Personal blog of Yzmir Ramirez

When it comes to software to help IT manage workers’ devices wherever they happen to be, enterprises have long been spoiled for choice — a situation that has come in especially handy in the last 18 months, when many offices globally have gone remote and people have logged into their systems from home. But the same can’t really be said for small and medium enterprises: As with so many other aspects of tech, they’ve long been overlooked when it comes to building modern IT management solutions tailored to their size and needs.

But there are signs of that changing. Today, a startup called Atera that has been building remote, and low-cost, predictive IT management solutions specifically for organizations with less than 1,000 employees, is announcing a funding round of $77 million — a sign of the demand in the market, and Atera’s own success in addressing it. The investment values Atera at $500 million, the company confirmed.

The Tel Aviv-based startup has amassed some 7,000 customers to date, managing millions of endpoints — computers and other devices connected to them — across some 90 countries, providing real-time diagnostics across the data points generated by those devices to predict problems with hardware, software and network, or with security issues.

Atera’s aim is to use the funding both to continue building out that customer footprint, and to expand its product — specifically adding more functionality to the AI that it currently uses (and for which Atera has been granted patents) to run predictive analytics, one of the technologies that today are part and parcel of solutions targeting larger enterprises but typically are absent from much of the software out there aimed at SMBs.

“We are in essence democratizing capabilities that exist for enterprises but not for the other half of the economy, SMBs,” said Gil Pekelman, Atera’s CEO, in an interview.

The funding is being led by General Atlantic, and it is notable for being only the second time that Atera has ever raised money — the first was earlier this year, a $25 million round from K1 Investment Management, which is also in this latest round. Before this year, Atera, which was founded in 2016, turned profitable in 2017 and then intentionally went out of profit in 2019 as it used cash from its balance sheet to grow. Through all of that, it was bootstrapped. (And it still has cash from that initial round earlier this year.)

As Pekelman — who co-founded the company with Oshri Moyal (CTO) — describes it, Atera’s approach to remote monitoring and management, as the space is typically called, starts first with software clients installed at the endpoints that connect into a network, which give IT managers the ability to monitor a network, regardless of the actual physical range, as if it’s located in a single office. Around that architecture, Atera essentially monitors and collects “data points” covering activity from those devices — currently taking in some 40,000 data points per second.

To be clear, these data points are not related to what a person is working on, or any content at all, but how the devices behave, and the diagnostics that Atera amasses and focuses on cover three main areas: hardware performance, networking and software performance and security. Through this, Atera’s system can predict when something might be about to go wrong with a machine, or why a network connection might not be working as it should, or if there is some suspicious behavior that might need a security-oriented response. It supplements its work in the third area with integrations with third-party security software — Bitdefender and Acronis among them — and by issuing updated security patches for devices on the network.

The whole system is built to be run in a self-service way. You buy Atera’s products online, and there are no salespeople involved — in fact most of its marketing today is done through Facebook and Google, Pekelman said, which is one area where it will continue to invest. This is one reason why it’s not really targeting larger enterprises (the others are the level of customization that would be needed; as well as more sophisticated service level agreements). But it is also the reason why Atera is so cheap: it costs $89 per month per IT technician, regardless of the number of endpoints that are being managed.

“Our constituencies are up to 1,000 employees, which is a world that was in essence quite neglected up to now,” Pekelman said. “The market we are targeting and that we care about are these smaller guys and they just don’t have tools like these today.” Since its model is $89 dollars per month per technician using the software, it means that a company with 500 people with four technicians is paying $356 per month to manage their networks, peanuts in the greater scheme of IT services, and one reason why Atera has caught on as more and more employees have gone remote and are looking like they will stay that way.

The fact that this model is thriving is also one of the reason and investors are interested.

“Atera has developed a compelling all-in-one platform that provides immense value for its customer base, and we are thrilled to be supporting the company in this important moment of its growth trajectory,” said Alex Crisses, MD, global head of New Investment Sourcing and co-head of Emerging Growth at General Atlantic, in a statement. “We are excited to work with a category-defining Israeli company, extending General Atlantic’s presence in the country’s cutting-edge technology sector and marking our fifth investment in the region. We look forward to partnering with Gil, Oshri and the Atera team to help the company realize its vision.”

As enterprise startups continue to target interesting gaps in the market, we’re seeing increasingly sophisticated tools getting built for small and medium businesses — traditionally a tricky segment to sell to, too small for large enterprise tools, and too advanced in their needs for consumer products. In the latest development of that trend, an Israeli startup called DataRails has raised $25 million to continue building out a platform that lets SMBs use Excel to run financial planning and analytics like their larger counterparts.

The funding closes out the company’s Series A at $43.5 million, after the company initially raised $18.5 million in April (some at the time reported this as its Series A, but it seems the round had yet to be completed). The full round includes Zeev Ventures, Vertex Ventures Israel and Innovation Endeavors, with Vintage Investment Partners added in this most recent tranche. DataRails is not disclosing its valuation, except to note that it has doubled in the last four months, with hundreds of customers and on target to cross 1,000 this year, with a focus on the North American market. It has raised $55 million in total. 

The challenge that DataRails has identified is that on one hand, SMBs have started to adopt a lot more apps, including software delivered as a service, to help them manage their businesses — a trend that has been accelerated in the last year with the pandemic and the knock-on effect that has had for remote working and bringing more virtual elements to replace face-to-face interactions. Those apps can include Salesforce, NetSuite, Sage, SAP, QuickBooks, Zuora, Xero, ADP and more.

But on the other hand, those in the business who manage finances and financial reporting are lacking the tools to look at the data from these different apps in a holistic way. While Excel is a default application for many of them, they are simply reading lots of individual spreadsheets rather than integrated data analytics based on the numbers.

DataRails has built a platform that can read the reported information, which typically already lives in Excel spreadsheets, and automatically translate it into a bigger picture view of the company.

For SMEs, Excel is such a central piece of software, yet such a pain point for its lack of extensibility and function, that this predicament was actually the germination of starting DataRails in the first place,

Didi Gurfinkel, the CEO who co-founded the company with Eyal Cohen (the CPO) said that DataRails initially set out to create a more general-purpose product that could help analyze and visualize anything from Excel.

Image: DataRails

“We started the company with a vision to save the world from Excel spreadsheets,” he said, by taking them and helping to connect the data contained within them to a structured database. “The core of our technology knows how to take unstructured data and map that to a central database.” Before 2020, DataRails (which was founded in 2015) applied this to a variety of areas with a focus on banks, insurance companies, compliance and data integrity.

Over time, it could see a very specific application emerging, specifically for SMEs: providing a platform for FP&A (financial planning and analytics), which didn’t really have a solution to address it at the time. “So we enabled that to beat the market.”

“They’re already investing so much time and money in their software, but they still don’t have analytics and insight,” said Gurfinkel.

That turned out to be fortunate timing, since “digital transformation” and getting more out of one’s data was really starting to get traction in the world of business, specifically in the world of SMEs, and CFOs and other people who oversaw finances were already looking for something like this.

The typical DataRails customer might be as small as a business of 50 people, or as big as 1,000 employees, a size of business that is too small for enterprise solutions, “which can cost tens of thousands of dollars to implement and use,” added Cohen, among other challenges. But as with so many of the apps that are being built today to address those using Excel, the idea with DataRails is low-code or even more specifically no-code, which means “no IT in the loop,” he said.

“That’s why we are so successful,” he said. “We are crossing the barrier and making our solution easy to use.”

The company doesn’t have a huge number of competitors today, either, although companies like Cube (which also recently raised some money) are among them. And others like Stripe, while currently not focusing on FP&A, have most definitely been expanding the tools that it is providing to businesses as part of their bigger play to manage payments and subsequently other processes related to financial activity, so perhaps it, or others like it, might at some point become competitors in this space as well.

In the meantime, Gurfinkel said that other areas that DataRails is likely to expand to cover alongside FP&A include HR, inventory and “planning for anything,” any process that you have running in Excel. Another interesting turn would be how and if DataRails decides to look beyond Excel at other spreadsheets, or bypass spreadsheets altogether.

The scope of the opportunity — in the U.S. alone there are more than 30 million small businesses — is what’s attracting the investment here.

“We’re thrilled to reinvest in DataRails and continue working with the team to help them navigate their recent explosive and rapid growth,” said Yanai Oron, general partner at Vertex Ventures, in a statement. “With innovative yet accessible technology and a tremendous untapped market opportunity, DataRails is primed to scale and become the leading FP&A solution for SMEs everywhere.”

“Businesses are constantly about to start, in the midst of, or have just finished a round of financial reporting — it’s a never-ending cycle,” added Oren Zeev, founding partner at Zeev Ventures. “But with DataRails, FP&A can be simple, streamlined, and effective, and that’s a vision we’ll back again and again.”

Small businesses have traditionally been underserved when it comes to IT — they are too big and have too many requirements that can’t be met by consumer products, yet are much too small to afford, implement or thoroughly need apps and other IT build for larger enterprises. But when it comes to neobanks, it feels like there is no shortage of options for the SMB market, nor venture funding being invested to help them grow.

In the latest development, Novo, a neobank that has built a service targeting small businesses, has closed a round of $40.7 million, a Series A that it will be using to continue growing its business, and its platform.

The funding is being led by Valar Ventures with Crosslink Capital, Rainfall Ventures, Red Sea Ventures and BoxGroup all participating. The startup is not disclosing valuation, but Novo — originally founded in New York in 2018 but now based out of Miami — has racked up 100,000 SMB customers — which it defines as businesses that make between $25,000 and $100,000 in annualized revenues — and has seen $1 billion in lifetime transactions, with growth accelerating in the last couple of years.

There are a wide variety of options for small businesses these days when it comes to going for a banking solution. They include staying with traditional banks (which are starting to add an increasing number of services and perks to retain small business customers), as well as a variety of fintechs — other neobanks, like Novo — that are building banking and related financial tools to cater to startups and other small businesses.

Just doing a quick search, some of the others targeting the sector include Rho, NorthOne, Lili, Mercury, Brex, Hatch, Anna, Tide, Viva Wallet, Open and many more (and you could argue also players like Amazon, offering other money management and spending tools similar to what neobanks are providing). Some of these are not in the U.S., and some are geared more at startups, or freelancers, but taken together they speak to the opportunity and also the attention that it is getting from the tech industry right now.

As CEO and co-founder Michael Rangel — who hails from Miami — described it to me, one of the key differentiators with Novo is that it’s approaching SMB banking from the point of view of running a small business. By this, he means that typically SMBs are already using a lot of other finance software — on average seven apps per business — to manage their books, payments and other matters, and so Novo has made it easier by way of a “drag and drop” dashboard where an SMB can integrate and view activity across all of those apps in one place. There are “dozens” of integrations currently, he said, and more are being added.

This is the first step, he said. The plan is to build more technology so that the activity between different apps can also be monitored, and potentially automated

“We’re able to see this is your balance and what you should expect,” he said. “The next frontier is to marry the incoming with outgoing. We’re using the funding to build that, and it’s on the roadmap in the next six months.”

Novo has yet to bring cash advances or other lending products into its platform, although those too are on the roadmap, but it is also listening to its customers and watching what they want to do on the platform — another reason why it’s clever to make it easy to for those customers to integrate other services into Novo: not only does that solve a pain point for the customer, but it becomes a pretty clear indicator of what customers are doing, and how you could better cater to that.

Listening to the customers is in itself becoming a happy challenge, it seems. Novo launched quietly enough — between 2018 and the end of 2019, it had picked up only 5,000 accounts. But all that changed during 2020 and the COVID-19 pandemic, which Rangel describes as “just hockey stick growth. We grew like crazy.”

The reason, he said, is a classic example of why incumbent banks have to catch up with the times. Everyone was locked down at home, and suddenly a lot of people who were either furloughed or laid off were “spinning up businesses,” he said, and that led to many of them needing to open bank accounts. But those who tried to do this with high-street banks were met with a pretty significant barrier: you had to go into the bank in person to authenticate yourself, but either the banks were closed, or people didn’t want to travel to them. That paved the way for Novo (and others) to cater to them.

Its customer numbers shot up to 24,000 in the year.

Then other market forces have also helped it. You might recall that banking app Simple was shut down by BBVA ahead of its merger with PNC; but at the same time, it also shut down Azlo, it’s small business banking service. That led to a significant number of users migrating to other services, and Novo got a huge windfall out of that, too.

In the last six months, Novo grew four-fold, and Rangel attributed a lot of that to ex-Azloans looking for a new home.

The fact that there are so many SMB banking providers out there might mean competition, but it also means fragmentation, and so if a startup emerges that seems to be catching on, it’s going to catch something else, too: the eye of investors.

“The ability of the Novo team to grow the company rapidly during a year where businesses have faced unprecedented challenges is impressive,” said Andrew McCormack, founding partner at Valar Ventures, the firm co-founded by Peter Thiel, another big figure in fintech. “Novo tripled its small business customer base in the first half of 2021! Their custom infrastructure and banking platform put them in prime position to expand their services at an even faster pace as we come out of the health crisis. All of us at Valar Ventures are excited to join this team.”

With more people than ever before going online to pay for things and pay each other, startups that are building the infrastructure that enables these actions continue to get a lot of attention.

In the latest development, Paysend, a fintech that has built a mobile-based payments platform — which currently offers international money transfers, global accounts, and business banking and e-commerce for SMBs — has picked up some money of its own. The London-based startup has closed a round of $125 million, a sizable Series B that the company’s CEO and founder Ronnie Millar said it will be using to continue expanding its business geographically, to hire more people, and to continue building more fintech products.

The funding is being led by One Peak, with Infravia Growth Capital, Hermes GPE, previous backer Plug and Play and others participating.

Millar said Paysend is not disclosing valuation today but described it as a “substantial kick-up” and “a great step forward in our position ahead toward unicorn status.”

From what I understand though, the company was valued at $160 million in its previous round, and its core metrics have gone up 4.5x. Doing some basic math, that gives the company a valuation of around $720 million, a figure that a source close to the company did not dispute when I brought it up.

Something that likely caught investors’ attention is that Paysend has grown to the size it is today — it currently has 3.7 million consumer customers using its transfer and global account services, and 17,000 small business customers, and is now available in 110 receiving countries — in less than four years and $50 million in funding.

There are a couple of notable things about Paysend and its position in the market today, the first being the competitive landscape.

On paper, Paysend appears to offer many of the same features as a number of other fintechs: money transfer, global payments, and banking and e-commerce services for smaller businesses are all well-trodden areas with companies like Wise (formerly “TransferWise”), PayPal, Revolut, and so many others also providing either all or a range of these services.

To me, the fact that any one company relatively off the tech radar can grow to the size that it has speaks about the opportunity in the market for more than just one or two, or maybe five, dominant players.

Considering just remittances alone, the WorldBank in April said that flows just to low- and middle-income countries stood at $540 million last year, and that was with a dip in volumes due to COVID-19. The cut that companies like Paysend make in providing services to send money is, of course, significantly smaller than that — business models include commission charges, flat fees or making money off exchange rates; Paysend charges £1 per transfer in the U.K. More than that, the overall volumes, and the opportunity to build more services for that audience, are why we’re likely to see a lot of companies with ambitions to serve that market.

Services for small businesses, and tapping into the opportunity to provide more e-commerce tools at a time when more business and sales are being conducted online, is similarly crowded but also massive.

Indeed, Paysend points out that there is still a lot of growing and evolution left to do. Citing McKinsey research, it notes that some 70% of international payments are currently still cash-to-cash, with fees averaging up to 5.2% per transaction, and timing taking up to an hour each for sender and recipient to complete transfers. (Paysend claims it can cut fees by up to 60%.)

This brings us to the second point about Paysend: How it’s built its services. The fintech world today leans heavily on APIs: Companies that are knitting together a lot of complexity and packaging it into APIs that are used by others who bypass needing to build those tools themselves, instead integrating them and adding better user experience and responsive personalization around them. Paysend is a little different from these, with a vertically integrated approach, having itself built everything that it uses from the ground up.

Millar — a Scottish repeat entrepreneur (his previous company Paywizard, which has rebranded to Singula, is a specialist in pay-TV subscriber management) — notes that Paysend has built both its processing and acquiring facilities. “Because we have built everything in-house it lets us see what the consumer needs and uses, and to deliver that at a lower cost basis,” he said. “It’s much more cost-efficient and we pass that savings on to the consumer. We designed our technology to be in complete control of it. It’s the most profitable approach, too, from a business point of view.”

That being said, he confirmed that Paysend itself is not yet profitable, but investors believe it’s making the right moves to get there. To be clear, Paysend actually does partner with other companies, including those providing APIs, to improve its services. In April, Plaid and Paysend announced they were working together to power open banking transfers, reducing the time to initiate and receive money.

“We are excited by Paysend’s enormous growth potential in a massive market, benefiting from a rapid acceleration in the adoption of digital payments,” said Humbert de Liedekerke, managing partner at One Peak Partners, in a statement. “In particular, we are seeing strong opportunities as Paysend moves beyond consumers to serve business customers and expands its international footprint to address a growing need for fast, easy and low-cost cross-border digital payments. Paysend has built an exceptional payment platform by maintaining an unwavering focus on its customers and constantly innovating. We are excited to back the entire Paysend team in their next phase of explosive growth.”

Qupital, a fintech startup that bills itself as Hong Kong’s largest trade financing platform for SMEs, has closed a $15 million Series A led by CreditEase FinTech Investment Fund (CEFIF), with participation from returning investors Alibaba Hong Kong Entrepreneurs Fund and MindWorks Ventures, both participants in its seed round. To date, Qupital has raised $17 million, including a seed round two years ago, and will use its latest funding to expand its supply chain financing products, launch in mainland Chinese cities and hire more people for its tech development and risk management teams.

CreditEase, which provides loans and other financial services for SMEs in China, will act as a strategic investor, aiding with Qupital’s geographic expansion. Existing investor Alibaba has already helped Qupital reach small businesses on its platform. Qupital will open branches in Chinese cities, including Shanghai, Hangzhou, Guangzhou and Shenzhen, along with setting up a new technology center in the Guangdong-Hong Kong-Macau Greater Bay Area for talent and tech development. In total, it will hire about 100 people for its Hong Kong office this year.

Founded in 2016, Qupital offers lending for SMEs that frequently have cash flow issues because they are in a cycle of waiting for invoices to be paid. Qupital’s loans cover most of the value of an invoice, then matches that with investors and funders who cover the cash with the expectation of a return. The company makes money by charging SMEs a service fee that is a fixed percentage of the total invoice value and then a discount fee, and taking a percentage of net gains made by investors.

Qupital has now processed 8,000 trades, totaling HKD $2 billion in value. It won’t disclose how many SMEs it has worked with, but co-founder and chairman Andy Chan says that number is in the hundreds.

Chan tells TechCrunch that in China, Qupital will not compete directly against traditional financial institutions, because it focuses on financing the Hong Kong business entities of Chinese companies in U.S. and Hong Kong currency, instead of onshore renminbi. It also will target SMEs underserved by traditional lenders, by using alternative data sources to determine their creditworthiness.

In a prepared statement, CEFIF managing director Dennis Cong said, “The growing volume of SME and cross-border trading drives a huge demand for alternative financing for SME’s who are underserved in the market and opportunities for investors to earn a decent risk-adjusted return. We look forward to working with Qupital to broaden its source of capital base and create unparalleled investment opportunities for CreditEase.”

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 Kabbage, a platform for online merchants to borrow working capital, is picking up some cabbage of its own: the startup has closed a $270 million credit facility from Guggenheim Securities, the investment banking and capital markets division of Guggenheim Partners. Atlanta, Georgia-based Kabbage will use the funds to build out its financing business both in the U.S. and beyond. This is one of the… Read More