-sharing companies growth marketing team, which included getting drivers to join the platform.

“Through that experience I got to build really strong relationships with drivers,” she said. “Seeing that you’re able to come into a city with a technology and people can start earning money, instantly — that’s really eye opening for me.” Notably, in California, the Uber and Lyft-backed Prop 22 bill passed, which allows gig workers to remain classified as independent contractors instead of full-time workers.

At Facebook, Sun worked on the company’s Stories product as a product manager. It’s unclear how her experience with consumer cameras and AR will be used within Daylight Labs, but that will definitely be interesting to track. During her tenure, users of Facebook Stories swelled from 2 million to 100 million.

Most recently, Sun worked at Sequoia Capital as the first woman on the firm’s growth stage team. Her portfolio included Noom, Aurora, Glossier, and The Wing, although she says she has transitioned “most responsibilities” from her tenure, including board seats, to the rest of the Sequoia team.

As for why leave the firm so soon after joining, Sun simply said that starting a company has “always been a dream” since the beginning of her career.

Since leaving Sequoia, Sun has lived a “nomadic lifestyle” with time in San Francisco, Boston, North Carolina, and more recently, Austin, Texas. Daylight Labs is based out of Austin, and Sun joins troves of entrepreneurs who have been moving to the area for years.

More to come on Daylight Labs when Sun is ready to share.

Equity Monday: Good vaccine news, three rounds, and why IPOs are trending


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

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

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

If you like Equity, your cup runeth over.

So, what did we get into this morning? A grip of things, which I’ve listed below in order:

Please stay safe this week, America. Do something boring and unfun, so that we can keep more of us alive into next year.

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

Corporate services platform Sleek lands $4 million in new funding


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

Sleek, the corporate services platform that helps entrepreneurs launch and run new companies in Singapore and Hong Kong, has raised $4 million.

The new funding was led by SEEDS Capital, the investment arm of government agency Enterprise Singapore. Returning investors MI8 Limited and Pierre Lorinet also participated, along with Singapore Fintech Association co-founder Varun Mittal as part of Sequoia Capital’s scout program.

Sleek co-founder and chief growth officer Adrien Barthel told TechCrunch that the funding is part of Sleek’s seed round and brings the startup’s total raised so far to $7 million. It will start raising a Series A next year.

Founded three years ago by Barthel and Julien Labruyere, Sleek first began offering online corporate services, including company incorporation, compliance, digital accounting and tax filing, in Singapore before expanding into Hong Kong. Sleek now serves more than 3,000 companies, ranging from individual consultants to SMEs, startups and investment vehicles for funds, Barthel said.

Sleek is one of several cloud-based corporate services platforms focused on Singapore and/or Hong Kong, where regulations make it easier to incorporate companies and file taxes online, that have recently raised new venture capital funding. Others include Lanturn, Osome and Bluemeg. These startups were originally launched to reduce the amount of time and money spent on performing operational tasks, but the COVID-19 pandemic has increased demand for their services.

“We are happy to see other digital initiatives coming up around us,” Barthel told TechCrunch. “The market is wide enough for us to evolve on different positioning, and we’re only starting to see traditional firms looking at embracing the use of technology.”

While Sleek’s peers also offer secretarial, accounting and tax services, Barthel said his company’s vision “is to become the entrepreneur’s operating system, by going beyond that common service ground and building a range of services that are here to fit all entrepreneurs’ needs.”

For example, it recently released an electronic signature app called SleekSign that has digitized 145,000 signatures so far, added payroll services and launched a corporate insurance desk. Barthel said more product releases are planned for the end of this year and the first quarter of 2021.

In addition to growing its roster of services for entrepreneurs, Sleek also plans to expand into new markets where regulations also mesh well with its digital services.

“Our platform being common law friendly, we’re looking at such jurisdictions with attention, such as Australia, the United Kingdom and North America,’ said Barthel. “We are also closely looking at a few regional markets in Southeast Asia where regulatory frameworks are evolving and accepting progressively the use of technology for governance management and accounting.”

Metigy gets $20 million AUD to making online marketing easier for SMEs


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

David Fairfull, CEO and co-founder of Metigy

David Fairfull, CEO and co-founder of Metigy

Metigy, a marketing platform created to help small businesses automate more of the decision making in their online ad campaigns, has raised a Series B of $20 million AUD (about $14.6 million USD). The new funding, led by returning investor Cygnet Capital, will be used to grow the Sydney, Australia-based startup’s international customer base, especially in the United States and Southeast Asia. Other participants in the round included Regal Funds Management, OC Funds, Five V Venture Capital and Thorney, plus returning

Founded in 2015, Metigy is currently used by about 26,000 businesses and has channel partnerships with Google and Optus. About 44% of its customers are in Australia and New Zealand, while 26% are in Southeast Asia, and 22% are in the United States. The startup has raised AUD $27.1 million (about USD $19.9 million) in total.

Co-founder and chief executive officer David Fairfull told TechCrunch Metigy was created because “half of SMEs fail in the first two years and marketing is one of the top two reasons for this. It’s a global issue and a paradigm that can be changed by harnessing technology.”

Fairfull and other members of Metigy’s founding team previously worked at We Are Social, a global creative agency. While there, they “spotted an opportunity to give small businesses access to the same data and strategic insights” as larger marketing teams.

Marketing platform Metigy's Command Center

Marketing platform Metigy’s Command Center

Metigy’s platform gives more support to small or inexperienced marketing teams by using real-time data from their online advertising channels to create a livestream of recommendations. For example, it will tell marketing teams if they should start posting more content right away, use more hashtags or schedule more posts. The platforms also predicts what posts will result in the most conversions, helping companies decide how to spend their advertising budget.

For example, one of Metigy’s customers, parking app Share with Oscar, used Metigy to analyze what was trending on social media when members of the Royal Family visited Sydney. As a result, Fairfull said they were able to generate 2,700 customer engagements by spending about AUD $10 (about USD $7).

Other social marketing platforms like Hootsuite and Sprout Social are “essentially process solutions that help make the marketer more efficient,” said Fairfull. “However, if you don’t understand marketing, then all this process efficiency won’t help you gain results.”

Metigy is focusing on the United States and Southeast Asia because of the large number of SMEs there. By 2022, there is expected to be 30 million SMEs in the U.S. “On top of this, success in marketing technology is often benchmarked by success in the U.S., so expanding in this region adds credibility,” Fairfull added.

But in terms of volume, Southeast Asia offers a more promising market. “The real growth opportunity for us though is in Southeast Asia, where there is expected to be 150 million SMEs across the 11 markets by 2022,” Fairfull said. But the majority of them don’t have large marketing teams or access to the kind of ad technology that larger companies do. Companies in the region also tend to be more price sensitive, Fairfull added, so artificial intelligence and machine learning-based technology helps lower the cost of software like Metigy to an attractive price.

Exclusive: Konnecto Lands $3.5M Seed To Provide Consumer Journey Insights


This post is by Christine Hall from Crunchbase News

Consumer intelligence startup Konnecto is putting $3.5 million of seed funding to work to provide brands with data and insights on their customers.

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Using machine learning, Konnecto’s “Reveal & Disrupt” platform applies data science at the SKU level to analyze the digital paths to purchase, then generates actionable recommendations.

“We help on three points: digital customer acquisition, marketing strategy and competitive intelligence before launching a product on the market,” Erez Nahom, CEO of Konnecto, told Crunchbase News. “The product impact can be measured in an increase in customers and a reduction of the marketing budget, while also increasing the ROI.”

The Tel Aviv-based company is backed by TPY Capital, which led the round, as well as Differential Ventures, Magna Capital Partners, SeedIL Ventures and Hike Ventures. Including this new round, Konnecto has raised $4 million in total venture-backed funding since the company was started in 2018, Nahom said.

The consumer analytics market is projected to grow from $10.5 billion this year to $24.2 billion by 2025, according to MarketsandMarkets Research.

Meanwhile, Konnecto is already working with a dozen Fortune 500 companies and plans to use the new funds to increase the size of its data science team, as well as expand into the fast-moving consumer goods and direct-to-consumer industries, Nahom added.

The company is active in the United States, United Kingdom, Germany, Italy and Spain with estimates of 80 percent growth in the next 12 months. Priority for growth will start in those regions, though Nahom aims to expand later into Brazil, Mexico, Japan and other Southeast Asian countries.

“It’s been exciting to watch Konnecto take off,” said Guy Yamen, general partner at TPY Capital, in a written statement. “Synthesizing unexplored consumer data sets and turning them into actionable business insights is needed more now–in the post-COVID world–than ever before, given the increased volume of online activity, as well as the drastic changes in consumers’ preferences and needs. We are excited to take part in this journey.”

Illustration: Dom Guzman

Exclusive: Phood Heats Up $2M Seed to Reduce Food Waste


This post is by Christine Hall from Crunchbase News

Phood Solutions aims to reduce food waste and has a new pile of green to help.

Subscribe to the Crunchbase Daily

The New York-based startup, developing a food waste prevention platform, raised its first institutional funding, a $2 million oversubscribed seed round co-led by New Stack Ventures and Story Ventures.

“Phood fits perfectly into our view of how the world is evolving–new forms of data capture that enable insights to modernize manual processes,” Story Ventures Partner Jake Yormak said in a written statement “ We particularly love the combination of innovative data capture with a positive mission.”

Here’s how it works: Phood uses computer vision and artificial intelligence to capture the food that businesses, such as restaurants, are purchasing, preparing and have sitting in refrigerators or on shelves, Luc Dang, Phood’s founder and CEO told Crunchbase News. All of that aggregate data is turned into actionable insights.

“We show the areas where they can make cuts and be more operationally efficient,” he added. “Fighting food waste is our most actionable solution to climate change.”

He plans to put the dollars to work expanding offerings to Phood’s “blue-chip” customer, Whole Foods Market, expanding industry reach, and helping foodservice operations reopen profitably.

Dang founded Phood in 2019 after spending years on a passion project to help spread information on food waste that included speaking around the world on the topic.

He is not alone. The United States wastes approximately 40 percent of the food it produces, and globally, $2.6 trillion annually is lost. Other sustainable food startups addressing this problem are:

While it is too early to talk specifics about growth, Dang said the company is beginning to see a focus on waste as an opportunity and collaboration among startups working toward the same goal.

“We are expanding around our current customer base, as well as helping businesses target reopening,” he added. “We are also expanding our team to ensure the right folks are here to glean customer needs and ensure our value proposition.”

Illustration: Li-Anne Dias

How the pandemic drove the IPO wave we see today


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

This is The TechCrunch Exchange, a newsletter that goes out on Saturdays, based on the column of the same name. You can sign up for the email here.

I had a neat look into the world of mental health startup fundraising planned for this week, but after being slow-motion carpet-bombed by S-1s, that is now shoved off to Monday and we have to pause and talk about COVID-19.

The pandemic has been the most animating force for startups and venture capital in 2020, discounting the slow movement of global business into the digital realm. But COVID did more than that, as we all know. It crashed some companies as assuredly as it gave others a boost. For every Peloton there is probably a Toast, in other words.

Such is the case with this week’s crop of unicorn IPO candidates, though they are unsurprisingly weighted far more toward the COVID-accelerated cohort of startups instead of the group of startups that the pandemic cut off at the knees. 

More simply, COVID-19 gave most of our recent IPOs a polite shove in the back, helping them jog a bit faster toward the public-offering finish line. Let’s talk about it.

Roblox, the gaming company that targets kids, has been a beneficiary during the COVID-19 pandemic, as folks stayed home and, it appears, gave their kids money to buy in-game currency so that their parents could have some peace. Great business, even if Roblox warned that growth could slow sharply next year, when compared to its epic 2020 gains.

But Roblox is hardly the only company taking advantage of COVID-19’s impacts on the market to get public while their numbers are stellar. We saw DoorDash file last week, crowing from atop a mountain of revenue growth that came in part from you and I trying to stay home since March. As it turns out you order more delivery when you can’t leave your house.

Affirm got a COVID-19 boost as well, with not only e-commerce spend growing — Affirm provides point-of-sale loans to consumers during online shopping — but also because Peloton took off, and lots of folks chose to finance their new exercise bike with the payment service. Call it a double-boost.

The IPO is well-timed. Wish falls into the same bucket, though it did hit some supply-chain and delivery issues due to the pandemic, so you could argue it either way.

Regardless, as we have seen from global numbers, COVID-19 is very much not done wreaking havoc on our health, happiness, and ability to go about normal life. So the trends that this week’s S-1s have shown us still have some room to run.

Which is irksome for Airbnb, a unicorn that was supposed to have debuted already via a direct listing, but instead had to hit pause, borrow money, lay off staff, and now jog to the startup finish line with less revenue in this Q3 than the last. In time, Airbnb will get back to full-speed, but among our new IPO candidates it’s the only company net-harmed by COVID-19. That makes it special.

There are other trends to keep tabs on, regarding the pandemic. Not every software company that you might expect to be thriving at the moment actually is; Workday shares are off 8% today as I write to you, because the company said that COVID-19 is harming its ability to land new customers. Here’s its CFO Robynne Sisco from its earnings call

Keep in mind, however, that while we have seen some recent stability in the underlying environment, headwinds due to COVID remains particularly to net new bookings. And given our subscription model, these headwinds that have impacted us all year will be more fully evident in next year’s subscription revenue weighing on our growth in the near-term.

Yeesh. So don’t look at recent IPOs and think that all things are good for all companies, or even all software companies. (To be clear, the pandemic is a human crisis, but my job is to talk about its business impacts so here we are. Hugs, and please stay as safe as you can.)

Market Notes

There was so much news this week that we have to be annoyingly summary. 

I caught up with Brex CEO Henrique Dubugras the other day, giving The Exchange a chance to parse what happened to the company during the early COVID days when the company decided to cut staff. The short answer from the CEO is that the company went from growing 10% to 15% each month, to seeing negative growth — not a sin, Airbnb saw negative gross bookings for a few months earlier this year — and as the company had hired for a big year, it had to make cuts. Dubugras talked about how hard of a choice that was to make.

Brex’s business rebounded faster than the company expected, however, driven in part by strong new business formation — some data here — and companies rapidly moving into the digital realm and moving to finance systems like Brex’s. 

Looking forward, Dubugras wants to expand the pool of companies that Brex can underwrite, which makes sense as that would open up its market size quite a lot. And the company is as remote as companies are now, with its CEO opening up during our chat about the pros and cons of the move. Happily for the business fintech unicorn, Dubugras said that some of the negatives of companies working more remotely haven’t been as tough as expected. 

Next up: Growth metric. Verbit, a startup that uses AI to transcribe and caption videos, raised a $60 million Series C this week led by Sapphire Ventures. I couldn’t get to the round, but the company did note in its release that it has seen 400% year-over-year revenue growth, and that its “revenue run-rate [has] grown five-fold since 2019.” Nice.

Jai Das led the round for Verbit, and, in a quirk of good timing, I’m hosting an Extra Crunch Live with him in a few weeks. (Extra Crunch sub required for that, head here if you need one. The discount code ‘EQUITY’ should still be working if it helps.)

Telos, a Virginia-based cybersecurity and identity company went public this week. It fell under our radar because there is more news than we have hands to type it up. Such is the rapid-fire news cycle of late 2020. But, to catch us both up, Telos priced midrange but with an upsized offering, valuing it around $1 billion, according to MarketWatch.

After going public, Telos shares have performed well. Cybersecurity is having one hell of a year.

Turning back to our favorite topic in the world, SaaS, ProfitWell’s Patrick Campbell dropped a grip of data on the impact of COVID-19 on the B2B SaaS market. Mostly it’s positive. There was a hit early on, but then growth seems to have accelerated. Just keep in mind the Workday example from earlier; not everyone is in software growth paradise as 2020 comes to a close.

And, finally, after Affirm released its S-1 filing, competing service Klarna decided it was a good time to drop some performance data of its own. First of all, Klarna — thanks. We like data. Second of all, just go public. Klarna said that it grew from 10 million customers in the United States to 11 million in three weeks, and that the second statistic was up 106% compared to its year-ago tally. 

Affirm, you are now required by honor to update your S-1 with even more data as an arch-nerd clapback. Sorry, I don’t make the rules.

Various and Sundry

Alright, that’s enough of all that. Chat to you soon, and I hope that you are safe and well and good.

Alex

All IPOs should be paid for in Robux


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

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

This is an all-time first for the show, it’s an Equity Leftovers. Which means that we’re not focusing on a single topic like we would in an Equity Shot. This is just, well, more Equity.

Danny and I and Chris got together to chat about a few things that we could not leave out:

And with this, our fourth episode in six days, we shall pause until Monday. Hugs from the Equity crew.

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

Extra Crunch roundup: A fistful of IPOs, Affirm’s Peloton problem, Zoom Apps and more


This post is by Walter Thompson from Fundings & Exits – TechCrunch

DoorDash, Affirm, Roblox, Airbnb, C3.ai and Wish all filed to go public in recent days, which means some venture capitalists are having the best week of their lives.

Tech companies that go public capture our imagination because they are literal happy endings. An Initial Public Offering is the promised land for startup pilgrims who may wander the desert for years seeking product-market fit. After all, the “I” in “ISO” stands for “incentive.”

A flurry of new S-1s in a single week forced me to rearrange our editorial calendar, but I didn’t mind; our 360-degree coverage let some of the air out of various hype balloons and uncovered several unique angles.

For example: I was familiar with Affirm, the service that lets consumers finance purchases, but I had no idea Peloton accounted for 30% of its total revenue in the last quarter.

“What happens if Peloton puts on the brakes?” I asked Alex Wilhelm as I edited his breakdown of Affirm’s S-1. We decided to use that as the subhead for his analysis.

The stories that follow are an overview of Extra Crunch from the last five days. Full articles are only available to members, but you can use discount code ECFriday to save 20% off a one or two-year subscription. Details here.

Thank you very much for reading Extra Crunch this week; I hope you have a relaxing weekend.

Walter Thompson
Senior Editor, TechCrunch
@yourprotagonist


What is Roblox worth?

Gaming company Roblox filed to go public yesterday afternoon, so Alex Wilhelm brought out a scalpel and dissected its S-1. Using his patented mathmagic, he analyzed Roblox’s fundraising history and reported revenue to estimate where its valuation might land.

Noting that “the public markets appear to be even more risk-on than the private world in 2020,” Alex pegged the number at “just a hair under $10 billion.”

What China’s fintech can teach the world

Alibaba Employees Pay For Meals With Face Recognition System

HANGZHOU, CHINA – JULY 31: An employee uses face recognition system on a self-service check-out machine to pay for her meals in a canteen at the headquarters of Alibaba Group on July 31, 2018 in Hangzhou, Zhejiang Province of China. The self-service check-out machine can calculate the price of meals quickly to save employees’ queuing time. (Photo by Visual China Group via Getty Images)

For all the hype about new forms of payment, the way I transact hasn’t been radically transformed in recent years — even in tech-centric San Francisco.

Sure, I use NFC card readers to tap and pay and tipped a street musician using Venmo last weekend. But my landlord still demands paper checks and there’s a tattered “CASH ONLY” taped to the register at my closest coffee shop.

In China, it’s a different story: Alibaba’s employee cafeteria uses facial recognition and AI to determine which foods a worker has selected and who to charge. Many consumers there use the same app to pay for utility bills, movie tickets and hamburgers.

“Today, nobody except Chinese people outside of China uses Alipay or WeChat Pay to pay for anything,” says finance researcher Martin Chorzempa. “So that’s a big unexplored side that I think is going to come into a lot of geopolitical risks.”

Inside Affirm’s IPO filing: A look at its economics, profits and revenue concentration

Consumer lending service Affirm filed to go public on Wednesday evening, so Alex used Thursday’s column to unpack the company’s financials.

After reviewing Affirm’s profitability, revenue and the impact of COVID-19 on its bottom line, he asked (and answered) three questions:

  • What does Affirm’s loss rate on consumer loans look like?
  • Are its gross margins improving?
  • What does the unicorn have to say about contribution profit from its loans business?

If you didn’t make $1B this week, you are not doing VC right

Image Credits: XiXinXing (opens in a new window) / Getty Images

“The only thing more rare than a unicorn is an exited unicorn,” observes Managing Editor Danny Crichton, who looked back at Exitpalooza 2020 to answer “a simple question — who made the money?”

Covering each exit from the perspective of founders and investors, Danny makes it clear who’ll take home the largest slice of each pie. TL;DR? “Some really colossal winners among founders, and several venture firms walking home with billions of dollars in capital.

5 questions from Airbnb’s IPO filing

The S-1 Airbnb released at the start of the week provided insight into the home-rental platform’s core financials, but it also raised several questions about the company’s health and long-term viability, according to Alex Wilhelm:

  • How far did Airbnb’s bookings fall during Q1 and Q2?
  • How far have Airbnb’s bookings come back since?
  • Did local, long-term stays save Airbnb?
  • Has Airbnb ever really made money?
  • Is the company wealthy despite the pandemic?

Autodesk CEO Andrew Anagnost explains the strategy behind acquiring Spacemaker

Andrew Anagnost, President and CEO, Autodesk.

Andrew Anagnost, president and CEO, Autodesk.

Earlier this week, Autodesk announced its purchase of Spacemaker, a Norwegian firm that develops AI-supported software for urban development.

TechCrunch reporter Steve O’Hear interviewed Autodesk CEO Andrew Anagnost to learn more about the acquisition and asked why Autodesk paid $240 million for Spacemaker’s 115-person team and IP — especially when there were other startups closer to its Bay Area HQ.

“They’ve built a real, practical, usable application that helps a segment of our population use machine learning to really create better outcomes in a critical area, which is urban redevelopment and development,” said Anagnost.

“So it’s totally aligned with what we’re trying to do.”

Unpacking the C3.ai IPO filing

On Monday, Alex dove into the IPO filing for enterprise artificial intelligence company C3.ai.

After poring over its ownership structure, service offerings and its last two years of revenue, he asks and answers the question: “is the business itself any damn good?”

Is the internet advertising economy about to implode?

Image Credits: jayk7 / Getty Images

In his new book, “Subprime Attention Crisis,” writer/researcher Tim Hwang attempts to answer a question I’ve wondered about for years: does advertising actually work?

Managing Editor Danny Crichton interviewed Hwang to learn more about his thesis that there are parallels between today’s ad industry and the subprime mortgage crisis that helped spur the Great Recession.

So, are online ads effective?

“I think the companies are very reticent to give up the data that would allow you to find a really definitive answer to that question,” says Hwang.

Will Zoom Apps be the next hot startup platform?

Logos of companies in the Zoom Apps marketplace

Image Credits: Zoom

Even after much of the population has been vaccinated against COVID-19, we will still be using Zoom’s video-conferencing platform in great numbers.

That’s because Zoom isn’t just an app: it’s also a platform play for startups that add functionality using APIs, an SDK or chatbots that behave like smart assistants.

Enterprise reporter Ron Miller spoke to entrepreneurs and investors who are leveraging Zoom’s platform to build new applications with an eye on the future.

“By offering a platform to build applications that take advantage of the meeting software, it’s possible it could be a valuable new ecosystem for startups,” says Ron.

Will edtech empower or erase the need for higher education?

Image Credits: Bryce Durbin

Without an on-campus experience, many students (and their parents) are wondering how much value there is in attending classes via a laptop in a dormitory.

Even worse: Declining enrollment is leading many institutions to eliminate majors and find other ways to cut costs, like furloughing staff and cutting athletic programs.

Edtech solutions could fill the gap, but there’s no real consensus in higher education over which tools work best. Many colleges and universities are using a number of “third-party solutions to keep operations afloat,” reports Natasha Mascarenhas.

“It’s a stress test that could lead to a reckoning among edtech startups.”

3 growth tactics that helped us surpass Noom and Weight Watchers

3D rendering of TNT dynamite sticks in carton box on blue background. Explosive supplies. Dangerous cargo. Plotting terrorist attack. Image Credits: Gearstd / Getty Images.

I look for guest-written Extra Crunch stories that will help other entrepreneurs be more successful, which is why I routinely turn down submissions that seem overly promotional.

However, Henrik Torstensson (CEO and co-founder of Lifesum) submitted a post about the techniques he’s used to scale his nutrition app over the last three years. “It’s a strategy any startup can use, regardless of size or budget,” he writes.

According to Sensor Tower, Lifesum is growing almost twice as fast as Noon and Weight Watchers, so putting his company at the center of the story made sense.

Send in reviews of your favorite books for TechCrunch!

Image via Getty Images / Alexander Spatari

Every year, we ask TechCrunch reporters, VCs and our Extra Crunch readers to recommend their favorite books.

Have you read a book this year that you want to recommend? Send an email with the title and a brief explanation of why you enjoyed it to bookclub@techcrunch.com.

We’ll compile the suggestions and publish the list as we get closer to the holidays. These books don’t have to be published this calendar year — any book you read this year qualifies.

Please share your submissions by November 30.

Dear Sophie: Can an H-1B co-founder own a Delaware C Corp?

Image Credits: Sophie Alcorn

Dear Sophie:

My VC partner and I are working with 50/50 co-founders on their startup — let’s call it “NewCo.” We’re exploring pre-seed terms.

One founder is on a green card and already works there. The other founder is from India and is working on an H-1B at a large tech company.

Can the H-1B co-founder lead this company? What’s the timing to get everything squared away? If we make the investment we want them to hit the ground running.

— Diligent in Daly City

Kea raises $10M to build AI that helps restaurants answer the phone


This post is by Anthony Ha from Fundings & Exits – TechCrunch

Kea is a new startup giving restaurants an opportunity to upgrade one of the more old-fashioned ways that they take orders — over the phone.

Today, Kea is announcing that it has raised a $10 million Series A led by Marbruck, with participation from Streamlined Ventures, Xfund, Heartland Ventures, DEEPCORE, Barrel Ventures and AVG Funds, as well as angel investors Raj Kapoor (chief strategy officer at Lyft), Craig Flom (who was on the founding team at Panera Bread), Wingstop franchisee Tony Lam and Five Guys franchisee Jonathan Kelly.

Founder and CEO Adam Ahmad said that with restaurants perpetually understaffed, they usually don’t have someone who can devote their attention to answering the phone. (Many of you, after all, are probably pretty familiar with the experience of calling a restaurant and being immediately placed on hold.)

At the same time, he suggested it remains an important ordering channel — especially during the pandemic, as takeout and delivery has become the biggest source of revenue for many restaurants. The New Yorker’s Helen Rosner put it succinctly when she suggested that anyone who wants to support restaurants should “pick up the damn phone.

Similarly, Ahmad said that for restaurants, paying substantial third-party ordering fees on all of their orders is “not a sustainable long-term strategy.” So Kea is offering technology that should help restaurants handle more orders over the phone, creating what Ahmad called a “virtual cashier” who can do the initial intake with customers, process most routine orders and bring in a human employee when needed.

The idea of an automated voice assistant may bring back unpleasant memories of trying to call your bank or another Byzantine customer service department. But Ahmad said that while most existing phone systems are “not smart,” Kea’s AI is very different, because it’s just focused on restaurant ordering.

“We’re doing a very closed domain,” he said. “In the pizza world, there are only a couple thousand permutations. We’re not innovating for the whole dictionary — it’s a constrained model, it’s a menu.”

In fact, the Kea team gave me a number to dial where I could try the system out for myself. It was a pretty straightforward and easy process, where I provided my address and then the details of my pizza order. And again, you can transfer to a human employee at any time. (In fact, I was accidentally transferred during my demo, leading me to quickly hang up in embarrassment.)

Kea is already live in more than 250 restaurants including Papa John’s, Donatos and Primanti Brothers, and it says it’s saving them an average of 10 hours of labor per week, with a 23% increase in average order size. With the new funding, Ahmad’s goal is to bring Kea to 1,000 restaurants across 37 states in 2021.

What is Roblox worth?


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

With Roblox joining the end-of-year unicorn stampede toward the public markets, we’re set for a contentedly busy second half of November and early December. I hope you didn’t have vacation planned in the next few weeks.

This morning we need to get deeper into the Roblox S-1 so we can better understand the nature of its revenue generation. Why? Because we want to start working on what the gaming company is worth; some comparisons are being made to Unity, another unicorn that went public earlier this year with a gaming focus.


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


Should we apply Unity’s revenue multiple to Roblox? Or does the company deserve a slimmer multiple based on the substance of its revenue?

We’ll also have to remind ourselves how much capital Roblox last raised while private, and at what price. Given our historical knowledge of its financial results, we might be able to nail some valuations to revenue figures, helping us understand, roughly, how the venture capital community was valuing Roblox while it was private.

If you want an overview of just the numbers, Natasha and I wrote a digest here.

Now, let’s get to work.

What’s Roblox worth as a public company?

To get a foundation, let’s recall how Roblox was valued during its last private round. According to Crunchbase data, Roblox’s $150 million Series G was raised at a $3.9 billion pre-money valuation. So, Roblox was worth $4.05 billion after the February 2020 funding event.

Naturally there is a lag between when a deal is struck and when it is announced. So, let’s rewind the clock to Q4 2019 and ask ourselves what Roblox looked like at the time. From its S-1, here are the Q4 2019 numbers:

  • Revenue of $138.3 million, +44.2% compared to the year-ago quarter
  • A net loss of $39.6 million, +197.1% compared to the year-ago quarter

Annualizing that revenue figure, Roblox was on a $553.3 million run rate at around the time it raised that Series G. In revenue-multiple terms, Roblox was valued at 7.3x its top line on an annualized basis.

If you are a SaaS fan you are probably pretty shocked right now. Why the hell was Roblox, a software company, worth so little? Well let’s remind ourselves how it makes money:

We generate substantially all of our revenue through the sales of Robux to users. Users can spend Robux to purchase access to experiences, enhancements in experiences, and items in the Avatar Marketplace. Robux are available as one-time purchases or monthly subscriptions. We recognize revenue ratably over the estimated average lifetime of a paying user. […]

Other revenue streams include a minimal amount of revenue from advertising, licenses, and royalties.

Onit acquires legal startup McCarthyFinch to inject AI into legal workflows


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

Onit, a workflow software company based in Houston with a legal component, announced this week that it has acquired 2018 TechCrunch Disrupt Battlefield alum McCarthyFinch.  Onit intends to use the startup’s AI skills to beef up its legal workflow software offerings.

The companies did not share the purchase price.

After evaluating a number of companies in the space, Onit focused on McCarthyFinch, which gives it an artificial intelligence component the company’s legal workflow software had been lacking. “We evaluated about a dozen companies in the AI space and dug in deep on six of them. McCarthyFinch stood out from the pack. They had the strongest technology and the strongest team,” Eric M. Elfman, CEO and co-founder of Onit told TechCrunch.

The company intends to inject that AI into its existing Aptitude workflow platform.”Part of what really got me excited about McCarthyFinch was the very first conversation I had with their CEO, Nick Whitehouse. They considered themselves an AI platform, which complemented our approach and our workflow automation platform, Aptitude,” Elfman said.

McCarthyFinch CEO and co-founder Whitehouse says the startup was considering whether to raise more money or look at being acquired earlier this year when Onit made its interest known. At first, he wasn’t really interested in being acquired and was hoping to go the partner route, but over time that changed.

“I was very much on the partner track, and was probably quite dismissive to begin with because I was quite focused on that partner strategy. But as we talked, all egos aside, it just made sense [to move to acquisition talks],” Whitehouse said.

The talks heated up in May and the deal officially closed last week. With Onit, headquartered in Houston and McCarthyFinch in New Zealand, the negotiations and meetings all happened on Zoom. The two companies’ principals have never met in person. The plan is for McCarthyFinch to stay in place, even after the pandemic ends. Whitehouse expects to make a trip to Houston whenever it is safe to do so.

Whitehouse says his experience with Battlefield has had a huge influence on him. “Just the insights that we got through Battlefield, the coaching that we got, those things have stuck with me and they’ll stick with me for the rest of my life,” he said.

The company had 45 customers and 17 employees at the time of the acquisition. It raised $5 million US dollars along the way. Now it becomes part of Onit as the journey continues.

Wish files to go public with 100M monthly actives, $1.75B in 2020 revenue thus far


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

This morning Wish, a well-known mobile ecommerce startup, filed to go public. It joins Affirm, Airbnb, and Roblox in filing this week as many well-known and valuable private companies look to debut before the year ends and the holidays start.

Wish’s S-1 (which is filed under its corporate name ContextLogic) is of particular interest given that COVID-19 and the global pandemic have changed consumer behavior around the world in 2020. As going to stores became more risky over time, many shoppers turned to buying more goods from the Internet, bolstering ecommerce players like Shopify, BigCommerce, as well as companies that facilitate online payments, like Square and PayPal.

How has the pandemic impacted Wish? It appears to have accelerated its growth.

Looking back in time, Wish saw its revenue growth slow in 2019, before expanding much more quickly in 2020. From 2017 to 2018, for example, when Wish saw revenues of $1.10 billion and $1.73 billion respectively, it grew 57%. But from 2018 to 2019, its revenue only grew to $1.90 billion, up a far-smaller 10%.

More recently, the situation has improved for the digital retailer, with Wish managing to grow more quickly in the first three months of 2020. In the first nine months of 2019, Wish racked up revenues of $1.33 billion. In the same period of 2020 the company’s top line grew to $1.75 billion, up 32% from the year-ago result.

That’s far better than the 10% growth pace that Wish showed in 2019. Wish’s growth acceleration helps explain why it is going public now: it has a growth story to tell investors.

But the company’s accelerated growth has come at a cost, namely rising losses. During the first three quarters of 2019, Wish posted net losses of just $5 million, before some preferred stock costs pushed its total deficit to $12 million. In the same period of 2020 Wish lost a far steeper $176 million.

Wish’s falling gross margins have not helped. In 2018, Wish had gross margins of 84%. That number fell to 77% in 2019, and then to just 65% in the first three quarters of 2020.

But the ecommerce player did have some more positive details to show, as this table details:

Improving free cash flow in 2020 compared to 2019? Check. Monthly active user growth rising nicely? Yes. Active buyers up compared to the year-ago period? Yep. Looking at the company’s adjusted profitability is not encouraging, but a 6% adjusted EBITDA margin won’t send investors packing for the hills if they buy Wish’s growth story.

COVID-19 was not simply a boost to Wish, its S-1 makes clear. The pandemic shut some supply hubs, slowed supply chains, and lengthened delivery times. But the company also said that it “benefited from greater mobile usage and less competition from physical retail as a result of shelter-in-place mandates” and “benefited from increased user spending due to U.S. government stimulus programs.” Noting that stimulus is fading, Wish warns investors in the document that it “cannot assure you that increased levels of mobile commerce will continue when COVID-19 has subsided or otherwise, or that the U.S. government will offer additional stimulus programs.”

Wish is wealthy, with around $1.1 billion in cash, cash equivalents, and marketable securities. It also has no long-term debts that could cause concern.

Finally, who is going to win in the deal? Most notably Peter Szulczewski, Wish’s founder and CEO. He controls 65.5% of the Company’s Class B shares and around 58% of its total voting power, pre-IPO. Major investors include DST Global, Formation8, Founder Fund, GGV Capital, and Republic Technologies.

Quite a lot of venture hopes and returns are riding on this IPO, then. More soon.

Paceline Pumps Up New Wellness Platform With $5M Seed


This post is by Christine Hall from Crunchbase News

Fintech startup Paceline received a cash infusion of $5 million in seed funding to continue building out its health and wellness platform that rewards physical activity with financial benefits.

Subscribe to the Crunchbase Daily

The San Francisco-based company is out to reinvent the financial industry with the aim of making it more technology-enabled and better at engaging with consumers.

“Financial services companies should not just force you to transact, but be there in a way you transact,” CEO Joel Lieginger told Crunchbase News. “Healthy people have a behavioral trait of prioritizing health and wellness, which makes them a better risk over time and a better contributor to society.”

Paceline is building out a full stack platform that will eventually have credit card, banking and insurance products. In fact, Lieginger said the company is building it backwards: building a “freemium” model of a financial services company and giving users rewards for free.

Here’s how it works: The platform tracks physical activity through wearables and also leverages customer spending data–accessed through a linked credit card–to curate rewards. Paceline uses this data to build financial products, starting with a health and wellness credit card and life insurance products, to change the behavioral habits of its members.

“People should be paid for the data they provide,” Lieginger added. “We want you to benefit from your data, and we can make a better world as a result.”

What investors have to say

The seed round was co-led by Montage Ventures and Propel Venture Partners, with participation from Northwestern Mutual and BlackRock’s Mark McCombe as an angel investor. This is the startup’s first institutional funding since the company was founded by Lieginger in 2019.

Funds will be used for product and engineering, as well as to build out the credit card and insurance products that will launch in 2021.

The breadth of investors involved includes a group of what Lieginger called “a unique mix of fintech, insurance and big funds on the future of health and wellness.”

“We are thrilled to be supporting Paceline’s mission to promote healthier lifestyles,” said Jay Reinemann, general partner at Propel Venture Partners, in a written statement. “Physical and financial health are tightly connected for the overall wellbeing of the consumer and at Paceline we have the opportunity to reward healthy consumers, and incentivize less healthy ones, with material financial benefit through financial products that better match their lifestyle.”

Growth

Since coming on the scene with its beta test in January, Paceline has amassed 50 brand partners. At the same time, members have logged more than 1.2 million workouts, which equates to more than 65 million exercise minutes. As a result, they have earned and redeemed more than 70,000 rewards valued at more than $500,000.

Meanwhile, Lieginger expects to double his team over the next 12 months, while also maintaining a lean center by partnering with companies that will provide resources as Paceline scales its product offerings.

The financial services market is valued at $2 trillion, Lieginger said. Paceline aims to make the industry more profitable, and he sees the market eventually becoming a $4 trillion one that would give back $1 trillion to users, which would be good for everyone.

Although Paceline has its roots in financial services, Lieginger sees the company also within the wellness industry. The Global Wellness Institute valued the global wellness economy at $4.5 trillion in 2018, and just the physical activity economy part of the industry is expected to surpass $1.1 trillion by 2023.

“We are creating a new category,” he said. “We are really a fintech company, but creating a community in health and wellness. That is the big trend going forward–embedded financial services–and we are building the biggest one for health and wellness.”

Illustration: Li-Anne Dias

Paceline Pumps Up New Wellness Platform With $5M Seed


This post is by Christine Hall from Crunchbase News

Fintech startup Paceline received a cash infusion of $5 million in seed funding to continue building out its health and wellness platform that rewards physical activity with financial benefits.

Subscribe to the Crunchbase Daily

The San Francisco-based company is out to reinvent the financial industry with the aim of making it more technology-enabled and better at engaging with consumers.

“Financial services companies should not just force you to transact, but be there in a way you transact,” CEO Joel Lieginger told Crunchbase News. “Healthy people have a behavioral trait of prioritizing health and wellness, which makes them a better risk over time and a better contributor to society.”

Paceline is building out a full stack platform that will eventually have credit card, banking and insurance products. In fact, Lieginger said the company is building it backwards: building a “freemium” model of a financial services company and giving users rewards for free.

Here’s how it works: The platform tracks physical activity through wearables and also leverages customer spending data–accessed through a linked credit card–to curate rewards. Paceline uses this data to build financial products, starting with a health and wellness credit card and life insurance products, to change the behavioral habits of its members.

“People should be paid for the data they provide,” Lieginger added. “We want you to benefit from your data, and we can make a better world as a result.”

What investors have to say

The seed round was co-led by Montage Ventures and Propel Venture Partners, with participation from Northwestern Mutual and BlackRock’s Mark McCombe as an angel investor. This is the startup’s first institutional funding since the company was founded by Lieginger in 2019.

Funds will be used for product and engineering, as well as to build out the credit card and insurance products that will launch in 2021.

The breadth of investors involved includes a group of what Lieginger called “a unique mix of fintech, insurance and big funds on the future of health and wellness.”

“We are thrilled to be supporting Paceline’s mission to promote healthier lifestyles,” said Jay Reinemann, general partner at Propel Venture Partners, in a written statement. “Physical and financial health are tightly connected for the overall wellbeing of the consumer and at Paceline we have the opportunity to reward healthy consumers, and incentivize less healthy ones, with material financial benefit through financial products that better match their lifestyle.”

Growth

Since coming on the scene with its beta test in January, Paceline has amassed 50 brand partners. At the same time, members have logged more than 1.2 million workouts, which equates to more than 65 million exercise minutes. As a result, they have earned and redeemed more than 70,000 rewards valued at more than $500,000.

Meanwhile, Lieginger expects to double his team over the next 12 months, while also maintaining a lean center by partnering with companies that will provide resources as Paceline scales its product offerings.

The financial services market is valued at $2 trillion, Lieginger said. Paceline aims to make the industry more profitable, and he sees the market eventually becoming a $4 trillion one that would give back $1 trillion to users, which would be good for everyone.

Although Paceline has its roots in financial services, Lieginger sees the company also within the wellness industry. The Global Wellness Institute valued the global wellness economy at $4.5 trillion in 2018, and just the physical activity economy part of the industry is expected to surpass $1.1 trillion by 2023.

“We are creating a new category,” he said. “We are really a fintech company, but creating a community in health and wellness. That is the big trend going forward–embedded financial services–and we are building the biggest one for health and wellness.”

Illustration: Li-Anne Dias

Strategy Session: Vertex US On Early Stage Investing


This post is by Christine Hall from Crunchbase News

Strategy Session is a feature for Crunchbase News where we ask venture capital firms five questions about their investment strategies.

Subscribe to the Crunchbase Daily

Vertex US is taking a unique approach to early-stage investments by investing early and often first.

The firm intentionally makes a select number of investments each year to be true partners to startups from Day One to 100 and beyond.

The Palo Alto-based firm is now investing from its second fund, the $150 million Vertex US Fund II, in enterprise tech investments. Upsolver’s $13.3 million Series A was the company’s first lead funding amid the global pandemic. Upsolver manages, integrates and structures streaming data for analysis at unprecedented ease.

We spoke with Vertex’s General Partner Jonathan Heiliger and Partner Sandeep Bhadra about the firm’s friendly approach to investing.

Your approach to early-stage investments is unique–investing early and often first. How did you settle on that thesis?

Heiliger: Before starting Vertex, we collectively had made more than 40 angel investments. We enjoy seeing, picking, winning and working with companies. In our former roles, we thought focus was an important ingredient. On our website, you don’t see the word “focus,” but you do see “no bullshit.” Early on, Sandeep said make a few investments and make them count.

How do you like to work with founders?

Heiliger: Our approach to investing is that while everyone touts being founder-friendly or been a founder before, in our case, our three partners were actually founders. We think that not only sets us apart from other investors by virtue of us being founders, we also have empathy. We end up being a couch for them to talk. You have to stretch your perception of what is possible and take the leap with the founder. Being able to respond quickly and interactively is important.

Bhadra: It’s also how we operate and use our time. Time is a constraint for any investor, and our portfolio is concentrated. We might do seven or eight Series A and seven or eight seed investments. We start bigger and expect to have some not make it to next term. Each of us takes up one to two new projects each year. We don’t treat investments as call options. Even in seed investments, we spend time with founders and do it with intention.

Among the enterprise tech investments you are looking at right now, what area or sector is attractive to you?

Bhadra: We are still in the early innings of moving to the cloud, the adoption of enterprise software, and formalization of work through software. IT was a department that would keep blinking machines working inside the broom closet. Then the cloud happened, and five years ago we all thought super artificial intelligence was going to take our jobs. However, there is a happy medium that software will work as a handmaid to humans. There is a symbiotic relationship. You can see acceleration through the pandemic that brought forward a digitalization strategy. We are now in a weird place where the market has come to us. We are fortunate to live through a time where work is being transformed through technology.

Heiliger: It’s the move to development and operations. To enterprises, this is new, interesting or novel, but they don’t have the bandwidth to build them, so they have to buy it. Just as businesses outsourced to places like AWS, this is another level, like doing it through tokenization. That is a trend we are betting on as the line of infrastructure goes from raw to a higher and higher level of things.

You are now working on your second fund. What lessons did you learn from your first fund that you are applying here?

Heiliger: Lots. It is worth repeating that we believed in the founder vision early on. We catch ourselves all the time. We get in the weeds all the time, and need to think where the company will be in three to five years and dream that dream. You also have to consider how to remain curious, especially now that there are no serendipitous conversations in the office. Now you have to be creative with the tools, be adaptive and continue to dig. During the first fund, we spent a lot of time putting our shingle out in the world, so deal flow was slow, and in fund two, we hit it hard and fast. The second fund closed in February 2019, and we made nine investments that year because we were primed and ready.

Vertex has seen several companies exit. While it’s difficult to pick a favorite, is there one that you were most excited to see exit?

Heiliger: SpaceIQ’s exit to WeWork (acquisition in 2019). We incubated with the founder, helped create the idea and set up interviews to validate. The idea is doing seed planning for offices used to be Post-its on a blueprint. They modernized it to become something you could drag and drop. What was going on under the hood was more advanced. Various teams grow and shrink at different rates, so you need to adjust planning, and they built this business, and it started going well. WeWork approached them to combine, and it was in the press pretty heavily. We literally closed the acquisition a week prior to the whole thing unraveling. We had coffee recently with the founders. It was kind of sad, because it went from a great marriage to not.

Illustration: Dom Guzman

Strategy Session: Vertex US On Early-Stage Investing


This post is by Christine Hall from Crunchbase News

Strategy Session is a feature for Crunchbase News where we ask venture capital firms five questions about their investment strategies.

Subscribe to the Crunchbase Daily

Vertex US is taking a unique approach to early-stage investments by investing early and often first.

The firm intentionally makes a select number of investments each year to be true partners to startups from Day One to 100 and beyond.

The Palo Alto-based firm is now investing from its second fund, the $150 million Vertex US Fund II, in enterprise tech investments. Upsolver’s $13.3 million Series A was the company’s first lead funding amid the global pandemic. Upsolver manages, integrates and structures streaming data for analysis at unprecedented ease.

We spoke with Vertex’s General Partner Jonathan Heiliger and Partner Sandeep Bhadra about the firm’s friendly approach to investing.

Your approach to early-stage investments is unique–investing early and often first. How did you settle on that thesis?

Heiliger: Before starting Vertex, we collectively had made more than 40 angel investments. We enjoy seeing, picking, winning and working with companies. In our former roles, we thought focus was an important ingredient. On our website, you don’t see the word “focus,” but you do see “no bullshit.” Early on, Sandeep said make a few investments and make them count.

How do you like to work with founders?

Heiliger: Our approach to investing is that while everyone touts being founder-friendly or been a founder before, in our case, our three partners were actually founders. We think that not only sets us apart from other investors by virtue of us being founders, we also have empathy. We end up being a couch for them to talk. You have to stretch your perception of what is possible and take the leap with the founder. Being able to respond quickly and interactively is important.

Bhadra: It’s also how we operate and use our time. Time is a constraint for any investor, and our portfolio is concentrated. We might do seven or eight Series A and seven or eight seed investments. We start bigger and expect to have some not make it to next term. Each of us takes up one to two new projects each year. We don’t treat investments as call options. Even in seed investments, we spend time with founders and do it with intention.

Among the enterprise tech investments you are looking at right now, what area or sector is attractive to you?

Bhadra: We are still in the early innings of moving to the cloud, the adoption of enterprise software, and formalization of work through software. IT was a department that would keep blinking machines working inside the broom closet. Then the cloud happened, and five years ago we all thought super artificial intelligence was going to take our jobs. However, there is a happy medium that software will work as a handmaid to humans. There is a symbiotic relationship. You can see acceleration through the pandemic that brought forward a digitalization strategy. We are now in a weird place where the market has come to us. We are fortunate to live through a time where work is being transformed through technology.

Heiliger: It’s the move to development and operations. To enterprises, this is new, interesting or novel, but they don’t have the bandwidth to build them, so they have to buy it. Just as businesses outsourced to places like AWS, this is another level, like doing it through tokenization. That is a trend we are betting on as the line of infrastructure goes from raw to a higher and higher level of things.

You are now working on your second fund. What lessons did you learn from your first fund that you are applying here?

Heiliger: Lots. It is worth repeating that we believed in the founder vision early on. We catch ourselves all the time. We get in the weeds all the time, and need to think where the company will be in three to five years and dream that dream. You also have to consider how to remain curious, especially now that there are no serendipitous conversations in the office. Now you have to be creative with the tools, be adaptive and continue to dig. During the first fund, we spent a lot of time putting our shingle out in the world, so deal flow was slow, and in fund two, we hit it hard and fast. The second fund closed in February 2019, and we made nine investments that year because we were primed and ready.

Vertex has seen several companies exit. While it’s difficult to pick a favorite, is there one that you were most excited to see exit?

Heiliger: SpaceIQ’s exit to WeWork (acquisition in 2019). We incubated with the founder, helped create the idea and set up interviews to validate. The idea is doing seed planning for offices used to be Post-its on a blueprint. They modernized it to become something you could drag and drop. What was going on under the hood was more advanced. Various teams grow and shrink at different rates, so you need to adjust planning, and they built this business, and it started going well. WeWork approached them to combine, and it was in the press pretty heavily. We literally closed the acquisition a week prior to the whole thing unraveling. We had coffee recently with the founders. It was kind of sad, because it went from a great marriage to not.

Illustration: Dom Guzman