Oct
21
2020
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Lessons from Datto’s IPO pricing and revenue multiple

Last night Datto priced its IPO at $27 per share, the top end of its range that TechCrunch covered last week. The data and security-focused software company had targeted a $24 to $27 per-share IPO price range, meaning that its final per-share value was at the top of its estimates.


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The Datto IPO won’t draw lots of attention; its business is somewhat dull, as selling software to managed service providers rarely excites. But, the public offering matters for a different reason: It gives us a fresh lens into today’s IPO market.

That lens is the perspective of slower, more profitable growth. What is that worth?

The value of quickly growing and unprofitable software and cloud companies is well known. Snowflake made a splash earlier this year on the back of huge growth and enormous losses. Investors ate its shares up, pushing its valuation to towering heights. This year we’ve even seen rapid growth and profits valued by public investors in the form of JFrog’s IPO.

But slower growth, software margins and profitability? Datto’s financial picture feels somewhat unique among the IPOs that TechCrunch has covered this year.

It’s a similar bet to the one that Egnyte is making; the enterprise software company crested $100 million ARR last year and announced that it grew by around 22% in the first half of 2020. And, it is profitable on an EBITDA basis. Therefore, the Datto IPO could provide a clue as to whether companies like Egnyte and the rest of the late-stage startup crop should be content to grow more slowly, but with the benefit of actually making money.

Lessons from Datto’s IPO pricing and revenue multiple

Here are the deal’s nuts and bolts:

Oct
19
2020
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Intel agrees to sell its NAND business to SK Hynix for $9 billion

SK Hynix, one of the world’s largest chip makers, announced today it will pay $9 billion for Intel’s flash memory business. Intel said it will use proceeds from the deal to focus on artificial intelligence, 5G and edge computing.

“For Intel, this transaction will allow us to to further prioritize our investments in differentiated technology where we can play a bigger role in the success of our customers and deliver attractive returns to our stockholders,” said Intel chief executive officer Bob Swan in the announcement.

The Wall Street Journal first reported earlier this week that the two companies were nearing an agreement, which will turn SK Hynix into one of the world’s largest NAND memory makers, second only to Samsung Electronics.

The deal with SK Hynix is the latest one Intel has made so it can double down on developing technology for 5G network infrastructure. Last year, Intel sold the majority of its modem business to Apple for about $1 billion, with Swan saying that the time that the deal would allow Intel to “[put] our full effort into 5G where it most closely aligns with the needs of our global customer base.”

Once the deal is approved and closes, Seoul-based SK Hynix will take over Intel’s NAND SSD and NAND component and wafer businesses, and its NAND foundry in Dalian, China. Intel will hold onto its Optane business, which makes SSD memory modules. The companies said regulatory approval is expected by late 2021, and a final closing of all assets, including Intel’s NAND-related intellectual property, will take place in March 2025.

Until the final closing takes places, Intel will continue to manufacture NAND wafers at the Dalian foundry and retain all IP related to the manufacturing and design of its NAND flash wafers.

As the Wall Street Journal noted, the Dalian facility is Intel’s only major foundry in China, which means selling it to SK Hynix will dramatically reduce its presence there as the United States government puts trade restrictions on Chinese technology.

In the announcement, Intel said it plans to use proceeds from the sale to “advance its long-term growth priorities, including artificial intelligence, 5G networking and the intelligent, autonomous edge.”

During the six-month period ending on June 27, 2020, NAND business represented about $2.8 billion of revenue for its Non-volatile Memory Solutions Group (NSG), and contributed about $600 million to the division’s operating income. According to the Wall Street Journal, this made up the majority of Intel’s total memory sales during that period, which was about $3 billion.

SK Hynix CEO Seok-Hee Lee said the deal will allow the South Korean company to “optimize our business structure, expanding our innovative portfolio in the NAND flash market segment, which will be comparable with what we achieved in DRAM.”

Oct
19
2020
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Juniper Networks acquires Boston-area AI SD-WAN startup 128 Technology for $450M

Today Juniper Networks announced it was acquiring smart wide area networking startup 128 Technology for $450 million.

This marks the second AI-fueled networking company Juniper has acquired in the last year and a half after purchasing Mist Systems in March 2019 for $405 million. With 128 Technology, the company gets more AI SD-WAN technology. SD-WAN is short for software-defined wide area networks, which means networks that cover a wide geographical area such as satellite offices, rather than a network in a defined space.

Today, instead of having simply software-defined networking, the newer systems use artificial intelligence to help automate session and policy details as needed, rather than dealing with static policies, which might not fit every situation perfectly.

Writing in a company blog post announcing the deal, executive vice president and chief product officer Manoj Leelanivas sees 128 Technology adding great flexibility to the portfolio as it tries to transition from legacy networking approaches to modern ones driven by AI, especially in conjunction with the Mist purchase.

“Combining 128 Technology’s groundbreaking software with Juniper SD-WAN, WAN Assurance and Marvis Virtual Network Assistant (driven by Mist AI) gives customers the clearest and quickest path to full AI-driven WAN operations — from initial configuration to ongoing AIOps, including customizable service levels (down to the individual user), simple policy enforcement, proactive anomaly detection, fault isolation with recommended corrective actions, self-driving network operations and AI-driven support,” Leelanivas wrote in the blog post.

128 Technologies was founded in 2014 and raised over $96 million, according to Crunchbase data. Its most recent round was a $30 million Series D investment in September 2019 led by G20 Ventures and The Perkins Fund.

In addition to the $450 million, Juniper has asked 128 Technology to issue retention stock bonuses to encourage the startup’s employees to stay on during the transition to the new owners. Juniper has promised to honor this stock under the terms of the deal. The deal is expected to close in Juniper’s fiscal fourth quarter, subject to normal regulatory review.

Oct
16
2020
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Lawmatics raises $2.5M to help lawyers market themselves

Lawmatics, a San Diego startup that’s building marketing and CRM software for lawyers, is announcing that it has raised $2.5 million in seed funding.

CEO Matt Spiegel used to practice law himself, and he told me that even though tech companies have a wide range of marketing tools to choose from, “lawyers have not been able to adopt them,” because they need a product that’s tailored to their specific needs.

That’s why Spiegel founded Lawmatics with CTO Roey Chasman. He said that a law firm’s relationship with its clients can be divided into three phases — intake (when a client is deciding whether to hire a firm); the active legal case; and after the case has been resolved. Apparently most legal software is designed to handle phase two, while Lawmatics focuses on phases one and three.

The platform includes a CRM system to manage the initial client intake process, as well as tools that can automate a lot of what Spiegel called the “blocking and tackling” of marketing, like sending birthday messages to former clients — which might sound like a minor task, but Spiegel said it’s crucial for law firms to “nurture” those relationships, because most of their business comes from referrals.

Lawmatics’ early adopters, Spiegel added, have consisted of the firms in areas where “if you need a lawyer, you go to Google and start searching ‘personal injury,’ ‘bankruptcy,’ ‘estate planning,’ all these consumer-driven law firms.” And the pandemic led to accelerated the startup’s growth, because “lawyers are at home now, their business is virtual and they need more tools.”

Spiegel’s had success selling technology to lawyers in the past, with his practice management software startup MyCase acquired by AppFolio in 2012 (AppFolio recently sold MyCase to a variety of funds for $193 million). He said that the strategies for growing both companies are “almost identical” — the products are different, but “it’s really the same segment, running the same playbook, only with additional go-to-market strategies.”

The funding was led by Eniac Ventures and Forefront Venture Partners, with participation from Revel Ventures and Bridge Venture Partners.

“In my 10 years investing I have witnessed few teams more passionate, determined, and capable of revolutionizing an industry,” said Eniac’s Tim Young in a statement. “They have not only created the best software product the legal market has seen, they have created a movement.”

 

Oct
15
2020
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Application security platform NeuraLegion raises $4.7 million seed led by DNX Ventures

A video call group photo of NeuraLegion's team working remotely around the world

A video call group photo of NeuraLegion’s team working remotely around the world

Application security platform NeuraLegion announced today it has raised a $4.7 million seed round led by DNX Ventures, an enterprise-focused investment firm. The funding included participation from Fusion Fund, J-Ventures and Incubate Fund. The startup also announced the launch of a new self-serve, community version that allows developers to sign up on their own for the platform and start performing scans within a few minutes.

Based in Tel Aviv, Israel, NeuraLegion also has offices in San Francisco, London and Mostar, Bosnia. It currently offers NexDAST for dynamic application security testing, and NexPLOIT to integrate application security into SDLC (software development life cycle). It was launched last year by a founding team that includes chief executive Shoham Cohen, chief technology officer Bar Hofesh, chief scientist Art Linkov and president and chief commercial officer Gadi Bashvitz.

When asked who NeuraLegion views as its closest competitors, Bashvitz said Invicti Security and WhiteHat Security. Both are known primarily for their static application security testing (SAST) solutions, which Bashvitz said complements DAST products like NeuraLegion’s.

“These are complementary solutions and in fact we have some information partnerships with some of these companies,” he said.

Where NeuraLegion differentiates from other application security solutions, however, is that it was created specifically for developers, quality assurance and DevOps workers, so even though it can also be used by security professionals, it allows scans to be run much earlier in the development process than usual while lowering costs.

Bashvitz added that NeuraLegion is now used by thousands of developers through their organizations, but it is releasing its self-serve, community product to make its solutions more accessible to developers, who can sign up on their own, run their first scans and get results within 15 minutes.

In a statement about the funding, DNX Ventures managing partner Hiro Rio Maeda said, “The DAST market has been long stalled without any innovative approaches. NeuraLegion’s next-generation platform introduces a new way of conducting robust testing in today’s modern CI/CD environment.”

Oct
11
2020
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Twilio is buying customer data startup Segment for between $3B and $4B

Sources have told TechCrunch that Twilio intends to acquire customer data startup Segment for between $3 and $4 billion. Forbes broke the story on Friday night, reporting a price tag of $3.2 billion.

We have heard from a couple of industry sources that the deal is in the works and could be announced as early as Monday.

Twilio and Segment are both API companies. That means they create an easy way for developers to tap into a specific type of functionality without writing a lot of code. As I wrote in a 2017 article on Segment, it provides a set of APIs to pull together customer data from a variety of sources:

Segment has made a name for itself by providing a set of APIs that enable it to gather data about a customer from a variety of sources like your CRM tool, customer service application and website and pull that all together into a single view of the customer, something that is the goal of every company in the customer information business.

While Twilio’s main focus since it launched in 2008 has been on making it easy to embed communications functionality into any app, it signaled a switch in direction when it released the Flex customer service API in March 2018. Later that same year, it bought SendGrid, an email marketing API company for $2 billion.

Twilio’s market cap as of Friday was an impressive $45 billion. You could see how it can afford to flex its financial muscles to combine Twilio’s core API mission, especially Flex, with the ability to pull customer data with Segment and create customized email or ads with SendGrid.

This could enable Twilio to expand beyond pure core communications capabilities and it could come at the cost of around $5 billion for the two companies, a good deal for what could turn out to be a substantial business as more and more companies look for ways to understand and communicate with their customers in more relevant ways across multiple channels.

As Semil Shah from early stage VC firm Haystack wrote in the company blog yesterday, Segment saw a different way to gather customer data, and Twilio was wise to swoop in and buy it.

Segment’s belief was that a traditional CRM wasn’t robust enough for the enterprise to properly manage its pipe. Segment entered to provide customer data infrastructure to offer a more unified experience. Now under the Twilio umbrella, Segment can continue to build key integrations (like they have for Twilio data), which is being used globally inside Fortune 500 companies already.

Segment was founded in 2011 and raised over $283 million, according to Crunchbase data. Its most recent raise was $175 million in April on a $1.5 billion valuation.

Twilio stock closed at $306.24 per share on Friday up $2.39%.

Segment declined to comment on this story. We also sent a request for comment to Twilio, but hadn’t heard back by the time we published.  If that changes, we will update the story.

Oct
06
2020
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Tone raises $4M to help e-commerce brands text with their customers

While many companies are using chatbots and other forms of automation to manage their communication with customers, Boston-based Tone is betting that humans will remain a key part of the equation.

“The traditional models of bots and humans is, ‘Hello, I’m a bot, now you get to battle with me to finally get to a human,’ ” said Tone CEO Tivan Amour. “Our version of that is, ‘I’m a human using AI to get you the answers you need more quickly.’ ”

Amour and his co-founders Vlad Pick and Kyle Weidman previously created a bicycle startup called Fortified Bicycle, and he said they “figured out that the best way to close our customers on these $750 to $1,000 orders was to actually engage them in text message conversations.”

After all, when it comes to “high consideration” purchases like bicycles, people usually want to discuss their questions and concerns with another human being. Over time, the Fortified team built what Amour said was a “semi-automated system” to help its sales team stay on top of these conversations.

“We started bragging to our friends about it, ‘You’ve gotta do this, it’s the future of mobile commerce,’ ” he recalled. “And they’d say, ‘Okay, that’s cool, but we don’t have any of the systems of doing that, we don’t have the salespeople.’ ”

Tone’s founders

So after selling Fortified Bicycle, Amour and Pick created Tone to help any e-commerce business manage similar text message conversations. Tone employs its own team of human agents to actually do the texting, assisted by software that helps them find the information they need.

It integrates with e-commerce systems like Shopify and Magento, and it’s already working with more than 1,000 brands like ThirdLove, Peak Design and Usual Wines — which are seeing as much as a 26% increase in revenue and a 15% increase in order size.

Amour also noted that specific Tone agents are assigned to specific brands, which means that customers will be talking to the same person whenever they have a question for that business. In some cases, customers have been talking to the same agent for months or years. (Update: Tone clarified that this isn’t a person, but a single persona that’s probably an amalgamation of multiple agents.)

“Particularly in a post-COVID world, it’s pretty clear that online shopping has become the dominant form of shopping, but I think nobody has thought about how you replace that human experience that you get in traditional retail,” he said.

Tone is announcing today that it has raised $4 million in seed funding led by Bling Capital, with participation from Day One Ventures, One Way Ventures, TIA Ventures and executives from Google, Facebook, Dropbox and Uber.

With the new funding, Amour said Tone will be able to build out the “relationship automation” aspect of the product. He also suggested that the platform could eventually expand beyond text messaging, but it sounds like that’s not a big priority.

“In theory, we’re a conversational sales platform more than we are an SMS company,” he said. “However there are a bunch of trends right now [such as the growth of mobile commerce] that make SMS the most obvious place for this sort of innovation.”

Oct
05
2020
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Printing giant Vistaprint acquires 99designs

Vistaprint announced today that its parent company Cimpress has acquired freelance design marketplace 99designs.

The companies say that 99designs will become part of Vistaprint while also operating as a separate brand, with 99designs CEO Patrick Llewelyn continuing to lead his team and reporting to Cimpress/Vistaprint CEO Robert Keane.

The acquisition announcement emphasizes the opportunity of connecting 99designs’ freelance designers with the 20 million small businesses who use Vistaprint to print signs, banners, business cards and other marketing materials — so they can have their design and printing needs handled in one place.

Apparently Vistaprint has already been expanding into design services, with offerings that include a design service that businesses have used to create custom face masks during the pandemic.

“The driving force behind Vistaprint’s future with 99designs is our passion to help small businesses,” Keane said in a statement. “We know how critical great design is for entrepreneurs on their journey. 99designs and Vistaprint have shared values and vision to be a trusted partner to business owners and creators, which lay the foundation for something bigger and more valuable than either of our teams could create alone.”

The financial terms of the acquisition were not disclosed. Cimpress is publicly traded, while 99designs has remained private, despite Llewellyn’s plans to go public a couple of years ago. The design company was founded in 2008 and raised a total of $45 million from Accel and Recruit Strategic Partners.

 

Oct
01
2020
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With $18M in new funding, Braintrust says it’s creating a fairer model for freelancers

Braintrust, a network for freelance technical and design talent that launched over the summer, is announcing that it has raised $18 million in new funding.

Co-founder and CEO Adam Jackson has written for TechCrunch about how tech companies need to treat independent contractors with more empathy. He told me via email that the San Francisco-based startup is making that idea a reality by offering a very different approach than existing marketplaces for freelance work.

For one thing, Braintrust only charges the companies doing the hiring — freelancers won’t have to pay to join or to bid on a project, and Braintrust won’t charge a fee on their project payments. In addition, the startup is using a cryptocurrency token that it calls Btrust to reward users who build the network, for example by inviting new customers or vetting freelancers. Apparently, the token will give users a stake in how the network evolves in the future.

“Just imagine if Uber had given all of its drivers some ownership in the company what a different company it would be today,” Jackson said. “Braintrust will be 100% user-owned. Everyone who participates on the platform has skin in the game.”

And for companies, Braintrust is supposed to allow them to tap freelancers for work that they’d normally do in-house. The startup’s clients already include Nestlé, Pacific Life, Deloitte, Porsche, Blue Cross Blue Shield and TaskRabbit.

According to Jackson, most of the talent on the platform consists of career freelancers, but with many people losing their jobs during the COVID-19 pandemic, “we’ve seen an influx of talent coming looking to join the ranks of the freelancers.”

He added that the startup already became profitable after raising its $6 million seed round, so the new funding will allow it to build the core team and also bring in more work.

“We exist to help companies accelerate their product roadmaps and innovation, and this injection of funding will help us do just that,” Jackson said.

The new funding was led by ACME and Blockchange, with participation from new investors Pantera, Multicoin and Variant.

Oct
01
2020
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SAP continues to build out customer experience business with Emarsys acquisition

SAP seemed to be all in on customer experience when it acquired Qualtrics for $8 billion in 2018. It continued on that journey today when it announced it was acquiring Austrian cloud marketing company Emarsys for an undisclosed amount of money.

Emarsys, which raised over $55 million according to PitchBook data, gives SAP customer personalization technology. If you spoke to any marketing automation vendor over the last several years, the focus has been on using a variety of data and touch points to understand the customer better, and deliver more meaningful online experiences.

With the pandemic closing or limiting access to brick and mortar stores, personalization has taken a new urgency as customers are increasingly shopping online and companies need to meet them where they are.

With Emarsys, the company is getting an omnichannel marketing solution that they say is designed to deliver messages to customers wherever they are, including e-mail, mobile, social, SMS and the web, and deliver that at scale.

When SAP announced it was spinning out Qualtrics a couple of months ago, just 20 months after buying it, it left some question about whether SAP was fully committed to the customer experience business.

Brent Leary, founder and principal analyst at CRM Essentials, says that the acquisition shows that SAP is still very much in the game. “This illustrates that SAP is serious about CX and competing in a highly competitive space. Emarsys adds industry-specific customer engagement capabilities that should help SAP CX customers accelerate their efforts to provide their customers with the experiences they expect as their needs change over time,” Leary told TechCrunch.

As an ERP company at its core, SAP has traditionally focused on back-office kinds of operations. But Bob Stutz, president, SAP Customer Experience, sees this acquisition as a way to continue bringing back-office and front-office operations together.

“With Emarsys technology, SAP Customer Experience solutions can link commerce signals with the back office and activate the preferred channel of the customer with a relevant and consistently personalized message, allowing customers the freedom to choose their own engagement,” Stutz said in a statement.

The company, which is based in Austria, was founded back in 2000, when marketing was a very different world. It has built a customer base of 1,500 companies with 800 employees in 13 offices across the globe. All of this will become part of SAP, of course, and come under Stutz’s purview.

As with all transactions of this type it will be subject to regulatory approval, but the deal is expected to close this quarter.

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