All posts in “economy”

Startups Weekly: There’s an alternative to raising VC and it’s called revenue-based financing

Revenue-based financing is on the rise, at least according to Lighter Capital, a firm that doles out entrepreneur-friendly debt capital.

What exactly is RBF you ask? It’s a relatively new form of funding for tech companies that are posting monthly recurring revenue. Here’s how Lighter Capital, which completed 500 RBF deals in 2018, explains it: “It’s an alternative funding model that mixes some aspects of debt and equity. Most RBF is technically structured as a loan. However, RBF investors’ returns are tied directly to the startup’s performance, which is more like equity.”

Source: Lighter Capital

What’s the appeal? As I said, RBFs are essentially dressed up debt rounds. Founders who opt for RBFs as opposed to venture capital deals hold on to all their equity and they don’t get stuck on the VC hamster wheel, the process in which you are forced to continually accept VC while losing more and more equity as a means of pleasing your investors.

RBFs, however, are better than traditional debt rounds because the investors are more incentivized to help the companies they invest in because they are receiving a certain portion of that business’s monthly revenues, typically 1% to 9%. Eventually, as is explained thoroughly in Lighter Capital’s newest RBF report, monthly payments come to an end, usually 1.3 to 2.5X the amount of the original financing, a multiple referred to as the “cap.” Three to five years down the line, any unpaid amount of said cap is due back to the investor. When all is said in done, ideally, the startup has grown with the support of the capital and hasn’t lost any equity.

At this point, they could opt to raise additional revenue-based capital, they could turn to venture capital or they could tap a tech bank to help them get to the next step. The idea is RBF is easier on the founder and it allows them optionality, something that is often lost when companies turn to VCs.

IPO corner, rapid-fire edition

Slack’s direct listing will be on June 20th. Get excited.

China’s Luckin Coffee raised $650 million in upsized U.S. IPO

Crowdstrike, a cybersecurity unicorn, dropped its S-1.

Freelance marketplace Fiverr has filed to go public on the NYSE.

Plus, I had a long and comprehensive conversation with Zoom CEO Eric Yuan this week about the company’s closely watched IPO. You can read the full transcript here.

Second Chances

Silicon Valley entrepreneur Hosain Rahman, the man behind Jawbone, has managed to raise $65.4 million for his new company, according to an SEC filing. The paperwork, coincidentally or otherwise, was processed while most of the world’s attention was focused on Uber’s IPO. Jawbone, if you remember, produced wireless speakers and Bluetooth earpieces, and went kaput in 2017 after burning up $1 billion in venture funding over the course of 10 years. Ouch.

More startup capital

Funds!

On the heels of enterprise startup UiPath raising at a $7 billion valuation, the startup’s biggest investor is announcing a new fund to double down on making more investments in Europe. VC firm Accel has closed a $575 million fund — money that it plans to use to back startups in Europe and Israel, investing primarily at the Series A stage in a range of between $5 million and $15 million, reports TechCrunch’s Ingrid Lunden. Plus, take a closer look at Contrary Capital. Part accelerator, part VC fund, Contrary writes small checks to student entrepreneurs and recent college dropouts.

Extra Crunch

Our paying subscribers are in for a treat this week. Our in-house venture capital expert Danny Crichton wrote down some thoughts on Uber and Lyft’s investment bankers. Here’s a snippet: “Startup CEOs heading to the public markets have a love/hate relationship with their investment bankers. On one hand, they are helpful in introducing a company to a wide range of asset managers who will hopefully hold their company’s stock for the long term, reducing price volatility and by extension, employee churn. On the other hand, they are flagrantly expensive, costing millions of dollars in underwriting fees and related expenses…”

Read the full story here and sign up for Extra Crunch here.

#Equitypod

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 chat about the notable venture rounds of the week, CrowdStrike’s IPO and more of this week’s headlines.

Want more TechCrunch newsletters? Sign up here.

Fastly pops in public offering showing that there’s still money for tech IPOs

Shares of Fastly, the service that’s used by websites to ensure that they can load faster, have popped in its first hours of trading on the New York Stock Exchange.

The company, which priced its public offering at around $16 — the top of the estimated range for its public offering — have risen more than 50% since their debut on public markets to trade at $25.01.

It’s a sharp contrast to the public offering last week from Uber, which is only just now scratching back to its initial offering price after a week of trading underwater, and an indicator that there’s still some open space in the IPO window for companies to raise money on public markets, despite ongoing uncertainties stemming from the trade war with China.

Compared with other recent public offerings, Fastly’s balance sheet looks pretty okay. Its losses are narrowing (both on an absolute and per-share basis according to its public filing), but the company is paying more for its revenue.

San Francisco-based Fastly competes with companies that include Akamai, Amazon, Cisco and Verizon, providing data centers and a content-distribution service to deliver videos from companies like The New York Times, Ticketmaster, New Relic and Spotify.

Last year, the company reported revenues of $144.6 million and a net loss of $30.9 million, up from $104.9 million in revenue and $32.5 million in losses in the year ago period. Revenue was up more than 38% and losses narrowed by 5% over the course of the year.

The outcome is a nice win for Fastly investors, including August Capital, Iconiq Strategic Partners, O’Reilly AlphaTech Ventures and Amplify Partners, which backed the company with $219 million in funding over the eight years since Artur Bergman founded the business in 2011.

GetYourGuide picks up $484M, passes 25M tickets sold through its tourism activity app

As we swing into the summer tourist season, a company poised to capitalise on that has raised a huge round of funding. GetYourGuide — a Berlin startup that has built a popular marketplace for people to discover and book sightseeing tours, tickets for attractions and other experiences around the world — is today announcing that it has picked up $484 million, a Series E round of funding that will catapult its valuation above the $1 billion mark.

The funding is a milestone for a couple of reasons. GetYourGuide says it is the highest-ever round of funding for a company in the area of “travel experiences” (tours and other activities) — a market estimated to be worth $150 billion this year and rising to $183 billion in 2020. And this Series E is also one of the biggest-ever growth rounds for any European startup, period.

The company has now sold 25 million tickets for tours, attractions and other experiences, with a current catalog of some 50,000 experiences on offer. That’s a sign of strong growth: in 2017 it sold 10 million tickets, and its last reported catalog number was 35,000. It will be using the funding to build more of its own “Originals” tour experiences — which have now passed the 40,000 tickets sold mark — as well as to build up more activities in Asia and the U.S., two fast-growing markets for the startup.

The funding is being led by SoftBank, via its Vision Fund, with Temasek, Lakestar, Heartcore Capital (formerly Sunstone Capital) and Swisscanto Invest among others also participating. (Swisscanto is part of Zürcher Kantonalbank: GetYourGuide was originally founded in Zurich, where the founders had studied, and it still runs some R&D operations there.) The company has now raised well over $600 million.

It’s notable how SoftBank — which is on the hunt for interesting opportunities to invest its $100 billion superfund — has been stepping up a gear in Germany to tap into some of the bigger tech players that have emerged out of that market, which today is the biggest in Europe. Other big plays have included €460 million into Auto1 and €900 million into payments provider Wirecard. Other companies it has backed, such as hotel company Oyo out of India, are using its funding to break into Europe (and buy German companies in the process).

There had been reports over the last several months that GetYouGuide was in the process of raising anywhere between $300 million and more than $500 million. In late April, we were told by sources that the round hadn’t yet closed, and that numbers published in the media up to then had been inaccurate, even as we nailed down that SoftBank was indeed involved in the round.

The valuation in this round is not being disclosed, but CEO Johannes Reck (who co-founded the app with Martin Sieber, Pascal Mathis, Tobias Rein and Tao Tao) said in an interview with TechCrunch that it was definitely “now a unicorn” — meaning that its valuation had passed the $1 billion mark. For additional context, the rumor last month was that GetYourGuide’s valuation was up to €1.6 billion ($1.78 billion), but I have not been able to get firm confirmation of that number.

From hip replacements to hipsters

GetYourGuide’s growth — and investor interest in it — has closely followed the rise of new platforms like Airbnb that have changed the face of how we travel, and what we do when we get somewhere. We have moved far beyond the days of visiting a travel agent that books everything, from flight to hotel to all your activities, as you sit on the other side of a desk from her or him. Now with the tap of a finger or the click of a mouse, we have thousands of choices.

Within that, GetYourGuide thinks that it has jumped on an interesting opportunity to rethink the activity aspect of tourism. Tour packages and other highly organized travel experiences are often associated with older people, or those with families — essentially people who need more predictability when they are not at home.

Reck noted that the earliest users of GetYourGuide in 2010 were precisely those people — or at least those who were more inclined to use digital platforms to begin with: the demographic, he said, was 40-50 year olds, most likely travelling with family.

That is one thing that has really started to change, in no small part because of GetYourGuide itself. Making the experience of booking experiences mobile-friendly, GetYourGuide has played into the culture of doing and showing, which has propelled the rise of social media.

“They want to do things, to have something to post on Instagram,” he said. The average age of a GetYourGuide user now, he said, is 25-40.

This has even evolved into what GetYourGuide provides to users. “At some point, staff in Asia had the idea of crafting a ‘GetYourGuide Instagram Tour of Bali.’ That really took off, and now this is the number-one tour booked in the region.” It has since expanded the concept to 50 destinations.

Not by coincidence, today the company is also announcing that Ameet Ranadive is joining as the company’s first chief product officer. Ranadive comes from Instagram, where he led the Well-being product team (the company’s health and safety team). He’d also been VP and GM of Revenue Product at Twitter. Nils Chrestin is also coming on as CFO, having recently been at Rocket Internet-incubated Global Fashion Group.

That has also led GetYourGuide to conclude it has a ways to go to continue developing its model and scope further, expanding into longer sightseeing excursions, beyond one or two-hour tours into day trips and even overnight experiences.

As it continues to play around with some of these offerings, it’s also increasingly taking a more direct role in the branding and the provision of the content. Initially, all tickets and tours were posted on GetYourGuide by third parties. Now, GetYourGuide is building more of what Reck calls “Originals” — which it might develop in partnership with others but ultimately handles as its own first-party content. (That Instagram tour was one of those Originals.)

It’s worth noting that others are closing in on the same “experiences” model that forms the core of GetYourGuide’s business: Airbnb, to diversify how it makes revenues and to extend its touchpoints with guests beyond basic accommodation bookings, has also started to sell experiences. Meanwhile, daily deals pioneer Groupon has also positioned itself as a destination for purchasing “experiences” as a way to offset declines in other areas of its business. Similarly, travel portals that sell plane tickets regularly default to pushing more activities on you.

Reck pointed out that the area of business where GetYourGuide is active is becoming increasingly attractive to these players as other aspects of the travel industry become increasingly commoditised. Indeed, you can visit dozens of sites to compare pricing on plane tickets, and if you are flexible, pick up even more of a bargain at the last minute. And the rise of multiple Airbnb-style platforms offering private accommodation has made competition among those supplying those platforms — as well as hotels — increasingly fierce.

All of that leaves experiences — for now at least — as the place where these companies can differentiate themselves from the pack. Reck believes that focusing on this, however, means you just do it much better than companies that have added experiences on to a platform that is not a native destination for discovering or buying that kind of content or product. (That doesn’t mean there aren’t others natively tackling “experiences” from the world of startups. Klook is one also funded by SoftBank.)

“Consumers, especially millennials, are spending an increasing portion of their disposable income on travel experiences. We believe GetYourGuide is leading this seismic shift by consolidating the fragmented global supply base of tour operators and modernizing access for travelers globally,” said Ted Fike, partner at SoftBank Investment Advisers, in a statement. “This combination creates powerful network effects for their business that is fueling their strong growth. We are excited to partner with their passionate and talented leadership team.” Fike is joining the board with this round.

Market map: the 200+ innovative startups transforming affordable housing

How founders are taking on housing costs worldwide

In this section of my exploration into innovation in inclusive housing, I am digging into the 200+ companies impacting the key phases of developing and managing housing.

Innovations have reduced costs in the most expensive phases of the housing development and management process. I explore innovations in each of these phases, including construction, land, regulatory, financing, and operational costs.

Reducing Construction Costs

This is one of the top three challenges developers face, exacerbated by rising building material costs and labor shortages.

India’s Locus raises $22 million to expand its logistics management business

Locus, an Indian startup that uses AI to help businesses map out their logistics, has raised $22 million in Series B funding to expand its operations in international markets.

The financing round for the four-year-old startup was led by Falcon Edge Capital and Tiger Global Management . Existing investors Exfinity Venture Partners and Blume Ventures also participated in the round. The startup has raised $29 million to date, Nishith Rastogi, co-founder and CEO of Locus, told TechCrunch in an interview.

Locus works with companies that operate in FMCG, logistics, and e-commerce spaces. Some of its clients include Tata Group companies, Myntra, BigBasket, Lenskart, and Bluedart. It helps these clients automate their logistics workload — tasks such as planning, organizing, transporting and tracking of inventories, and finding the best path to reach a destination — that have traditionally required intensive human labor.

“Say a Lenskart representative is visiting a house or an office to offer an eye checkup, and suddenly two more people there are interested in getting their eyes checked. The representative could attend these two new potential clients, or wrap things up with the first client and take care of his or her next appointment,” said Rastogi.

Locus looks at a client’s past data, identifies patterns, and automates these kind of decisions on a large scale. In an example shared earlier with TechCrunch, Rastogi talked about how Locus had built a scanner for ecommerce companies for measuring products.

Rastogi said he will use the fresh capital to develop products and expand Locus in Southeast Asian and North American markets. The startup says half of its 110 people workforce is outside of India. Half of the IP it has built and the revenue it generates comes from its team outside of India.

He said the startup has spent the recent quarters studying these international markets, and has secured some anchor clients to expand the business. Locus is operationally profitable already and any additional capital goes into expanding its business, he added.

The logistics market in India has long been riddled with challenges. A growing number of startups, including BlackBuck — which raised $150 million last week — have emerged in recent years to tackle these problems.

The new funding also illustrates Tiger Global Management’s new strategy for the Indian market. The VC fund, which has invested in B2C businesses Flipkart and Ola in India, has made a number of investments in B2B startups in recent months. Last month, it invested $90 million in agri-tech supply chain startup Ninjacart, and weeks later, it gave cloud-based solutions provider Zenoti $50 million.