Sep
10
2019
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Payments giant Stripe debuts a credit card in its latest step into the financing fray

Last week, when the popular payments startup Stripe made some waves with its first move into money lending through the launch of Stripe Capital, we reported that the company was also soon going to be launching a credit card. Now, that news is official. Today, the company is doubling down on financing with the launch of corporate cards for business customers.

Announced officially today to coincide with the company’s developer event Stripe Sessions, the Stripe Corporate Card — as the product is officially called — is a Visa that will be open to businesses that are incorporated in the U.S., although they can operate elsewhere.

Notably, users are expected to pay their balance in full each month, so for now there is no interest rate, or fee, to use the card, with Stripe making its money by way of the interchange fee that comes with every transaction using the card.

“We’re not freezing cards based on late or no payments,” Cristina Cordova, the business lead overseeing the launch, said in an interview. “A pretty common reason for non-payment is that a person switched bank accounts and forgot to update the information. But we think we’ll have fewer problems because we have banking information for accepting revenue, by way of our payments business.”

The move is another major step ahead for Stripe as it continues to diversify its business and bring on more financial products to become a one-stop shop for e-commerce and other companies for all the transactions they might need to make in the course of their lives. It is a little ironic that it’s taken years for credit cards to get added into the mix, considering Stripe’s earliest homepages and marketing efforts were built around the design of a credit card (a reference to taking payments online, not issuing credit, of course).

In any case, the list of products now offered by Stripe is long — longer, you might say, than it takes to incorporate a Stripe service into a developer workflow. In addition to its API-based flagship payments product — which is available as a direct service or, via Stripe Connect, for third parties via marketplaces and other platforms — it offers billing and invoicing, in-person payment services (via Terminal), business analytics, fraud prevention on transactions (Radar), company incorporation (Atlas) and a range of content around business strategy.

Some of these Stripe products are free to use, and some come at a price: The main point for offering them together is to build more engagement and loyalty from customers to keep them from migrating to other services. In that regard, credit cards are a cornerstone of how businesses operate, to handle day-to-day expenses in a more accountable way, and this is an area that is already well-served by others, including startups like Brex but also a plethora of challenger and traditional banks. So as much as anything else, this is a clear move to help stave off competition.

At the same time, it underscores how Stripe is leveraging the huge amount of data that it has amassed about its users and payments on the platform: It’s not just about enabling single services, but about using the byproducts of those services — data — to put fuel into new products.

Today, to underscore its global ambitions in that regard, Stripe is adding some expansions to several of its existing products. For example, it will now allow businesses to make payouts in local currencies in 45 countries (an important detail, for example, for marketplaces and network-based companies like ridesharing businesses).

The credit card product will follow a model similar to that of Stripe Capital. As with the lending product, there is a single bank issuing the credit and the card. Amber Feng, head of financial infrastructure for Stripe, confirmed to me that it is actually the same bank that’s providing the cash behind Stripe Capital. Stripe is still declining to name the bank itself, but hints that we may hear more about it soon, which leads me to wonder what news might be coming next.

(Funding perhaps would make sense? The company has raised a whopping $785 million to date and has a valuation of $22.5 billion at the moment. Given that Stripe has made indications that a public listing is not on the cards soon, that might imply, with the launch of these new financing products, that more capital might be raised soon.)

Also similar to Stripe Capital, the underwriting of the card is based on Stripe data. That is to say, business users are verified and approved based on turnover (revenues) as measured by the Stripe payments platform itself; and in cases where applicants are “pre-revenue,” they can be evaluated based on other data sources. For example, if they have used Stripe Atlas to incorporate their businesses, the paperwork supplied for that is used by Stripe to vet the customer’s suitability for a credit card.  

Notably, the cards will be delivered in the spirit of instant gratification: If you are applying and get approved, you can within minutes download a virtual card to your Apple Wallet as you await the physical card to arrive in the post.

Stripe is big on data in its own business, and it’s bringing some of that into this product with spending controls that can be set by person and by category; real-time expense reporting by way of texts; rewards of 2% back on spending in the business’s most-used categories; and integration with financial software like QuickBooks and Expensify.

Aug
27
2019
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Sweden’s Hedvig raises $10.4M led by Obvious Ventures to build ‘nice insurance’

Hedvig, a Swedish startup, is following in the footsteps of Lemonade, building a new generation of insurance platforms that use AI to help evaluate customers and operate on a policy of using surplus for social good. Today the company announced the next stage of its growth. The startup has closed a SEK100 million ($10.4 million) round of funding to expand from its current offering of property insurance into a wider range of categories, and begin the costly process of expanding its business into more countries beyond its home market.

The funding values the company at SEK342 million ($35.5 million) — a modest figure considering Lemonade’s recent $300 million round, reportedly (per PitchBook) at a $2.1 billion post-money valuation — but helps position the company to set its sights on being a strong regional player (if not an acquisition target for Lemonade if it wants to quickly add new regions: the latter kicked off its first services in Europe earlier this year, so its global aspirations are clear).

It currently has 15,000 customers in its home market of Sweden, who use it for property insurance on rented or owned apartments, and Lucas Carlsen, the co-founder and CEO, said in an emailed interview with TechCrunch that it “definitely” plans to expand that to houses as well as other categories. Home insurance also covers contents, such as gadgets, and travel, and Carlsen said that the former (gadgets) accounts for the majority of claims at the moment.

The round was led by Obvious Ventures, the venture fund co-founded by Twitter/Medium/Blogger co-founder Ev Williams, with D-Ax, the early-stage investment arm of Swedish retail giant Axel Johnson Group, also participating, along with past investor Cherry Ventures.

“We are building a global company. We just started in Sweden since we happened to live here, and it serves as a good test market as we have some of the worlds’ most progressive and demanding consumers. Today, we do not have any news to share about future markets, but stay tuned!,” said Carlsen.

“The new funding will mainly be used to fuel growth in Sweden, but we’ll also be looking at extending into new markets and insurance categories. Insurance is capital intensive and our new partners are committed to supporting our long-term vision,” he continued.

Indeed, getting an investor like Obvious (which published its own short announcement about the investment) involved could open the door to introductions with a number of other investors down the road.

Hedvig is harnessing its purpose, the power of AI, and its human-centered product to create a modern, full-stack insurance company. Their incredible team is delivering against the mission – to give people the world’s most incredible insurance experience – and we at Obvious are honored to help scale it further,” said Vishal Vasishth, one of Obvious Ventures’ other co-founders, in a statement.

Hedvig — named, Carlsen said, after a legend of “someone who stood up for others and fought for their causes: that’s what we do,” — will sound familiar to you if you know Lemonade.

It follows in a wave of more socially forward businesses that are being created, which are using technology to help disrupt the status quo but also to bridge the gap between building services that consumers need and the principles they would like to adhere to more if possible. (Other examples include the likes of Beyond Meat, which is also backed by Obvious; as well as the plethora of electric and hybrid vehicle makers; and more.)

In the case of Hedvig and the challenge of insurance, the proposition goes like this:

Hedvig uses technology and innovative algorithms to help assess a potential customer, who is then provided with lowest-cost, and often competitively priced, premiums. Then, as a “full-stack” digital company, it also uses its algorithms to help process claims. After Hedvig uses its bigger pot of money to pay out claims, the annual surplus is donated to charities selected by its customers.

“By not pocketing this money ourselves we can focus on providing the best service possible to you and not on making more money from denying claims,” Carlsen said.

Hedvig itself makes money by taking a cut off users’ monthly premiums (it doesn’t specify how much). To date, Hedvig has not disclosed how much it has been able to “give back” according to its business model. But the philosophy is that by digitising some of the more mundane processes that are relegated to human adjustors and customer agents at traditional agencies — and by not being inherently greedy — the startup is able to provide a more pleasant, more efficient and more conscionable service.

Aug
12
2019
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India’s Reliance Jio inks deal with Microsoft to expand Office 365, Azure to more businesses; unveils broadband, blockchain and IoT platforms

India’s Reliance Jio, which has disrupted the local telecom and features phone markets in less than three years of existence, is ready to foray into many more businesses.

In a series of announcements Monday, which included a long-term partnership with global giant Microsoft, Reliance Jio said it will commercially roll out its broadband service next month; an IoT platform with ambitions to power more than a billion devices on January 1 next year; and “one of the world’s biggest blockchain networks” in the next 12 months — all while also scaling its retail and commerce businesses.

The broadband service, called Jio Fiber, is aimed at individual customers, small and medium-sized businesses as well as enterprises, Mukesh Ambani, chairman and managing director of Reliance Industries and Asia’s richest man, said at a shareholders’ meeting today.

The service, which is being initially targeted at 20 million homes and 15 million businesses in 1,600 towns, will start rolling out commercially starting September 5. Ambani said more than half a million customers have already been testing the broadband service, which was first unveiled last year.

The broadband service will come bundled with access to hundreds of TV channels and free calls across India and at discounted rates to the U.S. and Canada, Ambani said. The service, the cheapest tier of which will offer internet speeds of 100Mbps, will be priced at Rs 700 (~$10) a month. The company said it will offer various plans to meet a variety of needs, including those of customers who want access to gigabit internet speeds.

Continuing its tradition to woo users with significant “free stuff,” Jio, which is a subsidiary of India’s largest industrial house (Reliance Industries) said customers who opt for the yearly plan of its fiber broadband will be provided with the set-top box and an HD or 4K TV at no extra charge. Specific details weren’t immediately available. A premium tier, which will be available starting next year, will allow customers to watch many movies on the day of their public release.

The broadband service will bundle games from many popular studios, including Microsoft Game Studios, Riot Games, Tencent Games and Gameloft, Jio said.

Partnership with Microsoft

The company also announced a 10-year partnership with Microsoft to launch new cloud data centers in India to ensure “more of Jio’s customers can access the tools and platforms they need to build their own digital capability,” said Microsoft CEO Satya Nadella in a video appearance Monday.

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Microsoft CEO Satya Nadella talks about the company’s partnership with Reliance Jio

“At Microsoft, our mission is to empower every person and every organization on the planet to achieve more. Core to this mission is deep partnerships, like the one we are announcing today with Reliance Jio. Our ambition is to help millions of organizations across India thrive and grow in the era of rapid technological change.”

“Together, we will offer a comprehensive technology solution, from compute to storage, to connectivity and productivity for small and medium-sized businesses everywhere in the country,” he added.

As part of the partnership, Nadella said, Jio and Microsoft will jointly offer Azure, Microsoft 365 and Microsoft AI platforms to more organizations in India, and also bring Azure Cognitive Services to more devices and in 13 Indian languages to businesses in the country. The solutions will be “accessible” to reach as many people and organizations in India as possible, he added. The cloud services will be offered to businesses for as little as Rs 1,500 ($21) per month.

The first two data centers will be set up in Gujarat and Maharashtra by next year. Jio will migrate all of its non-networking apps to the Microsoft Azure platform and promote its adoption among its ecosystem of startups, the two said in a joint statement.

The foray into broadband business and push to court small enterprises come as Reliance Industries, which dominates the telecom and retail spaces in India, attempts to diversify from its marquee oil and gas business. Reliance Jio, the nation’s top telecom operator, has amassed more than 340 million subscribers in less than three years of its commercial operations.

At the meeting, Ambani also unveiled that Saudi Arabia’s state-owned oil producer Aramco was buying a 20% stake in $75 billion worth Reliance Industries’ oil-to-chemicals business.

Like other Silicon Valley companies, Microsoft sees massive potential in India, where tens of millions of users and businesses have come online for the first time in recent years. Cloud services in India are estimated to generate a revenue of $2.4 billion this year, up about 25% from last year, according to research firm Gartner. Microsoft has won several major clients in India in recent years, including insurance giant ICICI Lombard.

Today’s partnership could significantly boost Microsoft’s footprint in India, posing a bigger headache for Amazon and Google.

Ambani also said Reliance Retail, the nation’s largest retailer, is working on a “digital stack” to create a new commerce partnership platform in India to reach tens of millions of merchants, consumers and producers. Ambani said Reliance Industries plans to list both Reliance Retail and Jio publicly in the next years.

“We have received strong interests from strategic and financial investors in our consumer businesses — Jio and Reliance Retail. We will induct leading global partners in these businesses in the next few quarters and move towards listing of both these companies within the next five years,” he said.

The announcement comes weeks after Reliance Industries acquired for $42.3 million a majority stake in Fynd, a Mumbai-based startup that connects brick and mortar retailers with online stores and consumers. Reliance Industries has previously stated plans to launch a new e-commerce firm in the country.

Without revealing specific details, Ambani also said that Jio is building an IoT platform to control at least one billion of the two billion IoT devices in India by next year. He said he sees IoT as a $2.8 billion revenue opportunity for Jio. Similarly, the company also plans to expand its blockchain network across India, he said.

“Using blockchain, we can deliver unprecedented security, trust, automation and efficiency to almost any type of transaction. And using blockchain, we also have an opportunity to invent a brand-new model for data privacy where Indian data, especially customer data is owned and controlled through technology by the Indian people an d not by corporate, especially global corporations,” he added.

Jul
10
2019
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Anvyl, looking to help D2C brands manage their supply chain, raises $9.3M

Growing D2C brands face an interesting challenge. While they’ve eliminated much of the hassle of a physical storefront, they must still deal with all the complications involved in managing inventory and manufacturing and shipping a physical product to suppliers.

Anvyl, with a fresh $9.3 million in Series A funding, is looking to jump in and make a difference for those brands. The company, co-founded by chief executive Rodney Manzo, is today announcing the raise, led by Redpoint Ventures, with participation from existing investors First Round Capital and Company Ventures. Angel investors Kevin Ryan (MongoDB and DoubleClick), Ben Kaufman (Quirky and Camp) and Dan Rose (Facebook) also participated in the round.

Manzo hails from Apple, where with $300 million in spend to manage logistics and supply chain he was still operating in an Excel spreadsheet. He then went to Harry’s, where he shaved $10 million in cash burn in his first month. He says himself that sourcing, procurement and logistics are in his DNA.

Which brings us to Anvyl. Anvyl looks at every step in the logistics process, from manufacture to arrival at the supplier, and visualizes that migration in an easy-to-understand UI.

The difference between Anvyl and other supply chain logistics companies, such as Flexport, is that Anvyl goes all the way to the very beginning of the supply chain: the factories. The company partners with factories to set up cameras and sensors that let brands see their product actually being built.

“When I was at Apple, I traveled for two years at least once a month to China and Japan just to oversee production,” said Manzo. “To oversee production, you essentially have to be boots on the ground and eyes in the factory. None of our brands have traveled to a factory.”

On the other end of the supply chain, Anvyl lets brands manage suppliers, find new suppliers, submit RFQs, see cost breakdowns and accept quotes.

The company also looks at each step in between, including trucks, trains, boats and planes so that brands can see, in real time, their products go from being manufactured to delivery.

Anvyl charges brands a monthly fee using a typical SaaS model. On the other end, Anvyl takes a “tiny percentage” of goods being produced within the Anvyl marketplace. The company declined to share actual numbers around pricing.

This latest round brings Anvyl’s total funding to $11.8 million. The company plans to use the funding toward hiring in engineering and marketing, and grow its consumer goods customer base.

Jul
05
2019
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A 23-year-old B2B company has shown how keen India is for tech IPOs

Away from the limelight of the press and the frenzy of fundraising, a tech startup in India has achieved a feat that few of its peers have managed: going public.

IndiaMART, the country’s largest online platform for selling products directly to businesses, raised nearly $70 million in a rare tech IPO for India this week.

The milestone for the 23-year-old firm is so uncommon for India’s otherwise burgeoning startup ecosystem that, beyond being over-subscribed 36 times, pent up demand for IndiaMART’s stock saw its share price pop 40% on its first day of trading on National Stock Exchange on Thursday — a momentum that it sustained on Friday.

The stock ended Friday at Rs 1326 ($19.3), compared to its issue price of Rs 973 ($14.2).

IndiaMART is the first business-to-business e-commerce firm to go public in India. Its IPO also marks the first listing for a firm following the May reelection of Narendra Modi as the nation’s Prime Minister and the months-long drought that led to it.

Accounting firm EY said it expects more companies from India to follow suit and file for IPO in the coming months.

“Now that national elections are over and favorable results secured, IPO activity is expected to gain momentum in H2 2019 (second half of the year). Companies that had filed their offer documents with the Indian stock markets regulator during H2 2018 and Q1 2019 may finally come to market in the months ahead,” it said in a statement (PDF).

IndiaMART’s origin

The fireworks of the IPO are just as impressive as IndiaMART’s journey.

The startup was founded in 1996 and for the first 13 years, it focused on exports to customers abroad, but it has since modernized its business following the wave of the internet.

“The thesis was, in 1996, there were no computers or internet in India. The information about India’s market to the West was very limited,” Dinesh Agarwal, co-founder and CEO of IndiaMART, told TechCrunch in an interview.

Until 2008, IndiaMART was fully bootstrapped and profitable with $10 million in revenue, Agarwal said. But things started to dramatically change in that year.

“The Indian rupee became very strong against the dollar, which dwindled the exports business. This is also when the stock market was collapsing in the West, which further hurt the exports demand,” he explained.

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Dinesh Agarwal, founder and CEO of IndiaMart.com, poses for a profile shot on July 29, 2015 in Noida, India.

By this time, millions of people in India were on the internet and, with tens of millions of people owning a feature phone, the conditions of the market had begun to shift towards digital.

“This is when we decided to pursue a completely different path. We started to focus on the domestic market,” Agarwal said.

Over the last 10 years, IndiaMART has become the largest e-commerce platform for businesses with about 60% market share, according to research firm KPMG. It handles 97,000 product categories — ranging from machine parts, medical equipment and textile products to cranes — and has amassed 83 million buyers and 5.5 million suppliers from thousands of towns and cities of India.

According to the most recent data published by the Indian government, there are about 50 to 60 million small and medium-sized businesses in India, but only around 10 million of them have any presence on the web. Some 97% of the top 50 companies listed on National Stock Exchange use IndiaMART’s services, Agarwal said.

That’s not to say that the transition to the current day was a straightforward process for the company. IndiaMART tried to capitalize on its early mover advantage with a stream of new services which ultimately didn’t reap the desired rewards.

In 2002, it launched a travel portal for businesses. A year later, it launched a business verification service. It also unveiled a payments platform called ABCPayments. None of these services worked and the firm quickly moved on.

Part of IndiaMART’s success story is its firm leadership and how cautiously it has raised and spent its money, Rajesh Sawhney, a serial angel investor who sits on IndiaMART’s board, told TechCrunch in an interview.

IndiaMART, which employs about 4,000 people, is operationally profitable as of the financial year that ended in March this year. It clocked some $82 million in revenue in the year. It has raised about $32 million to date from Intel Capital, Amadeus Capital Partners and Quona Capital. (Notably, Agarwal said that he rejected offers from VCs for a very long time.)

The firm makes most of its revenue from subscriptions it sells to sellers. A subscription gives a seller a range of benefits including getting featured on storefronts.

Where the industry stands

There are only a handful of internet companies in India that have gone public in the last decade. Online travel service MakeMyTrip went public in 2010. Software firm Intellect Design Arena and e-commerce store Koovs listed in 2014, then travel portal Yatra and e-commerce firm Infibeam followed two years later.

India has consistently attracted billions of dollars in funding in recent years and produced many unicorns. Those include Flipkart, which was acquired by Walmart last year for $16 billion, Paytm, which has raised more than $2 billion to date, Swiggy, which has bagged $1.5 billion to date, Zomato, which has raised $750 million, and relatively new entrant Byju’s — but few of them are nearing profitability and most likely do not see an IPO in their immediate future.

In that context, IndiaMART may set a benchmark for others to follow.

“The fact that we have a homegrown digital commerce business, serving both the urban and smaller cities, and having struggled and been around for so long building a very difficult business and finally going public in the local exchange is a phenomenal story,” Ganesh Rengaswamy, a partner at Quona Capital, told TechCrunch in an interview. “It keeps the story of India tech, to the Western world, going.”

Generally, it is agreed that there are too few IPOs in India and the industry can benefit from momentum and encouragement of high profile and successful public listings.

“There is a firm consensus that in India, markets will prefer only the IPOs of companies that are profitable. And investors in India might not value those companies. Both of these issues are being addressed by IndiaMART,” said Sawhney.

“We need 30 to 40 more IPOs. This will also mean that the stock market here has matured and understands the tech stocks and how it is different from other consumer stocks they usually handle. More tech companies going public would also pave the way for many to explore stock exchanges outside of India.

“Indian market is ready for more tech stocks. We just need to get more companies to go out there,” Sawhney added, although he did predict that it will take a few years before the vast majority of leading startups are ready for the public market.

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The Indian government, for its part, this week announced a number of incentives to uplift the “entrepreneurial spirit” in the nation.

Finance minister Nirmala Sitharaman said the government would ease foreign direct investment rules for certain sectors — including e-commerce, food delivery, grocery — and improve the digital payments ecosystem. Sitharaman, who is the first woman to hold this position in India, said the government would also launch a TV program to help startups connect with venture capitalists.

The path ahead for IndiaMART

IndiaMART has managed to build a sticky business that compels more than 55% of its customers to come back to the platform and make another transaction within 90 days, Agarwal — its CEO — said. With some 3,500 of its 4,000 employees classified as sales executives, the company is aggressive in its pursuit of new customers. Moving forward, that will remain one of its biggest focuses, according to Agarwal.

“Most of our time still goes into educating MSMEs on how to use the internet. That was a challenge 20 years ago and it remains a challenge today,” he told TechCrunch.

In recent years, IndiaMART has begun to expand its suite of offerings to its business customers in a bid to increase the value they get from its platform and thus increase their reliance on its service.

IndiaMART has built a customer relationship management (CRM) tool so that customers need not rely on spreadsheets or other third-party services.

“We will continue to explore more SaaS offerings and look into solving problems in accounting, invoice management and other areas,” said Agarwal.

The firm also recently started to offer payment facilitation between buyers and sellers through a PayPal -like escrow system.

“This will bridge the trust gap between the entities and improve an MSME’s ability to accept all kinds of payment options including the new age offerings.”

There’s an elephant in the room, however.

A bigger challenge that looms for IndiaMART is the growing interest of Amazon and Walmart in the business-to-business space. Several startups including Udaan — which has raised north of $280 million from DST Global and Lightspeed Venture Partners — have risen up in recent years and are increasingly expanding their operations. Agarwal did not seem much worried, however, telling TechCrunch that he believes that his prime competition is more focused on B2C and serving niche audiences. Besides he has $100 million in the bank himself.

Indeed, as Quona Capital’s Rengaswamy astutely noted, competition is not new for IndiaMART — the company has survived and thrived more than two decades of it.

“Alibaba came and gave up,” he noted.

An important — and unanswered question — that follows the successful IPO is how IndiaMART’s stock will fare over the coming months. A glance to the U.S. — where hyped companies like Uber, Lyft and others have seen prices taper off — shows clearly that early demand and sustained stock performance are not one and the same.

Nobody knows at this point, and the added complexity at play is that the concept of a tech IPO is so uncommon in India that there is no definitive answer to it… yet. But IndiaMART’s biggest achievement may be that it sets the pathway that many others will follow.

Jul
02
2019
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Kabbage secures $200M to fuel its AI-based loans platform for small businesses

Kabbage, the AI-based small business loans platform backed by SoftBank and others, is adding more firepower to its lending machine: the Atlanta-based startup has secured an additional $200 million in the form of a revolving credit facility from an unnamed subsidiary of a large life insurance company, managed and administered by 20 Gates Management, and Atalaya Capital Management.

The money comes on the heels of a $700 million securitization Kabbage secured just three months ago and it is notable not just for its size but its terms: it’s a four-year facility, a length of time that underscores a level of confidence in the company’s performance.

Kabbage, which loans up to $250,000 in a single deal to small and medium businesses, has built a platform that harnesses the long tail of big data from across the web. It uses not just indicators from a company’s own public activities, but also sources comparative information from across a wider group of similar companies, with “2 million live data connections” currently helping to feed its algorithm.

Together, these help Kabbage determine whether to provide the loans, and at what rates. Notably, the whole process takes mere minutes, making Kabbage disruptive to the traditional route of applying for loans from banks, which can come at higher rates, often take longer to close and may never get approved.

The company was last valued at $1.2 billion in its most recent equity round from the Vision Fund in 2017, with about $500 million raised in equity to date from it and other investors, including BlueRun Ventures and Mohr Davidow Ventures. Rob Frohwein, the co-founder and CEO, confirmed to me via email that there are “no plans on the equity side right now.” We’ve asked about IPO plans and will update if we learn anything more on that front.

More importantly, alongside its equity story is the company’s business story: Kabbage has to date loaned out $7 billion in capital — amassed through securitizations and other facilities alongside that — to 185,000 businesses, and the company has seen an acceleration of business activity over the last two years. Nearly $700 million was loaned out in Q2 of this year, passing the record in Q1 of $600 million. This puts Kabbage on track to loan out between $2.4 billion and $3 billion this year.

“This transaction further diversifies Kabbage’s committed sources of funding and prepares us to meet the escalating demand for capital access among small businesses,” said Kabbage head of Capital Markets, Deepesh Jain, in a statement. “2019 has proven to be a tide-shifting year as customers accessed more than $670 million from Kabbage in Q2 2019, well surpassing our previously set record last quarter.”

While a lot of Kabbage’s business has come out of its direct consumer relationships, it’s also been expanding by way of more third-party relationships. It has white-label partnerships with banks to power their own loan offerings for SMBs, and earlier this year it was also tapped by e-commerce giant Alibaba to provide loans to its small business customers of up to $150,000 to help finance purchases, part of the latter company’s redoubled efforts to build out its business in the U.S. by way of its quiet acquisition of OpenSky.

Jun
25
2019
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Tundra, the zero-fee wholesale marketplace, picks up $12 million

Tundra, a new zero-commission wholesale marketplace, has today announced the close of $12 million in Series A funding. The round was led by Redpoint’s Annie Kadavy, with participation from investors such as Initialized Capital, Peterson Ventures, FJ Labs, Switch Ventures and Background Capital.

Tundra was founded by married couple Arnold and Katie Engel who previously ran a global supply chain company called Vox Supply Chain. In that world, they quickly realized just how much inefficiency is built into the wholesale market, from disorganized trade shows to transaction fees from the incumbents to a business that’s largely done on phone with pen and paper.

That’s where Tundra comes in.

Tundra allows suppliers to list their products on the platform, which is built to look and feel like a B2C marketplace. Buyers can come on the platform and shop for products, complete with ratings and reviews, supplier performance metrics, and free shipping with easy tracking.

“The wholesale market is set up to benefit big businesses, with other platforms and distributors charging anywhere from 5 percent to 30 percent commission,” said Engel. “That can be particularly pronounced for small businesses.”

Plus, it can be perilous for small players to depend on big platforms like Amazon. Just a few weeks ago, there were rumors that Amazon would focus its attention on big brands like P&G and purge smaller suppliers from the platforms. Amazon denied the rumors, saying it evaluates suppliers on an individual basis.

For Tundra, the hope is to eliminate both the time-consuming and tedious process of negotiating deals at trade shows as well as the cost of simply buying and selling wholesale products online. And, importantly, Tundra has a zero-fee model, which means that buyers and suppliers can operate on the platform without spending a penny if they so choose.

Of course, the company has to generate revenue in some way, which is why Tundra offers premium options at checkout, such as faster shipping, order insurance, and additional custom clearance and logistics services for international orders.

Having spent a year serving as Head of Strategic Operations growing Uber Freight, Redpoint Managing Director Annie Kadavy saw first-hand just how gargantuan the wholesale market is. During a phone interview, she reminded me that almost every item within view at any given moment was shipped on a truck and purchased at a wholesale price before it was purchased by a consumer in a store.

“Tundra’s greatest challenge ahead is execution, because the market opportunity here is very obvious,” said Kadavy. “It’s a huge business that is currently transacted by fax, phone call and pen and paper, so the opportunity is very clear.”

There is clearly movement in the space. Just last month, Shopify acquired Handshake to handle B2B e-commerce directly for customers. That followed its acquisition of dropshipping platform Oberlo in 2017, signaling the fact that existing platforms realize the opportunity of wholesale e-commerce, as well.

And a recent report stated that B2B e-commerce passed the $1 trillion mark for the first time in 2018.

The opportunity is there, as is the competition, but Tundra comes to the table armed with fresh capital.

Jun
24
2019
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Comscore raises $20M with an option to bump it to $50M, in a bid to rebuild its digital measurement business

Comscore’s name is usually in the news because of its widely-cited research and stats around media traffic and other analysis charting digital consumer behavior. More recently, it’s been coming up for another reason: ongoing corporate upheaval and its tumbling stock price. Today comes the latest development in that story: the company announced that it has raised $20 million, with the option of increasing the sum to $50 million, from a firm called CVI Investments.

“This transaction strengthens our balance sheet and positions us to pursue our refocused growth strategy while providing the flexibility to better apply resources to meet our business objectives, and ultimately drive long-term value for our stockholders,” Dale Fuller, Interim Chief Executive Officer of Comscore, said in a statement.

As explained in the 8-K, the money is coming in the form of a share purchase that is expected to close around June 26.

Comscore did not give more specifics about how it plans to use the funding, but it comes at a tricky time, with the stock today at one point dipping to a 52-week low at $7.39/share. Earlier this year, it lost both its CEO and its president, and then this month its COO departed after less than a month with the company. Counting its current interim CEO, it has been through five CEOs in the last five years. In May, the loss-making company also announced that it would be reducing headcount by 10%, or 180 people, as part of a restructuring and effort to move into profitability.

Comscore competes with the likes of Nielsen in measuring media consumption and patterns of digital consumers, but that is not its only challenge.

The company, and others like it, have traditionally been a key component in the world of advertising, as they provide an inportant, third-party assessment of audience data, necessary for helping to plan media spend and campaigns. But the rise of adtech and marketing tech, and a new array of places where ad inventory is placed beyond websites, has created a new level of more granular measurements and customer demands, so part of the challenge for Comscore has been to build new products to meet those new scenarios.

Its most recent series of executive departures and workforce reductions have not been the first faced by the company: it has also been the subject of an SEC investigation into its accounting practices, having admitted in 2018 that it overstated revenues by some $127 million resulting from a long-term WPP partnership. Prior to that, longtime CEO Gian Fulgoni left the company over the same problem.

Last year, it was reported that Comscore had engaged Goldman Sachs to reach out to parties potentially interested in acquiring it, including strategic acquirers operating in a similar space and buyout firms. The talks were never confirmed and nothing ever materialised at the time.

The company’s market cap is now at around $460 million, having seen its share price decline drastically since 2015.

 

Jun
06
2019
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The Ticket Fairy is tech’s best hope against Ticketmaster

Ticketmaster’s dominance has led to ridiculous service fees, scalpers galore, and exclusive contracts that exploit venues and artists. The moronic approval of venue operator and artist management giant Live Nation’s merger with Ticketmaster in 2010 produced an anti-competitive juggernaut. It pressures venues to sign ticketing contracts under veiled threat that artists would otherwise be routed to different concert halls. Now it’s become difficult for venues, artists, and fans to avoid Ticketmaster, which charges fees as high as 50% that many see as a ripoff.

But The Ticket Fairy wants to wrestle control of venues away from Ticketmaster while giving fans ways to earn tickets for referring their friends. The startup is doing that by offering the most technologically advanced ticketing platform that not only handle sales and checkins, but acts as a full-stack Salesforce for concerts that can analyze buyers and run ad campaigns while thwarting scalpers. Co-founder Ritesh Patel says The Ticket Fairy has increased revenue for event organizers by 15% to 25% during its private beta focused on dance music festivals.

Now after 850,000 tickets sold, it’s officially launching its ticketing suite and actively poaching venues from EventBrite as it moves deeper into esports and conventions. With a little more scale, it will be ready to challenge Ticketmaster for lucrative clients.

Ritesh’s combination of product and engineering skills, rapid progress, and charismatic passion for live events after throwing 400 of his own has attracted an impressive cadre of angel investors. They’ve delivered a $2.5 million seed round for Ticket Fairy adding to its $485,000 pre-seed from angels like Twitch/Atrium founder Justin Kan, Twitch COO Kevin Lin, and Reddit CEO Steve Huffman. The new round includes YouTube founder Steve Chen, former Kleiner Perkins partner and Mark’s sister Arielle Zuckerberg, and funds like 500 Startups, ex-Uber angels Fantastic Ventures, G2 Ventures, Tempo Ventures, and WeFunder. It’s also scored music industry angels like Serato DJ hardware CEO AJ Bertenshaw, Spotify’s head of label licensing Niklas Lundberg, and celebrity lawer Ken Hertz who reps Will Smith and Gwen Stefani.

“The purpose of starting The Ticket Fairy was not to be another EventBrite, but to reduce the risk of the person running the event so they can be profitable. We’re not just another shopping cart” Patel says. The Ticket Fairy charges a comparable rate to EventBrite’s $1.59 + 3.5% per ticket plus payment processing that brings it closer to 6%, but Patel insists it offers far stronger functionality.

Constantly clad in his golden disco hoodie over a Ticket Fairy t-shirt, Patel lives his product, spending late nights dancing and taking feedback at the events his clients host. He’s been a savior of SXSW the past two years, injecting the aging festival that shuts down at 2am with multi-night after-hours raves. Featuring top DJs like Pretty Lights in creative locations cab drivers don’t believe are real, The Ticket Fairy’s parties have won the hearts of music industry folks.

The Ticket Fairy co-founders. Center and inset left: Ritesh Patel. Inset right: Jigar Patel

Now the Y Combinator startup hopes its ticketing platform will do the same thanks to a slew of savvy features:

Earn A Ticket – The Ticket Fairy supercharges word of mouth marketing with a referral system that lets fans get a rebate or full-free ticket if they get enough friends to buy a ticket. 30% of ticket buyers are now sharing a Ticket Fairy referral link, and Patel says the return on investment is $30 in revenue for each $1 paid out in rewards, with 10% to 25% of all ticket sales coming from referrals. A public leaderboard further encourages referrals, with those at the top eligible for backstage passes, free merch, and bar tabs. And to prevent mass spamming, only buyers, partners, and street teamers get a referral code.

Creative Payment Options – The startup offers “FreeFund” tickets for free events that otherwise see huge no-show rates. Users pay a small deposit that’s refunded when they scan their ticket for entry, discouraging RSVPs from those who won’t come. Buyers can also pay on layaway with Affirm or LayBuy and then earn a ticket before their debt is due.

Anti-Scalping – The Ticket Fairy offers identity-locked tickets that must be presented with the buyer’s ID on arrival, which means customers can’t scalp them. Instead, the startup offers a waitlist for sold out events, and buyers can sell their tickets back to the company which then redistributes them at face value with a new QR code to a specific friend or whoever’s at the top of the waitlist. Patel says client SunAndBass Festival hasn’t had a scalped ticket in five years of working with the ticketer.

Clever Analytics – Never wasting an opportunity, The Ticket Fairy lets events collect contact info and demand before ticket sales start with its pre-registration system. It can ceate multiple variants of ticketing sites designed for different demographics like rock vs dance fans for a festival, track sales and demographics in real-time, and relay instant stats about checkins at the door. Integration of email managers like MailChimp and sales pixels like Facebook plus the ability to instantly retarget people who abandoned their shopping via Facebook Custom Audience ads makes marketing easier. And all the metrics, budgets, and expenses are automatically organized into financial reports to eliminate spreadsheet busywork.

Still, the biggest barrier to adoption remains the long exclusive contracts Ticketmaster and other giants like AEG coerce venues into in the US. Abroad, venues typically work with multiple ticket promoters who sell from the same pool, which is why 80% of The Ticket Fairy’s business is international right now. In the US, ticketing is often handled by a single company except for the 8% of tickets artists can sell however they want. That’s why The Ticket Fairy has focused on signing up non-traditional venues for festivals, trade convention halls, newly built esports arenas, as well as concert halls.

“Coming from the event promotion background, we understand the risk event organizers take in creating these experiences” The Ticket Fairy’s co-founder and Ritesh’s brother Jigar Patel explains. “The odds of breaking even are poor and many are unable to overcome those challenges, but it is sheer passion that keeps them going in the face of financial uncertainty and multi-year losses.” As competitors’ contracts expire, The Ticket Fairy hopes to swoop in by dangling its sales-boosting tech. “We get locked out of certain things because people are locked in a contract, not because they don’t want to use our system.”

The live music industry can brutal, though. Events can have slim margins, organizers are loathe to change their process, it’s a sales heavy process convincing them to try new software. But while record business has been redefined by streaming, ticketing looks a lot like it did a decade ago. That makes it ripe for disruption.

“The events industry is more important than ever, with artists making the bulk of their income from touring instead of record sales, and demand from fans for live experiences is increasing at a global level” Jigar concludes. “When events go out of business, everybody loses, including artists and fans. Everything we do at The Ticket Fairy has that firmly in mind – we are here to keep the ecosystem alive.”

May
13
2019
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Mailchimp expands from email to full marketing platform, says it will make $700M in 2019

Mailchimp, a bootstrapped startup out of Atlanta, Ga., is known best as a popular tool for organizations to manage their customer-facing email activities — a profitable business that its CEO told TechCrunch has now grown to around 11 million active customers with a total audience of 4 billion (yes, 4 billion), and is on track for $700 million in revenue in 2019. (Note: Slack’s previous quarter was around $133 million, and it’s operating at a loss.)

To help hit that number, Mailchimp is taking the wraps off a significant update aimed at catapulting it into the next level of business services. Starting today, Mailchimp will start to offer a full marketing platform aimed at smaller organizations.

Going beyond the email services that it has been offering for 20 years — which alone has led to multiple acquisition offers (all rebuffed) as its valuation has crept up reportedly into the billions (depending on which multiple you use) — the new platform will feature a number of new products within it.

They include technology to record and track customer leads; the ability to purchase domains and build sites; ad retargeting on Facebook and Instagram; social media management. It will also offer business intelligence that leverages a new move into the artificial intelligence to provide recommendations to users on how and when to market to whom.

The latter of these will be particularly interesting considering the data that it has collected and will collect on 4 billion individuals and their responses to emails and other services that Mailchimp now offers.

As of Wednesday of this week, Mailchimp also plans a pretty significant shift of its pricing into four tiers of free, $9.99/month, $14.99/month or $299/month (up from the current pricing of free, $10/month, $199/month) — with those fees scaling depending on usage and features.

(Existing paid customers maintain current pricing structure and features for the time being and can move to the new packages at any time, the company said. New customers will sign up to the new pricing starting May 15.)

The expansion is part of a longer-term strategic play to widen Mailchimp’s scope by building more services for the typically underserved but collectively large small-business segment.

Even as multinationals like Amazon and other large companies continue to feel like they are eating up the mom-and-pop independent business model, SMBs continue to make up 48% of the GDP in the U.S.

And within the SMB sector, the opportunity has totally changed with the rise of the internet.

“What’s really key is the role digital apps, digital publishing and social media have played,” said Ben Chestnut, Mailchimp’s co-founder and CEO. “We can have a 10-employee company with a customer base bigger than 1 million. That’s a combination you couldn’t achieve before the growth of online.”

And within that, marketing is one of those areas that small businesses might not have invested in much traditionally but are increasingly turning to as so much transactional activity has moved to digital platforms — be it smartphones, computers, or just the tech that powers the TV you watch or music you listen to.

In March, we reported that Mailchimp quietly acquired a small Shopify competitor called LemonStand to start to build more e-commerce tools for its users. And the new marketing platform is the next step in that strategy.

“We still see a big need for small businesses to have something like this,” Chestnut said in an interview. Enterprises have a range of options when it comes to marketing tools, he added, “but small businesses don’t.” The mantra for many building tech for the SMB sector has traditionally been “dumbed down and cheap,” in his words. “We agreed that cheap was good, but not dumbed down. We want to empower them.”

The new services launch also comes at a time when an increasing number of companies are closing in on the small business opportunity, with e-commerce companies like Square, Shopify and PayPal also widening their portfolio of products. (These days, Square is a Mailchimp partner, Shopify is not.)

Marketing is something that Mailchimp had already been dabbling with over the last two years — indeed, customer-facing email services is essentially a form of marketing, too. Other launches have included a Postcards service, offering companies very simple landing pages online (about 10% of Mailchimp’s customers do not have their own web sites, Chestnut said), and a tool for companies to create Google, Facebook and Instagram ads.

Mailchimp itself has a big marketing presence already: it says that daily, more than 1.25 million e-commerce orders are generated through Mailchimp campaigns; over 450 million e-commerce orders were made through Mailchimp campaigns in 2018; and its customers have sold over $250 million in goods through multivariate + A/B campaigns run through Mailchimp.

There are clearly a lot of others vying to be the go-to platform for small businesses to do their business — “Google, Facebook, a lot of the big players see the magic and are moving to the space more and more,” Chestnut said — but Mailchimp’s unique selling point — or so it hopes — is that it’s the platform that has no vested interests in other business areas, and will therefore be as focused as the small businesses themselves are. That includes, for example, no upcharging regardless of the platform where you choose to run a campaign.

“We are Switzerland,” Chestnut said.

Given that Mailchimp took 20 years to grow into marketing from email, it’s not clear what the wait will be for future expansions, and into which areas those might go. Surprisingly, one product that Mailchimp does not want to touch for now is CRM. “No plans for CRM services,” Chestnut said. “We are focused on consumer brands. We think about small organizations, with fewer than 100 employees.”

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