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Zoom, the profitable tech unicorn, prices IPO above range

Posted by on Apr 17, 2019 in board member, economy, Emergence Capital, Finance, Fundings & Exits, initial public offering, Li Ka-shing, NASDAQ, photo sharing, Pinterest, Private Equity, sequoia capital, Startups, TC, Venture Capital, video conferencing, zoom | 0 comments

Zoom, a relatively under-the-radar tech unicorn, has defied expectations with its initial public offering. The video conferencing business priced its IPO above its planned range on Wednesday, confirming plans to sell shares of its Nasdaq stock, titled “ZM,” at $36 apiece, CNBC reports.

The company initially planned to price its shares at between $28 and $32 per share, but following big demand for a piece of a profitable tech business, Zoom increased expectations, announcing plans to sell shares at between $33 and $35 apiece.

The offering gives Zoom an initial market cap of roughly $9 billion, or nine times that of its most recent private market valuation.

Zoom plans to sell 9,911,434 shares of Class A common stock in the listing, to bring in about $350 million in new capital.

If you haven’t had the chance to dive into Zoom’s IPO prospectus, here’s a quick run-down of its financials:

  • Zoom raised a total of $145 million from venture capitalists before filing to go public
  • It posted $330 million in revenue in the year ending January 31, 2019 with a gross profit of $269.5 million
  • It more than doubled revenues from 2017 to 2018, ending 2017 with $60.8 million in revenue and 2018 with $151.5 million
  • Its losses have shrunk from $14 million in 2017, $8.2 million in 2018 and just $7.5 million in the year ending January 2019

Zoom is backed by Emergence Capital, which owns a 12.2 percent pre-IPO stake; Sequoia Capital (11.1 percent); Digital Mobile Venture, a fund affiliated with former Zoom board member Samuel Chen (8.5 percent); and Bucantini Enterprises Limited (5.9 percent), a fund owned by Chinese billionaire Li Ka-shing.

Zoom will debut on the Nasdaq the same day Pinterest will go public on the NYSE. Pinterest, for its part, has priced its shares above its planned range, per The Wall Street Journal.


Source: The Tech Crunch

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Birth control delivery startup Nurx taps Clover Health’s Varsha Rao as CEO

Posted by on Apr 17, 2019 in Airbnb, Alphabet, board member, Chelsea Clinton, chief executive officer, Chief Operating Officer, Clover Health, Companies, Health, healthcare, Kleiner Perkins, Lowercase Capital, Medicare, Nurx, sharing economy, Startups, telemedicine, Union Square Ventures, United States, vacation rental, Venture Capital, websites, Y Combinator | 0 comments

Varsha Rao, Airbnb’s former head of global operations and, most recently, the chief operating officer at Clover Health, has joined Nurx as its chief executive officer.

Rao replaces Hans Gangeskar, Nurx’s co-founder and CEO since 2014, who will stay on as a board member.

Nurx, which sells birth control, PrEP, the once-daily pill that reduces the risk of getting HIV, and an HPV testing kit direct to consumer, has grown 250 percent in the last year, doubled its employee headcount and attracted 200,000 customers. Rao tells TechCrunch the startup realized they needed talent in the C-suite that had experienced this kind of growth.

“The company has made some really great progress in bringing on strong leaders and that’s one of the things that got me excited about joining,” Rao told TechCrunch. Nurx recently hired Jonathan Czaja, Stitch Fix’s former vice president of operations, as COO, and Dave Fong, who previously oversaw corporate pharmacy services at Safeway, as vice president of pharmacy.

Rao, for her part, joined Clover Health, a Medicare Advantage startup backed by Alphabet, in late 2017 after three years at Airbnb.

“After being at Airbnb, a really mission-driven company, I couldn’t go back to something that wasn’t equally or more so and healthcare really inspired me,” Rao said. “In terms of accessibility, I feel like [Nurx] is super important. We are really fortunate to live in a place where can access birth control and it can be more easily found but there are lots of parts of the country where physical access is challenging and costs can be a factor. To be able to break down barriers of access both physically and from an economic standpoint is hugely meaningful to me.”

Nurx, a graduate of Y Combinator, has raised about $42 million in venture capital funding from Kleiner Perkins, Union Square Ventures, Lowercase Capital and others. It launched in 2015 to facilitate women’s access to birth control across the U.S. with a HIPAA-compliant web platform and mobile application that delivers contraceptives directly to customers’ doorsteps.

Today, the telehealth startup is available to customers in 24 states and counts Chelsea Clinton as a board member.


Source: The Tech Crunch

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Ten pieces of friendly VC advice for when someone wants to buy your company

Posted by on Dec 16, 2018 in Bank, board member, Business, ceo, Column, economy, executive, Facebook, human resource management, Mergers and Acquisitions, Startup company, the wall street journal | 0 comments

I’ve been fortunate to have been part of half a dozen exits this year, and have seen the process work smoothly, and other times, like a roller coaster with only the most tenuous connection to the track. Here are ten bits of advice I’ve distilled from these experiences in the event someone makes you an offer for your startup.

1. Understand the motivations of your acquirer.

The first thing you need to understand is why the acquiring company wants your startup. Do you have a strategic product or technology, a unique team, or a sizable revenue run rate? Strategic acquirers, like Google and Facebook, likely want you for your tech, team, or sometimes even your user traction. Financial acquirers, like PE firms, care a great deal more about revenue and growth. The motivations of the buyers will likely be the single-biggest influencer of the multiple offered.

It’s also essential to talk price early on. It can be somewhat awkward for less experienced founders to propose a rich valuation for their company but it’s a critical step towards assessing the seriousness of the discussion. Otherwise, it’s far too easy for an acquirer to put your company through a distracting process for what amounts to an underwhelming offer, or worse, a ploy to learn more about your strategy and product roadmap.

2. Don’t “Test the waters.” Pass, or fully commit.

Going through an M&A process is the single most distracting thing a founder can do to his or her company. If executed poorly, the process can terminally damage the company. I’d strongly advise founders to consider these three points before making a decision:

Is now the right time? The decision to sell can be a tough choice for first-time founders. Often the opportunity to sell the company comes just as the process of running it becomes enjoyable. Serial entrepreneurship is a low-percentage game, and this may be the most influential platform a founder will ever have. But the reflex to sell is understandable. Most founders have never had a chance to add millions to their bank accounts overnight. Moreover, there is a team to consider; usually all with mortgages to pay, college funds to shore up, and the myriad of other expenses and their needs should factor into the decision.

Is it actually your choice to make? Most investors look at M&A as a sign your company could be even bigger and as an opportunity to put more capital to work. However, when VCs have lost confidence and see a fair offer come in, or they hear a larger competitor is looking at entering your space, they may push you to sell. Of course, the best position to be in is one where you can control your destiny and use profitability as the ultimate BATNA (“best alternative to a negotiated agreement”).

How long do you have to stay? In the case of competing offers, you may have limited ability to negotiate price, but other deal terms could be negotiable. One of the most important is the amount of time you have to stay at the company, and how much of the sale price is held in escrow, or dependent on earn-outs.

3. Manage your team.

As soon as you attract interest from an acquirer, start socializing the idea that most M&A deals fall apart — because they do. This is important for two reasons.

First, your executive team will likely start counting their potential gains, and they just may let KPIs key to running the business slip. If the deal fails to close, the senior team will be dejected, demotivated, and you may start to hear some mutinous noises. This attitude quickly percolates through the team and can be deadly for the culture. What was supposed to be your moment of triumph can quickly turn into a catastrophe for team morale.

This is typically the toughest part of the M&A process. You need the exec team to execute to close a deal, but you’re running into some of the deepest recesses of human nature too. Recognize the fact that managing internal expectations is as important as managing the external process.

4. Raise enough money to stay flush for a year.

Assuming you’re selling your company from a position of strength, make sure you have enough capital so that you don’t lose leverage due to a balance sheet lacking cash. I’ve seen too many companies start M&A discussions and take their foot off the gas in the business, only to see the metrics drop and runway shorten, allowing the acquirer to play hardball. In an ideal scenario, you want at least 9 months of cash in the bank.

5. Hire a banker.

If you get serious inbound interest, or if you’re at the point where you want to sell your company, hire a banker. Your VCs should be able to introduce you to a few strong firms. Acquisition negotiations are high stakes, and while bankers are expensive, they can help avoid costly rookie mistakes. They can also classically and plausibly play the bad cop to your good cop which can also contribute positively to your post-merger relations.

My only caveat is that bankers have a playbook and tend not to get creative enough. You can still be additive in helping fill the funnel of potential acquirers, especially if you’ve had communication with unlikely acquirers in the past.

6. Find a second bidder… and a third… and a fourth.

The hardest bit of advice is also the most valuable. Get a second bidder ASAP. It’s Negotiation 101, but without a credible threat of a competitive bid, it is all too easy to be dragged along.

Hopefully, you’ve been talking with other companies in your space as you’ve been building your startup. Now is the time to call your point of contact and warn them that a deal is going down, and if they want in, they need to move quickly.

Until you’re in a position of formal exclusivity, keep talking with potential acquirers. Don’t be afraid to add new suitors late in the game. You’d be amazed at how much info spreads through M&A back channels and you may not even be aware of rivalries that can be extremely useful to your pursuit.

Even when you’re far down the road with an acquirer, if they know you have a fallback plan in mind it can provide valuable leverage as you negotiate key terms. The valuation may be set, but the amount paid upfront vs. earnouts, the lock-up period for employees and a multitude of other details can be negotiated more favorably if you have a real alternative. Of course, nothing provides a better alternative than your simply having a growing and profitable business!

7. Start building your data room.

Founders can raise shockingly large sums of money with pitch decks and spreadsheets, but when it comes time to sell your startup for a large sum, the buyer is going to want to get access to documentation, sometimes down to engineering meeting minutes. Financial records, forward-looking models, audit records, and any other spreadsheet will be scrutinized. Large acquirers will even want to look at information like HR policies, pay scales, and other human resources minutiae. As negotiations progress, you’ll be expected to share almost every detail with the buyer, so start pulling this information together sooner rather than later.

One CEO said that during the peak of diligence, there were more people from the acquirer in his office than employees. Remember to treat your CFO and General Counsel well – chances are high that they get very little rest during this process.

8. Keep your board close, your tiny investors far away.

Founders are in a tough situation in that they’re starving for advice, but they should avoid the temptation to share info about negotiations with those who don’t have alignment. For instance, a small shareholder on the cap table is more likely to blab to the press than a board member whose incentives are the same as yours. We’ve seen deals scuttled because word leaked and the acquirer got cold feet.

Loose lips sink startups.

9. Use leaks when they inevitably happen.

Leaks are annoying and preventable, but if they do happen, try using them as leverage. If the press reports that you’ve been acquired, and you haven’t been, and also haven’t entered a period of exclusivity, try to ensure that other potential bidders take notice. If you’ve been having trouble drumming up interest with potential bidders, a report from Bloomberg, The Wall Street Journal, or TechCrunch can spark interest in the way a simple email won’t.

10. Expect sudden radio silence.

There’s a disconnect between how founders perceive a $500M acquisition and how a giant like Google does. For the founder, this is a life changing moment, the fruition of a decade of work, a testament to their team’s efforts. For the corp dev person at Google, it’s Tuesday.

This reality means that your deal may get dropped as all hands rush to get a higher-priority, multi-billion dollar transaction over the finish line. It can be terrifying for founders to have what were productive talks go radio silent, but it happens more often than you think. A good banker should be able to back channel and read the tea leaves better than you can. It’s their day job not yours.

No amount of advice can prepare you for the M&A process, but remember that this could be one of the highest quality problems you’re likely to experience as a founder. Focus on execution, but feel good about achieving a milestone many entrepreneurs will never experience!


Source: The Tech Crunch

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