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Startups Weekly: Will the real unicorns please stand up?

Posted by on Jun 1, 2019 in Aileen Lee, alex wilhelm, bluevoyant, Co-founder, CRM, crowdstrike, cybersecurity startup, dashlane, economy, editor-in-chief, entrepreneurship, eric lefkofsky, Finance, garry tan, Indonesia, initialized capital, money, neologisms, Pegasus, Private Equity, records, SoFi, Softbank, Southeast Asia, starbucks, Startup company, Startups, startups weekly, stewart butterfield, tiny speck, unicorn, valuation, Venture Capital, virtual reality | 0 comments

Hello and welcome back to Startups Weekly, a newsletter published every Saturday that dives into the week’s noteworthy venture capital deals, funds and trends. Before I dive into this week’s topic, let’s catch up a bit. Last week, I wrote about the sudden uptick in beverage startup rounds. Before that, I noted an alternative to venture capital fundraising called revenue-based financing. Remember, you can send me tips, suggestions and feedback to kate.clark@techcrunch.com or on Twitter @KateClarkTweets.

Here’s what I’ve been thinking about this week: Unicorn scarcity, or lack thereof. I’ve written about this concept before, as has my Equity co-host, Crunchbase News editor-in-chief Alex Wilhelm. I apologize if the two of us are broken records, but I think we’re equally perplexed by the pace at which companies are garnering $1 billion valuations.

Here’s the latest data, according to Crunchbase: “2018 outstripped all previous years in terms of the number of unicorns created and venture dollars invested. Indeed, 151 new unicorns joined the list in 2018 (compared to 96 in 2017), and investors poured more than $135 billion into those companies, a 52% increase year-over-year and the biggest sum invested in unicorns in any one year since unicorns became a thing.”

2019 has already coined 42 new unicorns, like Glossier, Calm and Hims, a number that grows each and every week. For context, a total of 19 companies joined the unicorn club in 2013 when Aileen Lee, an established investor, coined the term. Today, there are some 450 companies around the globe that qualify as unicorns, representing a cumulative valuation of $1.6 trillion. 😲

We’ve clung to this fantastical terminology for so many years because it helps us classify startups, singling out those that boast valuations so high, they’ve gained entry to a special, elite club. In 2019, however, $100 million-plus rounds are the norm and billion-dollar-plus funds are standard. Unicorns aren’t rare anymore; it’s time to rethink the unicorn framework.

Last week, I suggested we only refer to profitable companies with a valuation larger than $1 billion as unicorns. Understandably, not everyone was too keen on that idea. Why? Because startups in different sectors face barriers of varying proportions. A SaaS company, for example, is likely to achieve profitability a lot quicker than a moonshot bet on autonomous vehicles or virtual reality. Refusing startups that aren’t yet profitable access to the unicorn club would unfairly favor certain industries.

So what can we do? Perhaps we increase the valuation minimum necessary to be called a unicorn to $10 billion? Initialized Capital’s Garry Tan’s idea was to require a startup have 50% annual growth to be considered a unicorn, though that would be near-impossible to get them to disclose…

While I’m here, let me share a few of the other eclectic responses I received following the above tweet. Joseph Flaherty said we should call profitable billion-dollar companies Pegasus “since [they’ve] taken flight.” Reagan Pollack thinks profitable startups oughta be referred to as leprechauns. Hmmmm.

The suggestions didn’t stop there. Though I’m not so sure adopting monikers like Pegasus and leprechaun will really solve the unicorn overpopulation problem. Let me know what you think. Onto other news.

Image by Rafael Henrique/SOPA Images/LightRocket via Getty Images

IPO corner

CrowdStrike has set its IPO terms. The company has inked plans to sell 18 million shares at between $19 and $23 apiece. At a midpoint price, CrowdStrike will raise $378 million at a valuation north of $4 billion.

Slack inches closer to direct listing. The company released updated first-quarter financials on Friday, posting revenues of $134.8 million on losses of $31.8 million. That represents a 67% increase in revenues from the same period last year when the company lost $24.8 million on $80.9 million in revenue.

Startup Capital

Online lender SoFi has quietly raised $500M led by Qatar
Groupon co-founder Eric Lefkofsky just-raised another $200M for his new company Tempus
Less than 1 year after launching, Brex eyes $2B valuation
Password manager Dashlane raises $110M Series D
Enterprise cybersecurity startup BlueVoyant raises $82.5M at a $430M valuation
Talkspace picks up $50M Series D
TaniGroup raises $10M to help Indonesia’s farmers grow
Stripe and Precursor lead $4.5M seed into media CRM startup Pico

Funds

Maveron, a venture capital fund co-founded by Starbucks mastermind Howard Schultz, has closed on another $180 million to invest in early-stage consumer startups. The capital represents the firm’s seventh fundraise and largest since 2000. To keep the fund from reaching mammoth proportions, the firm’s general partners said they turned away more than $70 million amid high demand for the effort. There’s more where that came from, here’s a quick look at the other VCs to announce funds this week:

~Extra Crunch~

This week, I penned a deep dive on Slack, formerly known as Tiny Speck, for our premium subscription service Extra Crunch. The story kicks off in 2009 when Stewart Butterfield began building a startup called Tiny Speck that would later come out with Glitch, an online game that was neither fun nor successful. The story ends in 2019, weeks before Slack is set to begin trading on the NYSE. Come for the history lesson, stay for the investor drama. Here are the other standout EC pieces of the week.

Equity

If you enjoy this newsletter, be sure to check out TechCrunch’s venture-focused podcast, Equity. In this week’s episode, available here, Crunchbase News editor-in-chief Alex Wilhelm and I debate whether the tech press is too negative or too positive in its coverage of tech startups. Plus, we dive into Brex’s upcoming round, SoFi’s massive raise and CrowdStrike’s imminent IPO.


Source: The Tech Crunch

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Madrona Venture Labs raises $11M to build companies from the ground up

Posted by on May 15, 2019 in alpha, Amazon, Artificial Intelligence, blake irving, eBay, economy, entrepreneurship, erik blachford, Facebook, Finance, GoDaddy, madrona venture group, Microsoft, money, Private Equity, Seattle, spencer rascoff, Startup company, TC, Trinity Ventures, Venture Capital, venture capital Firms, venture capital funds, Zillow | 0 comments

In regions where would-be entrepreneurs need a little more support and encouragement before they’ll quit their day job, the startup studio model is taking off.

In Seattle, Madrona Venture Labs (MVL), a studio founded within one the city’s oldest and most-celebrated venture capital firms, Madrona Venture Group, has raised $11.3 million. The investment brings the studio’s total funding to $20 million.

Traditional venture capital funds invite founders to pitch their business idea to a line-up of partners. Sometimes that’s a founder with an idea looking for seed capital, other times it’s a more mature company looking to scale. When it comes to startup studios, the partners themselves craft startup ideas internally, recruiting entrepreneurs to lead the projects, then building them from the ground up within their own safe, protective walls. After a project passes the studio’s litmus test, i.e. shows proof of traction, product-market fit and more, it’s spun out with funding from Madrona and other VCs within its large and growing investor network.

For aspiring entrepreneurs deterred by the risk factors inherent to building venture-backed startups, it’s a highly desirable route. In the Pacific Northwest, where MVL focuses its efforts, it’s a chance to lure Microsoft and Amazon employees into the world of entrepreneurship.

“We want to be an onboard for founders in our market,” MVL managing director Mike Fridgen, who previously led the eBay-acquired business Decide.com, tells TechCrunch. “In Seattle, everyone isn’t a co-founder or an angel investor. Not everyone has been at a startup. A lot of people coming here are coming to work at Amazon, Microsoft or one of the larger satellite offices like Facebook. We want to help them fast-track learning, fundraising and everything else that comes with launching a successful company.”

Fridgen, MVL managing director Ben Elowitz, who co-founded the online jewelry marketplace Blue Nile and chief technology officer Jay Bartot, the co-founder of Hulu-acquired Vhoto, lead Madrona’s studio effort.

The investment in MVL comes in part from its parent company, Madrona, and for the first time, outside investors have acquired stakes in the practice. Alpha Edison, West River Group, Founder’s Co-op partner Rudy Gadre, Zillow co-founder Spencer Rascoff, former GoDaddy CEO Blake Irving, Trinity Ventures venture partner Gus Tai, TCV venture partner Erik Blachford and others participated.

With $1.6 billion in assets under management, Madrona is known for investments in Seattle bigwigs like Smartsheet, Rover and Redfin. The firm, which recently closed on another $100 million for an acceleration fund that will expand its geographic reach beyond the Pacific Northwest, launched its startup studio in 2014. Since then, it’s spun-out seven companies with an aggregate valuation of $140 million.

“There are some 85 VCs that have $300 million-plus funds,” Fridgen said. “In Seattle, we have two of the most valuable companies in the world and we have just one [big fund], Madrona; it’s the center of gravity for Seattle technology innovation.”

Companies created within MVL include Spruce Up, an AI-powered personal shopping platform, and Domicile, a luxury apartment rental service geared toward business travelers. Domicile was co-founded by Ross Saario, who spent the three years ahead of launching the startup as a general manager at Amazon. The company recently raised a $5 million round, while Spruce Up, co-founded by serial founder Mia Lewin, closed a $3 million round in May.

Other spin-outs include MightyAI, which was valued at $71 million in 2017; Nordstrom-acquired MessageYes, Chatitive and Rep the Squad. The latter, a jersey rental business, was a failure, shutting down in 2018 after failing to land necessary investment, according to GeekWire.

MVL’s latest fundraise will be used to invest in operations. Though MVL does provide its spin-outs with some capital, between $100,000 to $200,000 Fridgen said, it takes a back seat when it comes time to raise outside capital and doesn’t serve as the lead investor in deals.


Source: The Tech Crunch

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Uber’s first day as a public company didn’t go so well

Posted by on May 10, 2019 in carsharing, Commuting, economy, Finance, Fundings & Exits, initial public offering, money, Transportation, Uber, Uber IPO, Venture Capital | 0 comments

Ouch. Yikes. Oof. Sigh.

Those are some of the friendlier phrases I imagine came out of the mouths of bankers, investors, executives and really anyone who has been paying close attention to Uber’s road to the stock markets today when the company debuted on the New York Stock Exchange below its initial public offering price.

The ride-hailing business (NYSE: UBER), previously valued at $72 billion by venture capitalists, priced its stock at $45 apiece for a valuation of $82.4 billion on Thursday. It began trading this morning at $42 apiece, only to close even lower at $41.57, or down 7.6% from its IPO price.

Still, the IPO was successful enough for Uber. The business now has $8.1 billion on its balance sheet to invest in growth and, ideally, transform into a profitable business.

Anyone who expected Uber to climb past $100 billion at its IPO is surely disappointed. And those who projected a valuation of some $120 billion, well, they’re probably feeling pretty dumb. Nonetheless, Uber’s new market cap makes its exit one of the most valuable in history, and represents a landmark event for tech, mobility and the gig economy at large.

Where the stock will go from here, who knows. Lyft, as we’ve observed, has taken quite a hit since it completed an IPO in March. The Uber competitor is currently trading at a higher price than Uber: $51 per share with a market cap of about $14.6 billion. Its stock has fallen all week long, however, after the company posted losses of more than $1 billion in the first quarter of 2019.


Source: The Tech Crunch

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Equity Shot: Pinterest and Zoom file to go public

Posted by on Mar 22, 2019 in alex wilhelm, Bessemer Venture Partners, ceo, Cisco, economy, Equity podcast, Eric Yuan, Finance, FirstMark Capital, Kate Clark, katy perry, Lyft, money, photo sharing, Pinterest, Startups, TC, TechCrunch, Uber, unicorn, Venture Capital, video conferencing, web conferencing, WebEX, zoom | 0 comments

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

What a Friday. This afternoon (mere hours after we released our regularly scheduled episode no less!), both Pinterest and Zoom dropped their public S-1 filings. So we rolled up our proverbial sleeves and ran through the numbers. If you want to follow along, the Pinterest S-1 is here, and the Zoom document is here.

Got it? Great. Pinterest’s long-awaited IPO filing paints a picture of a company cutting its losses while expanding its revenue. That’s the correct direction for both its top and bottom lines.

As Kate points out, it’s not in the same league as Lyft when it comes to scale, but it’s still quite large.

More than big enough to go public, whether it’s big enough to meet, let alone surpass its final private valuation ($12.3 billion) isn’t clear yet. Peeking through the numbers, Pinterest has been improving margins and accelerating growth, a surprisingly winsome brace of metrics for the decacorn.

Pinterest has raised a boatload of venture capital, about $1.5 billion since it was founded in 2010. Its IPO filing lists both early and late-stage investors, like Bessemer Venture Partners, FirstMark Capital, Andreessen Horowitz, Fidelity and Valiant Capital Partners as key stakeholders. Interestingly, it doesn’t state the percent ownership of each of these entities, which isn’t something we’ve ever seen before.

Next, Zoom’s S-1 filing was more dark horse entrance than Katy Perry album drop, but the firm has a history of rapid growth (over 100 percent, yearly) and more recently, profit. Yes, the enterprise-facing video conferencing unicorn actually makes money!

In 2019, the year in which the market is bated on Uber’s debut, profit almost feels out of place. We know Zoom’s CEO Eric Yuan, which helps. As Kate explains, this isn’t his first time as a founder. Nor is it his first major success. Yuan sold his last company, WebEx, for $3.2 billion to Cisco years ago then vowed never to sell Zoom (he wasn’t thrilled with how that WebEx acquisition turned out).

Should we have been that surprised to see a VC-backed tech company post a profit — no. But that tells you a little something about this bubble we live in, doesn’t it?

Equity drops every Friday at 6:00 am PT, so subscribe to us on Apple PodcastsOvercast, Pocket Casts, Downcast and all the casts.


Source: The Tech Crunch

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CXA, a health-focused digital insurance startup, raises $25M

Posted by on Mar 13, 2019 in Asia, asia pacific, b capital, Banking, ceo, China, Co-founder, cxa group, economy, Eduardo Saverin, Europe, Facebook, Finance, funding, Fundings & Exits, healthcare, Indonesia, insurance, Louisiana, money, North America, openspace ventures, singtel, SingTel Innov8, Southeast Asia, Venture Capital | 0 comments

CXA Group, a Singapore-based startup that helps make insurance more accessible and affordable, has raised $25 million for expansion in Asia and later into Europe and North America.

The startup takes a unique route to insurance. Rather than going to consumers directly, it taps corporations to offer their employees health flexible options. That’s to say that instead of rigid plans that force employees to use a certain gym or particular healthcare, a collection over 1,000 programs and options can be tailored to let employees pick what’s relevant or appealing to them. The ultimate goal is to bring value to employees to keep them healthier and lower the overall premiums for their employers.

“Our purpose is to empower personalized choices for better living for employees,” CXA founder and CEO Rosaline Koo told TechCrunch in an interview. “We use data and tech to recommend better choices.”

The company is primarily focused on China, Hong Kong and Southeast Asia where it claims to works with 600 enterprises including Fortune 500 firms. The company has over 200 staff, and it has acquired two traditional insurance brokerages in China to help grow its footprint, gain requisite licenses and its logistics in areas such as health checkups.

We last wrote about CXA in 2017 when it raised a $25 million Series B, and this new Series C round takes it to $58 million from investors to date. Existing backers include B Capital, the BCG-backed fund from Facebook co-founder Eduardo Saverin, EDBI — the investment arm of the Singapore Economic Development Board — and early Go-Jek backer Openspace Ventures, and they are joined by a glut of big-name backers in this round.

Those new investors include a lot of corporates. There’s HSBC, Singtel Innov8 (of Singaporean telco Singtel), Telkom Indonesia MDI Ventures (of Indonesia telco Telkom), Sumitomo Corporation Equity Asia (Japanese trading firm) Muang Thai Fuchsia Ventures (Thailand-based insurance firm), Humanica (Thailand-based HR firm) and PE firm Heritas Venture Fund.

“There are additional insurance companies and strategic partners that we aren’t listing,” said Koo.

Rosaline Koo is founder and CEO of CXA Group

That’s a very deliberate selection of large corporates which is part of a new strategy to widen CXA audience.

The company had initially gone after massive firms — it claims to reach a collective 400,000 employees — but now the goal is to reach SMEs and non-Fortune 500 enterprises. To do that, it is using the reach and connections of larger service companies to reach their customers.

“We believe that banks and telcos can cross-sell insurance and banking services,” said Koo, who grew up in LA and counts benefits broker Mercer on her resume. “With demographic and work life event data, plus health data, we’re able to target the right banking and insurance services.

“We can help move them away from spamming,” she added. “Because we will have the right data to really target the right offering to the right person at the right time. No firm wants an agent sitting in their canteen bothering their staff, now it’s all digital and we’re moving insurance and banking into a new paradigm.”

The ultimate goal is to combat a health problem that Koo believes is only getting worse in the Asia Pacific region.

“Chronic disease comes here 10 years before anywhere else,” she said, citing an Emory research paper which concluded that chronic diseases in Asia are “rising at a rate that exceeds global increases.”

“There’s such a crying need for solutions, but companies can’t force the brokers to lower costs as employees are getting sick… double-digit increases are normal, but we think this approach can help drop them. We want to start changing the cost of healthcare in Asia, where it is an epidemic, using data and personalization at scale in a way to help the community,” Koo added.

Talking to Koo makes it very clear that she is focused on growing CXA’s reach in Asia this year, but further down the line, there are ambitions to expand to other parts of the world. Europe and North America, she said, may come in 2020.


Source: The Tech Crunch

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Netflix star and tidying expert Marie Kondo is looking to raise $40M

Posted by on Mar 8, 2019 in economy, Finance, marie kondo, money, Netflix, sequoia capital, Tidying Up With Marie Kondo, Venture Capital | 0 comments

Marie Kondo, the woman who stole millions of Netflix viewers hearts this year with her show, “Tidying Up,” is in talks to raise up to $40 million in venture capital funding to scale KonMari, the business behind her personal brand, books and TV series.

The round, first reported by The Information, wouldn’t be KonMari’s first infusion of venture investment, surprisingly. Last year, the company closed a small funding round led by top-tier VC fund Sequoia Capital, TechCrunch confirmed. A spokesperson for the business told TechCrunch KonMari isn’t commenting on fundraising at this time.

Sources have also confirmed with TechCrunch that Kondo is indeed on the fundraising circuit again, with plans to build an ecommerce platform.

“Tidying Up with Marie Kondo” debuted on Netflix on January 1, 2019 to near-instant success, spurring a wave of internet-fandom for Kondo with her catchphrase “does it spark joy?” and efficient method of cleaning and organizing. The KonMari Method encourages cleaners to tidy by category, starting with clothes, then books, papers, miscellaneous items and sentimental items. “Keep only those things that speak to the heart, and discard items that no longer spark joy. Thank them for their service – then let them go,” Kondo explains on her website.

KonMari was founded in 2015 by Kondo and her husband, Takumi Kawahara.

 


Source: The Tech Crunch

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VCs have growing appetite for ‘AgriFood’

Posted by on Mar 7, 2019 in AgFunder, agriculture, agriculture tech, AgTech, Asia, Biotech, CrunchBase, economy, entrepreneurship, farming, Finance, Food, food delivery, food tech, funding, GreenTech, groceries, grocery, McKinsey, money, Naspers, Private Equity, restaurant tech, Restaurants, Softbank, Startup company, Startups, TC, Venture Capital, Zume Pizza | 0 comments

Venture investors are pouring billions of dollars into feeding their hunger for food and agriculture startups. Whether that trend line is due to enthusiasm for the sector or just broader heavy investing in the VC space is much less clear.

According to a recent report published by AgFunder – a VC and investing marketplace focused on the agriculture and food sectors – the “AgriFood” space is booming. Using data from Crunchbase and several other data partners, the organization published its “2018 AgriFood Tech Investing Report” this morning, finding that investment in AgriFood companies increased 43% year-over-year, reaching $16.9 billion in 2018.

AgFunder classifies AgriFood tech as “the small but growing segment of the startup and venture capital universe that’s aiming to improve or disrupt the global food and agriculture industry.” Their definition is intentionally broad, encompassing everything from crop and livestock biotech, property management systems, and payments, to biomaterials and meat alternatives, all the way up to tech platforms for restaurants, grocers, deliveries and at-home cooks.

While some of the AgriFood tech categories – such as delivery or restaurant software – have long been popular destinations for venture capital, we’re now seeing a more diverse array of startups innovating across the entire food supply chain. According to the report, expansion in AgriFood is fairly consistent across upstream (agricultural and farming) subsectors to downstream (more consumer-facing) subsectors, with each group growing roughly 44% and 42% year-over-year respectively.

The data also shows growth occurring across almost all deal stages. AgriFood saw huge increases in the average deal size and total investment for late-stage companies in particular, as venture-backed startups have grown to global scale. And penetrating and attracting capital from international markets seems more feasible than ever. AgriFood investing, which traditionally has been largely US-centric, is rapidly becoming a global phenomenon, with more than half of total funding – and some of the largest rounds – now coming from companies and investors outside the US.


Source: The Tech Crunch

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Revolut CFO resigns following money laundering controversy

Posted by on Mar 1, 2019 in Bank, Banking, ceo, challenger bank, Drama, Europe, Finance, Financial Conduct Authority, financial services, Japan, jp morgan, money, monzo, N26, North America, reporter, Revolut, Singapore, TC, the telegraph, TransferWise, United Kingdom | 0 comments

This hasn’t been a good week for challenger bank Revolut . The company, which offers digital banking services and is valued at $1.7 billion, confirmed today that embattled CFO Peter O’Higgins has resigned and left the business.

The startup and O’Higgins have been under pressure after a Daily Telegraph report that revealed that Revolt switched off an anti-money laundering system that flags suspect transactions because it was prone to throwing out false positives.

According to the Telegraph, the system was inactive between July-September 2018, which potentially allowed illegal transactions to pass across the banking platform. Revolut did not contact the Financial Conduct Authority to inform the regulator of the lapse, Telegraph reporter James Cook said.

O’Higgins, who joined the company from JP Morgan three years ago, made no mention of the saga in his resignation statement:

Having been at Revolut for almost three years, I am immensely proud to have taken the company from £1m revenue to £50m revenue during this time. However, as Revolut begins to scale globally and applies to become a bank in multiple jurisdictions, the time has come to pass the reigns over to someone who has global retail banking experience at this level. My time at Revolut has been invaluable and I’m so proud of what myself and the team have achieved. There is no doubt in my mind that Revolut will go on to build one of the largest and most trusted financial institutions in the world.

In a separate statement received by TechCrunch, Revolut CEO Nik Storonsky said that O’Higgins had been “absolutely pivotal to our success.”

The resignation caps a terrible few days for Revolut, which was the subject of a report from Wired earlier this week that delved into allegations around its challenging workplace culture and high employee churn rate.

“Former Revolut employees say this high-speed growth has come at a high human cost – with unpaid work, unachievable targets, and high-staff turnover,” wrote guest reporter Emiliano Mellino, citing the experiences of numerous former employees.

Those incidents included prospective staff being told to canvass for new customers as part of the interview process. The candidates were not compensated for their efforts, according to Wired. Revolut later removed the demands from its hiring processes.

Revolut is headquartered in the UK, where it launched its service in the summer of 2015. Today, it claims over four million registered users across Europe — it is available in EEA countries — although it plans to extend its presence to other parts of the world are taking longer than expected.

The company said last year it aims to launch in Singapore and Japan in Q1 of this year — so far neither has happened — while it also harbors North American market plans. Entries to the U.S. and Canada were supposed to happen by the end of 2018, according to an interview with Storonsky at TechCrunch Disrupt in September, but they also appear to have been delayed.

Revolut is generally considered to be the largest challenger bank in Europe, in terms of valuation and registered users, but other rivals include N26, Monzo and Starling. Even Transferwise, the global remittance service, now includes border-less banking features and an accompanying debit card.


Source: The Tech Crunch

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Nigerian fintech firm TeamApt raises $5M, eyes global expansion

Posted by on Feb 28, 2019 in africa, Asia, Banking, Canada, cellulant, ceo, CFO, Chief Information Officer, consumer finance, economy, engineer, ethiopia, Europe, Finance, flutterwave, Lagos, Mexico, money, Nigeria, online payments, paystack, POS, Series A, TC | 0 comments

Nigerian fintech startup TeamApt has raised $5.5 million in capital in a Series A round led by Quantum Capital Partners.

The Lagos based firm will use the funds to expand its white label digital finance products and pivot to consumer finance with the launch of its AptPay banking app.

Founded by Tosin Eniolorunda, TeamApt supplies financial and payment solutions to Nigeria’s largest commercial banks — including Zenith, UBA, and ALAT.

For Eniolorunda, launching the fintech startup means competing with his former employer, the later stage Nigerian tech company Interswitch.

The TeamApt founder is open about his company going head to head not only with his former employer, but other Nigerian payment gateway startups.

“Yes, we are in competition with Interswitch,” Eniolorunda said. But he also said that the Nigerian fintech startups Paystack and Flutterwave—both of which facilitate payments for businesses— are competitors as well.

TeamApt, whose name is derivative of aptitude, bootstrapped its way to its Series A by generating revenue project to project working for Nigerian companies, according to CEO Eniolorunda.

“To start, we closed a deal with Computer Warehouse Group to build a payment solution for them and that’s how we started bootstrapping,” he said. A project soon followed for Fidelity Bank Nigeria.

TeamApt now has a developer team of 40 in Lagos, according to Eniolorunda, who spent 6 years at Interswitch as developer and engineer himself, before founding the startup in 2015 .

“The 40 are out of a total staff of about 72 so the firm is a major engineering company. We build all the IP and of course use open source tools,” he said.

TeamApt’s commercial bank product offerings include Moneytor— a digital banking service for financial institutions to track transactions with web and mobile interfaces—and Monnify, an enterprise software suite for small business management.

TeamApt worked with Sterling Bank Nigeria to develop its Sterling Onepay mobile payment app and POS merchant online platform, Sterling Bank’s Chief Information Officer Moronfolu Fasinro told TechCrunch.

On performance, TeamApt claims 26 African bank clients and processes $160 million in monthly transactions, according to company data. Though it does not produce public financial results, TeamApt claimed revenue growth of 4,500 percent over a three year period.

Quantum Capital Partners, a Lagos based investment firm founded by Nigerian banker Jim Ovia, confirmed it verified TeamApt’s numbers.

“Our CFO sat with them for about two weeks,” Elaine Delaney said.

TeamApt’s results and the startup’s global value proposition factored into the fund’s decision to serve as sole-investor in the $5.5 million round.

“The problem that they’re solving might be African but the technology is universal. ‘Can it be applied to any other market?’ of course it can,” said Delaney.

Delaney will take a board seat with TeamApt “as a supportive investor,” she said.

TeamApt plans to develop more business and consumer based offerings. “We’re beginning to pilot into much more merchant and consume facing products where we’re building payment infrastructure to connect these banks to merchants and businesses,” CEO Tosin Eniolorunda said.

Part of this includes the launch of AptPay, which Eniolorunda describes as “a push payment, payment infrastructure” to “centralize…all services currently used on banking mobile apps.”

The company recently received its license from the Nigerian Central Bank to operate as a payment switch in the country.

On new markets, “Nigeria comes first. But we’re also looking at some parts of Europe. Canada is also hot on list,” said Eniolorunda.  He wouldn’t specific a country but said to look for a TeamApt expansion announcement by fourth quarter 2019.

TeamApt joins several fintech firms in Africa that announced significant rounds, expansion, or partnerships over the last year.  As covered by TechCrunch, in September 2018, Nigeria’s Paga raised $10 million and announced possible expansion in Ethiopia, Asia, and Mexico. Kenyan payment company Cellulant raised $53 million in 2018, targeted to boost its presence across Africa. And in January, Flutterwave partnered with Visa to launch the GetBarter global payment product.

The fintech space has also been the source of speculation regarding the continent’s first tech IPO on a major exchange, including Interswitch’s much anticipated and delayed public offering.

TeamApt’s CEO is open about the company’s future intent to list. “The project code name for the recent funding was NASDAQ. We’re clear about becoming a public company,” said Eniolorunda.


Source: The Tech Crunch

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How to prepare for an investment apocalypse

Posted by on Feb 8, 2019 in behance, Column, craigslist, customer acquisition cost, economy, entrepreneurship, executive, Facebook, Finance, instagram, Mergers and Acquisitions, money, Private Equity, Scott Belsky, Sequoia, Startup company, Startups, TC, unicorn, United States, Venture Capital, venture debt, WhatsApp | 0 comments

Unlike 2000 and 2008, everyone in the startup world is expecting a crash to come at any moment. But few are taking concrete steps to prepare for it.

If you’re running a venture-backed startup, you should probably get on that. First, go read RIP Good Times from Sequoia to get a sense for how bad it can get, quickly. Then take a look at the checklist below. You don’t need to build a bomb shelter, yet, but adopting a bit of the prepper mentality now will pay dividends down the road.

Don’t wait, prepare

The first step in preparing for a coming downturn is making a plan for how you’d get to a point of sustainability. Many startups have been lulled into a false sense of confidence that profit is something they can figure out “later.” Keep in mind, it has to be done eventually and it’s easier to do when the broader economy isn’t crashing around you. There are two complicating factors to keep in mind.

You’ll have to do it with less revenue

In a downturn, business customers skip investing in capital equipment and new software. Likewise, consumer discretionary spending goes way down. The result is you’ll likely have less revenue than you do now. War-game a variety of scenarios — what you’d do if you lost 20 percent, 50 percent or 80 percent of your revenue, and what decisions would have to be taken to survive.

Sometimes capital can’t be had at any valuation

When a downturn comes, capital markets don’t soften, they seize. Depending on how bad a hypothetical financial crisis got, there’s a good chance that investors would close up their checkbooks and triage. If you aren’t one of your investor’s favorite portfolio companies, there’s a decent chance you may be left in the cold. Don’t even assume you’ll be able to close a down round. Fortunately, showing a plan with a clear path to profitability will allay investors concerns that you’ll need their capital indefinitely and make it more likely you’ll be able to raise.

Planning around these three realities — the need for profits, while experiencing dropping revenue, in a world where capital can’t be had at any valuation — is going to lead to unpleasant conclusions. A dramatically diminished business, major layoffs, and a decisive drop in morale are likely outcomes. Thankfully, you can take steps now to help soften the landing, or if you’re really successful, avoid it entirely.

Avoid “growth at all costs” mentality

Getting acquisition costs under control will help you in two ways. First, it’ll lower your burn rate. Chasing growth for growth’s sake is always a short-sighted decision, but especially during the late part of the business cycle. Avoid this even if you’re VC is encouraging it. Second, by carefully analyzing the inputs to your acquisition cost, it will force you to examine the dynamics of your business. It gives you an opportunity to decide if a poorly performing channel or lackluster sales reps are actually smart investments. Even cutting your payback period from 12 months to nine will provide an increased measure of visibility and control.

Increase the hiring bar

Instagram took over the web with a team of a dozen. Craigslist is a pillar of the internet with a staff of 40 employees. WhatsApp supported hundreds of millions of daily users with fewer than 50 people. Chances are you need fewer people than you think.

In his new book, Scott Belsky shares an algorithm he used building Behance into a $100M company — automate, automate, then hire. His point was that founders should encourage teams to push hard on improving processes and other labor-saving tools before adding more FTEs.

Don’t institute a hiring freeze or take other actions that might spook the staff, but do send the message that new hires should be the last resort, not the first response to a challenge.

Preach discipline — build it into the culture

Founders often try to change spending habits, and in turn culture, when it’s too late. Is there a fair bit of business class flying among the executive team? Do your employees stretch your free dinner policy by staying just past the dinner hour to take advantage of free food? At most tech ventures, everyone is truly an owner. Try to help the entire team to internalize that they are spending their own money.

Get to know your potential acquirers

The week the market drops 50 percent is not the week to start a M&A conversation. You should be getting to know the five most likely buyers of your company, now. Find out who the decision makers at each of the companies are and build relationships. Make it a point to catch up with these people at conferences and even consider sending them regular updates about your company’s progress (but not too much data). You’re not running a formal sales process, but helping build up the internal desire to buy your company if the opportunity presents itself. It may not be the exit of your dreams, but it’s nice to have options if you need them.

Jettison expensive office space

If you’re coming to a T-juncture regarding office space, you may want to prioritize price and lease flexibility over quality and location. I remember one of our offices at my start-up was a twelve month lease with 6 months free. The landlords were desperate, and so were we!

Front-load revenue

If you’re in the kind of business that will support annual contracts, figure out a way to offer them. Pre-sell credits to consumers at a discount. More fundamentally, think about how you might be able to adjust your business model so you can get paid before you deliver services. Plenty of viable businesses are asphyxiated by delays in accounts receivable, don’t allow your ambitions to be thwarted by accounting.

Diversify your customer base

One lesson learned in the 2000 bubble was that startups that serve other startups tend to be hit hardest. It’s important to think about how a downturn will impact your customer base. If more than 30 percent of your revenue comes from one industry (perhaps start-ups!), or heaven help you, a single customer, start thinking about managing risk by diversifying your customer base.

Raise a pre-emptive round (AND DON’T SPEND IT)

Topping up your balance sheet at this point isn’t a bad idea, provided you have the discipline to treat it as a rainy day fund. Communicate this rationale to your investors. It’s also important to use this moment to reflect on valuation. An eye-popping valuation will feel good when you sign the term sheet, but it’s going to feel like a millstone if the economy turns, and the market for blue-chip tech stocks drops precipitously.

Consider venture debt

Many VCs discourage venture debt. They’ll say “if you need more money, we’ll backstop you.” The problem is when things ugly, they may not be there. Debt providers are a good way to extend the runway. The thing is that it’s best to raise debt capital when you don’t need it. Venture debt can add ⅓ to ½ of additional capital to some funding rounds with minimal dilution and relatively modest interest rates. Do note that when things get bad, some debt funds can get aggressive so do your homework before taking the notes.

Don’t panic

It’s tough to predict the top of the market. CNN, Time, The Atlantic, The Wall Street Journal, and many others argued Facebook paying $1 billion for Instagram was a sure sign of a bubble — in 2012. Reputable commentators have claimed that we’re in a bubble every year since, see 2013, 2014, 2015, 2016, 2017, and 2018. Going into survival mode in any of those years would have been a serious mistake for most startups.

Still, we’re only two quarters away from marking the longest economic expansion in US history. The good times have got to end at some point. Venture capital is a hell of a drug and withdrawal can be painful. Keep in mind that there’s no correlation between how much a company raised and how well they did on the public markets. If you’re struggling to make your startup’s economics work, read up on dozens of “invisible unicorns” who show that you can get big without relying on outsized amounts of venture capital.

If your house is in order when the downturn hits, you may actually be able to grow through it. As unprepared competitors go out of business, you’ll find that talent is more plentiful and customer acquisition costs plummet. Some of the best companies have been founded and thrived in the worst of times — if you’re prepared.


Source: The Tech Crunch

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