Tag: The TechCrunch Exchange

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The Exchange: Which VCs are the most popular, why enterprise startups are hot, and how patient are public investors?

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, and catch up on prior editions of the column and newsletter here. 

It’s Saturday, July 18, and this is The Exchange. Today we’re wrapping our look at second-quarter VC, capping off the recent IPOs of some venture-backed startups, and digging into the hottest VCs while peeking at a new startup trend.

Venture capital activity by the numbers

As July rubs along we’re getting deeper into the third quarter of 2020, meaning it’s time to close the books on Q2. To that end The Exchange combed through all the second-quarter VC data that we could this week.

But, despite working to grasp the health of the global venture scene, the United States’ own venture capital totals, and diving more deeply into AI/ML startups and how women-founded startups fundraised in Q2, there’s still more data to sift.

Keeping brief as we are a bit charted-out, New York City-based venture capital group Work-Bench released a grip of numbers detailing the city’s enterprise-focused startups’ Q2 VC results. Given that Work-Bench invests in enterprise tech, the data’s focus was not a surprise.

The numbers, per the firm, look like this:

  • NYC enterprise tech startups raised 51 rounds in Q2 worth $1.5 billion, above Q1 totals of 44 deals worth $1.3 billion
  • Those quarterly results were the best recorded, according to a Work-Bench historical analysis of enterprise tech deals since at least the start of 2014
  •  Q1 and Q2 2020 were so active in the sector and city that the first half of this year saw nearly as many deals and dollars ($2.7 billion in 95 total deals) than the same cohort and metropolis managed in all of 2019 ($3.3 billion in 114 total deals).

The data is not surprising. B2B startups are raking in a larger share of venture capital rounds as time goes along, so to see NYC’s own enterprise-focused startups doing well is not shocking. (And if you add in the recent $225 million UIPath round, the Big Apple’s enterprise startups are even closer to their 2019 venture dollar benchmark, though the UIPath deal came in Q3.)

One last bit of data and we are done. Fenwick & West, a law firm that works with startups, released a report this week concerning Silicon Valley’s own May VC results. Two data points in particular from the digest stood out. Chew on these (emphasis TechCrunch):

The percentage of up-rounds declined modestly from 71% in April to 67% in May, but continued [to be] noticeably lower than the 83% up-rounds on average in 2019. […] The average share price increase of May financings weakened noticeably, declining from 63% in April to 43% in May. The results for both April and May were significantly below the 2019 average increase of 93%.

The Q2 data mix then shakes out to be better than I would have expected with plenty of highlights. But if you look, it isn’t hard to find weaker points, either. We are, after all, in the midst of a pandemic.

Going public in a pandemic

nCino and GoHealth went public this week. TechCrunch got on the blower afterwards with nCino CEO Pierre Naudé and GoHealth CEO Clint Jones. By now you’ve seen the pricing pieces and notes on their companies’ early performance, so let’s instead talk about why they chose to pursue traditional IPOs.

Our goal was to understand why CEOs are going public through initial public offerings when some players in the venture space have soured on traditional IPOs. Here’s what we gleaned from the leaders of the week’s new offerings:

nCino: Naudé didn’t want to dig into nCino’s IPO process, but did note that he read TechCrunch’s coverage of his company’s IPO march. The CEO said that his firm was going to have an all-hands this Friday, and then get back to work. Naudé also said that becoming a public company could help the nCino brand by helping others understand the company’s financial stability. The company’s larger-than-expected IPO haul (one point for the old-fashion public offering, we suppose) could provide it with more options, we learned, including possibly upping its sales and marketing spend.

  • The Exchange’s take: It’s very hard to get a CEO to say on the record that a different approach to the public markets than the one they took was enticing. Nothing that Naudé was off-script for a newly public company.

GoHealth: Jones told TechCrunch that GoHealth’s IPO was oversubscribed, implying good pre-IPO demand. When it came to pricing, GoHealth worked through a number of scenarios according to the CEO, who didn’t have anything negative to share about how his company finally set its IPO valuation. He did bring up the importance of collecting long-term investors.

  • The Exchange’s take: GoHealth shares dipped after the company went public, so its offering won’t engender the usual complaints about mispricing. nCino, in contrast, shot higher, making it a better poster child for the direct-listing fans out there.

The method by which a company goes public is only a piece of the public-markets saga that companies spin. Once public, either through a direct listing or SPAC-led reverse-IPO, all companies become lashed to the quarterly reporting cycle. Even more common than complaints about the IPO process among Silicon Valley is the refrain that public investors are too short-term-focused to let really innovative companies do well once they stop being private.

Is that true? TechCrunch spoke with Medallia CEO Leslie Stretch this week to get notes on the current level of patience that public investors have for growing tech companies; are public markets as impatient as some claim? 

According to Stretch, there can be enough space in the public markets for tech shops to maneuver. At least that was his take a year after Medallia’s own 2019 IPO (transcript edited by TechCrunch for clarity; additions denoted by brackets):

[Our] partnership with public investors has been phenomenal. They really test you, you know? They really test your proposition, [and] they test your operational resilience in a way that just makes you better. And they give you feedback. Our philosophy is feedback always makes you better.

What people want to do is they want to crest the really big growth rate [that] is unassailable, it can’t be challenged. And then you come out in public, and it’s a no brainer. And some companies managed to do that. But of the [thousands of Series] A rounds that took place in early 2000s, you know, only 75 companies made it public. Right? We’re one of them.

I’m not fearful. I don’t think people should be fearful of [going public]. They should partner with public investors. The stock price, and the quarter-to-quarter, will be what it will be. Don’t worry about that. It’s what are you building for the long term, and make sure you have enough cash, of course, to meet your ambitions. [But] also a bit of fiscal discipline actually makes your products better, because you think how about how you invest, and harder about your priorities. That’s my view on [the] public piece.

Who wants to bet that unicorns keep putting off their IPOs anyways?

Odds & Ends: Popular VCs, extensions, and more

Let’s wrap with some fun stuff, kicking off with the TechCrunch List, a dataset that set out to figure out which VCs were the most likely to cut first checks. I’ve already used it to help put together an investor survey (stay tuned). It’s in front of the Extra Crunch paywall, so give it a whirl.

If you are part of Extra Crunch, Danny also pulled out an even more exclusive list that we built off the back of thousands of founder comments.

And I have two trends for you to think on. First, a wave of startups are trying to make our new, video-chatting based world a better place to be. It will be super interesting to see how much space is left in the market by the incumbent players currently battling for market leadership.

Second, some startups are raising extension rounds not only because they need defensive capital, but because they’ve caught a tailwind in the COVID era and want to go even faster. So, from a somewhat safe move, some extension rounds these days are more weapons than shields.

And that’s all we have. Say hi on Twitter if there’s something you want The Exchange to explore. Chat soon!

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

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.

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The Exchange: IPO season, self-driving misfires and a fintech letdown

Welcome to The TechCrunch Exchange, a forthcoming weekly newsletter from the TC crew about startups, money, and markets. You can sign up for it here, and receive it regularly when it formally launches in a few weeks. You can email me about it here, or talk to me on Twitter. Let’s go!

In the last week there were 23 rounds worth $50 million in the world, according to Crunchbase data. The rounds were worth a total of $3.72 billion, with a median value of $80 million and an average size of $161.9 million. So in case you were under the impression that late-stage money was under threat, it’s not.

And it’s not hard to see why; with the public markets flirting with new record highs, late-stage startups are able to raise on the back of strong comps. High public valuations help late-stage startups defend their own prices as much as rising stocks can help direct venture investment to certain sectors at the earlier-stages of startup land.

It’s also a situation that can lead to a rash of IPOs, which we’re on the cusp of seeing. With Agora out this week to good effect, and Lemonade in the wings alongside Accolade, nCino, and GoHealth, things are heating up.

This week The Exchange and TechCrunch more broadly tried to take on the matter, asking questions about Lemonade’s impending public offering, trying our best to explore the S-1 filings of nCino and GoHealth (two IPOs not from California or New York), parsing Accolade’s proposed IPO valuation after it reignited its march to the public markets, and working to grok Agora’s pretty solid IPO pricing.

But there was still more going on. Over on Extra Crunch and TechCrunch this week, we also chewed over Lemonade’s first whack at IPO pricing (down from its prior valuation) and what’s good about it (better than we’d expected), and talked about the host of companies that we are excited about seeing go public over the next few quarters and years.

What’s coming

There are reasons to expect more of the same going forward in terms of IPO density. Looking into Q3 — now just days away — there are some VCs who anticipate a tide of software IPOs as many unicorns try to get public before the election, and while valuations are super hot.

Redpoint’s Jamin Ball is of this view:

You can think of today’s public markets as a do-over for unicorns that should have gone public last year, but put it off. Or in racing terms, it’s a free pit stop for cars that made an error. But if you don’t get out while the getting is this good, what the hell were you waiting for? That’s the multi-billion-dollar question.

Money, markets, mistakes

Let’s catch up on the week’s biggest market news and how we feel about it. As always, we’ll lean toward the private markets but talk about public tech companies when they matter to the startup world.

Social companies took a hit late in the week after Snap, Facebook, and Twitter fell sharply was trading came to a close, after major advertisers like P&G, Unilever, and Verizon* decided that they might actually care what sort of content their ads are shown against. Bear in mind that this sort of ad-dollar yanking is not new; publishers have dealt with this sort of thing for ages. However, social tech companies haven’t taken as many hits from this as they might have over time. Welcome to reality, y’all. For startups? It’s not great for social startups that Facebook and Twitter are taking very public knocks. If they the startups wanted to raise new capital, that is.

SaaS startups — early and late-stage alike — should take heart that the recent spate of public SaaS earnings went pretty ok. There were some misfires, but it could have been worse. And with SaaS shares on the rise again, it’s a lovely time to be a SaaS company. Putting metrics on it, you can find over a dozen public SaaS companies that are worth more than 25x their next year’s sales. That’s insane.

Something we’re tracking is the pace of SaaS investing in 2020. So far, Crunchbase has 648 rounds for companies tagged as SaaS in 2020 through June 26, 2020. Looking at the same interval last year, it was 1,135. Dollars are down from $12.15 billion in the year-ago period, to $9.36 billion this year. Now, there is venture data lag there, but, all the same, it’s not precisely what we expected to see. Perhaps middle-tier SaaS startups are struggling?

The Zoox deal with Amazon shows how far private-market self-driving rounds valued startups ahead of reality. At one point self-driving engineers were the unobtanium of the labor market. Now, we wonder. Still, a $1 billion deal isn’t the end of the world for any company. For self-driving startups, it could mark the end of the good times in the sector, if we hadn’t already crossed the zenith and began a trudge towards its nadir.

Cybersecurity is still hot hot hot, as this week Salesforce poured capital into security startup Tanium. Tanium is now worth $9 billion. 2019 IPO CrowdStrike has been outperforming as a public company, making its sector look rosy at the same time. Some of that beneficence could be at play here.

Fintech is hard. Uber is backing out of its fintech push, it appears. Sure, every company is going to be a fintech company of sorts in time, but not, apparently, like this. Chime et al, rest easy, Uber’s downshift from its formerly frenetic fintech fight indicates that not every major company is going to be able to take a slice of this particular consumer pie.

And, finally, the excellent Kate Clark has notes on startup valuation trends: “The median valuation for Series C or later-stage financings increased to a new high of $120 million in the first half of this year, from $80 million for 2019, according to data provided to The Information by research firm PitchBook.” It’s still good times, we suppose.

There’s so much more to talk about in the worlds of startups, money and markets, but we have to stop here. This newsletter will come out every Friday once we get all the pipes linked up. So, go ahead and subscribe here (it’s 100% free) so that you miss precisely zero entries. Chat soon!

*Verizon owns Verizon Media Group, which owns TechCrunch, which, in turns, owns me.