Fundings & Exits

Auto Added by WPeMatico

On-demand logistics company Lalamove gets $515 million Series E

Lalamove will extend its network to cover more small Chinese cities after raising $515 million in Series E funding, the on-demand logistics company announced on its site. The round was led by Sequoia Capital China, with participation from Hillhouse Capital and Shunwei Capital. All three are returning investors.

According to Crunchbase data, this brings Lalamove’s total raised so far to about $976.5 million. The company’s last funding announcement was in February 2019, when it hit unicorn status with a Series D of $300 million.

Bloomberg reported last week that Lalamove was seeking at least $500 million in new funding at $8 billion valuation, or four times what it raised at least year.

Founded in 2013 for on-demand deliveries within the same city, Lalamove has since grown its business to include freight services, enterprise logistics, moving and vehicle rental. In addition to 352 cities in mainland China, Lalamove also operates in Hong Kong (where it launched), Taiwan, Vietnam, Indonesia, Malaysia, Singapore, the Philippines and Thailand. The company entered the United States for the first time in October, and currently claims about 480,000 monthly active drivers and 7.2 million monthly active users.

Part of its Series D had been earmarked to expand into India, but Lalamove was among 43 apps that were banned by the government, citing cybersecurity concerns.

In its announcement, Lalamove CEO Shing Chow said its Series E will be used to enter more fourth- and fifth-tier Chinese cities, adding “we believe the mobile internet’s transformation of China’s logistics industry is far from over.”

Other companies that have recently raised significant funding rounds for their logistics operations in China include Manbang and YTO.

Lalamove’s (known in Chinese as Huolala) Series E announcement said the company experienced a 93% drop in shipment volume at the beginning of the year, due to the COVID-19 pandemic, but has experienced a strong rebound, with order volume up 82% year-over-year even before Double 11.

Reddit acquires Dubsmash

Reddit announced that it has acquired short video platform Dubsmash. The deal’s terms were undisclosed. Dubsmash will retain its own platform and brand, and Reddit will integrate its video creation tools. Its co-founders, Suchit Dash, Jonas Drüppel and Tim Specht, will join Reddit.

According to Crunchbase data, the app has raised $20.2 million from investors including Lowercase Capital, Index Ventures, Eniac Ventures, Heartcore Capital and Sunstone Life.

Dubsmash is now one of TikTok’s biggest rivals, but struggled for several years after a brief stint of popularity in 2015 during its first incarnation as a lip-sync video app. In 2017 it began transforming itself into a social platform and moved its headquarters from Berlin to Brooklyn. By the beginning of this year, Dubsmash’s share of the United States’ short-form video market was second only to TikTok when counted by app installs, and it reportedly held acquisition talks with Facebook and Snap.

Credit for much of Dubsmash’s success goes to Black and Latinx users. While many of TikTok’s highest-profile stars are white, Dubsmash is known for its large communities of Black and Latinx content creators. The polarization between the two apps began to gain more attention earlier this year, when the New York Times published a piece about how dance moves by Black Dubsmash stars are frequently appropriated without credit by TikTok influencers, which means their creators miss out on opportunities like larger followings, brand deals and industry connections.

Reddit has its own issues with racism, and has been criticized for not doing enough to stop hate speech or giving moderators of subreddits targeted by racist trolls enough support.

Last year, founder and former chief executive officer Alexis Ohanian called for his position on Reddit’s board to be filled with a Black candidate when he stepped down, which current CEO Steve Huffman said the company would honor as part of a larger effort to address hate speech on the platform announced during anti-racism demonstrations after the killing of George Floyd by a police officer. Ohanian’s position was filled by Y Combinator CEO Michael Seibel.

In its announcement today, Reddit linked its acquisition of Dubsmash to its inclusion efforts, acknowledging that the app’s “communities are driven by young, diverse creators—about 25 percent of all Black teens in the U.S. are on Dubsmash, and females represent 70 percent of users.”

It also said the integration of Dubsmash’s video creation tools will enable Reddit’s users to “express themselves in original and authentic ways that are endemic to our communities.”

Since launching native videos in 2017, Reddit said usage has increased sharply, growing 2X in 2020 alone. Much of Reddit’s content is still text-based, however, with video, gifs and images often shared from other sources, so Dubsmash’s integration can help Reddit build out its own video platform.

Seoul-based payment tech startup CHAI gets $60 million from Hanhwa, SoftBank Ventures Asia

Demand for contactless payments and e-commerce has grown in South Korea during the COVID-19 pandemic. This is good news for payment service operators, but the market is very fragmented, so adding payment options is a time-consuming process for many merchants. CHAI wants to fix this with an API that enables companies to accept over 20 payment systems. The Seoul-based startup announced today it has raised a $60 million Series B.

The round was led by Hanhwa Investment & Securities, with participation from SoftBank Ventures Asia (the early-stage venture capital arm of SoftBank Group), SK Networks, Aarden Partners and other strategic partners. It brings CHAI’s total funding to $75 million, including a $15 million Series A in February.

Last month, the Bank of Korea, South Korea’s central bank, released a report showing that contactless payments increased 17% year-over-year since the start of COVID-19.

CHAI serves e-commerce companies with an API called I’mport, that allows them to accept payments from over 20 options, including debit and credit cards through local payment gateways, digital wallets, wire transfers, carrier billings and PayPal. It is now used by 2,200 merchants, including Nike Korea and Philip Morris Korea.

CHAI chief executive officer Daniel Shin told TechCrunch that businesses would usually have to integrate each kind of online payment type separately, so I’mport saves its clients a lot of time.

The company also offers its own digital wallet and debit card called the CHAI Card, which launched in June 2019 and now has 2.5 million users, a small number compared with South Korea’s leading digital wallets, which include Samsung Pay, Naver Pay, Kakao Pay and Toss.

“CHAI is a late comer to Korea’s digital payments market, but we saw a unique opportunity to offer value,” said Shin. The CHAI Card offers merchants a lower transaction fee than other cards and users typically check its app about 20 times to see new cashback offers and other rewards based on how often they pay with their cards or digital wallet.

“We’ve digitized the plastic card experience, and this is the first step towards creating a robust online rewards platform,” Shin added.

In press statement, Hanhwa Investment & Securities director SeungYoung Oh director said, “I’mport has reduced what once took e-commerce businesses weeks to complete into a simple copy-and-paste task, radically reducing costs. It is a first-of-its-kind business model in Korea, and I have no doubt that CHAI will continue to grow this service into an essential infrastructure of the global fintech landscape.”

Singapore-based mental health app Intellect reaches one million users, closes seed funding

Theodoric Chew, co-founder and chief executive officer of mental health app Intellect

Theodoric Chew, co-founder and chief executive officer of mental health app Intellect

Intellect, a Singapore-based startup that wants to lower barriers to mental health care in Asia, says it has reached more than one million users just six months after launching. Google also announced today that the startup’s consumer app, also called Intellect, is one of its picks for best personal growth apps of 2020.

The company recently closed an undisclosed seed round led by Insignia Ventures Partners. Angel investors including e-commerce platform Carousell co-founder and chief executive officer Quek Siu Rui; former Sequoia partner Tim Lee; and startup consultancy xto10x’s Southeast Asia CEO J.J. Chai also participated.

In a statement, Insignia Ventures Partners principal Samir Chaibi said, “In Intellect, we see a fast-scaling platform addressing a pain that has become very obvious amidst the COVID-19 pandemic. We believe that pairing clinically-backed protocols with an efficient mobile-first delivery is the key to break down the barriers to access for millions of patients globally.”

Co-founder and chief executive officer Theodoric Chew launched Intellect earlier this year because while there is a growing pool of mental wellness apps in the United States and Europe that have attracted more funding during the COVID-19 pandemic, the space is still very young in Asia. Intellect’s goal is encourage more people to incorporate mental health care into their daily routines by lowering barriers like high costs and social stigma.

Intellect offers two products. One is a consumer app with self-guided programs based on cognitive behavioral therapy techniques that center on issues like anxiety, self-esteem or relationship issues.

The other is a mental health platform for employers to offer as a benefit and includes a recently launched telehealth service called Behavioural Health Coaching that connects users with mental health professionals. The service, which includes one-on-one video sessions and unlimited text messaging, is now a core part of Intellect’s services, Chew told TechCrunch.

Intellect’s enterprise product now reaches 10,000 employees, and its clients include tech companies, regional operations for multinational corporations and hospitals. Most are located in Singapore, Hong Kong, Indonesia and India, and range in size from 100 to more than 3,000 employees.

For many small- to mid-sized employers, Intellect is often the first mental health benefit they have offered. Larger clients may already have EAP (employee assistance programs), but Chew said those are often underutilized, with an average adoption rate of 1% to 2%. On the other hand, he said Intellect’s employee benefit program sees an average adoption rate of 30% in the first month after it is rolled out at a company.

Chew added that the COVID-19 pandemic has prompted more companies to address burnout and other mental health issues.

“In terms of larger trends, we’ve seen a huge spike in companies across the region having mental health and wellbeing of their employees being prioritized on their agenda,” said Chew. “In terms of user trends, we see a significantly higher utilization in work stress and burnout, anxiety and relationship-related programs.”

Intellect’s seed round will be used to expand in Asian markets and to help fund clinical research studies it is currently conducting with universities and organizations in Singapore, Australia and the United Kingdom.

What to make of Stripe’s possible $100B valuation

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.

Welcome to a special Thanksgiving edition of The Exchange. Today we will be brief. But not silent, as there is much to talk about.

Up top, The Exchange noodled on the Slack-Salesforce deal here, so please catch up if you missed that while eating pie for breakfast yesterday. And, sadly, I have no idea why Palantir is seeing its value skyrocket. Normally we’d discuss it, asking ourselves what its gains could mean for the lower tiers of private SaaS companies. But as its public market movement appears to be an artificial bump in value, we’ll just wait.

Here’s what I want to talk about this fine Saturday: Bloomberg reporting that Stripe is in the market for more money, at a price that could value the company at “more than $70 billion or significantly higher, at as much as $100 billion.”

Hot damn. Stripe would become the first or second most valuable startup in the world at those prices, depending on how you count. Startup is a weird word to use for a company worth that much, but as Stripe is still clinging to the private markets like some sort of liferaft, keeps raising external funds, and is presumably more focused on growth than profitability, it retains the hallmark qualities of a tech startup, so, sure, we can call it one.

Which is odd, because Stripe is a huge concern that could be worth twelve-figures, provided that gets that $100 billion price tag. It’s hard to come up with a good reason for why it’s still private, other than the fact that it can get away with it.

Anyhoo, are those reported, possible prices bonkers? Maybe. But there is some logic to them. Recall that Square and PayPal earnings pointed to strong payments volume in recent quarters, which bodes well for Stripe’s own recent growth. Also note that 14 months ago or so, Stripe was already processing “hundreds of billions of dollars of transactions a year.”

You can do fun math at this juncture. Let’s say Stripe’s processing volume was $200 billion last September, and $400 billion today, thinking of the number as an annualized metric. Stripe charges 2.9% plus $0.30 for a transaction, so let’s call it 3% for the sake of simplicity and being conservative. That math shakes out to a run rate of $12 billion.

Now, the company’s actual numbers could be closer to $100 billion, $150 billion and $4.5 billion, right? And Stripe won’t have the same gross margins as Slack .

But you can start to see why Stripe’s new rumored prices aren’t 100% wild. You can make the multiples work if you are a believer in the company’s growth story. And helping the argument are its public comps. Square’s stock has more than tripled this year. PayPal’s value has more than doubled. Adyen’s shares have almost doubled. That’s the sort of public market pull that can really help a super-late-stage startup looking to raise new capital and secure an aggressive price.

To wrap, Stripe’s possible new valuation could make some sense. The fact that it is still a private company does not.

Market Notes

Various and Sundry

And speaking of edtech, Equity’s Natasha Mascarenhas and our intrepid producer Chris Gates put together a special ep on the education technology market. You can listen to it here. It’s good.

Hugs and let’s both go do some cardio,

Alex

PingCAP, the open-source developer behind TiDB, closes $270 million Series D

PingCAP, the open-source software developer best known for NewSQL database TiDB, has raised a $270 million Series D. TiDB handles hybrid transactional and analytical processing (HTAP), and is aimed at high-growth companies, including payment and e-commerce services, that need to handle increasingly large amounts of data.

The round’s lead investors were GGV Capital, Access Technology Ventures, Anatole Investment, Jeneration Capital and 5Y Capital (formerly known as Morningside Venture Capital). It also included participation from Coatue, Bertelsmann Asia Investment Fund, FutureX Capital, Kunlun Capital, Trustbridge Partners, and returning investors Matrix Partners China and Yunqi Partners.

The funding brings PingCAP’s total raised so far to $341.6 million. Its last round, a Series C of $50 million, was announced back in September 2018.

PingCAP says TiDB has been adopted by about 1,500 companies across the world. Some examples include Square; Japanese mobile payments company PayPay; e-commerce app Shopee; video-sharing platform Dailymotion; and ticketing platfrom BookMyShow. TiDB handles online transactional processing (OLTP) and online analytical processing (OLAP) in the same database, which PingCAP says results in faster real-time analytics than other distributed databases.

In June, PingCAP launched TiDB Cloud, which it describes as fully-managed “TiDB as a Service,” on Amazon Web Services and Google Cloud. The company plans to add more platforms, and part of the funding will be used to increase TiDB Cloud’s global user base.

Reliance Retail buys Urban Ladder for $24.4 million

Reliance Retail has acquired a majority stake in furniture and decor platform Urban Ladder, making a broader push into e-commerce as the largest retail chain in India gears up to fight Amazon and Flipkart.

In a filing to the local stock exchange, Reliance Retail said it had acquired a 96% stake in Urban Ladder for about $24.43 million. The Indian retail giant, which retains the option to acquire the remainder stake in the seven-and-a-half-years-old startup, said it has proposed to invest up to $10.06 million more in Urban Ladder by December 2023.

Founded in early 2012, Urban Ladder sells home furniture and decor products online. It also operates a chain of physical retail stores in several Indian cities. The deal size suggests that it was a fire sale.

The startup had raised about $115 million from Sequoia Capital, SAIF Partners, Steadview Capital, and MIT and other investors, according to Crunchbase and Tracxn. In the financial year that ended in March, the Indian startup reported a loss of $6.63 million on a turnover of $58.2 million.

Reliance Retail said (PDF) the investment “will further enable the group’s digital and new commerce initiatives and widen the bouquet of consumer products provided by the group, while enhancing user engagement and experience across its retail offerings.”

Urban Ladder is the latest acquisition for Reliance Retail, which earlier this year said it had entered into a $3.4 billion deal with Future Group to buy several of India’s second largest retail chain’s businesses. In August, Reliance acquired a 60% stake in pharma marketplace Netmeds’ parent firm Vitalic for about $83.2 million.

Reliance Retail, which is part of Reliance Industries (India’s most valued firm), has raised about $6.4 billion in recent months after its sister subsidiary, Jio Platforms, secured over $20 billion this year from Facebook and Google among other high-profile investors.

Reliance Retail, which serves more than 3.5 million customers each week through its nearly 10,000 physical stores in more than 6,500 cities and towns in the country, entered the e-commerce space with JioMart through a joint venture with Jio Platforms. JioMart now has a presence in over 200 Indian cities and towns, and it also maintains a partnership with Facebook for WhatsApp integration.

Warren gets $1.4 million to help local cloud infrastructure providers compete against Amazon and other giants

Started as a side project by its founders, Warren is now helping regional cloud infrastructure service providers compete against Amazon, Microsoft, IBM, Google and other tech giants. Based in Tallinn, Estonia, Warren’s self-service distributed cloud platform is gaining traction in Southeast Asia, one of the world’s fastest-growing cloud service markets, and Europe. It recently closed a $1.4 million seed round led by Passion Capital, with plans to expand in South America, where it recently launched in Brazil.

Warren’s seed funding also included participation from Lemonade Stand and angel investors like former Nokia vice president Paul Melin and Marek Kiisa, co-founder of funds Superangel and NordicNinja.

The leading global cloud providers are aggressively expanding their international businesses by growing their marketing teams and data centers around the world (for example, over the past few months, Microsoft has launched a new data center region in Austria, expanded in Brazil and announced it will build a new region in Taiwan as it competes against Amazon Web Services).

But demand for customized service and control over data still prompt many companies, especially smaller ones, to pick local cloud infrastructure providers instead, Warren co-founder and chief executive officer Tarmo Tael told TechCrunch.

“Local providers pay more attention to personal sales and support, in local language, to all clients in general, and more importantly, take the time to focus on SME clients to provide flexibility and address their custom needs,” he said. “Whereas global providers give a personal touch maybe only to a few big clients in the enterprise sectors.” Many local providers also offer lower prices and give a large amount of bandwidth for free, attracting SMEs.

He added that “the data sovereignty aspect that plays an important role in choosing their cloud platform for many of the clients.”

In 2015, Tael and co-founder Henry Vaaderpass began working on the project that eventually became Warren while running a development agency for e-commerce sites. From the beginning, the two wanted to develop a product of their own and tested several ideas out, but weren’t really excited by any of them, he said. At the same time, the agency’s e-commerce clients were running into challenges as their businesses grew.

Tael and Vaaderpass’s clients tended to pick local cloud infrastructure providers because of lower costs and more personalized support. But setting up new e-commerce projects with scalable infrastructure was costly because many local cloud infrastructure providers use different platforms.

“So we started looking for tools to use for managing our e-commerce projects better and more efficiently,” Tael said. “As we didn’t find what we were looking for, we saw this as an opportunity to build our own.”

After creating their first prototype, Tael and Vaaderpass realized that it could be used by other development teams, and decided to seek angel funding from investors, like Kiisa, who have experience working with cloud data centers or infrastructure providers.

Southeast Asia, one of the world’s fastest-growing cloud markets, is an important part of Warren’s business. Warren will continue to expand in Southeast Asia, while focusing on other developing regions with large domestic markets, like South America (starting with Brazil). Tael said the startup is also in discussion with potential partners in other markets, including Russia, Turkey and China.

Warren’s current clients include Estonian cloud provider Pilw.io and Indonesian cloud provider IdCloudHost. Tael said working with Warren means its customers spend less time dealing with technical issues related to infrastructure software, so their teams, including developers, can instead focus on supporting clients and managing other services they sell.

The company’s goal is to give local cloud infrastructure providers the ability to meet increasing demand, and eventually expand internationally, with tools to handle more installations and end users. These include features like automated maintenance and DevOps processes that streamline feature testing and handling different platforms.

Ultimately, Warren wants to connect providers in a network that end users can access through a single API and user interface. It also envisions the network as a community where Warren’s clients can share resources and, eventually, have a marketplace for their apps and services.

In terms of competition, Tael said local cloud infrastructure providers often turn to OpenStack, Virtuozzo, Stratoscale or Mirantis. The advantage these companies currently have over Warren is a wider network, but Warren is busy building out its own. The company will be able to connect several locations to one provider by the first quarter of 2021. After that, Tael said, it will “gradually connect providers to each other, upgrading our user management and billing services to handle all that complexity.”

Intel agrees to sell its NAND business to SK Hynix for $9 billion

SK Hynix, one of the world’s largest chip makers, announced today it will pay $9 billion for Intel’s flash memory business. Intel said it will use proceeds from the deal to focus on artificial intelligence, 5G and edge computing.

“For Intel, this transaction will allow us to to further prioritize our investments in differentiated technology where we can play a bigger role in the success of our customers and deliver attractive returns to our stockholders,” said Intel chief executive officer Bob Swan in the announcement.

The Wall Street Journal first reported earlier this week that the two companies were nearing an agreement, which will turn SK Hynix into one of the world’s largest NAND memory makers, second only to Samsung Electronics.

The deal with SK Hynix is the latest one Intel has made so it can double down on developing technology for 5G network infrastructure. Last year, Intel sold the majority of its modem business to Apple for about $1 billion, with Swan saying that the time that the deal would allow Intel to “[put] our full effort into 5G where it most closely aligns with the needs of our global customer base.”

Once the deal is approved and closes, Seoul-based SK Hynix will take over Intel’s NAND SSD and NAND component and wafer businesses, and its NAND foundry in Dalian, China. Intel will hold onto its Optane business, which makes SSD memory modules. The companies said regulatory approval is expected by late 2021, and a final closing of all assets, including Intel’s NAND-related intellectual property, will take place in March 2025.

Until the final closing takes places, Intel will continue to manufacture NAND wafers at the Dalian foundry and retain all IP related to the manufacturing and design of its NAND flash wafers.

As the Wall Street Journal noted, the Dalian facility is Intel’s only major foundry in China, which means selling it to SK Hynix will dramatically reduce its presence there as the United States government puts trade restrictions on Chinese technology.

In the announcement, Intel said it plans to use proceeds from the sale to “advance its long-term growth priorities, including artificial intelligence, 5G networking and the intelligent, autonomous edge.”

During the six-month period ending on June 27, 2020, NAND business represented about $2.8 billion of revenue for its Non-volatile Memory Solutions Group (NSG), and contributed about $600 million to the division’s operating income. According to the Wall Street Journal, this made up the majority of Intel’s total memory sales during that period, which was about $3 billion.

SK Hynix CEO Seok-Hee Lee said the deal will allow the South Korean company to “optimize our business structure, expanding our innovative portfolio in the NAND flash market segment, which will be comparable with what we achieved in DRAM.”

VCs reload ahead of the election as unicorns power ahead

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.

It was an active week in the technology world broadly, with big news from Facebook and Twitter and Apple. But past the headline-grabbing noise, there was a steady drumbeat of bullish news for unicorns, or private companies worth $1 billion or more.

A bullish week for unicorns

The Exchange spent a good chunk of the week looking into different stories from unicorns, or companies that will soon fit the bill, and it’s surprising to see how much positive financial news there was on tap even past what we got to write about.

Databricks, for example, disclosed a grip of financial data to TechCrunch ahead of regular publication, including the fact that it grew its annual run rate (not ARR) to $350 million by the end of Q3 2020, up from $200 million in Q2 2019. It’s essentially IPO ready, but is not hurrying to the public markets.

Sticking to our theme, Calm wants more money for a huge new valuation, perhaps as high as $2.2 billion which is not a surprise. That’s more good unicorn news. As was the report that “India’s Razorpay [became a] unicorn after its new $100 million funding round” that came out this week.

Razorpay is only one of a number of Indian startups that have become unicorns during COVID-19. (And here’s another digest out this week concerning a half-dozen startups that became unicorns “amidst the pandemic.”)

There was enough good unicorn news lately that we’ve lost track of it all. Things like Seismic raising $92 million, pushing its valuation up to $1.6 billion from a few weeks ago. How did that get lost in the mix?

All this matters because while the IPO market has captured much attention in the last quarter or so, the unicorn world has not sat still. Indeed, it feels that unicorn VC activity is the highest we’ve seen since 2019.

And, as we’ll see in just a moment, the grist for the unicorn mill is getting refilled as we speak. So, expect more of the same until something material breaks our current investing and exit pattern.

Market Notes

What do unicorns eat? Cash. And many, many VCs raised cash in the last seven days.

A partial list follows. It could be that investors are looking to lock in new funds before the election and whatever chaos may ensue. So, in no particular order, here’s who is newly flush:

All that capital needs to go to work, which means lots more rounds for many, many startups. The Exchange also caught up with a somewhat new firm this week: Race Capital. Helmed by Alfred Chuang, formerly or BEA who is an angel investor now in charge of his own fund, the firm has $50 million to invest.

Sticking to private investments into startups for the moment, quite a lot happened this week that we need to know more about. Like API-powered Argyle raising $20 million from Bain Capital Ventures for what FinLedger calls “unlocking and democratizing access to employment records.” TechCrunch is currently tracking the progress of API-led startups.

On the fintech side of things, M1 Finance raised $45 million for its consumer fintech platform in a Series C, while another roboadvisor, Wealthsimple, raised $87 million, becoming a unicorn at the same time. And while we’re in the fintech bucket, Stripe dropped $200 million this week for Nigerian startup Paystack. We need to pay more attention to the African startup scene. On the smaller end of fintech, Alpaca raised $10 million more to help other companies become Robinhood.

A few other notes before we change tack. Kahoot raised $215 million due to a boom in remote education, another trend that is inescapable in 2020 as part of the larger edtech boom (our own Natasha Mascarenhas has more).

Turning from the private market to the public, we have to touch on SPACs for just a moment. The Exchange got on the phone this week with Toby Russell from Shift, which is now a public company, trading after it merged with a SPAC, namely Insurance Acquisition Corp. Early trading is only going so well, but the CEO outlined for us precisely why he pursued a SPAC, which was actually interesting:

  • Shift could have gone public via an IPO, Russell said, but prioritized a SPAC-led debut because his firm wanted to optimize for a capital raise to keep the company growing.
  • How so? The private investment in public equity (PIPE) that the SPAC option came with ensured that Shift would have hundreds of millions in cash.
  • Shift also wanted to minimize what the CEO described as market risk. A SPAC deal could happen regardless of what the broader markets were up to. And as the company made the choice to debut via a SPAC in April, some caution, we reckon, may have made some sense.

So now Shift is public and newly capitalized. Let’s see what happens to its shares as it gets into the groove of reporting quarterly. (Obviously, if it flounders, it’s a bad mark for SPACs, but, conversely, successful trading could lead to a bit more momentum to SPAC-mageddon.)

A few more things and we’re done. Unicorn exits had a good week. First, Datto’s IPO continues to move forward. It set an initial price this week, which could value it above $4 billion. Also this week, Roblox announced that it has filed to go public, albeit privately. It’s worth billions as well. And finally, DoubleVerify is looking to go public for as much as $5 billion early next year.

Not all liquidity comes via the public markets, as we saw this week’s Twilio purchase of Segment, a deal that The Exchange dug into to find out if it was well-priced or not.

Various and Sundry

We’re running long naturally, so here are just a few quick things to add to your weekend mental tea-and-coffee reading!

Next week we are digging more deeply into Q3 venture capital data, a foretaste of which you can find here, regarding female founders, a topic that we returned to Friday in more depth.

Alex

Gogoro’s Eeyo 1s e-bike goes on sale in France, its first European market

Gogoro announced today that its Eeyo 1s is now available for sale in France, the smart electric bike’s first European market. Another model, the Eeyo 1, will launch over the next few months in France, Belgium, Monaco, Germany, Switzerland, Austria and the Czech Republic.

In France, the Eeyo 1s can be purchased through Fnac, Darty or, in Paris, Les Cyclistes Branchés. The Eeyo 1s is priced at €4699 including VAT, while the the Eeyo 1 will be priced at €4599, also including VAT.

The weight of Eeyo bikes is one of their key selling points and Gogoro says they are about half the weight of most other e-bikes. The Eeyo 1s weighs 11.9 kg and the Eeyo 1 clocks in at 12.4 kg.  Both have carbon fiber frames and forks, but the Eeyo 1s’ seat post, handlebars and rims are also carbon fiber, while on the Eeyo 1 they are made with an alloy.

Based in Taiwan, Gogoro first introduced its Eeyo lineup in May, making them available for sale in the U.S. first. The e-bikes are the company’s second type of vehicle after its SmartScooters, electric scooters that are powered by swappable batteries. The Eeyo bike’s key technology is the SmartWheel, a self-contained hub that integrates its motor, battery, sensor and smart connectivity technology so it can be paired with a smartphone app.

In an interview for the Eeyo’s launch, Gogoro co-founder and chief executive Horace Luke said the company began planning for Eeyo’s launch in 2019, before the COVID-19 pandemic. While sale of e-bikes were already growing steadily before COVID-19, the pandemic has accelerated sales of e-bikes as people avoid public transportation and stay closer to home. Several cities have also closed some streets to car traffic, making riders more willing to use bikes for short commutes and exercise.

Founded in 2011 and backed by investors including Temasek, Sumitomo Corporation, Panasonic, the National Development Fund of Taiwan and Generation (the sustainable tech fund led by former vice president Al Gore), Gogoro is best known for its electric scooters, but it is also working on a turnkey solution for energy-efficient vehicles to license to other companies, with the goal of reducing carbon emissions in cities around the world.

Venture capital gets less diverse in 2020

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. You can subscribe here.


First, a big congrats on making it through the week. If you live in the United States, you just endured one of the wildest news weeks ever. Rapid-fire headlines and nigh-panic have been our lot since last Friday when the president announced he was COVID-19 positive. We’re all very tired. You get points for just surviving.

Second, I wanted to bring you something uplifting this weekend, as you deserve it. Sadly, that’s not what we’re going to talk about.

On Friday, The Exchange covered new data concerning the venture capital results of female founders during the third quarter. The data set was U.S.-focused, but we can presume that it is illustrative of global trends. Regardless of that nuance, the data was depressing.

In the third quarter, U.S.-based female founders and co-founders raised 136 rounds worth $434 million, per PitchBook data. That was a handful more rounds than Q2 2020, but far fewer dollars. And it was down across the board compared to Q3 2019. Even more, as we noted in the piece, the aggregate venture capital world did very well.

Here’s some PwC data making that point, and a bit more from my old employer Crunchbase. What matters is that female founders are doing worse when VCs are super active. This will only perpetuate inequalities and inequities in the startup market.

Speaking of which, here’s some more bad news. Vern Howard Jr., the co-founder and CEO of Hallo, a startup that has raised nearly $2 million, according to Crunchbase, compiled some data on Black founders’ VC performance in Q3. Here’s what he set out to do:

[W]e wanted to put hard numbers behind the promises of so many venture capitalists and create a benchmark for how we can track the investment into black founders over time. So our team pulled a list from Crunchbase of all the startups globally with a total funding amount of $500,000 — $20,000,000 and who raised a round between July 1 and October 1. There were over 1383 companies here and our team went through one by one, to see how many Black founders there were.

There were 31.

Now, you could open up the funding bands to include both smaller and larger funding events, but regardless of the data boundaries, the resulting number — just 2.2% of the total — is a disgrace.

Market Notes

Various and Sundry

  • Continuing our coverage of the savings and investing boom that fintech startups around the world have been riding this year, Freetrade, a British Robinhood if you will, told The Exchange that it crossed £1 billion in September order volume. That’s not bad!
  • Freetrade also recently launched a paid version of its service, as the payment-for-order-flow method of generating revenue that Robinhood is growing on the back of is not allowed across the pond.
  • Sticking to the fintech world, Yotta Savings is a startup that provides a savings option to its users, with the added chance of winning a big monetary prize for having stored their money with the startup. Folks have been whispering in my ear about the company for a bit, but I’ve held off writing about it until now as it was not clear to me if the model was merely a gimmick, or something that would actually attract customers.
  • Well, Yotta grew from 8,000 accounts to more than 30,000 in the past few weeks and has reached the $100 million deposit mark. So, I guess we now care.
  • Coinbase lost one in 20 employees to its new strategy of standing neutral during political times on anything that its CEO deems as unrelated to its core mission, which, as a for-profit company with tectonic financial backing, is making money.
  • On the same topic, Can from The Margins made a salient point that “no politics is a political stance.” Correct, and it is a very conservative one at that.
  • Even more, Coinbase’s CEO made noise about how his company will “work to create an environment where everyone is welcome and can do their best work, regardless of background, sexual orientation, race, gender, age, etc.” Whether he likes it or not, this is a political stance, and one that has nothing to do with the company’s stated core mission. And a political fight earned it — namely, equal access to the workplace.
  • I’ll toss in a plug for this piece on the matter from a VC that TechCrunch published, and these thoughts from a tech denizen on how to guarantee that your company lands on the wrong side of history on essentially everything.
  • Wrapping our grab-bag this week, Ping Identity bought ShoCard. Ping is now a public company, so normally its deals would land outside our wheelhouse. But we care in this case because TechCrunch has covered ShoCard (2015: “ShoCard Is A Digital Identity Card On The Blockchain”), and because the startup does crypto-related work.
  • Seeing a public company snap up a blockchain startup for real money, on purpose and out loud, doesn’t happen every day. More here if you want to read about the deal.

Wrapping, this newsletter is a lot of fun and I appreciate your reading it. It is, also, a work in progress. So feel free to hit respond to it and let me know what you want to see more of. Or hit respond and send me a cute pic of your pet. Either is fine by me.

Chat soon,

Alex

Faraday Future plans to go public through a SPAC deal

Faraday Future, the electric vehicle startup with a messy and complicated past, is planning to go public through a special-purchase acquisition company (SPAC) deal.

The company’s chief executive Carsten Breitfeld told Reuters that the company is working on a reverse merger with a SPAC and “will be able to announce something hopefully quite soon.”

Breitfeld, formerly the co-founder of Chinese EV startup Byton, declined to give more information about who Faraday is talking to or when the deal will closed. A Faraday Future spokesperson contacted by TechCrunch also said the company had no further details to share at this time.

SPACs are blank-check companies that are formed to raise money through an initial public offering in order to merge or acquire other companies. As TechCrunch’s Connie Loizos wrote in an explainer, they’ve become more popular among tech companies recently because many had their initial public offering plans delayed by the pandemic. SPACs also present an alternative to the regulatory issues surrounding traditional IPOs.

Shortly after being appointed CEO in September 2019, Breitfeld told Automotive News that Faraday Future wanted to raise about $850 million by the first quarter of 2020. By that time, company had already received $225 million in bridge financing led by Birch Lake Associates. The funding’s purpose is to finally bring Faraday’s flagship vehicle, the FF91 luxury electric SUV, to market.

Though the SPAC deal’s timeline is still undisclosed, Breitfeld told Reuters that Faraday Future plans to start volume production of the FF91, its first electric luxury SUV, 12 months after securing funding. This would represent a major milestone for the company, which was founded in 2015 but hasn’t produced a production vehicle yet. Faraday Future has made several prototypes, including one that went up for auction in August.

If the deal is successful, Breitfeld told Reuters that Faraday Future will first build the FF91 at its Hanford, California plant, but then work with a contract manufacturer in Asia that it has already entered into an agreement with.

Faraday Future’s financial issues date back to 2017, when LeEco, the Chinese tech company it was closely linked to, began dealing with multiple financial headaches of its own. They worsened when Faraday Future fell out with its main backer, Evergrande Health, in 2018.

Many of those issues were tied to Jia Yueting, founder and former CEO of LeEco and Faraday Future, who filed for personal bankruptcy earlier this year. Filings in the case revealed that Jia’s bankruptcy was funded by one of Faraday Future’s main holding companies, Pacific Technology. The documents also revealed that Faraday Future had just $6.8 million in cash at the end of July 2019.

Breitfeld told Reuters that Jia no longer owns stock in Faraday Future. The approval of Jia’s bankruptcy enabled Faraday Future to once again pursue investments to produce its electric vehicles, though now that may hinge on the success of its SPAC deal. Breitfeld acknowledged that Faraday Future’s past raises questions. “Because of the history and sometimes the bad news of the company, not everyone is really trusting us,” he told Reuters. “They want to see that we’ve become a stable company.”

Allbirds CEO Joey Zwillinger on the startup’s $100 million round, profitability, and SPAC mania

As people spend less time out in the world and more time daydreaming about when a vaccine will arrive, lifestyle shoes are only gaining traction.

One obvious beneficiary is Allbirds, the San Francisco-based maker of comfortable, sustainable kicks that launched in 2016 and quickly became a favorite in Silicon Valley circles before taking off elsewhere.

Though the company saw its business slow this year because of the pandemic, its products are now available to purchase in 35 countries and its 20 brick-and-mortar stores are sprinkled throughout the U.S. and Europe, with another outpost in Tokyo and several shops in China.

Investors clearly see room for more growth. Allbirds just closed on $100 million in Series E funding at roughly the same $1.6 billion valuation it was assigned after closing on $27 million in Series D funding earlier this year, and blank-check companies have been calling, says cofounder and CEO Joey Zwillinger. He talked with us earlier this week in a chat that has been edited for length and clarity.

TC: Your shoes are sold worldwide. What are your biggest markets?

JZ: The biggest market by far is the U.S., and the same day that we started here in 2016, we also launched in New Zealand, so that’s been very good to us over the last four years, too. But we’ve seen growth in Japan and Korea and China and Canada and Australia. We have a network of warehouses globally that lets us reach 2.5 billion people [who], if they were so inclined, could get their product in three days. We’re proud of the infrastructure we’ve set up.

TC: We’ve all worn shoes a lot less than we might have expected in 2020. How has that impacted your business?

JZ: We’re growing but definitely not at the same pace we would be had the pandemic not occurred. We’re predominantly digital in terms of how we reach people, but stores are important for us. And we had to switch [those] off completely and lost a portion of our sales for a long time.

TC: Did you have to lay off your retail employees?

JZ: A large portion of our retail force was unable to work, but we were luckily able to keep them fully paid for four months, plus [some received] government benefits if they got that. And now all of our 20 stores are up and running again in a way that’s totally safe and everyone feels really comfortable.

We also donated shoes to frontline workers — 10,000 pairs or around a million dollars’ worth.

TC: What does Allbirds have up its sleeve, in terms of new offerings?

JZ: We just launched our native mobile app, and through it we’re able to give our more loyal fans exclusives. It’s a really cool experience that blends technology with fashion. You can try on shoes in a virtual mirror; you’re given information [about different looks] that you wouldn’t have otherwise.

We also launched wool-based weather-proofed running shoes in April that have blown away our expectations but [were fast discovered by] people who haven’t really been running for 10 to 15 years and are running again [because of gym closures]. It’s a super high-stakes category and one that’s hard to break into because people buy on repeat. But we spent two years making it. It’s not like we launched it because of the pandemic. It’s a shoe for 5K to 10K distances — it’s not a marathon shoe or a trail shoe — and that we’ve been able to clearly articulate that speaks to its success, I think.

TC: What about clothing?

We launched underwear and socks last year in a small launch. We developed a textile that hasn’t been used before — it’s a blend of tree fiber and merino wool because our view is that nature can unlock magic. Underwear is typically synthetic — it’s made from plastics — or cotton, which isn’t a great material for a whole bunch of reasons. [Meanwhile] ours is phenomenal for temperature control; it also feels like cashmere.

TC: Patagonia really advertises its social and environmental values. Do you see Allbirds evolving in a similar way, with a growing spate of offerings?

JZ: I’m incredibly humbled by [the comparison]. Given their environmental stewardship of the retail sector, we hope we’re compared to them. But they are much more of an outdoor brand — not a competitor so to speak. And we’d love to share more of the retail world with them so we can do our environmental thing together.

TC: You just raised funding. Are you profitable and, if not, is profitability in sight?

JZ: We’ve been profitable for most of our existence. Having some discipline as we grow is good. We’re not close to the profitability that we’ll eventually have, but we’re still a small company in investment mode. After we emerge from the pandemic, we’ll enter a ramping-up phase.

TC: Everyone and their brother is raising money for a blank-check company, or SPAC, which can make it a lot faster for a private company to go public. Have you been approached, and might this option interest you?

JZ: Yes and no. Yes we’ve been approached, and no, we’re [not interested]. We want to build a great company and being public might be something that helps enable that for a whole bunch of reasons. But we want to do it at the right time, in a way that helps the business grow in the most durable and sustainable fashion. Just jumping at the opportunity of a SPAC without doing the rigorous prep the way we want to, we’re not super focused on that

E-scooter startup Neuron Mobility adds $12M to its Series A for expansion in Australia and New Zealand

Neuron Mobility, a Singapore-based e-scooter rental startup, announced today that it has added $12 million to its Series A. Led by Square Peg, an Australian venture capital firm and GSR Ventures, this increases the round’s new total to $30.5 million. The company, which operates in Australia and New Zealand in addition to Southeast Asian markets, first announced its Series A in December 2019.

Part of Neuron Mobility’s growth plans hinges on the increased adoption of electric scooters and bikes during the COVID-19 pandemic. Many people are using their cars less frequently because they are working remotely or there are movement restrictions where they live. When they do go out, electric bikes and scooters offer an alternative to public transportation and ride-hailing services for short trips.

Neuron Mobility’s chief executive Zachary Wang said the company raised a Series A+ instead of moving onto a Series B because more cities are “opening up to the possibility of micromobility, particularly rental e-scooters as they present an individual transport option that takes pressure off public transport and allows people to continue social distancing.”

“We’ve been experiencing tremendous growth in ANZ and the pandemic has made us fast track our plans,” he added.

Though Neuron Mobility currently does not operate in other Southeast Asian countries besides Singapore, Wang said it is “constantly evaluating opportunities across APAC.”

The new funding will be used to speed up Neuron Mobility’s expansion plans in Australia and New Zealand, where it claims to be the leading electric scooter rental operator. The company is currently present in nine locations, including Auckland, New Zealand, and Australian cities Adelaide, Brisbane, Darwin, Canberra and Townsville. Neuron Mobility plans to expand into five new cities over the next two months and part of that involves hiring 400 more people in Australia, New Zealand and Singapore. In addition to the Asia-Pacific, Neuron Mobility will also launch in Slough, it’s first location in the United Kingdom, by the end of this year.

Neuron Mobility’s research found that before the COVID-19 lockdowns in Australia, one in five of its users had never used an e-scooter before. But now Australian and New Zealand users have increased their average e-scooter trip distances by 23% to 2.6 kilometers, with the average duration of rides rising by 10% to more than 14 minutes. Neuron Mobility’s pricing is meant to be affordable depending on different markets. For example, in Brisbane, users pay one Australian dollar (about 68 U.S. cents) to begin a trip and then 38 Australian cents for each minute of the ride. Its e-scooters can go up to speeds of about 25 kilometers (15.5 miles) per hour.

Other “micromobility” companies, including Ofo, Reddy Go, Obike and Lime, have also offered rental services in Australia and New Zealand, but ran into trouble. Bike-sharing startups Ofo, Reddy Go and Obike withdrew from Australia in part because city councils were frustrated by bikes were being abandoned on sidewalks and in parks. Lime still operates in Australian cities, but in June, the Australian Competition and Consumer Commission found that the company failed to disclose safety issues with its Generation 2 scooters (in response, Lime said it would implement new compliance procedures and upgrade to its new Generation 3 scooter).

Wang said Neuron Mobility avoids those issues by strategically planning which cities it will launch in, instead of focusing on rapid expansion, partnering with city councils and “continually shifting and adapting to meet their needs.” Several of Neuron Mobility’s features, including geofencing to control where and how fast e-scooters can be ridden, and a “Helmet Lock” to make helmets available for all scooters, were developed after discussions with city councils. Neuron Mobility’s scooters, designed by the company specifically for renting, also use swappable batteries to decrease pollution.

After launching in Singapore, Neuron Mobility decided to focus on Australia and New Zealand because “both countries have cities that are highly suitable for micromobility in terms of infrastructure and regulations,” Wang said. City councils have also “been keen to push the boundaries of what can be done with technology to make programs better and safer and that really suits our way of thinking.”

 

Philippines payment processing startup PayMongo lands $12 million Series A led by Stripe

Stripe has led a $12 million Series A round in Manila-based online payment platform PayMongo, the startup announced today.

PayMongo, which offers an online payments API for businesses in the Philippines, was the first Filipino-owned financial tech startup to take part in Y Combinator’s accelerator program. Y Combinator and Global Founders Capital, another previous investor, both returned for the Series A, which also included participation from new backer BedRock Capital.

PayMongo partners with financial institutions, and its products include a payments API that can be integrated into websites and apps, allowing them to accept payments from bank cards and digital wallets like GrabPay and GCash. For social commerce sellers and other people who sell mostly through messaging apps, the startup offers PayMongo Links, which buyers can click on to send money. PayMongo’s platform also includes features like a fraud and risk detection system.

In a statement, Stripe’s APAC business lead Noah Pepper said it invested in PayMongo because “we’ve been impressed with the PayMongo team and the speed at which they’ve made digital payments more accessible to so many businesses across the Philippines.”

The startup launched in June 2019 with $2.7 million in seed funding, which the founders said was one of the largest seed rounds ever raised by a Philippines-based fintech startup. PayMongo has now raised a total of almost $15 million in funding.

Co-founder and chief executive Francis Plaza said PayMongo has processed a total of almost $20 million in payments since launching, and grown at an average of 60% since the start of the year, with a surge after lockdowns began in March.

He added that the company originally planned to start raising its Series A in in the first half of next year, but the growth in demand for its services during COVID-19 prompted it to start the round earlier so it could hire for its product, design and engineering teams and speed up the release of new features. These will include more online payment options; features for invoicing and marketplaces; support for business models like subscriptions; and faster payout cycles.

PayMongo also plans to add more partnerships with financial service providers, improve its fraud and risk detection systems and secure more licenses from the central bank so it can start working on other types of financial products.

The startup is among fintech companies in Southeast Asia that have seen accelerated growth as the COVID-19 pandemic prompted many businesses to digitize more of their operations. Plaza said that overall digital transactions in the Philippines grew 42% between January and April because of the country’s lockdowns.

PayMongo is currently the only payments company in the Philippines with an onboarding process that was developed to be completely online, he added, which makes it attractive to merchants who are accepting online payments for the first time. “We have a more efficient review of compliance requirements for the expeditious approval of applications so that our merchants can use our platform right away and we make sure we have a fast payout to our merchants,” said Plaza.

If the momentum continues even as lockdowns are lifted in different cities, that means the Philippine’s central bank is on track to reach its goal of increasing the volume of e-payment transactions to 20% of total transactions in the country this year. The government began setting policies in 2015 to encourage more online payments, in a bid to bolster economic growth and financial inclusion, since smartphone penetration in the Philippines is high, but many people don’t have a traditional bank account, which often charge high fees.

Though lockdown restrictions in the Philippines have eased, Plaza said PayMongo is still seeing strong traction. “We believe the digital shift by Filipino businesses will continue, largely because both merchants and customers continue to practice safety measures such as staying at home and choosing online shopping despite the more lenient quarantine levels. Online will be the new normal for commerce.”

WeWork sells majority stake in Chinese entity, seeks localization

Four years after its foray into the Chinese market followed by rapid and cash-hemorrhaging expansion, WeWork decided to wind down its involvement in the country.

WeWork’s Chinese unit has secured a $200 million investment led by Shanghai-based equity firm Trustbridge Partners, which first backed WeWork China in its Series B round in 2018, the American co-working giant announced. What the release didn’t emphasize is that the latest financing effectively makes Trustbridge Partners the controlling shareholder, leaving WeWork with a minority stake in its Chinese entity.

The investment marks WeWork China’s transition from a subsidiary of a multinational into a Chinese-owned company — with a globally recognized brand, sort of like franchising.

WeWork China will continue its close cooperation with WeWork’s global headquarters to “ensure the consistency of the WeWork brand and satisfication of global members and employees,” a spokesperson said in a statement to TechCrunch.

Other changes are already underway, though. There have been layoffs as part of the sale and “many things remain uncertain,” said the person with knowledge of the matter. WeWork China declined to comment on the matter.

WeWork arrived in China at the height of the country’s co-working boom. Its brand, service and chic design have long attracted well-financed startups and open-minded big corps. Since 2016, more than 100 WeWork spaces have sprung up across 12 cities in China, including dozens it acquired from local rival Naked Hub. It now claims 65,000 members in the country.

It’s also launched a range of initiatives in China, including an on-demand service for customers who don’t want to commit to long-term leases, which could help drive in more revenue.

Globally, WeWork serves 612,000 members in 843 offices across 38 countries. China accounts for roughly one-eight of its locations, down from a share of one-sixth in 2018.

WeWork China is not only competing with cheaper, home-grown alternatives — both private and government-subsidized — but also dealing with a weakening economy in COVID-19 times and uncertain U.S.-China relations. Relinquishing operational control in a cash-burning market seems logical, given all the troubles it already faces back home.

Ahead of its planned initial public offering, which was later postponed, WeWork said trade policy uncertainty could have an adverse impact on its business. It also highlighted China, a lower-priced market, as a drag on its profit margin.

Following the investment, Trustbridge Partners will launch an extensive localization makeover for WeWork China, from “decision-making and management, product and business, through to operations and productivity,” said the WeWork China representative. The new owner will also seek partnerships with local communities, real estate firms and Chinese enterprises during the process.

WeWork China gets a new boss as a result of the sale. Michael Jiang, ann operating partner at Trustbridge Partners, will serve as the acting chief executive. Jiang was previously a senior vice presidnet at Meituan, China’s food delivery and on-demand services giant.

China’s electric carmaker WM Motor pulls in $1.47 billion Series D

Chinese electric vehicle startup WM Motor just pocketed an outsize investment to fuel growth in a competitive landscape increasingly coveted by foreign rival Tesla. The five-year-old company raised 10 billion yuan ($1.47 billion) in a Series D round, it announced on Tuesday, which will pay for research and development, branding, marketing and expansion of sales channel.

WM Motor, backed by Baidu and Tencent, is one of the highest funded EV startups in China alongside NIO, Xpeng and Li Auto, all of which have gone public in New York. With its latest capital boost, WM Motor could be gearing up for an initial public offering. As Bloomberg’s sources in July said, the company was weighing a listing on China’s Nasdaq-style STAR board as soon as this year.

Days before its funding news, WM Motor unveiled its key partners and suppliers: Qualcomm Snapdragon’s cockpit chips will power the startup’s in-cabin experience; Baidu’s Apollo autonomous driving system will give WM vehicles self-parking capability; Unisplendour, rooted in China’s Tsinghua University, will take care of the hardware side of autonomous driving; and lastly, integrated circuit company Sino IC Leasing will work on “car connectivity” for WM Motor, whatever that term entails.

It’s not uncommon to see the new generation of EV makers seeking external partnerships given their limited experience in manufacturing. WM Motor’s rival Xpeng similarly works with Blackberry, Desay EV and Nvidia to deliver its smart EVs.

WM Motor was founded by automotive veteran Freeman Shen, who previously held executive positions at Volvo, Fiat and Geely in China.

The startup recently announced an ambitious plan for the next 3-5 years to allocate 20 billion yuan ($2.95 billion) and 3,000 engineers to work on 5G-powered smart cockpits, Level-4 driving and other futuristic auto technologies. That’s a big chunk of the startup’s total raise, which is estimated to be north of $3 billion, based on Crunchbase data and its latest funding figure.

Regional governments are often seen rooting for companies partaking in China’s strategic industries such as semiconductors and electric cars. WM Motor’s latest round, for instance, is led by a state-owned investment platform and state-owned carmaker SAIC Motor, both based in Shanghai where the startup’s headquarters resides. The city is also home to Tesla’s Gigafactory where the American giant churns out made-in-China vehicles.

In July, the Chinese EV upstart delivered its 30,000th EX5 SUV vehicle, which comes at about $22,000 with state subsidy and features the likes of in-car video streaming and air purification. The company claimed that parents of young children account for nearly 70% of its customers.

Unity Software has strong opening, gaining 31% after pricing above its raised range

Whoever said you can’t make money playing video games clearly hasn’t taken a look at Unity Software’s stock price.

On its first official day of trading, the company rose more than 31%, opening at $75 per share before closing the day at $68.35. Unity’s share price gains came after last night’s pricing of the company’s stock at $52 per share, well above the range of $44 to $48 which was itself an upward revision of the company’s initial target.

Games like “Pokémon GO” and “Iron Man VR” rely on the company’s software, as do untold numbers of other mobile gaming applications that use the company’s toolkit for support. The company’s customers range from small gaming publishers to large gaming giants like Electronic Arts, Niantic, Ubisoft and Tencent.

Unity’s IPO comes on the heels of other well-received debuts, including Sumo Logic, Snowflake and JFrog .

TechCrunch caught up with Unity’s CFO, Kim Jabal, after-hours today to dig in a bit on the transaction.

According to Jabal, hosting her company’s roadshow over Zoom had some advantages, as her team didn’t have to focus on tackling a single geography per day, allowing Unity to “optimize” its time based on who the company wanted to meet, instead, of say, whomever was free in Boston or Chicago on a particular Tuesday morning.

Jabal’s comments aren’t the first that TechCrunch has heard regarding roadshows going well in a digital format instead of as an in-person presentation. If the old-school roadshow survives, we’ll be surprised, though private jet companies will miss the business.

Talking about the transaction itself, Jabal stressed the connection between her company’s employees, value  and their access to that same value. Unity’s IPO was unique in that existing and former employees were able to trade 15% of their vested holdings in the company on day one, excluding “current executive officers and directors,” per SEC filings.

That act does not seemed to have dampened enthusiasm for the company’s shares, and could have helped boost early float, allowing for the two sides of the supply and demand curves to more quickly meet close to the company’s real value, instead of a scarcity-driven, more artificial figure.

Regarding Unity’s IPO pricing, Jabal discussed what she called a “very data-driven process.” The result of that process was an IPO price that came in above its raised range, and still rose during its first day’s trading, but less than 50%. That’s about as good an outcome as you can hope for in an IPO.

One final thing for the SaaS nerds out there. Unity’s “dollar-based net expansion rate” went from very good to outstanding in 2020, or in the words of the S-1/A:

Our dollar-based net expansion rate, which measures expansion in existing customers’ revenue over a trailing 12-month period, grew from 124% as of December 31, 2018 to 133% as of December 31, 2019, and from 129% as of June 30, 2019 to 142% as of June 30, 2020, demonstrating the power of this strategy.

We had to ask. And the answer, per Jabal, was a combination of the company’s platform strength and how customers tend to use more of Unity’s services over time, which she described as growing with their customers. And the second key element was 2020’s unique dynamics that gave Unity a “tailwind” thanks to “increased usage, particularly in gaming.”

Looking at our own gaming levels in 2020 compared to 2019, that checks out.

This post closes the book on this week’s IPO class. Tired yet? Don’t be. Palantir is up next, and then Asana .

Homage announces strategic partnership with Infocom, one of Japan’s largest healthcare IT providers

Homage, a Singapore-based caregiving and telehealth company, has taken a major step in its global expansion plan. The startup announced today that it has received strategic investment from Infocom, the Japanese information and communications technology company that runs one of the largest healthcare IT businesses in the country. Infocom’s solutions are used by more than 13,000 healthcare facilities in Japan.

During an interview with TechCrunch that will air as part of Disrupt tomorrow, Homage co-founder and chief executive Gillian Tee said “Japan has one of the most ageing populations in the world, and the problem is that we need to start building infrastructure to enable people to be able to access the kind of care services that they need.” She added that Homage and Infocom’s missions align because the latter is also building a platform for caregivers in Japan, in a bid to help solve the shortage of carers in the country.

Homage raised a Series B earlier this year with the goal of entering new Asian markets. The company, which currently operates in Singapore and Malaysia, focuses on patients who need long-term rehabilitation or care services, especially elderly people. This makes it a good match for Japan, where more than one in five of its population is currently aged 65 or over. In the next decade, that number is expected to increase to about one in three, making the need for caregiving services especially acute.

The deal includes a regional partnership that will enable Homage to launch its services into Japan, and Infocom to expand its reach in Southeast Asia. Homage’s services include a caregiver-client matching platform and a home medical service that includes online consultations and house calls, while Infocom’s technology covers a wide range of verticals, including digital healthcare, radiology, pharmaceuticals, medical imaging and hospital information management.

In a statement about the strategic investment, Mototaka Kuboi, Infocom’s managing executive officer and head of its healthcare business division, said, “We see Homage as an ideal partner given the company’s unique cutting-edge technology and market leadership in the long-term care segment, and we aim to drive business growth not only in Homage’s core and rapidly growing market in Southeast Asia, but also regionally.”

Do Ventures launches $50 million fund for Vietnamese startups, backed by Naver, Vertex and other notable LPs

Vy Le and Dzung Nguyen, the founders and general partners of Do Ventures, an investment firm focused on early-stage Vietnamese startups

Vy Le and Dzung Nguyen, the founders and general partners of Do Ventures, an investment firm focused on early-stage Vietnamese startups

New investment firm Do Ventures announced today the first closing of its fund for Vietnamese startups, which is backed by several of Asia’s most notable institutional investors. Called Do Ventures Fund I, the investment vehicle has hit more than half of its $50 million target, with limited partners including Korean internet giant Naver; Sea, whose businesses include Garena and Shopee; Singapore-based venture capital firm Vertex Holdings; and Korean app developer Woowa Brothers.

Do Ventures was founded by general partners Nguyen Manh Dung, former CEO of CyberAgent Ventures Vietnam and Thailand, and Vy Hoang Uyen Le, previously a general partner at ESP Capital. Its first fund will focus on early-stage companies and invest in seed to Series B rounds.

Both of its founders have a long track record of working with Vietnamese startups. Nguyen was an early investor in companies including Tiki.vn, one of Vietnam’s largest online marketplaces; food delivery platform Foody.vn; and digital marketing company CleverAds. Before she became an investor, Le was a serial entrepreneur and served as chief executive officer at fashion e-commerce company Chon.vn and VinEcom, the e-commerce project launched by Vietnamese real estate conglomerate Vingroup.

In an email, Le told TechCrunch that Do Ventures Fund I is industry agnostic, but will structure its investments into two tiers. The first will consist of B2C platforms, including education, healthcare and social commerce, that serve younger users, and are addressing changes in consumer behavior caused by the COVID-19 pandemic. The second tier will include B2B platforms that can provide services for companies in the first tier, and allow them to expand regionally with SaaS solutions for data and e-commerce services.

Do Ventures’ founders say that between 2016 and 2019, the amount of startup funding in Vietnam grew eight-fold to $861 million last year. But there are still only a few funds that focus specifically on the country, which means early-stage Vietnamese startups often run into funding gaps.

One of the firm’s goals is to help founders weather the impact of COVID-19, so their companies can continue growing in spite of the pandemic.

“We hope tech startups can enable traditional businesses to digitize faster and better adapt to the new normal,” Le said. “For consumers, we hope tech startups can transform customer experience in all aspects of daily life, and bring more accessibility to consumers in remote areas.”

The firm will take a hands-on approach to its investments, helping companies develop new business models. Do Ventures plans to set up an automatic reporting system that collects data about how its portfolio companies are performing, which its general partners say will enable them support startups’ operations, including product development, business organization, supply chain development, and overseas expansion.

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

The week’s biggest IPO news had nothing to do with Monday’s S-1 deluge

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. (You can sign up for the newsletter here!)

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

The week’s biggest IPO news had nothing to do with Monday’s S-1 deluge

During Monday’s IPO wave I was surprised to see Asana join the mix. 

After news had broken in June that the company had raised hundreds of millions in convertible debt, I hadn’t guessed that the productivity unicorn wouldn’t give us an S-1 in the very next quarter. I was contentedly wrong. But the reason why Asana’s IPO is notable isn’t really much to do with the company itself, though do take the time to dig into its results and history

What matters about Asana’s debut is that it appears set to test out a model that, until very recently, could have become the new, preferred way of going public amongst tech companies. 

Here’s what I mean: Instead of filing to go public, and raising money in a traditional IPO, or simply listing directly, Asana executed two, large, convertible debt offerings pre-debut, thus allowing it to direct list with lots of cash without having raised endless equity capital while private.

The method looked like a super-cool way to get around the IPO pricing issue that we’ve seen, and also provide a ramp to direct listing for companies that didn’t get showered with billions while private. (That Asana co-founder Dustin Moskovitz’s trust led the debt deal is simply icing on this particular Pop-Tart).

This brief column was going to be all about how we may see unicorns follow the Asana route in time, provided that its debt-powered direct listing goes well. But then the NYSE got permission from the SEC to allow companies to raise capital when they direct-list.

In short, some companies that direct-list in the future will be able to sell a bloc of shares at a market-set value that would have previously set their “open” price. So instead of flogging the stock and setting a price and selling shares to rich folks and then finding out what public investors would really pay, all that IPO faff is gone and bold companies can simply offer shares at whatever price the market will bear. 

All that is great and cool, but as companies will be able to direct-list and raise capital, the NYSE’s nice news means that Asana is blazing a neat trail, but perhaps not one that will be as popular as we had expected.

The NASDAQ is working to get in on the action. As Danny said yesterday on the show, this new NYSE method is going to crush traditional IPOs, provided that we’re understanding it during this, its nascent period.

Market Notes

Look, this week was bananas, and my brain is scrambled toast. You, like myself, are probably a bit confused about how it is only finally Saturday and not the middle of next week. But worry not, I have a quick roundup of the big stuff from our world. And, notes from calls with the COO of Okta and the CEO of Splunk, from after their respective earnings report: 

Over to our chats, starting with Okta COO and co-founder Frederic Kerrest:

  • Okta had a good quarter. But instead of noodling on just the numbers, we wanted to chat with its team about the accelerating digital transformation and what they are seeing in the market. 
  • On the SMB side, Kerrest reported little to no change. This is a bit more bullish than we anticipated, given that it seemed likely that SMB customers would have taken the largest hit from COVID.
  • Kerrest also told us some interesting stuff about how the wave of COVID-related spend has changed: “We actually have seen the COVID ‘go home and remote work very quickly’ [thing], we’ve actually seen that rush subside a little bit, because you know now we’re five months into [the pandemic], so they had to figure it out.”
  • This is a fascinating comment for the startup world
  • Okta is big and public and is going to grow fine for a while. Whatever. For smaller companies aka startups that were seeing COVID-related tailwinds, I wonder how common seeing “that rush subside a little bit” is. If it is very common, many startups that had taken off like a rocket could be seeing their growth come back to Earth.
  • And if they raised a bunch of money off the back of that growth at a killer valuation, they may have just ordered shoes that they’ll struggle to grow into.

And then there was new McLaren F-1 sponsor Splunk, data folks who are in the midst of a transition to SaaS that is seeing the firm double-down on building ARR and letting go of legacy incomes:

  • I spoke with CEO Doug Merritt, kicking off with a question about his use of the word “tectonic” regarding the shift to data-driven decisions from Splunk’s earnings report. (“As organizations continue to adapt to tectonic societal shifts brought on by COVID-19, one thing is constant: the power of data to radically transform business.”)
  • I wanted to know how far down the American corporate stack that idea went; are mid-size businesses getting more data-savvy? What about SMBs? Merritt was pretty bullish: “We’re getting to tectonic,” he said during our call, adding that before “it really was the Facebooks, the Googles, the Apples, the DoorDashes, [and] the LinkedIns that were using [Splunk].” But now, he said, even small restaurant chains are using data to better track their performance. 
  • Relating this back to the startup world, I’ve been curious if lots of stuff that you and I think is cool, like low-code business app development, will actually find as wide a footing in the market as some expect. Why? Because most small and medium-sized businesses are not tech companies at all. But if Merritt is right, then the CEO of Appian might be right as well about how many business apps the average company is going to have in a few years’ time.

And finally for Market Notes, my work BFF and IRL friend Ron Miller wrote about Box’s earnings this week, and how the changing world is bolstering the company. It’s worth a read. (Most public software companies are doing well, mind.)

Various and Sundry

We’re already over length, so I’ll have to keep our bits-and-bobs section brief. Thus, only the brightest of baubles for you, my friend:

And with that, we are out of room. Hugs, fist bumps and good vibes, 

Alex

Palantir and the great revenue mystery

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. You can subscribe to the newsletter here if you haven’t yet.

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

Palantir and the great revenue mystery

As I write to you on Friday afternoon, the Palantir S-1 has yet to drop, but TechCrunch did break some news regarding the impending filing and just how big the company actually is. Please forgive the block quote, but here’s our reporting:

In screenshots of a draft S-1 statement dated yesterday (August 20), Palantir is listed as generating revenues of roughly $742 million in 2019 (Palantir’s fiscal year is a calendar year). That revenue was up from $595 million in 2018, a gain of roughly 25%. […] Palantir lists a net loss of roughly $580 million for 2019, which is almost identical to its loss in 2018. The company listed a net loss percentage of 97% for 2018, improving to a loss of 78% for last year.

A few notes from this. First, those losses are flat icky. Palantir was founded in 2003 or 2004 depending on who you read, which means that it’s an old company. And it was running an effective -100% net margin in 2018? Yowza.

Second, what the flocking frack is that revenue number? Did you expect to see Palantir come in with revenues of less than $1 billion? If you did, well done. After a deluge of articles over the years discussing just how big Palantir had become, I was anticipating a bit more (more here for context). Here are two examples:

  • Reporting from TechCrunch that Palantir expected “more than $1 billion in contracts” in 2014
  • Reporting from Bloomberg that Palantir had “booked deals totaling $1.7 billion in 2015”

Notably, Palantir’s real revenue result, or one very close to it, made it into Business Insider this April. The reporting makes the company’s S-1 less of a climax and more of a denouement. But, hey, we’re still glad to have the filing.

The Exchange will have a full breakdown of Palantir’s numbers Monday morning, but I think what Palantir coverage over the years shows is that when companies decline to share specific revenue figures that are clear, just presume that what they do share is misleading. (ARR is fine, trailing revenue is fine, “contract” metrics are useless.)

Market Notes

The Exchange spent a lot of time digging into e-commerce venture capital results this week, including notes from some VCs about why e-commerce-focused startups aren’t raising as much as we might have guessed.

Overstock!

We got a chance to fire a question over to the CEO of Overstock.com on the matter, adding to what we learned from private investors on the same topic. So here’s the online retailer’s CEO Jonathan Johnson, answering our question on how many smaller vendors are signing up to sell on its platform during today’s e-comm boom:

We have had increased demand to sell on Overstock and we are adding new partners daily. To protect the customer experience, we have become more selective and have increased the requirements to become a selling partner on our site. Our customers’ experience is critical to our long-term success and if partners cannot perform to our operational standards, we do not allow them to sell on our site.

We care because Shopify and BigCommerce are stacking up new rev, and we were curious how widely the e-commerce step-change from major platforms extended. Seems like all of them are eating.

How today’s evolving economic landscape isn’t working out better for e-commerce-focused startups is still a surprise. Normally when the world changes rapidly, startups do well. This time it seems that Amazon and a few now-public unicorns are snagging most of the gains.

Airbnb!

Anyhoo, onto the Airbnb world; we have a few data points to share this week. According to Edison Trends data that was shared with us, here’s how Airbnb is doing lately:

  • Per Edison Trends, “Airbnb July spend was 22% higher than it had been in 2019” in the United States.
  • From the same source, Airbnb has seen U.S. spend rise around 10% week-over-week “increase in customer spending” since April 27th.

This explains why the company is prepping to go public sooner rather than later: The second-half of Q2 was a ramp back to normal for the company, and July was pretty good by the looks of it. If Airbnb is worth what it once was is not clear, but the company is certainly doing better than we might have expected it to. (More on the comeback here.)

For more on the big unicorn IPOs, I wrote a digest on Friday that should help ground you. I can say that with some confidence, as I wrote it to ground myself!

Various and Sundry

Finally some loose ends and other notes like an after-dinner amuse-bouche:

  • A PE deal caught our eye, namely that the Williams Formula 1 team has been sold to Dorilton Capital. We had two thoughts: First, who is that. And second, it’s all good so long as they make the car faster but still slower than Haas F1, the official team of this newsletter, I’ve just decided. (Note to F1 lawyers: I am kidding, please don’t sue.)
  • The folks at Sensor Tower sent over some fintech data this week that we tucked into our pocket for this newsletter. According to the data and analytics firm, “the five largest mobile payment apps saw their average monthly active users grow 41.5% year-over-year in 1H20 when compared to 1H19” for “Cash App, Venmo, PayPal, Zelle, and Google Pay.”
  • Now, we’ve covered fintech often on The Exchange because it matters. But we’ve mostly been covering the startup/unicorn side of things. The above growth rates for some of the incumbent-led apps was a surprise, with faster growth than we would have guessed.
  • If momentum from the majors is good or bad for startups, we leave to you to decide.
  • Robinhood raised more money on the back of its huge revenue gains.
  • Until the Palantir brouhaha, the lead story of our missive today was going to be about BlockFi, which we’re still working to understand. The crypto outfit just raised more money, so we got curious. I wound up chatting with the CEO on Twitter about, you know, what BlockFi is. Turns out it’s like a credit union, but in the crypto space. That seems fair enough. Credit unions work! Maybe this will, too! We have some questions into the company, the answers to which we might post if they are interesting. (The company has detractors, as well.)
  • made a bad bet.
  • The Exchange chatted with a number of VC firms this week, including Tribeca Venture Partners for the first time. We caught up with Brian Hirsch from the firm, who told us a bit about the SaaS market (doing better than anticipated pre-COVID thanks to “rocket fuel” from the accelerating digital transformation) and the future of New York and cities in general (going to be fine long-term). We’ll cut out the best bits from the chat for next week if we have time.

And we’ll wrap with a tiny note from Greg Warnock, managing director at Mercato via email about the late-stage venture capital market. We asked for “notes on current valuation trends, in particular re: ARR/run rate multiples.” Here’s what we heard back:

I think valuations are correlated with economic activity and certainly something like COVID would qualify, but it’s very much a lagging indicator. It takes a while for entrepreneurs’ expectations to shift. Once they feel like the economy has moved in a permanent way, they begin to rethink. The first thing that they experience a little bit more urgency. They start from a belief that they can raise money any time they want, from anyone they want. Soon they realize there are fewer investors in market, that those opportunities appear less frequently, and each one should be managed more carefully. From there they go to thinking about terms. They might have to be flexible around some terms or some construct. Finally, they go to just fundamentally thinking about valuation in terms of multiples.

Going back to my first comment about economic factors being a lagging indicator, COVID related shocks haven’t moved through the system yet. It will take something more like a year for all the expectations to shift. My experience is that a shift in the economy from an investor standpoint creates a flight to quality. Companies with lackluster performance are first to feel lack of options in fundraising and exits. High performing businesses are the last ones to experience a change in valuation multiples. It disproportionately affects average businesses more quickly and more dramatically than high quality businesses which may feel no significant effects.

Hugs, fist bumps and good vibes,

Alex

Almost everything you need to know about SPACs

Feeling as if you should better understand special purpose acquisition vehicles – or SPACS — than you do? You aren’t alone.

Like most casual observers, you’re probably already aware that Paul Ryan now has a SPAC, as does baseball executive Billy Beane and Silicon Valley stalwart Kevin Hartz. You probably know, too, that entrepreneur Chamath Palihapitiya seemed to kick off the craze around SPACS — blank-check companies that are formed for the purpose of merging or acquiring other companies — in 2017 when he raised $600 million for a SPAC. Called Social Capital Hedosophia Holdings, it was ultimately used to take a 49% stake in the British spaceflight company Virgin Galactic.

But how do SPACS come together in the first place, how they work exactly, and should you be thinking of launching one? We talked this week with a number of people who are right now focused on almost nothing but SPACs to get our questions — and maybe yours, too — answered.

First, why are these things suddenly spreading like weeds?

Kevin Hartz — who we spoke with after his $200 million blank-check company made its stock market debut on Tuesday — said their popularity ties in part to “Sarbanes Oxley and the difficulty in taking a company public the traditional route.”

Troy Steckenrider, an operator who has partnered with Hartz on his newly public company, said the growing popularity of SPACs also ties to a “shift in the quality of the sponsor teams,” meaning that more people like Hartz are shepherding these vehicles versus “people who might not be able to raise a traditional fund historically.”

Indeed, according to the investment bank Jefferies, 76% of last year’s SPACs were sponsored by industry executives who “typically have public company experience or have sold their prior business and are seeking new opportunities,” up from 65% in 2018 and 32% in 2017.

Don’t forget, too, that there are whole lot of companies that have raised tens and hundreds of millions of dollars in venture capital and whose IPO plans may have been derailed or slowed by the COVID-19 pandemic. Some need a relatively frictionless way to get out the door, and there are plenty of investors who would like to give them that push.

How does one start the process of creating a SPAC?

The process is really no different than a traditional IPO, explains Chris Weekes, a managing director in the capital markets group at the investment bank Cowen. “There’s a roadshow that will incorporate one-on-one meetings between institutional investors and the SPAC’s management team” to drum up interest in the offering.

At the end of it, institutional investors like mutual funds, private equity funds, and family offices buy into the offering, along with a smaller percentage of retail investors.

Who can form a SPAC?

Basically anyone who wants to create one and who can persuade shareholders to buy its shares.

These SPACs all seem to sell their shares at $10 apiece. Why?

Easier accounting? Tradition? It’s not entirely clear, though Weekes says $10 has “always been the unit price” for SPACs and continues to be, with the very occasional exception, such as with Bill Ackman’s Pershing Square Capital Management.

Last month it launched a $4 billion SPAC that sold units for $20 each.

Have SPACS changed structurally over the years?

Funny you should ask! This gets a little more technical, but when buying a unit of a SPAC, institutional investors typically get a share of common stock and a warrant or a fraction of a warrant. A warrant is security that entitles the holder to buy the underlying stock of the issuing company at a fixed price at a later date; warrants are used as deal sweeteners to keep investors involved with a company.)

Earlier in time, when a SPAC announced the company it planned to buy, institutional investors in the SPAC — who had to sign NDA-type agreements — would vote yes to the deal if they wanted to keep their money in, and no to the deal if they wanted to redeem their shares and get out. But sometimes investors would team up and threaten to torpedo the deal if they weren’t given founder shares or other preferential treatment. (“There was a bit of bullying in the marketplace,” says Weekes.)

Regulators have since separated the right to vote and the right to redeem one’s shares, meaning investors today can vote ‘yes’ or ‘no’ and still redeem their capital, making the voting process more perfunctory and enabling most deals to go through as planned.

Does that mean SPACs are more safe? They haven’t had the best reputation historically.

They’ve “already gone through their junk phase,” suspects Albert Vanderlaan, an attorney in the tech companies group of Orrick, the global law firm. “In the ’90s, these were considered a pretty junky situation,” he says. “They were abused by foreign investors. In the early 2000s, they were still pretty disfavored.” Things could turn on a dime again, he suggests, but over the last couple of years, the players have changed for the better, which is making a big difference.

How much of the money raised does a management team like Hartz and Steckenrider keep?

The rough rule of thumb is 2% of the SPAC value, plus $2 million, says Steckenrider. The 2% roughly covers the initial underwriting fee; the $2 million then covers the operating expenses of the SPAC, from the initial cost to launch it to legal preparation, accounting, and NYSE or NASDAQ filing fees. It’s also “provides the reserves for the ongoing due diligence process,” he says.

Is this money like the carry that VCs receive, and do a SPAC’s managers receive it no matter how the SPAC performs?

Yes and yes.

Here’s how Hartz explains it: “On a $200 million SPAC, there’s a $50 million ‘promote’ that is earned at $10 a share if the transaction consummates at $10 a share,” which, again, is always the traditional size of a SPAC. “But if that company doesn’t perform and, say, drops in half over a year or 18-month period, then the shares are still worth $25 million.”

Hartz calls “egregious,” though he and Steckenrider formed their SPAC in exactly the same way, rather than structure it differently.  

Says Steckrider, “We ultimately decided to go with a plain-vanilla structure [because] as a first-time spec sponsor, we wanted to make sure that the investment community had as as easy as a time as possible understanding our SPAC. We do expect to renegotiate these economics when we go and do the [merger] transaction with the partner company,” he adds.

From a mechanics standpoint, what happens right after SPAC has raised its capital?

The money is moved into a blind trust until the management team decides which company or companies it wants to acquire. Share prices don’t really move much during this period as no investors know (or should know, at least) what the target company will be yet.

Does a $200 million SPAC look to acquire a company that’s valued at around the same amount?

No. According to law firm Vinson & Elkins, there’s no maximum size of a target company — only a minimum size (roughly 80% of the funds in the SPAC trust).

In fact, it’s typical for a SPAC to combine with a company that’s two to four times its IPO proceeds in order to reduce the dilutive impact of the founder shares and warrants.

In the case of Hartz’s and Steckenrider’s SPAC (it’s called “one”), they are looking to find a company “that’s approximately four to six times the size of our vehicle of $200 million,” says Harzt, “so that puts us around in the billion dollar range.”

Where does the rest of the money come from if the partner company is many times larger than the SPAC itself?

It comes from PIPE deals, which, like SPACs, have been around forever and come into and out of fashion. These are literally “private investments in public equities” and they get tacked onto SPACs once management has decided on the company with which it wants to merge.

It’s here that institutional investors get different treatment than retail investors, which is why some industry observers are wary of SPACs.

Specifically, a SPAC’s institutional investors — along with maybe new institutional investors that aren’t part of the SPAC — are told before the rest of the world what the acquisition target is under confidentiality agreements so that they can decide if they want to provide further financing for the deal via a PIPE transaction.

The information asymmetry seems unfair. Then again, they’re restricted not only from sharing information but also from trading the shares for a minimum of four months from the time that the initial business combination is made public. Retail investors, who’ve been left in the dark, can trade their shares any time.

How long does a SPAC have to get all of this done?

It varies, but the standard seems to be around two years.

What do you call that phase of the deal after the partner company has been identified and agrees to merge, but before the actual combination?

That’s called De-SPACing and during this stage of things, the SPAC has to obtain shareholder approval through that vote we talked about, followed by a review and commenting by the SEC.

Toward the end of this stretch — which can take 12 to 18 weeks — bankers aretaking out the new operating team and, in the style of a traditional roadshow, getting the story out to analysts who cover the segment so when the combined new company is revealed, it receives the kind of support that keeps public shareholders interested in a company.

Will we see more people from the venture world like Palihapitiya and Hartz start SPACs?

So far, says Weekes, he’s seeing less interest from VCs in sponsoring SPACs and more interest from them in selling their portfolio companies to a SPAC. As he notes, “Most venture firms are typically a little earlier stage investors and are private market investors, but there’s an uptick of interest across the board, from PE firms, hedge funds, long-only mutual funds.”

That might change if Hartz has anything to do with it. “We’re actually out in the Valley, speaking with all the funds and just looking to educate the venture funds,” he says. “We’ve had a lot of requests in. We think we’re going to convert [famed VC] Bill Gurley from being a direct listings champion to the SPAC champion very soon.”

In the meantime, Hartz says his SPAC doesn’t have a specific target in mind yet. But he does takes issue with the word “target,” preferring instead “partner” company.

“A target sounds like we’re trying to assassinate somebody.”

InfraDigital helps Indonesian schools digitize tuition and enrollment

In Indonesia, about half of adults are “underbanked,” meaning they don’t have access to bank accounts, credit cards and other traditional financial services. A growing list of tech companies are working on solutions, from Payfazz, which operates a network of financial agents in small towns, to digital payment services from GoJek and Grab. As a result, financial inclusion is increasing for consumers and small businesses in Southeast Asia’s largest country, but one group remains underserved: schools.

InfraDigital was founded in 2018 by chief executive officer Ian McKenna and chief operating officer Indah Maryani. Both have backgrounds in financial tech, and their platform enables parents to pay school tuition with the same digital services they use for electricity bills or online shopping. The startup currently serves about 400 schools and recently raised a Series A led by AppWorks.

Many Indonesian schools still rely on cash payments, which are often delivered by kids to their teachers.

“My kid had just started school, and one day I spotted my wife giving him an envelope full of cash for tuition. He was only three years old,” McKenna said. “That triggered my curiosity about how these financial systems work.”

To give parents an easier alternative, InfraDigital, which is registered with Indonesia’s central bank, partners with banks, convenience store chains like Indomaret, online wallets and digital payment services like GoPay to allow them to send tuition money online.

“The way you pay your electricity bill, it’s likely that your school is already there, regardless of whether you have a bank account or live in a really remote place” where many people make cash payments for services at convenience stores, McKenna said. The startup is now working on a system for schools in areas that don’t have access to convenience store chains and banks.

Before building InfraDigital’s network, McKenna and Maryani had to understand why many schools still rely on cash payments and paper ledgers to manage tuition.

“Banks have been trying to tap into the education market for a long time, 12 to 15 years probably, but no one has become the biggest bank for schools,” said Maryani. “The reason behind that is because they come in with their own products and they don’t try to resolve the issues schools are facing. Since they are focused on the consumer side, they don’t really see schools or other offline businesses as their customers, and there is a lot of customization that they need to do.”

For example, a school might have 2,000 students and charge each of them about USD $10 a month in school fees. But they also collect separate payments for books, uniforms, and building fees. InfraDigital’s founders say schools typically send out an average of about 2.5 invoices a month.

Digitizing payments also makes it easier for schools to track their finances. InfraDigital provides its clients with a backend application for accounting and enrollment management. It automatically tracks tuition payments as they come in.

“People don’t get paid that much and they are ridiculously busy taking care of thousands of kids. It’s really, really tough,” McKenna said. “When you’re giving them a solution, it’s not about features, it’s not about tools, it’s about the practicalities of their day-to-day life and how we are going to assist them with it. So you remove that burden from them.”

During the COVID-19 pandemic, which resulted in movement restriction orders in different areas of Indonesia, InfraDigital’s founders say the platform was able to forecast trends even before schools officially closed. They started surveying schools in their client base, and sent back data to help them forecast how school closures would affect their income.

“From the school’s perspective, it’s a really damaging situation, with 30% to 60% income drops. Teachers don’t get paid. If the economy goes down, parents at lower-income schools, which are a big part of our client base, won’t be able to pay,” McKenna said. “It’s built into the model, and we’ll continue seeing that however long the economic impact of COVID-19 lasts.”

YC-backed Statiq wants to bootstrap India’s EV charging network

Electric vehicles (EVs) are spreading throughout the world. While Tesla has drawn the most attention in the United States with its luxurious and cutting-edge cars, EVs are becoming a mainstay in markets far away from the environs of California.

Take India for instance. In the local mobility market, two- and three-wheel vehicles are starting to emerge as a popular option for a rapidly expanding middle class looking for more affordable options. EV versions are popular thanks to their reduced maintenance costs and higher reliability compared to gasoline alternatives.

Two-wheeled electric scooters are a fast-growing segment of India’s mobility market.

There’s just one problem, and it’s the same one faced by every country which has attempted to convert from gasoline to electric: how do you build out the charging station network to make these vehicles usable outside a small range from their garage?

It’s the classic chicken-and-egg problem. You need EVs in order to make money on charging stations, but you can’t afford to build charging stations until EVs are popular. Some startups have attempted to build out these networks themselves first. Perhaps the most famous example was Better Place, an Israeli startup that raised $800 million in venture capital before dying from negative cash flow back in 2013. Tesla has attempted to solve the problem by being both the chicken and egg by creating a network of Superchargers.

That’s what makes Statiq so interesting. The company, based in the New Delhi suburb of Gurugram, is bootstrapping an EV charging network using a multi-revenue model that it hopes will allow it to avoid the financial challenges that other charging networks have faced. It’s in the current Y Combinator batch and will be presenting at Demo Day later this month.

Akshit Bansal and Raghav Arora, the company’s co-founders, worked together previously as consultants and built a company for buying photos online, eventually reaching 50,000 monthly actives. They decided to make a pivot — a hard pivot really — into EVs and specifically charging equipment.

Statiq founders Raghav Arora and Akshit Bansal. Photos via Statiq

“We felt the need to do something about the climate because we were living in Delhi and Delhi is one of the most polluted cities in the world, and India is home to a lot of the polluted cities in the world. So we wanted to do something about it,” Bansal said. As they researched the causes of pollution, they learned that automobile exhaust represented a large part of the problem locally. They looked at alternatives, but EV charging stations remain basically non-existent across the country.

Thus, they founded Statiq in October 2019 and officially launched this past May. They have installed more than 150 charging stations in Delhi, Bangalore, and Mumbai and the surrounding environs.

Let’s get to the economics though, since that to me is the most fascinating part of their story. Statiq as I noted has a multi-revenue model. First, end users buy a subscription from Statiq to use the network, and then users pay a fee per charging session. That session fee is split between Statiq and the property owner, giving landlords who install the stations an incremental revenue boost.

A Statiq charging station. Photo via Statiq

When it comes to installation, Statiq has a couple of tricks up its sleeves. First, the company’s charging equipment — according to Bansal — costs roughly a third of the equivalent cost of U.S. equipment. That makes the base technology cheaper to acquire. From there, the company negotiates installations with landlords where the landlords will pay the fixed costs of installation in exchange for that continuing session charge fee.

On top of all that, the charging stations have advertising on them, offering another income stream particularly in high-visibility locations like shopping malls which are critical for a successful EV charging network.

In short, Statiq hasn’t had to outlay capital in order to put in place their charging equipment — and they were able to bootstrap before applying to YC earlier this year. Bansal said the company had dozens of charging stations and thousands of paid sessions on its platform before joining their YC batch, and “we are now growing 20% week-over-week.”

What’s next? It’s all about deliberate scaling. The EV market is turning on in India, and Statiq wants to be where those cars are. Bansal and his co-founder are hoping to ride the wave, continuing to build out critical infrastructure along the way. India’s government will likely continue to help: its approved billions of dollars in incentives for EVs and for charging stations, tipping the economics even further in the direction of a clean car future.

Singaporean startup Partipost gets $3.5 million to let anyone become an influencer

Partipost, a Singapore-based marketing startup that lets anyone with a social media profile sign up for influencer campaigns, has raised $3.5 million in new funding. The round was led by SPH Ventures, the investment arm of publisher Singapore Press Holdings, with participation from Quest Ventures and other investors.

The funding will be used to grow Partipost’s current operations in Singapore, Indonesia and Taiwan, and expand into Vietnam, the Philippines and Malaysia, other Southeast Asian markets with heavy social media usage. Since launching its mobile app in 2018, Partipost says it has added about 200,000 influencers to its platform, and that over the past 12 months, it has helped conduct 2,500 social media marketing campaigns for more than 850 brands, including Adidas, Arnott’s, Red Bull, Chope and Gojek.

According to benchmark report released in March by Influencer Marketing Hub, the influencer marketing industry is expected to be worth about $9.7 billion in 2020, with companies spending increasing amounts on social media campaigns and working with more “micro-influencers.” To serve them, the report said that more than 380 new influencer marketing agencies and platforms were launched last year, joining a roster of companies that already include AspireIQ, Upfluence, BuzzSumo, SparkToro and Inzpsire.me, to name just a few examples.

While most of these companies focus on helping brands identify the influencers with the widest social media reach, Partipost lets anyone sign up to take part in a campaign.

“Partipost’s main difference is that we believe that everyone can be an influencer,” founder and chief executive officer Jonathan Eg told TechCrunch. “Even if you have 200 followers, you can be one. We want to create a new market that we believe will be the future. Everyone can post on social media, write a review or give some feedback and be paid for it.”

“We want to empower everyone to monetize off their own data and influence and not just allow the big tech companies to do so,” he added.

Aspiring influencers browse brand campaigns on Partipost’s app and apply to take part by submitting a post draft. If the brand approves it, the user can then go ahead and post it on their social media profiles.

The amount of cash they earn is based on how much engagement each post receives. According to the company’s website, most campaigns require a minimum of 200 followers or more, and successful users can earn an average of $5 to $150 per campaign, depending on the brand’s payout structure.

One of Partipost’s selling points for brands is that it enables them to sign up thousands of influencers for a campaign in a single day, help them react quickly to online trends. Part of the funding will also be used to build data tools to help brands match campaigns with Partipost users more efficiently. The company says it expects to increase its base of aspiring influencers to one million within the next 18 months.

As part of the funding, SPH Ventures chief executive officer Chua Boon Ping will join Partipost’s board, while Quest Ventures partner Jeffrey Seah will become an observer.

In a media statement, Chua said, “Social influencer marketing is one of the fastest growing segments within Digital marketing. Hence, we are very excited to lead Partipost’s Series A round to further accelerate its growth. We are impressed by Partipost’s strong traction in Singapore, Indonesia and Taiwan as a young startup and look forward to partnering it to scale to new markets.”

Vietnamese online pharmaceutical marketplace BuyMed raises $2.5 million

BuyMed, a Vietnamese startup that wants to fix Southeast Asia’s complex pharmaceutical distribution networks, announced today it has raised $2.5 million in pre-Series A funding. Investors include Sequoia Capital India’s Surge early-stage accelerator program, and Genesia Ventures. Returning investor Cocoon Capital also participated.

Founded in 2018, BuyMed operates Thuocsi.vn, a pharmaceutical distribution platform in Vietnam. Over the past 12 months, the company says it has tripled its annual revenue, and now plans to add new product lines, including cosmetics, medical devices, supplements and medical services, with the goal of becoming a “one-stop marketplace” for supplies needed by healthcare providers in Southeast Asia.

BuyMed verifies suppliers on its platform, improving safety and reducing the risk of medications making its way into the grey market (or unofficial distribution channels). The startup currently has 700 verified suppliers, distributors and manufacturers on its platform, who serve over 7,000 healthcare providers.

In a press statement, Genesia Ventures general partner Takahiro Suzuki, said, “There is still a tremendous opportunity for growth and improvement in Vietnam’s pharmaceutical supply chain and we believe that BuyMed’s founders have the experience, execution and operational management necessary to tackle this problem.”

BuyMed Co-founder and CEO Peter Nguyen formerly served as a consultant for companies like Eli Lilly, Roche and Siemens, helping them create more efficient operations and supply chains.

Nguyen told TechCrunch that there are no major multi-brand distributors in Vietnam, so most pharmaceutical manufacturers and brands need to set up their own networks. This means the process of getting medications and other pharmaceutical supplies to healthcare providers is highly-fragmented.

There are roughly 200 domestic manufacturers in Vietnam, in addition to imported brands, and their products are handled by over 3,000 distributors. While about 2% of pharmacies in Vietnam are part of a franchise or chain, the vast majority are independent. This means distributors need to serve over 40,000 independent pharmacies and about 5,000 independent clinics.

Nguyen added that fragmentation is similar in many other Southeast Asian markets, giving BuyMed an opportunity to expand across the region.

Thuocsi.vn’s usage has grown over the last 60 days, as more Vietnamese pharmacies source from online channels. In response to the COVID-19 pandemic, BuyMed has expanded its platform so more of its partners can sell online, and added safety measures like frequent warehouse and office sanitization and a no-contact drop-off and cash collection system.

Sprout.ai raises $2.5M to speed up insurance claims

Sprout.ai, an insurtech incubated at London’s Imperial College that is applying AI to insurance claims,, has raised $2.5 million in additional seed funding. Leading the round is Amadeus Capital Partners, with participation from Playfair Capital, and Techstars.

Founded in 2018, Sprout.ai has developed AI-based software that it says enables insurance claims to be settled within “just 24 hours”. Specifically, it uses natural language processing and optical character recognition to understand unstructured insurance claim data, and then combines this with real-time external data such as weather, geolocation, business and medication information, to automate claims or escalate them for further human analysis.

“Our mission is to enable insurers to pay out successful claims inside 24 hours,” Sprout.ai co-founder and CEO Niels Thone tells me. “Currently the average claims settlement time in the U.K. is 25 days. This is mainly caused by a lack of information at the start of the claims journey and a lot of manual touch points throughout the journey. This causes two problems: bad customer experiences and high operational costs for claims teams”.

To remedy this, insurance companies can plug their existing systems into Sprout.ai’s “Contextual AI” solution, which provides what Thone says is a much more complete data capture at the start of the claims process, and then is able to automatically validate incoming claims and predict the next necessary steps in the process.

This sees the big bulk of claims sent straight through for processing, resulting in them being settled in record time. “This way claim handlers only have to focus on the really complex claims, where their specialised skill set is actually needed,” says the Sprout.ai CEO.

“The secret lies in accessing the underlying unstructured data, such as pdfs, images, documents, etc.,” he adds. “This is where all the actual ‘data gold’ or, as we call it, ‘data sprouts’ lie, so it’s pertinent that you have the means to extract and structure this data as well as leverage it for further claims verification. Sprout.ai has developed proprietary algorithms in both the OCR and NLP fields to enable very accurate and fast extraction of this underlying data”.

Asked about Sprout.ai’s revenue model, Thone says the insurtech operates via a transactional model, whereby it charges a fee per claim processed. “The fee is volume dependent, which means that the more claims we process for a client, the cheaper the price per claim becomes,” he explains.

Meanwhile, Sprout.ai, which was previously called BlockClaim, says it will use the investment to further build out its data science and engineering team, and expand its sales operations. The U.K. startup is also making plans for U.S. expansion.

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.

Dahmakan, a Malaysian “full-stack” food delivery startup, raises $18 million Series B

Dahmakan, a full-stack food delivery startup based in Malaysia, announced today that it has closed a $18 million Series B. Investors include Rakuten Capital, White Star Capital, JAFCO Asia and GEC-KIP Fund, along with participation from South Korean food delivery app Woowa Brothers, and returning investors Partech Partners and Y Combinator.

This brings Dahmakan’s total funding to about $28 million. Its previous round of financing was announced last May.

Launched by former executives from FoodPanda, Dahmakan was the first Malaysian startup to participate in Y Combinator’s startup accelerator program. Operational costs for food delivery companies are notoriously high, and eat away at their profitability, but Dahmakan is among several startups that use “cloud” kitchens, located closer to customers, in order to reduce delivery costs.

The foundation of the startup’s full-stack platform is an operating system that controls nearly every step of its operations, from recipe development to last-mile delivery, and its cloud kitchens are part of “satellite” hubs placed around different cities to be closer to customers.

Instead of delivering from restaurants, Dahmakan creates its own meals, offering about 40 options each week from a database of 2,000 dishes. It selects its weekly menu based on customer data, including food preferences and spending habits, along with market research.

Then customers are given a menu and pick from a schedule of delivery times. Other startups trying to make food delivery more efficient in Southeast Asia by using a vertically-integrated model and cloud kitchens include Grain, which s backed by investors including Openspace Ventures, First Gourmet and Singha Ventures.

In a press statement about Dahmakan’s funding, White Star Capital managing partner Eric Martineau-Fortin said “Dahmakan is well-positioned to serve the growing demand for food delivery services in Southeast Asia with its unique, technology-forward approach of taking control of the entire value chain to provide affordable delivery options to SEA’s rising middle class.”

On-demand tutoring app Snapask gets $35 million to expand in Southeast Asia

Snapask, an on-demand tutoring app, announced today that it has raised $35 million in Series B funding. Earmarked for the startup’s expansion in Southeast Asia, the round was led by Asia Partners and Intervest.

Launched in Hong Kong five years ago, Snapask has now raised a total of $50 million and operates in Hong Kong, Taiwan, Malaysia, Indonesia, Thailand, Japan and South Korea. Its other investors have included Kejora Ventures, Ondine Capital and SOSV Chinaccelerator (Snapask participated in its accelerator program).

Founder and CEO Timothy Yu said Snapask will expand into Vietnam and focus on markets in Southeast Asia where there is a high demand for tutoring and other private education services. It will also open a regional headquarter in Singapore and develop video content and analytics products for its platform.

The company now has a total of 3 million students, with 1.3 million who registered over the past twelve months (including a recent surge that Yu attributes to students studying at home after COVID-19 related school cancellations). Over the past year, 100,000 tutors have applied, taking Snapask’s current total to 350,000 applicants.

Yu says that over 2 million questions are asked by students each month on the platform, with each subscriber typically asking about 60 questions a month, during tutoring sessions that last between 15 to 20 minutes. The majority, or about two-thirds, of the questions are about math and science-related topics.

One thing all of Snapask’s markets have in common are highly-competitive public exams to enter top universities, says Yu. The exams have both a positive and negative effect on education, he adds.

“Students have a very clear objective about what topics they need to study, so that is driving a very lucrative market in the tutoring industry. But I think what Snapask focuses on is that exams are important, but you should do it the right way. We’re about self-directed learning. It’s not necessary to go to three-hour classes every day after school. If you need specific help on a question, you can ask for it immediately.”

While at university, Yu worked as a math tutor, and sometimes spent a total of two hours commuting to sessions that lasted the same amount of time. In markets like Malaysia or Indonesia, many educators chose to work in major cities, leaving students in rural areas with less options. The goal of Snapask is to help solve those issues and connect tutors with more students.

Yu says the average time for students to connect with a tutor after asking a question is about 15 to 20 minutes, which it is able to do because of machine learning-based technology that matches them based on educational styles, subject and availability. Snapask’s matching algorithms are also based on how students engage with tutors (for example, if they respond better to concise or longer, more elaborate answers). Students can also pick up to 15 to 20 tutors for their favorites list, who are prioritized when matching.

Yu says Snapask screens tutors by looking at their university transcripts and public exam results. Then they go through a probation period on the platform to assess how they interact with students. The platform also tracks how many messages are sent during a tutoring session and response times to make sure that tutors are explaining students’ questions instead of just giving them the answers.

Tutors can talk to up to 10 students at a time through Snapask’s platform. Yu says Snapask tutors in Hong Kong, Singapore, Japan and South Korea who spend about two hours per day answering questions usually make about $1,200 a month, while those who work about four to five hours a day can make about $4,000 to $5,000 a month. The company uses different pricing models in Southeast Asian markets, and Yu says tutors there can make about 50% to 60% more than they would at traditional tutoring jobs.

Other study apps focused on students some of the same markets as Snapask include ManyTutors and Mathpresso, whose products combine tutoring services with tools that let students upload math questions, which are then scanned with optical character recognition to provide instant answers. Yu says Snapask is focusing on one-on-one tutoring because it wants to differentiate by creating a “holistic experience.”

“A lot of students come to Snapask after using OCR tools, which we know that user surveys, but they can’t get to certain steps. They still need someone to help them understand what is happening,” he says. “So we try not to use technology for every component in teaching, but to make it more efficient and scalable, and we’re creating a holistic experience to differentiate us.”

Created to help employees figure out health benefits, HealthJoy raises $30 million

HealthJoy, a platform designed to make it easier for employees to use their healthcare benefits, has raised $30 million in Series C funding led by Health Velocity Capital. Returning investors also participated, including U.S. Venture Partners, Chicago Ventures, Epic Ventures, Brandon Cruz and Clint Jones. This brings HealthJoy’s total funding so far to $53 million.

By integrating with healthcare service providers and partnering with benefit consultant agencies, HealthJoy simplifies the process of finding and using benefits. Its features include an AI-based virtual assistant and healthcare concierges. The startup says it has a monthly login rate of 33% and that its clients, which now includes 500 employers, see a tenfold increase in the employee use of benefits, including telemedicine.

Since TechCrunch covered HealthJoy’s Series B round last year, the company has launched two new services. One is a price transparency tool called HealthJoy Rewards that allows companies to provide incentives for employees to use more cost-efficient services.

“For example, an MRI in Chicago can vary in price from around $500 for an independent clinic to around $3,500 in a hospital system,” HealthJoy founder and CEO Justin Holland told TechCrunch. “Our rewards platform allows companies to customize the incentive, but we provide nearly 100 recommendations. We’re showing an amazing ROI for companies that have adopted the program since we’re targeting high-cost procedures.”

The second new service is called HealthJoy EAP, an employee assistance program that Holland says is a priority for further development. It gives 24/7 access to short-term counseling, with several sessions available for free.

“Addressing mental heath is of extreme importance for companies in today’s world. Access to traditional counseling is on decline in many rural areas due to lack of access. In cities, costs have risen so many users are priced out of the market,” he says.

The funding will also be used to improve HealthJoy’s virtual assistant, develop new services, integrate with more partners and aggregate data. HealthJoy plans to add 200 employees in its Chicago office during 2021, with the goal of doubling its engineering team. Future plans include working with more small- to medium-sized businesses and a potential partnership to serve Medicare recipients.

Other startups focused on employee benefits include League, Catch and Collective Health. Holland says HealthJoy integrates with, instead of competing with, benefits administration platforms and differentiates by being able to work with any benefits package.

Health Velocity Capital partner Saurabh Bhansali will join HealthJoy’s board of directors. In a press statement, Bhansali said “HealthJoy offers proven technology solutions to help navigate employees through our nation’s complex and costly healthcare system, one that costs US employees over $1.2 trillion each year. Healthjoy has shown that it can deliver substantial cost savings to employers while simplifying the employee healthcare experience.”

Instamojo acquires Times Internet’s GetMeAShop to serve more small businesses in India

Instamojo, a Bangalore-based startup that helps merchants and small businesses accept digital payments, establish presence and sell on the web, has acquired Times Internet-owned Gurgaon-based startup GetMeAShop.

The deal is worth $5 million and includes conglomerate Times Internet making an investment in Instamojo, Sampad Swain, co-founder and chief executive of the Bangalore-based startup, told TechCrunch in an interview.

Hundreds of millions of people have come online in India in the last decade thanks to proliferation of low-cost Android smartphones and availability to some of the world’s cheapest mobile data plans. But most small businesses, especially neighbourhood stores and merchants, remain offline.

A wave of startups in the country today are trying to make it easier for these merchants and businesses to come online. GetMeAShop is one such startup. It runs a platform that allows businesses to set up their website, build an online store, and make it easier for merchants or individuals to engage with — and sell to — their customers through social apps such as WhatsApp and Facebook.

For Instamojo, this acquisition is not surprising. The seven-year-old startup began its journey as a payments provider for small businesses. Over the years, it has launched an online store, an app store, and a lending service to serve more needs of a business. “This acquisition will allow us to become a full-fledged operating system for businesses,” said Swain.

Instamojo has amassed 1.2 million merchants on its platform. “It took us seven years to get a million merchants on the platform. Now we are adding more than 2,000 a day. We are on track to hit 2 million merchants by the end of this year,” he said.

More to follow shortly…

Ophelia Brown’s Blossom Capital raises new $185M European early-stage fund

Blossom Capital, the early-stage VC firm co-founded by ex-Index Ventures and LocalGlobe VC Ophelia Brown, is announcing a second fund, less than 12 months since fund one was closed.

The new fund, which is described as “heavily oversubscribed,” sits at $185 million. That’s up from $85 million first time around.

Blossom’s remit remains broadly the same: to be the lead investor in European tech startups at Series A, along with doing some seed deals, too. In particular, the VC will continue to focus on finance, design, marketplaces, travel, developer-focused tools, infrastructure and “API-first” companies.

Its differentiator is pitched as so-called “high conviction” investing, which sees it back fewer companies by writing larger cheques, along with claiming to have close ties to U.S. top tier investors ready to back portfolios at the next stage.

And whilst a “bridge to the valley” is a well worn claim by multiple European VCs, Blossom’s track record so far bares this is out somewhat, even if it nascent. Of the firm’s portfolio, travel booking platform Duffel has received two follow-on investment rounds led by Benchmark and Index Ventures; cybersecurity automation platform Tines received follow-on investment led by Accel Partners; and payments unicorn Checkout.com is also backed by Insight Partners.

In addition, I understand that about half of Blossom’s LPs are in the U.S., and that all of the firm’s original LPs invested in this second fund, which Brown concedes was a lot easier to raise than the first. That’s presumably down to the up round valuations Blossom is already able to tout.

Citing benchmark data from Cambridge Associates and Preqin, Blossom says it sits in the top 5% of funds of 2018/2019 vintage in the U.S. and EU. Although, less than a year old, I would stress that it is still very early days.

More broadly, Brown and Blossom’s other partners — Imran Gohry, Louise Samet and Mike Hudack — argue that the most successful European companies historically are those that were able to attract U.S. investors but that companies no longer need to relocate to the U.S. to seize the opportunity.

“When we looked at the data it was very clear at the growth stage that, outside of Index and Accel, the most successful European outcomes were driven by the combination of European early-stage investors and top-tier U.S. growth investors,” explained Blossom Capital partner, Imran Ghory, in a statement. “From day one we prioritised building those relationships, both to share knowledge but also provide a bridge for European founders to access the best growth capital as they scale”.

Challenger business bank Qonto raises $115 million round led by Tencent and DST Global

French startup Qonto has raised a $115 million Series C funding round led by Tencent and DST Global. Today’s news comes a few days after another French fintech startup Lydia raised some money from Tencent.

Existing investors Valar and Alven are also participating in today’s funding round. TransferWise co-founder Taavet Hinrikus and Adyen CFO Ingo Uytdehaage are also joining the round. Qonto says that it represents the largest funding round for a French fintech company.

Qonto is a challenger bank, or a neobank, but for B2B use cases. Instead of attracting millions of customers like N26 or Monzo, Qonto is serving small and medium companies as well as freelancers in Europe.

According to the startup, business banking in Europe is broken. The company thinks it can provide a much better user experience with an online- and mobile-first product.

The company has managed to attract 65,000 companies over the past two years and a half. The product is currently live in France, Italy, Spain and Germany. In 2019 alone, Qonto has managed €10 billion in transaction volume.

With today’s funding round, the company plans to double down on its existing markets, develop new features that make the platform works better in each country based on local needs and hire more people. The team should grow from 200 to 300 employees within a year.

Qonto obtained a payment institution license in June 2018 and has developed its own core banking infrastructure. Around 50% of the company’s user base is currently using Qonto’s own core banking system. Others are still relying on a third-party partner.

Moving from one back end to another requires some input from customers, which explains why there are still some customers using the legacy infrastructure. Over the coming months, Qonto plans to launch new payment features that should convince more users to switch to Qonto’s back end.

Even more important, Qonto plans to obtain a credit institution license, which could open up a ton of possibilities when it comes to features and revenue streams. The company says that it should have its new license by the end of the year.

For instance, you could imagine being able to get a credit card, apply for an overdraft and get a small loan with Qonto.

Compared to traditional banks, Qonto lets you open a bank account more easily. After signing up, Qonto offers a modern interface with your activity. You can export your transactions in no time, manage your expenses and get real-time notifications. Qonto also integrates with popular accounting tools.

When it comes to payment methods, Qonto gives you a French IBAN as well as debit cards. You can order physical or virtual cards whenever you want, customize limits and freeze a card. Qonto also supports direct debit and checks. Like many software-as-a-service products, you can also manage multiple user accounts and customize permission levels.

PayU acquires controlling stake in Indian credit business PaySense, to merge it with LazyPay

PayU is acquiring a controlling stake in fintech startup PaySense at a valuation of $185 million and plans to merge it with its credit business LazyPay as the nation’s largest payments processor aggressively expands its financial services offering.

The Prosus-owned payments giant said on Friday that it will pump $200 million — $65 million of which is being immediately invested — into the new enterprise in the form of equity capital over the next two years. PaySense, which employs about 240 people, has served more than 5.5 million consumers to date, a top executive said.

Prior to today’s announcement, PaySense had raised about $25.6 million from Nexus Venture Partners, and Jungle Ventures, among others. PayU became an investor in the five-year-old startup’s Series B financing round in 2018. Regulatory filings show that PaySense was valued at about $48.7 million then.

The merger will help PayU solidify its presence in the credit business and become one of the largest players, said Siddhartha Jajodia, Global Head of Credit at PayU, in an interview with TechCrunch. “It’s the largest merger of its kind in India.” he said. The combined entity is valued at $300 million, he said.

PaySense enables consumers to secure long-term credit for financing their new vehicle purchases and other expenses. Some of its offerings overlap with those of LazyPay, which primarily focuses on providing short-term credit to consumers to facilitate orders on food delivery platforms, e-commerce websites and other services. Its credit ranges between $210 and $7,030.

Cumulatively, the two services have disbursed over $280 million in credit to consumers, said Jajodia. He aims to take this to “a couple of billion dollars” in the next five years.

PaySense’s Prashanth Ranganathan and PayU’s Siddhartha Jajodia pose for a picture

As part of the deal, PaySense and LazyPay will build a common and shared technology infrastructure. But at least for the immediate future, LazyPay and PaySense will continue to be offered as separate services to consumers, explained Prashanth Ranganathan, founder and chief executive of PaySense, in an interview with TechCrunch.

“Overtime as the businesses get closer, we will make a call if a consolidation of brands is required. But for now, we will let consumers direct us,” added Ranganathan, who will serve as the chief executive of the combined entity.

There are about a billion debit cards in circulation in India today, but only about 20 million people have a credit card. (The official government figures show that about 50 million credit cards are active in India, but many individuals tend to have more than one card.)

This has meant that most Indians don’t have a traditional credit score, so they can’t secure loans and a range of other financial services from banks. Scores of startups in India today are attempting to address this opportunity by using other signals and alternative data — such as the kind of a smartphone a person has — to evaluate whether they are worthy of being granted some credit.

Digital lending is a $1 trillion opportunity (PDF) over the four and a half years, according to estimates from Boston Consulting Group.

PayU’s Jajodia said PaySense and LazyPay will likely explore building new offerings such as credit for small and medium businesses. He did not rule out exploring getting a stake in more fintech startups in the future. PayU has already invested north of half a billion dollars in its India business. Last year, it acquired Wibmo for $70 million.

“At PayU, our ambition is to build financial services using data and technology. Our first two legs have been payments [processing] and credit. We will continue to scale both of these businesses. Even this acquisition was about getting new capabilities and a strong management team. If we find more companies with some unique assets, we may look at them,” he said.

PayU leads the payments processing market in India. It competes with Bangalore-based RazorPay. In recent years, RazorPay has expanded to serve small businesses and enterprises. In November, it launched corporate credit cards and other services to strengthen its neo banking play.

Tech’s biggest companies are worth ~$5T as 2019’s epic stock market run wraps

Look, this is the last post I’m writing in 2019 and I’m tired. But I can’t let the year close without taking stock of how well tech stocks did this year. It was bonkers.

So let’s mark the year’s conclusion with some notes for our future selves. Yes, we know that the Nasdaq has been setting new records and SaaS had a good year. But we need to dig in and get the numbers out so that we can look back and remember.

Let’s cap off this year the way it deserves to be remembered, as a kick-ass trip ’round the sun for your local, public technology company.

Keeping score

We’ll start with the indices that we care about:

  • The tech-heavy Nasdaq Composite rose 35% in 2019
  • The SaaS-heavy Bessemer Cloud Index rose 41% this year

Next, the highest-value U.S.-based technology companies:

  • Microsoft was up around 55% in 2019
  • Apple managed an 86% gain in the year
  • Not be left out, Facebook rose 57%
  • Amazon posted its own gain of 23% in 2019
  • Alphabet managed to grow by 29%, as well

Now let’s turn to some companies that we care about, even if they are smaller than the Big Five:

  • Salesforce? Up 19% this year
  • Adobe was up 46% in 2019, which was astounding
  • Intel picked up 28% in the year, making it no slouch
  • Even Oracle managed to gain 17% in 2019

And so on.

The technology industry’s epic run has been so strong that The Wall Street Journal noted this morning that, powered by tech companies, U.S. stocks “are poised for their best annual performance in six years.” The Journal highlighted the performance of Apple and Microsoft in particular for helping drive the boom. I wonder why.

How long will we live in the neighborhood of Nasdaq 9,000? How long can two tech companies be worth more than $1 trillion at the same time? How long can the biggest tech companies be worth a combined $4.93 trillion (I remember when $3 trillion for the Big Five was news, and I recall when the group reach a collective value of $4 trillion).1

But the worst trade in recent years has been the pessimists’ gambit. No matter what, stocks have kept going up, short-term hiccoughs and other missteps aside.

For nearly everyone, that is. While tech stocks in general did very well, some names that we all know did not. Let’s close on those reminders that a rising tide lifts only most boats.

2019 naughty list

Several of the most lackluster public tech companies were 2019 technology IPOs, interestingly enough. Who didn’t do well? Uber earns a spot on the naughty list for not only being underwater from its IPO price, but also from its final private valuations. And as you guessed, Lyft is down from its IPO price as well, which is not good.

Some 2019 IPOs did well in the middle of the year, but fell a little flat as the year came to a close. Pinterest, Beyond Meat and Zoom meet that criteria, for example. And some SaaS companies struggled, even if we think they will reach $1 billion in revenue in time.

But it was mostly a party. The public markets were good, and tech stocks were great. This helped create another 100+ unicorns in the year.

Such was 2019. On to 2020!

  1. In time, those numbers will look small. But sitting here on December 31, 2019, they appear huge and towering and, it must be said, somewhat perilously stacked.

Indian tech startups raised a record $14.5B in 2019

Indian tech startups have never had it so good.

Local tech startups in the nation raised $14.5 billion in 2019, beating their previous best of $10.5 billion last year, according to research firm Tracxn .

Tech startups in India this year participated in 1,185 financing rounds — 459 of those were Series A or later rounds — from 817 investors.

Early stage startups — those participating in angel or pre-Series A financing round — raised $6.9 billion this year, easily surpassing last year’s $3.3 billion figure, according to a report by venture debt firm InnoVen Capital.

According to InnoVen’s report, early stage startups that have typically struggled to attract investors saw a 22% year-over-year increase in the number of financing deals they took part in this year. Cumulatively, at $2.6 million, their valuation also increased by 15% from last year.

Also in 2019, 128 startups in India got acquired, four got publicly listed, and nine became unicorns. This year, Indian tech startups also attracted a record number of international investors, according to Tracxn.

This year’s fundraise further moves the nation’s burgeoning startup space on a path of steady growth.

Since 2016, when tech startups accumulated just $4.3 billion — down from $7.9 billion the year before — flow of capital has increased significantly in the ecosystem. In 2017, Indian startups raised $10.4 billion, per Tracxn.

“The decade has seen an impressive 25x growth from a tiny $550 million in 2010 to $14.5 billion in 2019 in terms of the total funding raised by the startups,” said Tracxn.

What’s equally promising about Indian startups is the challenges they are beginning to tackle today, said Dev Khare, a partner at VC fund Lightspeed Venture Partners, in a recent interview to TechCrunch.

In 2014 and 2015, startups were largely focused on building e-commerce solutions and replicating ideas that worked in Western markets. But today, they are tackling a wide-range of categories and opportunities and building some solutions that have not been attempted in any other market, he said.

Tracxn’s analysis found that lodging startups raised about $1.7 billion this year — thanks to Oyo alone bagging $1.5 billion, followed by logistics startups such as Elastic Run, Delhivery, and Ecom Express that secured $641 million.

176 horizontal marketplaces, more than 150 education learning apps, over 160 fintech startups, over 120 trucking marketplaces, 82 ride-hailing services, 42 insurance platforms, 33 used car listing providers, and 13 startups that are helping businesses and individuals access working capital secured funding this year. Fintech startups alone raised $3.2 billion this year, more than startups operating in any other category, Tracxn told TechCrunch.

The investors

Sequoia Capital, with more than 50 investments — or co-investments — was the most active venture capital fund for Indian tech startups this year. (Rajan Anandan, former executive in charge of Google’s business in India and Southeast Asia, joined Sequoia Capital India as a managing director in April.) Accel, Tiger Global Management, Blume Ventures, and Chiratae Ventures were the other top four VCs.

Steadview Capital, with nine investments in startups including ride-hailing service Ola, education app Unacademy, and fintech startup BharatPe, led the way among private equity funds. General Atlantic, which invested in NoBroker and recently turned profitable edtech startup Byju’s, invested in four startups. FMO, Sabre Partners India, and CDC Group each invested in three startups.

Venture Catalysts, with over 40 investments including in HomeCapital and Blowhorn, was the top accelerator or incubator in India this year. Y Combinator, with over 25 investments, Sequoia Capital’s Surge, Axilor Ventures, and Techstars were also very active this year.

Indian tech startups also attracted a number of direct investments from top corporates and banks this year. Goldman Sachs, which earlier this month invested in fintech startup ZestMoney, overall made eight investments this year. Among others, Facebook made its first investment in an Indian startup — social-commerce firm Meesho and Twitter led a $100 million financing round in local social networking app ShareChat.

Fashion platform Zilingo acquires Sri Lankan SaaS startup nCinga for $15.5M

Singapore’s fashion startup Zilingo has acquired Sri Lanka’s SaaS startup nCinga in a $15.5 cash and stock deal, the two said today.

nCinga, founded in 2014, offers an IoT platform to enable real-time production monitoring on factory floors and data analytics tools. Its acquisition is one of Sri Lanka’s largest tech exits in recent times, the two said.

Zilingo, which has built several pieces of supply chain — manufacturing, logistics, payments, etc for retailers and brands, said it will deploy the Sri Lankan startup’s Manufacturing Execution System (MES) software across its network of 6,000 factories and 75,000 businesses.

Ankiti Bose, co-founder and chief executive of Zilingo, said, nCinga’s product has helped the startup “drastically improve” efficiency and drive insights by digitizing the shop floor. “Their work has been crucial to our mission of creating a transparent, sustainable, economically viable and socially responsible apparel supply chain,” she said.

Zilingo “has long” been a client of nCinga, she said.

Retailers continue to struggle with meeting consumer demand for fast, responsibly produced products due to inefficiencies and information asymmetry, said Zilingo, which is steps away from becoming the latest Southeast Asian unicorn. The acquisition will enable it to help customers in the United States, Europe and Australia, where brands traditionally lack transparency over supply chain and manufacturing processes, it said.

Zilingo will also help to expand the reach of nCinga’s software to core fashion manufacturing markets such as Bangladesh, India, Vietnam, Indonesia, Thailand and Turkey. In a statement, nCinga chief executive Imal Kalutotage said the startup “hopes to do great things together.”

The announcement today comes weeks after Zilingo said it planned to invest $100 million to expand its supply chain in the U.S.

It’s unclear how much capital nCinga had raised prior to today’s announcement. According to Crunchbase, nCinga’s last financing was its seed round five years ago.

Shipper, a platform for e-commerce logistics in Indonesia, raises $5 million

Indonesia has one of the fastest-growing e-commerce markets in the world, but the logistics industry there is still very fragmented, creating headaches for both vendors and customers. Shipper is a startup with the ambitious goal of giving online sellers access to “Amazon-level logistics.” The company has raised $5 million in seed funding from Lightspeed Ventures, Floodgate Ventures, Insignia Ventures Partners and Y Combinator (Shipper is part of the accelerator’s winter 2019 batch), which will be used for hiring and customer acquisition.

Shipper was launched in 2017 by co-founders Phil Opamuratawongse and Budi Handoko, and is now used by more than 25,000 online sellers. Indonesia’s e-commerce market is growing rapidly, but online sellers still face many logistical hurdles.

The country is large (Indonesia has more than 17,500 islands, of which 600 are inhabited) and unlike the United States, where Amazon dominates, e-commerce sellers often use multiple platforms, like Tokopedia, Shopee, Bukalapak and Lazada. Smaller vendors also sell through Facebook, Instagram, WhatsApp and other social media. Once an order has been placed, the challenge of making sure it gets to customers starts. There are more than 2,500 logistics providers in Indonesia, many of whom only cover a small area.

“It is really hard for any one provider to do nationwide themselves, so the big ones usually use local partners to fulfill locations where they don’t have infrastructure,” says Opamuratawongse.

The startup’s mission is to create a platform that makes the process of fulfilling and tracking orders much more efficient. In addition to a package pick-up service and fulfillment centers, Shipper also has a technology stack to help logistics providers manage shipments. It is used to predict the best shipping routes and consolidate packages headed in the same direction and also provides a multi-carrier API that allows sellers to manage orders, print shipping labels and get tracking information from multiple providers on their phones.

When it launched three years ago, Shipper began by focusing on the last-mile for smaller vendors, who Opamuratawongse says typically keep inventory in their homes and fulfill about five to 10 orders per day. Since many give customers a choice of several logistics providers, that meant they needed to visit multiple drop-off locations every morning.

Shipper offers pick-up service performed by couriers (who Opamuratawongse says are people like stay-at-home parents who want flexible, part-time work) who collect packages from several vendors in the same neighborhood and distribute them to different logistics providers, serving as micro-fulfillment hubs. Shipper signs up about 10 to 30 new couriers each week, keeping them at least 2.5 kilometers apart so they don’t compete against each other.

The company began setting up fulfillment centers to keep up with vendors whose businesses were growing and were turning to third-party warehouse services. Shipper has established 10 fulfillment centers so far across Indonesia, including Jakarta, with plans to open a new one about every two weeks until it covers all of Indonesia.

Opamuratawongse says he expects the logistics industry in Indonesia to remain fragmented for the next decade at least, and perhaps longer because of Indonesia’s size and geography. Shipper will focus on expanding in Indonesia first, with the goal of having 1,000 microhubs within the next year and 15 to 20 fulfillment centers. Then the company plans to tackle other Southeast Asian countries with rapidly-growing e-commerce markets, including Thailand, Vietnam and the Philippines.

Alibaba acquires NetEase Kaola in deal worth $2 billion

Alibaba Group has acquired NetEase Kaola for $2 billion, the two companies said today, and will integrate it into Tmall, creating the largest cross-border e-commerce platform in China. The announcement follows weeks of media reports about a potential deal, which was said to have stalled in the middle of August after the companies reportedly disagreed on transaction details.

Tmall Import and Export general manager Alvin Liu has been named as Kaola’s new CEO, replacing Zhang Lei, but Kaola will continue to operate independently under its own brand.

Tmall Global and Kaola are China’s largest and second-largest cross-border e-commerce platforms, respectively, holding 31.7% and 24.5% of the market, and their union means they will create a business that will far outstrip in size rivals like JD Worldwide, VIP International and Amazon China. (Earlier this year, NetEase was reportedly in talks to merge Kaola with Amazon China).

Alibaba and Yunfeng, the investment firm launched by Alibaba founder Jack Ma, also agreed to invest $700 million into NetEase Cloud Music’s latest funding round. This will give Alibaba a minority stake in the streaming music service, with NetEase remaining its controlling shareholder.

In a press release, NetEase CEO William Ding said “We are pleased to have found a strategic fit for Kaola within Alibaba’s extensive ecosystem, where Kaola will continue to provide Chinese consumers with high-quality import products and services. At the same time, the completion of this strategic transaction will allow NetEase to focus on its growth strategy, investing in markets that allow us to best leverage our competitive advantages.”

Daniel Zhang, Alibaba Group’s CEO, said “Alibaba is confidence about the future of China’s import e-commerce market, which we believe remains in its infancy with great growth potential.”

SoftBank announces AI-focused second $108 billion Vision Fund with LPs including Microsoft, Apple and Foxconn

SoftBank Group announced today that it will launch its second Vision Fund with participation from Apple, Foxconn, Microsoft and other tech companies and investors. Called the Vision Fund 2, the fund will focus on AI-based technology. SoftBank said the fund’s capital has reached about $108 billion, based on memoranda of understandings. SoftBank Group’s own investment in the fund will be $38 billion.

It is worth noting that the second Vision Fund’s list of expected limited partners does not currently include any participants from the Saudi Arabia government (the first Vision Fund’s close ties to people, including Crown Prince Mohammed bin Salman, who have been implicated in the murder of journalist Jamal Khashoggi, has understandably been a major source of concern for investors, companies and human rights observers).

But SoftBank Group also said is still in discussions with other participants and that the total amount of the fund is expected to increase. The full list of participants who have signed MOUs so far are: “Apple, Foxconn Technology Group, Microsoft Corporation, Mizuho Bank, Ltd., Sumitomo Mitsui Banking Corporation, MUFG Bank, Ltd., The Dai-ichi Life Insurance Company, Limited, Sumitomo Mitsui Trust Bank, Limited, SMBC Nikko Securities Inc., Daiwa Securities Group Inc., National Investment Corporation of National Bank of Kazakhstan, Standard Chartered Bank, and major participants from Taiwan.”

SoftBank’s intention to launch Vision Fund 2 was first reported earlier this week by the Wall Street Journal. The new fund is expected to decrease SoftBank’s reliance on Saudi Arabian investment and also potentially change the relationship between startups, corporate giants like Microsoft and investors.

The second Vision Fund could help SoftBank extend its position as the most influential investor globally. Through its first $97 billion Vision Fund, the giant invested in dozens of high-profile growing companies, including ride hailing giants Didi Chuxing and Grab, and India-based grocery delivery startup Grofers, payments-firm Paytm, and budget lodging startup Oyo.

The maiden Vision Fund, which was announced in October 2016 and began investing in early 2017, has earned 62% returns to date, SoftBank said last month. SoftBank, known for consistently cutting checks of $100 million and of larger sizes, has invested in 24 of 377 unicorns globally (companies with valuation of $1 billion or more), according to research firm CB Insights.

China’s new Nasdaq-style board for tech shares starts trading with 25 companies listed

Trading on China’s new Nasdaq-style stock market began today, with 25 tech companies listed on the Science and Technology Innovation Board, operated by the Shanghai Stock Market. Called the STAR Market, the board is an initiative by the government to encourage more Chinese tech companies to list domestically by addressing concerns about governance.

Traders cautioned that initial trading may be volatile as investors buy and trade stocks, however, and that warning was borne out today with trading by several companies paused after a surge of buying triggered their circuit breakers, or measures put into place that temporarily halt buying and selling to prevent stock crashes.

Plans for the STAR Market were announced in November as part of the Chinese government’s efforts to launch capital market reforms and make listing in mainland China more appealing to tech companies by easing profitability requirements. Some of the highest-profile Chinese tech IPOs, including Alibaba, Tencent, Xiaomi, JD.com and Pinduoduo, have taken place in New York City or Hong Kong, and the STAR Market may encourage more local stock debuts and investment—a goal that holds especially high stakes as China’s trade war with the U.S. continues.

But CNBC notes that the success of the STAR Market is far from a sure thing, since China has launched two other equity markets (the ChiNext in 009 and the New Third Board in 2013) that still receive far less attention than its two primary stock exchanges in Shanghai and Shenzhen.

Swedish ‘neobank’ P.F.C. picks up €5M backing from Nordic banking giant Nordea

P.F.C. (Personal Finance Co.), a so-called “neobank” founded in Sweden, has raised €5 million in funding. Backing the young company is Nordea, the largest bank in the Nordics region.

In other words, chalk this up as another example of an incumbent bank placing financial and strategic bets on a fintech upstart, even if it doesn’t always end as the parties involved planned.

Nordea is present in 20 countries, including having a stronghold in Denmark, Finland, Norway and Sweden. Also targeting the Nordics, P.F.C. is tiny in comparison. The neobank says it hopes to get to 100,000 users by the end of the year.

Described as a personal finance app and accompanying debit card, P.F.C. is regulated under a payments institution license rather than being a fully-licensed bank. It’s the same lighter touch model that Revolut and a plethora of other banking apps choose, before in some instances applying for a bank license so they can begin doing more risky regulated activities: namely lending out deposits in the form of overdrafts and loans.

PFC DASHBOARD 02P.F.C.’s features include being able to instantly top up your account/card using Swish (a mobile payment technology provided by a group of Swedish banks), the ability to set a weekly budget, and automatic transaction categorisation.

In addition, you can freeze, unfreeze, change your pin and order a new card directly within the P.F.C. app. You also have the option to receive a push notification after each purchase with your updated balance.

It’s a travel card, too: P.F.C. says there are no additional fees for purchases and ATM withdrawals abroad.

Other soon-to-launch features include the ability for friends and partners to share expenses and settle debts, and personalised savings and credit products with “transparent pricing”.

“There’s an opportunity in the market for companies that personalize financial services,” says Eli Daniel Keren, founder and CEO of P.F.C., in a statement. “We provide a personal, transparent and simple banking experience for our customers”.

Adds Ewan Macleod, Chief Digital Officer at Nordea: “We are delighted to have P.F.C. in our portfolio as it provides a personalized digital solution for customers. We see the investment as a great opportunity for us to team up and support P.F.C. in their growth”.

Monzo, the UK challenger bank, raises £113M Series F led by YC’s Continuity fund at a £2B post-money valuation

Monzo, the fast-growing U.K.-based challenger bank with more than two million account holders, has raised £113 million (~$144m) in additional funding.

Confirming TechCrunch’s scoop in April, the Series F round is led by Y Combinator’s “Continuity” growth fund, and gives the company a new £2 billion (~$2.5b) post-money valuation. That’s double the £1 billion valuation it garnered in October last year.

A number of other new and existing investors have also participated in the Series F. They include Latitude, General Catalyst, Stripe, Passion Capital, Thrive, Goodwater, Accel, and Orange Digital Ventures.

The investment by London-based Latitude, the growth fund from prolific seed investor LocalGlobe, is particularly noteworthy given that LocalGlobe itself didn’t previously back Monzo. The same might be said of YC’s Continuity, considering that Monzo isn’t a YC alumni (although GoCardless, Monzo co-founder Tom Blomfield’s previous startup, did take part in the Silicon Valley accelerator).

The take-away: a growth fund attached to an early-stage fund can be a great antidote to the anti-portfolio (the list of successful companies a VC firm either missed, were unable or chose not to invest in).

Meanwhile, Monzo’s new funding round and YC’s backing should be viewed within the context of not only fast growth and increasingly convincing product-market fit in the U.K. — the challenger bank is currently adding 200,000 new sign-ups for its current account each month — but also recently unveiled plans to tentatively launch across the pond.

We first reported that Monzo was busy assembling a U.S.-based team over five months ago, and the U.K. company made its U.S. plans official last week. This will see a U.S. Monzo app and connected Mastercard debit card available via in-person signups at events to be held soon. The rollout will initially consist of a few thousand cards, supported by a waitlist in preparation for a wider launch.

The U.S. launch is being done in partnership with a local bank, but in the longer term Monzo plans to apply for its own U.S. bank license, similar to the strategy it employed in the U.K. so as to own and operate as much of its technical, product and regulatory infrastructure as possible.

In the U.K., this has helped Monzo achieve an NPS score of 80, which Blomfield previously told me is unusually high for a bank. This is seeing 60% of U.K. signups remain long-term active, transacting at once per week. As a counterpoint, however, the percentage of Monzo users that pay a salary into their Monzo account sits at between about 27% and 30% of active users, suggesting that a significant number of Monzo customers aren’t yet using it as their main account (Monzo’s definition of salaried is anyone who deposits at least £1,000 per month by bank transfer).

Success in the U.S., therefore, isn’t a given, conceded Blomfield when I had a call with him earlier this month. Instead, he argued that the key to cracking North America will be creating a fully localised version of Monzo based on carefully listening to U.S. users and once again finding product-market fit. He says there are obvious and less obvious cultural and technical differences in the way Brits and Americans save, spend and manage their finances, and this will require significant product divergence from the U.K. version of Monzo. Today’s new £113 million injection of capital is clearly designed to provide some of the breathing space required to achieve that.

As a side note, there are encouraging signs from other London-based fintechs that have ventured across the pond. One recent example is the financial “digital assistant” chatbot Cleo, which entered the U.S. around a year ago and has been more successful than the company anticipated, seeing Cleo add 650,000 active U.S. users to date. In fact, the U.S. currently makes up more than 90% of new Cleo users, prompting one source to describe the U.K. startup as effectively a U.S. company now.

Penta, the digital SME banking upstart, appoints co-founder of solarisBank as new CEO

Hon on the heels of being acquired by company builder Finleap, German SME banking upstart Penta has appointed a new CEO.

Marko Wenthin, who previously co-founded solarisBank (the banking-as-a-service used by Penta), is now heading up the company, having replaced outgoing CEO and Penta co-founder Lav Odorović.

I understand Odorović left Penta last month after it was mutually agreed with new owner Finleap that a CEO with more experience scaling should be brought in. The Penta co-founder remains a shareholder in the SME banking fintech and is thought to be eyeing up his next venture.

Wenthin, who remains on the board of solarisBank according to LinkedIn, stepped down from the banking-as-a-service’s executive team in late 2018 citing “health reasons” and saying that he needed to focus on his recovery. It’s not known what those health issues were, although, regardless, it’s good to see that he’s well-enough to take up a new role as Penta CEO.

Asked to comment on Odorović’s departure, Penta issued the following statement:

“Lav is still part of the shareholders at Penta. His step back from the operational management team was a decision taken by mutual agreement. Lav was the right fit during the building phase of Penta, but by entering a new step of growth, the company faces bigger challenges and needs therefore to position itself differently”.

Penta says that in his new leadership role, Wenthin, who previously spent 16 years at Deutsche Bank, will lead international expansion — next stop Italy — and begin to market the fintech to larger SMEs in addition to its original focus on early-stage startups and other small digital companies. “In the future, the focus will be also on traditional medium-sized companies,” says Penta.

Adds Wenthin in a statement: “I am very much looking forward to my new role at Penta. On the one hand, digital banking for small and medium-sized companies is very important to me, as they are the driver of the economy and I have spent most of my career in this segment. On the other hand, I have known Penta and the team for a long time as successful partners of solarisBank. Penta is the best example of how a very focused banking provider can create real, digital added value for an entire customer segment in cooperation with a banking-as-a-service platform”.

Meanwhile, TechCrunch understands that Odorović’s departure and the appointment of Wenthin isn’t the only recent personnel change within Penta’s leadership team. According to LinkedIn, Aleksandar Orlic, who held the position of CTO, departed the company last month. “We are searching for a new CTO,” said a Penta spokesperson.

Alongside Wenthin, that leaves Penta’s current management team as Jessica Holzbach (Chief Customer Officer), Luka Ivicevic (Chief of Staff), Lukas Zörner (Chief Product Officer (CPO) and Matteo Concas (Chief Marketing Officer).

Shares of SoftBank Group, Uber’s biggest stakeholder, slide after its disappointing IPO

As Uber’s biggest shareholder, SoftBank Group had high hopes for the ride-sharing company’s stock market debut last week. Instead, the Japanese conglomerate’s shares have been sliding along with Uber’s following its disappointing initial public offering. SoftBank shares began sliding at the end of last week after Uber set its IPO price at the low end of its planned range. Since the start of trading on Friday morning, SoftBank Group shares have fallen 14.4 percent in value from 11,700 yen (about $106.69) to 10,020 yen (about $91.37)

On paper, SoftBank Group, which became an investor in Uber in early 2018, had expected to make a profit of $3 billion from its debut. According to its IPO filing, SoftBank Group is Uber’s largest shareholder, owning 16.3 percent of pre-IPO shares through its Vision Fund.

After shares continued falling on their second day of trading, Uber CEO Dara Khosrowshahi told employees in a memo that “like all periods of transition, there are ups and downs. Obviously, our stock did not trade as well as we had hoped post-IPO. Today is another tough day in the market, and I expect the same as it relates to our stock.”

All major market indexes fell on Monday as the China-U.S. trade war continued to escalate, with China planning to raise customs on American imports after the U.S.increased tariffs on Chinese goods last week.

Singapore’s Grain, a profitable food delivery startup, pulls in $10M for expansion

Cloud kitchens are the big thing in food delivery, with ex-Uber CEO Travis Kalanick’s new business one contender in that space, with Asia, and particularly Southeast Asia, a major focus. Despite the newcomers, a more established startup from Singapore has raised a large bowl of cash to go after regional expansion.

Founded in 2014, Grain specializes in clean food while it takes a different approach to Kalanick’s CloudKitchens or food delivery services like Deliveroo, FoodPanda or GrabFood.

It adopted a cloud kitchen model — utilizing unwanted real estate as kitchens, with delivery services for output — but used it for its own operations. So while CloudKitchens and others rent their space to F&B companies as a cheaper way to make food for their on-demand delivery customers, Grain works with its own chefs, menu and delivery team. A so-called ‘full stack’ model if you can stand the cliched tech phrase.

Finally, Grain is also profitable. The new round has it shooting for growth — more on that below — but the startup was profitable last year, CEO and co-founder Yi Sung Yong told TechCrunch.

Now it is reaping the rewards of a model that keeps it in control of its product, unlike others that are complicated by a chain that includes the restaurant and a delivery person.

We previously wrote about Grain when it raised a $1.7 million Series A back in 2016 and today it announced a $10 million Series B which is led by Thailand’s Singha Ventures, the VC arm of the beer brand. A bevy of other investors took part, including Genesis Alternative Ventures, Sass Corp, K2 Global — run by serial investor Ozi Amanat who has backed Impossible Foods, Spotify and Uber among others — FoodXervices and Majuven. Existing investors Openspace Ventures, Raging Bull — from Thai Express founder Ivan Lee — and Cento Ventures participated.

The round includes venture debt, as well as equity, and it is worth noting that the family office of the owners of The Coffee Bean & Tea Leaf — Sassoon Investment Corporation — was involved.

Grain covers individual food as well as buffets in Singapore

Three years is a long gap between the two deals — Openspace and Cento have even rebranded during the intervening period — and the ride has been an eventful one. During those years, Sung said the business had come close to running out of capital before it doubled down on the fundamentals before the precarious runway capital ran out.

In fact, he said, the company — which now has over 100 staff — was fully prepared to self-sustain.

“We didn’t think of raising a Series B,” he explained in an interview. “Instead, we focused on the business and getting profitable… we thought that we can’t depend entirely on investors.”

And, ladies and gentleman, the irony of that is that VCs very much like a business that can self-sustain — it shows a model is proven — and investing in a startup that doesn’t need capital can be attractive.

Ultimately, though, profitability is seen as sexy today — particularly in the meal space where countless U.S. startups has shuttered including Munchery and Sprig — but the focus meant that Grain had to shelve its expansion plans. It then went through soul-searching times in 2017 when a spoilt curry saw 20 customers get food poisoning.

Sung declined to comment directly on that incident, but he said that company today has developed the “infrastructure” to scale its business across the board, and that very much includes quality control.

Grain co-founder and CEO Yi Sung Yong [Image via LinkedIn]

Grain currently delivers “thousands” of meals per day in Singapore, its sole market, with eight-figures in sales per year, he said. Last year, growth was 200 percent, Sung continued, and now is the time to look overseas. With Singha, the Grain CEO said the company has “everything we need to launch in Bangkok.”

Thailand — which Malaysia-based rival Dahamakan picked for its first expansion — is the only new launch on the table, but Sung said that could change.

“If things move faster, we’ll expand to more cities, maybe one per year,” he said. “But we need to get our brand, our food and our service right first.”

One part of that may be securing better deals for raw ingredients and food from suppliers. Grain is expanding its ‘hub’ kitchens — outposts placed strategically around town to serve customers faster — and growing its fleet of trucks, which are retrofitted with warmers and chillers for deliveries to customers.

Grain’s journey is proof that startups in the region will go through trials and tribulations, but being able to bolt down the fundamentals and reduce burn rate is crucial in the event that things go awry. Just look to grocery startup Honestbee, also based in Singapore, for evidence of what happens when costs are allowed to pile up.