Accel

Auto Added by WPeMatico

How one VC firm wound up with no-code startups as part of its investing thesis

Welcome back to The TechCrunch Exchange, a weekly startups-and-markets newsletter. It’s broadly based on the daily column that appears on Extra Crunch, but free, and made for your weekend reading. 

Ready? Let’s talk money, startups and spicy IPO rumors.

How one VC firm wound up with no-code startups as part of its investing thesis

Throughout all the chaos of 2020’s economic upheaval in the startup world, I’ve worked to pay more attention to low-code and no-code services. The short gist of chats I’ve had with investors and founders and public company execs in the past few weeks is that market awareness of no-code/low-code terminology is starting to spread more broadly.

Why? Again, summarizing aggressively, it seems that the gap between what different business units need (marketing, say) and what in-house or external engineering teams are capable of providing is widening. This means there is more total pain in the market, hunting for a solution, often with a tooling budget in hand.

Enter no-code and low-code startups, and even big-company services alike that can help non-developers do more without having to beg for engineering inputs.

I spoke with Arun Mathew this week. He’s a partner at Accel, a venture firm that has invested in all sorts of companies that you’ve heard of — including Webflow, which raised a $72 million Series A last August that Mathew led for his firm. (More on the round here, and notes from TechCrunch on Webflow’s early days here, and here, if you are curious.)

More interesting than that single round is how Accel wound up building a thesis around no-code startups. According to Mathew, Accel had made large investments into companies like Qualtrics, for example, when they were already pretty big and had found product-market fit. That same general approach led to the Webflow deal last year.

At the time, Webflow “wasn’t really defining what they were doing as n- code, they just said ‘we have a very simple drag and drop UI, to build websites, and soon full web applications, very simply,’ ” he told TechCrunch. But, according to Mathew, what Webflow was doing “lined up really well” with the “rising movement of no-code.”

From there, Accel “made a couple [more no-code] investments in Europe where [it has] an early-stage team and a growth team,” along with a few more in India. In the investor’s view, some of the investing activity was “thesis driven because we think [no-code is] a really interesting theme,” but some of the deals “happened opportunistically” where Accel had found “really talented founders in the space that we thought was interesting, executing on a vision that we found appealing.”

In the “span of a year, year-and-a-half,” Accel totted up “seven or eight companies in this no-code space,” which over the last five or six quarters became “a real thesis” for the firm, Mathew said. Accel now has “a global team” of around a dozen people “spending a lot of our time in and around no-code” he added.

Apologies for the length there, but what Mathew said makes me feel a bit less behind. After dipping a toe into learning more about no-code services and tooling (and, yes, low-code as well) it felt somewhat like I was playing catch-up. But as I covered that Webflow round and have since started paying more attention to no-code as well, perhaps you and I are right on time.

(We also recently ran an investor survey on the no-code topic, so hit it up if you want more VC scribbles on the topic.)

Market Notes

For Market Notes this week, we have four things. First, riffs from chats with two public company execs about the software market, some public market stuff and then some neat Airbnb spend data by which I am confounded:

  • I spoke with Apple MDM company Jamf’s CFO Jill Putman this week, after her company reported its first set of earnings as a public company. I wanted to know a bit more about the education market — a hot topic here at TechCrunch, given outsized rounds and huge market demand — and the medical world.
  • Regarding the software market for education, Putman noted that schools are buying lots of hardware, and that software sales should follow. Our read from that is that the boom in education software is not going to slow for some time as schools work on reopening.
  • Ditto the medical market, where Jamf has found uptake as hospitals roll out hardware to patients and families thereof to facilitate all sorts of demand that COVID has engendered. (Hardware needs software, enter Jamf!)
  • Chatting with the CFO our key takeaway was that there are still sectors that could generate a continued COVID tailwind, even if not all Jamf customers fit that bill. For startups that did catch a wave, this is probably good news.
  • And then there was Yext, a company that helps other companies’ customers find accurate information about them around the Web, and has recently gotten into the search game. Yext launched at a TechCrunch conference back in 2009, which is a neat bit of history. Anyway, Yext is public company now and we wanted to chat about which industries are driving growth for the former startup, and how the general climate for software is for the company, so we got on Zoom with its CEO, Howard Lerman.
  • So, which sectors are accelerating from Yext’s perspective? Government, education (again), insurance and financial services. Let that guide your take on the health of various startups.
  • Turning to the business climate, Lerman had some notes: “I will tell you in Q2,” he said, “things came back a bit from Q1.” In what sense? Retention rates, for one, according to the CEO. A return to form is welcome, but Lerman did caution that some companies were slower to “pull the trigger on big deals.”
  • Lerman also said that his perspective on the macro-climate has bounced back as well from a local-minima set around 30 days ago.

Public company execs are pretty guarded in how they talk because they have to be. But what Putman and Lerman seemed to intimate is that economic damage — provided you are selling to business, and not individuals — seems more contained on a per-sector basis than I would have anticipated. And that there are some good things ahead, at least in a handful of hot sectors.

Opening our aperture a bit, some SaaS companies struggled this week to meet investor expectations, even as more companies added themselves to the IPO queue. It’s going to be very busy for a few quarters. (Speaking of which, you can find the good and bad from the new Sumo IPO filing here.)

The economy is still garbage for many, but at least for companies it’s improving. And on that note, some data regarding Airbnb. According to the folks over at Edison Trends, things are going better for the home-booking site than I would have guessed. Per the group:

  • Airbnb’s bookings recovery outstripped its traditional rivals, growing “32% week-over-week” from late April into early June.
  • And, most critically: “Airbnb spending in July was up 22% over the previous July, and spending the week of August 17 was 75% higher than the equivalent week in 2019.”

Wild, right? Perhaps that’s why Airbnb has filed to go public.

Various and Sundry

We’re a tiny bit short on space, so I’ll keep our V&S dose short this week to respect your time. Here’s what I couldn’t not share:

And with that, we are out of room. Hugs, fist bumps and good vibes, and thank you so much for reading this little newsletter on the weekends. It’s a treat to write, and I hope you like it.

Hit me up with notes at alex.wilhelm@techcrunch.com. (I don’t know if you reply to this email if I will get the response. But try it so that we can find out?)

Alex

Investors tell Indian startups to ‘prepare for the worst’ as Covid-19 uncertainty continues

Just three months after capping what was the best year for Indian startups, having raised a record $14.5 billion in 2019, they are beginning to struggle to raise new capital as prominent investors urge them to “prepare for the worst”, cut spending and warn that it could be challenging to secure additional money for the next few months.

In an open letter to startup founders in India, ten global and local private equity and venture capitalist firms including Accel, Lightspeed, Sequoia Capital, and Matrix Partners cautioned that the current changes to the macro environment could make it difficult for a startup to close their next fundraising deal.

The firms, which included Kalaari Capital, SAIF Partners, and Nexus Venture Partners — some of the prominent names in India to back early-stage startups — asked founders to be prepared to not see their startups’ jump in the coming rounds and have a 12-18 month runway with what they raise.

“Assumptions from bull market financings or even from a few weeks ago do not apply. Many investors will move away from thinking about ‘growth at all costs’ to ‘reasonable growth with a path to profitability.’ Adjust your business plan and messaging accordingly,” they added.

Signs are beginning to emerge that investors are losing appetite to invest in the current scenario.

Indian startups participated in 79 deals to raise $496 million in March, down from $2.86 billion that they raised across 104 deals in February and $1.24 billion they raised from 93 deals in January this year, research firm Tracxn told TechCrunch. In March last year, Indian startups had raised $2.1 billion across 153 deals, the firm said.

New Delhi ordered a complete nation-wide lockdown for its 1.3 billion people for three weeks earlier this month in a bid to curtail the spread of COVID-19.

The lockdown, as you can imagine, has severely disrupted businesses of many startups, several founders told TechCrunch.

Vivekananda Hallekere, co-founder and chief executive of mobility firm Bounce, said he is prepared for a 90-day slowdown in the business.

Founder of a Bangalore-based startup, which was in advanced stages to raise more than $100 million, said investors have called off the deal for now. He requested anonymity.

Food delivery firm Zomato, which raised $150 million in January, said it would secure an additional $450 million by the end of the month. Two months later, that money is yet to arrive.

Many startups are already beginning to cut salaries of their employees and let go of some people to survive an environment that aforementioned VC firms have described as “uncharted territory.”

Travel and hotel booking service Ixigo said it had cut the pay of its top management team by 60% and rest of the employees by up to 30%. MakeMyTrip, the giant in this category, also cut salaries of its top management team.

Beauty products and cosmetics retailer Nykaa on Tuesday suspended operations and informed its partners that it would not be able to pay their dues on time.

Investors cautioned startup founders to not take a “wait and watch” approach and assume that there will be a delay in their “receivables,” customers would likely ask for price cuts for services, and contracts would not close at the last minute.

“Through the lockdown most businesses could see revenues going down to almost zero and even post that the recovery curve may be a ‘U’ shaped one vs a ‘V’ shaped one,” they said.

Spotify says it paid $340M to buy Gimlet and Anchor

Spotify doubled down on podcasts last week with a double deal to buy podcast networks Gimlet and Anchor. Those acquisitions were initially undisclosed, but Spotify has quietly confirmed that it spent €300 million, just shy of $340 million, to capture the companies.

That’s according to an SEC filing — hat tip Recode’s Peter Kafka — which deals the transactions which were “primarily in cash,” Spotify said. Kafka previously reported that Spotify paid around $200 million for Gimlet, which, if correct, would mean Anchor fetched the remaining $140 million.

Those numbers represent an impressive return for the investors involved, particularly those who backed the companies at seed stage.

Gimlet raised $28.5 million from investors that included Stripes Group, WPP, Betaworks and Lowercase Capital, according to Crunchbase.

Anchor, meanwhile, raised $14.4 million. Crunchbase data shows its backers included Accel, GV, Homebrew and (again) Betaworks.

Those deals represent a good chunk of change, but Spotify still has more fuel in the tanks.

As we reported last week, it plans to spend a total of up to $500 million this year “on multiple acquisitions” as it seeks to further its position on podcasting which, to date, has been an after-thought to its focus on music. Less these deals, Spotify has around $160 million left in its spending budget for 2019.

In a blog post announcing the deals published last week, Spotify CEO Daniel Ek admitted that he didn’t originally release that “audio — not just music — would be the future of Spotify” when he founded the business in 2006.

“This opportunity starts with the next phase of growth in audio — podcasting. There are endless ways to tell stories that serve to entertain, to educate, to challenge, to inspire, or to bring us together and break down cultural barriers. The format is really evolving and while podcasting is still a relatively small business today, I see incredible growth potential for the space and for Spotify in particular,” Ek explained.