Author: azeeadmin

Lost amongst all the IPO chatter of the mega-unicorns are a crop of companies reaching their stride, often flush with capital, ready with big plans, and still with some time before they go public. This group of companies are what we’re calling our $50 million annual recurring revenue (ARR) group, though we’re not too strict on that revenue figure.

Close enough will do.

A little bit ago we kicked off the series by looking at  OwnBackup and Assembly. Today we’re continuing the series, digging into SimpleNexus and PicsArt. Next up is and Synack, and we have an interview with Kaseya on deck. The latter company is a bit oversized for our cohort, but we’ll figure out what to do with our notes from that chat in due time.

As a reminder, we’re looking at startups that are around the $50 million ARR mark because our 2020 exploration of $100 million ARR companies wound up merely taking looks at companies, like Lemonade, that were going public in short order. We’ll still do the occasional piece on the group, but we’re focusing on smaller firms this year.

So, into the breach with notes on SimpleNexus and PicsArt, drawing on public information concerning their fundraising history and product, and interviews with both companies. Let’s see what we can learn from their growth!

SimpleNexus

SimpleNexus is a Utah-based technology company that provides digital mortgage software. The company most recently raised $108 million in January of this year, a Series B that we sadly lack a valuation for.

The company is growing quickly, with founders Matt Hansen and Ben Miller telling TechCrunch that they expect to scale from $30 million to $58 million in the next 12 months. That puts the the company comfortably into our new group.

SimpleNexus’s product is sold to banks and other financial institutions, helping provide a hub — a simple nexus, if you will — providing consumers a single login to manage their home-buying process from search to purchase. The software itself is sold on a SaaS basis, often white-labeled to banks.

But while SimpleNexus has seen success with its current model, claiming to touch around one in every eight mortgages, its founders told TechCrunch in a video call that they have bigger aspirations. Hansen, who is also the company’s CEO, said that in the future its service could stick with customers after they buy a home, perhaps helping them connect utilities, find appraisers, and manage their home.

TechCrunch was curious about the company’s recent capital raise, and how it may impact SimpleNexus’s ramp to nearly $60 million in revenue by January 2021. Per the company, it wasn’t looking for capital, but after receiving some inbound offers to sell its entire business, which weren’t what its founders wanted, it decided to raise more external capital instead. Insight, which led the round, was excited about their company, the founders said, thanks to its customer growth and revenue expansion.

Rust, the programming language — not the survival game, now has a new home: the Rust Foundation. AWS, Huawei, Google, Microsoft and Mozilla banded together to launch this new foundation today and put a two-year commitment to a million-dollar budget behind it. This budget will allow the project to “develop services, programs, and events that will support the Rust project maintainers in building the best possible Rust.”

Rust started out as a side project inside of Mozilla to develop an alternative to C/C++ . Designed by Mozilla Research’s Graydon Hore, with contributions from the likes of JavaScript creator Brendan Eich, Rust became the core language for some of the fundamental features of the Firefox browser and its Gecko engine, as well as Mozilla’s Servo engine. Today, Rust is the most-loved language among developers. But with Mozilla’s layoffs in recent months, a lot of the Rust team lost its job and the future of the language became unclear without a main sponsor, though the project itself has thousands of contributors and a lot of corporate users, so the language itself wasn’t going anywhere.

A large open-source project oftens needs some kind of guidance and the new foundation will provide this — and it takes a legal entity to manage various aspects of the community, including the trademark, for example. The new Rust board will feature 5 board directors from the 5 founding members, as well as 5 directors from project leadership.

“Mozilla incubated Rust to build a better Firefox and contribute to a better Internet,” writes Bobby Holley, Mozilla and Rust Foundation Board member, in a statement. “In its new home with the Rust Foundation, Rust will have the room to grow into its own success, while continuing to amplify some of the core values that Mozilla shares with the Rust community.”

All of the corporate sponsors have a vested interest in Rust and are using it to build (and re-build) core aspects of some of their stacks. Google recently said that it will fund a Rust-based project that aims to make the Apache webserver safer, for example, while Microsoft recently formed a Rust team, too, and is using the language to rewrite some core Windows APIs. AWS recently launched Bottlerocket, a new Linux distribution for containers that, for example, features a build system that was largely written in Rust.

SoftBank’s earnings always leads to a bonanza of news. One storyline that has dominated the company’s earnings over the past few years that has all but disappeared though is WeWork.

The co-working company, which saw its scorching-hot flame dim a few years ago and which has been parlayed into such books as Billion Dollar Loser, is all but invisible in SoftBank’s presentations these days. The company, despite being one of the largest investments in the company’s $98.6 billion Vision Fund, is not mentioned in the firm’s quarterly update, and the company’s investor presentation also has no mention of the company. (Its logo does appear on the portfolio page, although it is buried with all the other logos).

Yet, for all the doom that has been emanating from WeWork, from its financial shenanigans to dealing with the workplace in a post-COVID-19 world, results apparently are better than what might be expected.

Buried in the footnotes of SoftBank’s earnings report today is some good news related to WeWork. The Japanese telco conglomerate recognized improvements of $1.36 billion in various credit facilities for WeWork compared to its figures in the first three months of 2020.

Given WeWork’s instability, SoftBank had set aside large sums of capital to cover the rent and mandatory loan payments of WeWork in order to shore up the company’s financial picture. However, “mainly due to the improvement in the credit risk of WeWork” according to SoftBank, the risk profile of those loans has improved quite a bit, and the company no longer feels the need to offer as much of a financial buffer as it did nine months previous.

Now, that could just be some innovative accounting engineering, but that improvement in WeWork’s performance mirrors rumors heard in recent weeks that the company is expected to once again attempt to head to the public markets.

Last week, the Wall Street Journal reported that WeWork was looking to go public via SPAC for a rumored price of $10 billion. No deal has yet been announced, and while SoftBank is in the process of raising two more SPACs for a grand total of three, it is unlikely to merge WeWork through its own vehicles.

While that $10 billion market cap is far below some of the most bullish prices that WeWork was pumping investors on back during its roadshow in September 2019, it nonetheless shows that the company may not be the financial albatross it was two years ago.

DoorDash is expanding its robotic footprint into the kitchen. The delivery service is set to acquire Chowbotics, a Bay Area-based robotics best known for its salad-making robot, Sally. TechCrunch has confirmed the acquisition, which was first noted by The Wall Street Journal.

“We have long admired the work that Chowbotics has done to increase access to fresh meals, with its groundbreaking robotics product and vision,” DoorDash co-founder Stanley Tang said in a comment offered to TechCrunch. “At DoorDash, we are always working to innovate and continue improving how we support our merchant partners and their success — and are excited to leverage this technology to do so in new ways. With the Chowbotics team on board, we can explore new use cases and customers, providing another service to help our merchants grow.”

Founded in 2014, Chowbotics has raised around $21 million to date, including an $11 million round back in 2018. The company’s vending machine-style salad bar robot was already well-positioned for the pandemic, removing a human element from the food preparation process — not to mention the fact that salad bars and buffets tend to be open air affairs. In October, the startup added a contactless feature to the robot, letting users order ahead of time, via app.

“Joining the DoorDash team unlocks new possibilities for Chowbotics and the technology that this team has built over the past seven years,” CEO Rick Wilmer said in a statement. “As the leader in food delivery and on-demand logistics, DoorDash has the unparalleled reach and expertise to help us grow and deploy our technology more broadly, so together, we can make fresh, nutritious food easy for more people.”

It’s not entirely clear how the company’s technology will fit into the delivery service’s current offering, though DoorDash notes it will “improve consumer access to fresh and safe meals, and enhance our robust merchant offerings and logistics platform.” It also remains to be seen whether Chowbotics will continue to operate as its own entity within the broader DoorDash. We’ve reached out for more insight.

“At DoorDash, we strive to become a merchant’s first call when they want to grow their business,” Tang said. “What excites us most about Chowbotics is that the team has developed a remarkable tool for helping merchants grow. Bringing Chowbotics’ technology into the DoorDash platform gives us a new opportunity to help merchants expand their current menu offerings and reach new customers in new markets — which is a fundamental part of our merchant-first approach to empowering local economies.”

DoorDash has been working with robotics companies for a number of years now. Perhaps the most prominent example is a partnership with Starship Technologies to explore food delivery robots. Though that technology has seen a fair number of roadblocks among local officials not eager to turn their sidewalks over to robots. The delivery company likens Chowbotics’ kiosk-style technology to its work with ghost kitchens, effectively serving as a conduit to help expand food options at local merchants – be it in store or through delivery. The former will likely be of more interest once the current pandemic is in the rear view.

Details of the acquisition have not been disclosed.

Last week, another container security startup came off the board when Rapid7 bought Alcide for $50 million. The purchase is part of a broader trend in which larger companies are buying up cloud-native security startups at a rapid clip. But why is there so much M&A action in this space now?

Palo Alto Networks was first to the punch, grabbing Twistlock for $410 million in May 2019. VMware struck a year later, snaring Octarine. Cisco followed with PortShift in October and Red Hat snagged StackRox last month before the Rapid7 response last week.

This is partly because many companies chose to become cloud-native more quickly during the pandemic. This has created a sharper focus on security, but it would be a mistake to attribute the acquisition wave strictly to COVID-19, as companies were shifting in this direction pre-pandemic.

It’s also important to note that security startups that cover a niche like container security often reach market saturation faster than companies with broader coverage because customers often want to consolidate on a single platform, rather than dealing with a fragmented set of vendors and figuring out how to make them all work together.

Containers provide a way to deliver software by breaking down a large application into discrete pieces known as microservices. These are packaged and delivered in containers. Kubernetes provides the orchestration layer, determining when to deliver the container and when to shut it down.

This level of automation presents a security challenge, making sure the containers are configured correctly and not vulnerable to hackers. With myriad switches this isn’t easy, and it’s made even more challenging by the ephemeral nature of the containers themselves.

Yoav Leitersdorf, managing partner at YL Ventures, an Israeli investment firm specializing in security startups, says these challenges are driving interest in container startups from large companies. “The acquisitions we are seeing now are filling gaps in the portfolio of security capabilities offered by the larger companies,” he said.

SoftBank reported earnings today, including the performance of its $98.6 billion Vision Fund. The numbers were enticing given the recent exit of DoorDash, which returned billions to SoftBank and represents one of its first truly blockbuster investments out of the fund. The company has now seen 18 investments exit, including 10 fully exited and eight that are now trading on the public markets.

Yet, tucked away deeply in the company’s earnings statement was a note that the company has cut the performance incentive earmarked for the Vision Fund’s leadership in half, from $5 billion to $2.5 billion.

That $5 billion incentive scheme was controversial when news of it was first reported by publications like the Financial Times back in April 2018. In the model, SoftBank essentially loaned its employees money to buy into the Vision Fund, a structure that was designed to accelerate the closing of the fund’s $100 billion fundraise. The company first added language about the incentive scheme in its 2018Q2 earnings, writing:

On October 19, 2018, SoftBank Vision Fund completed an interim closing with additional committed capital of $5 billion. This brought the total committed capital of the Fund to $96.7 billion. The additional committed capital is intended for the installment of an incentive scheme for operations of SoftBank Vision Fund.

Since then, the company has had consistent language about the $5 billion figure in every quarterly earnings report. However, in today’s latest earnings for fiscal 2020Q3, the company noted that the incentives are now “$2.5 billion (decreased from the previous $5.0 billion).”

The incentive scheme for SoftBank has been a huge point of discussion for industry observers. Four top executives at SoftBank — Rajeev Misra, Marcelo Claure, Katsunori Sago and Ken Miyauchi have collectively been loaned $600 million to buy into the Vision Fund, according to a report two weeks ago in the Financial Times. Some of that money was derived from the $5 billion (now $2.5 billion) incentive scheme, although it isn’t clear if all that money was earmarked exclusively from this particular pool.

SoftBank’s pullback on incentives for the Vision Fund is seemingly a response to the fund’s overall lackluster performance and the fund’s disastrous investment in WeWork, which led to wide losses at the telecom group. While more recent performance has been much better for the fund, eliminating some of those incentives should improve overall performance of the fund and ultimately SoftBank’s bottom line.

Vision Fund I has stopped investing in new companies as of last year. A second fund has $10 billion in capital — all from SoftBank itself — and has been making regular investments. The Vision Fund has also been raising SPACs, including two new ones it announced late last week.

In February 2019 we launched Extra Crunch to help founders and startup teams get ahead, and this week we’re celebrating its two-year anniversary. Since Extra Crunch is turning 2, we’re offering a limited-time deal on 2-year membership plans.

From now until February 15, new users signing up for Extra Crunch in the U.S. can get a 2 year membership plan for $150 plus tax (normally priced at $189). Readers outside the US will also see similar discounts.

Get a 2-year Extra Crunch membership for $150 here.

Extra Crunch is a members-only community from TechCrunch. Membership includes weekly startup investor surveys, private tech market analysis, how-tos on fundraising and growth, topical newsletters, and other exclusives delivered daily. Membership also unlocks access to our weekly virtual event series, Extra Crunch Live, discounts on TechCrunch events, a cleaner reading experience on TechCrunch.com, discounts from software partners, and more. 

Since launching Extra Crunch, we’ve published more than 2,000 articles on startup investment trends, fundraising, late-stage startups, and more. In addition to our own writers, we’ve run contributions from Merritt Hummer of Bain Capital Ventures, Kyle Poyar of OpenView, and Roger Lee and Justin Da Rosa of Battery Ventures. 

Some of our top stories from the past year:

• The VCs who founders love the most
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In the past year, we held over 40 virtual events for our members through Extra Crunch Live. If you haven’t had a chance to join, check out our slate of events for February here. 

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Readers can join Extra Crunch with a discounted 2-year membership plan here.

The French government and the government-backed initiative La French Tech unveiled the new indexes that identify the most promising French startups. The 40 top-performing startups are called the Next40, and the top 120 startups are grouped into the French Tech 120.

The Next40 and French Tech 120 are somewhat new as this is only the second version of those indexes. Out of the 120 startups that were already in last year’s French Tech 120, 90 of them are still in this year’s index — 30 are newcomers as there were 123 startups in last year’s French Tech 120.

Combined, they generate close to €9 billion in revenue and provide a job to 37,500 people. Revenue in particular is up 55% compared to last year’s French Tech 120.

Here’s a list of the French Tech 120 — the red logos are part of the Next40:

Image Credits: La French Tech

There are two different ways to get accepted in the Next40:

• You have raised more than €100 million over the past three years ($120 million at today’s rate) or you are a unicorn, which means your company’s valuation has reached $1 billion or more.
• You generate more than €5 million in revenue with a year-over-year growth rate of 30% or more for the past three years.

As for the remaining 80 startups in the French Tech 120:

• 40 of them have raised more than €20 million in a funding round over the past three years.
• 40 of them are selected based on the annual turnover and growth rate.

Of course, those indexes are limited to private French companies. For the French Tech 120, there are at least two startups per administrative region.

Based on those metrics, only a handful of the startups in the French Tech 120 have a female CEO and the French government thinks tech startups should do more when it comes to diversity and inclusion. That’s why a small group of people are going to work on a roadmap and some recommendations to improve those numbers.

Representatives of six different startups in the French Tech 120 as well as people from Sista, Tech Your Place and Future Positive Capital will get together to work on those topics.

In addition to a cool logo for your website, being part of the French Tech 120 comes with some perks. Those companies can access a network of French Tech representatives in different public administrations.

For instance, it’s easier for your company if you want to get visas for foreign employees, obtain a certification or a patent, if you want to sell your product to a public administration, etc.

There are two new additions to the French Tech network. Someone from the Conseil d’État can help you when it comes to legal compliance. The government has also signed a partnership with Euronext to educate entrepreneurs about going public.

SoftBank had some good data to report overnight with its third-quarter earnings, which covers the last quarter of 2020 through December 31. The company’s first Vision Fund reported large gains driven by DoorDash, where the company’s $680 million investment blew up to just shy of $9 billion — a 13.2x return in SoftBank’s math. While not the first exit from the fund nor the first high-returning exit SoftBank has had, it is the first exit that meaningfully shakes up the prognosis for the Vision Fund’s returns.

Now seems as good a time as any to ask a question we first started pondering when SoftBank launched the Vision Fund way back in 2017: what does a return profile look like at such a late stage of investment?

Early-stage venture capital has a return profile dubbed the “J-curve.” Given a cohort of startups in a venture portfolio, the failures of that cohort tend to materialize quite quickly. Those startups can’t raise money, and thus, they run out of runway and either die or are sold off. That means that the losses from those investments are recognized by investors right away. Meanwhile, the successful startups keep growing and raising venture capital, but funds won’t realize their gains for potentially a decade or more. Thus, the J-curve describes the early years of a fund where the losses are visible but the future gains have not yet materialized.

The Vision Fund pioneered a much more muscular form of traditional mezzanine (pre-IPO) capital, where it would barge into a company’s cap table with big dollars and high valuations with the dream that these companies would go big. While not true of all of the Vision Fund’s investments, many of these startups were quite mature with serious revenues where the alternative to mezzanine capital was an IPO.

That brought up an interesting fund construction question: the sort of immediate failures that create the J-curve for early-stage investors shouldn’t presumably exist at later stages, where startups are less risky investments. Sure, some startups may grow more slowly than other companies and exit for a middling return, but few startups should actually fail entirely.

So what does the SoftBank data look like today and what can it tell us about late-stage fund performance?

SoftBank Vision Fund I made a total of 92 investments from summer of 2017 to mid 2020, of which 10 have fully exited, and 8 are now traded on the public markets. According to SoftBank, 25 of its Fund I portfolio companies received another venture capital round in calendar year 2020 as well, giving the firm some upticks in its fair-market valuation.

InEvent, a Brazilian startup powering virtual and hybrid events, is announcing that it has raised $2 million in seed funding from Storm Ventures.

That’s just tiny fraction of the $125 million that online events platform Hopin raised last fall — in fact, a recent Equity episode suggested that Hopin might be the fastest growth story of the current startup era.

CEO Pedro Góes told me that even in a world of more established and better-funded platforms, his team sees an opportunity to break out by focusing on business-to-business events.

“There’s an opening in the space space for us to be the leader that we want on B2B,” Góes said. “We don’t intend to compete with platforms in the B2C market.”

Put another way, InEvent is less focused on replicating giant consumer events and more on helping businesses hold virtual events where they can connect with clients and partners. Góes said this is something that he and his co-founder saw Mauricio Giordano and Vinicius Neris saw in their previous work running a digital agency, where they were often asked to help with events in this vein.

“Since we had a lot of experience with events, we could see where the industry was broken and how to fix it,” he said.

Image Credits: InEvent

Góes suggested that two of the big needs for B2B events are customization and support, so InEvent has created what he described as a “really beautiful” product that can still be customized with the organizer’s branding, and the company also offers 24-hour support.

The platform that a virtual lobby where participants can browse all the programming, a video player, a registration system, the ability to create a conference mobile app and more. Góes said the goal was to build something that was “really flexible,” allowing organizers to run everything from within InEvent while also allowing them to incorporate outside tools, whether that’s video platforms like Zoom or CRM software like Salesforce, Marketo and Hubspot.

InEvent is based in Brazil, but it has employees in 13 countries, and the startup says it’s been used by more than 500 customers including DowDupont, Coca-Cola and Santander for global events. With the new funding, Góes told me that startup will be able to expand the team (he was proud to note the team’s diversity — 50% of its managers are women, and 50% of its managers come from a Latinx background). It will also continue to develop the product, for example by improving the video player and adding more marketing automation.

And when the pandemic ends and large-scale, in-person conferences become possible again, Góes predicted that there will still be plenty of appetite for what InEvent can do, because more events will bring online and in-person elements together.

“We have different clients where we have a website, we have a mobile app, but we also have hardware [to] connect with in-person,” he said. After all, if you’re at a sprawling conference like CES, it might still be convenient to chat with another attendee through the mobile app, rather than traveling two miles to see them face-to-face. “For us, what we are building, the technology for virtual and in-person, is the same thing.”