Jun
01
2021
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Sprinklr’s IPO filing shows uneven cash flow but modest growth

Another week, another unicorn IPO. This time, Sprinklr is taking on the public markets.

The New York-based software company works in what it describes as the customer experience market. After attracting over $400 million in capital while private, its impending debut will not only provide key returns to a host of venture capitalists but also more evidence that New York’s startup scene has reached maturity. (More evidence here.)


The Exchange explores startups, markets and money. 

Read it every morning on Extra Crunch or get The Exchange newsletter every Saturday.


Sprinklr last raised a $200 million round at a $2.7 billion valuation in September 2020. That round, as TechCrunch reported, also included a host of secondary shares and $150 million in convertible notes. Inclusive of the latter instrument, Sprinklr’s total capital raised to date soars above the $500 million mark.

Temasek Holdings, Battery Ventures, ICONIQ Capital, Intel Capital and others have plugged funds into Sprinklr during its startup days.

Sure, Robinhood didn’t file last week as many folks hoped, but the Sprinklr IPO ensures that we’ll have more than just SPACs to chat about in the coming days. But one thing at a time. Let’s discuss what Sprinklr does for a living.

Sprinklr’s business

Sprinklr’s IPO filing and corporate website suffer from a slight case of corporate speak, so we have some work to do this morning to determine what the company does. Here’s what the company says about itself in its filing:

Sprinklr empowers the world’s largest and most loved brands to make their customers happier.

We do this with a new category of enterprise software — Unified Customer Experience Management, or Unified-CXM — that enables every customer-facing function across the front office, from Customer Care to Marketing, to collaborate across internal silos, communicate across digital channels, and leverage a complete suite of modern capabilities to deliver better, more human customer experiences at scale — all on one unified, AI-powered platform.

Not very clear, yeah? Don’t worry, I’ve got you. Here’s what the company actually does:

May
19
2021
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Can Squarespace dodge the direct-listing value trap?

It’s Squarespace direct-listing day, and the SMB web hosting and design shop’s reference price has been set at $50 per share.

According to quick math from the IPO-watching group Renaissance Capital, Squarespace is worth $7.4 billion at that price, calculated using a fully diluted share count. The company’s new valuation is sharply under where Squarespace raised capital in March, when it added $300 million to its accounts at a $10 billion post-money valuation, according to Crunchbase data.


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The company’s reference price, however, is just that: a reference. It doesn’t mean that much. As we’ve seen from other notable direct listings, a company’s opening price does not necessarily align with its formal reference price. Until Squarespace opens, whether it will be valued at a discount to its final private price is unclear.

While the benefits of a direct listing are understood, the post-listing performance for well-known direct listings is less obvious. Indeed, Coinbase is currently under its reference price after starting its life as a public company at a far-richer figure, and Spotify’s share price is middling at best compared to its 2018-era direct-listing reference price.

This morning, we’re going over Squarespace’s recently disclosed Q2 and full-2021 guidance. Then we’ll ask how its expectations compare to its reference price-defined pre-trading valuation. Finally, we’ll set some stakes in the ground regarding historical direct-listing results and what we might expect from the company as it adds a third set of data to our quiver.

This will be lots of fun, so let’s get into the numbers!

Squarespace’s Q2

Per Squarespace’s own reporting, it expects revenues between $186 million and $189 million in Q2 2021, which it calculates as a growth rate of between 24% and 26%. That pace of growth at its scale is perfectly acceptable for a company going public.

For all of 2021, Squarespace expects revenues of $764 million to $776 million, which works out to a very similar 23% to 25% growth rate.

In profit terms, Squarespace only shared its “non-GAAP unlevered free cash flow,” which is a technical thing I have no time to explain. But what matters is that the company expects some non-GAAP unlevered free cash flow in Q2 2021 ($10 million to $13 million), and lots more in all of 2021 ($100 million to $115 million).

May
17
2021
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Fast growth pushes an unprofitable no-code startup into the public markets: Inside Monday.com’s IPO filing

At long last, the Monday.com crew dropped an F-1 filing to go public in the United States. TechCrunch has long known that the company, which sells corporate productivity and communications software, has scaled north of $100 million in annual recurring revenue (ARR).

The countdown to its IPO filing — an F-1, because the company is based in Israel, rather than the S-1s filed by domestic companies — has been ticking for several quarters, so seeing Monday.com drop the document on this Monday morning was just good fun.


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The Exchange has been riffling through the document since it came out, and we’ve picked up on a few things to explore. We’ll start by looking at the company’s revenue growth on a historical basis to see if it has accelerated in recent quarters thanks to the pandemic. Then, we’ll turn to profitability, cash burn, share-based compensation expenses and product vision.

We’ll wrap at the end with a summary of what we’ve learned and also make sure to check out the company’s marketing spend, because I’m sure you’ve seen its digital ads.

It’s a lot to chew through, so no more dilly-dallying. Into the numbers!

As always, we’re starting with revenue growth because it’s still the single most important thing about any venture-backed company.

Revenue adds are accelerating

This is great news for the startup, its employees and its investors. From 2019 to 2020, Monday.com grew its revenues from $78.1 million to $161.1 million, or 106%.

From Q1 2020 to Q1 2021, the company’s revenues grew from $31.9 million to $59 million. That’s about 85% growth. So, by what measure do we mean that the company’s revenue growth is accelerating? Its sequential-quarter revenue growth is picking up. Observe the following:

Image Credits: Monday.com F-1 filing

From Q2 2019 to Q3 2019, the company added around $4 million in revenue. From Q2 2020 to Q3 2020, that number was $6.1 million. More recently, the company’s revenue added $7.6 million from Q3 2020 to Q4 2020, which accelerated to $8.8 million from the final quarter of 2020 to the first quarter of 2021. Of course, from an ever-larger base, the company’s growth rate may decline. But the super clean and obvious expanding sequential revenue gains at the company are solid.

The fact that it added so much top line in recent quarters also helps explain why Monday.com is going public now. Sure, the markets are still near record highs and the pandemic is fading, but just look at that consistent growth! It’s investor catnip.

Apr
27
2021
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What can the OKR software sector tell us about startup growth more generally?

In the never-ending stream of venture capital funding rounds, from time to time, a group of startups working on the same problem will raise money nearly in unison. So it was with OKR-focused startups toward the start of 2020.

How were so many OKR-focused tech upstarts able to raise capital at the same time? And was there really space in the market for so many different startups building software to help other companies manage their goal-setting? OKRs, or “objectives and key results,” a corporate planning method, are no longer a niche concept. But surely, over time, there would be M&A in the group, right?

During our first look into the cohort, we concluded that it felt likely that there was “some consolidation” ahead for the group “when growth becomes more difficult.” At the time, however, it was clear that many founders and investors expected the OKR software market to have material depth.

They were right, and we were wrong. A year later, in early 2021, we asked the same group how their previous year had gone. Nearly every single company had a killer year, with many players growing by well over 100%.


The Exchange explores startups, markets and money. Read it every morning on Extra Crunch or get The Exchange newsletter every Saturday.


OKR company Ally.io grew 3.3x in 2020, for example, while its competitor Gtmhub grew by 3x over the same time period. More capital followed. Ally.io raised $50 million in a Series C in the first quarter, while Gtmhub put together a $30 million Series B during the same period.

They won’t be the final startups in the OKR cohort to raise this year. We know this because we reached out to the group again this week, this time probing their Q1 performance, and, critically, asking the startups to discuss their level of optimism regarding the rest of 2021.

As before, the group’s recent results are strong, at least when compared to their own planning. But notably, the collection of competing companies is more optimistic than before about the rest of the year than they were before Q1 2021. Things are heating up for the OKR startup world.

A takeaway from our work today is that our prior notes about how impressively deep the software market is proving to be may have been too modest. And frankly, that’s super-good news for startups and investors alike. So much for SaaS-fatigue.

In a sense, we should not be surprised that OKR startups are doing well or that the startup software market is so large. You’d imagine that the historic pace of venture capital investment that we’ve seen so far in 2021 in Europe and the United States was based on results, or evidence that there was lots more room for software-focused startups to grow.

Interestingly, while these companies look similar to outsiders, they are each betting on strategies and differentiators that could help them win in their selected portion of the OKR space. Which also means that the sector may not be as crowded as it seems.

Don’t take our word for it. Let’s hear from Gtmhub COO Seth Elliott, Workboard CEO and co-founder Deidre Paknad, Koan CEO and co-founder Matt Tucker, Ally.io CEO and co-founder Vetri Vellore, and Perdoo CEO and founder Henrik-Jan van der Pol about just what the software market looks like to them.

We’ll start with how the startups performed in Q1 2021, dig into how they feel about the rest of the year, and then talk about how differentiation among the cohort could be helping them not step on each other’s toes.

Rapid growth

WorkBoard is having a strong start to 2021. Paknad’s company, which raised in both March of 2019 and January of 2020, told The Exchange that it hired 82 people in the first three months of 2021, and that it plans on doing it again in the current quarter. WorkBoard is “investing heavily,” Paknad said via DM, and “made [its] Q1 targets.”

Feb
17
2021
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With software markets getting bigger, will more VCs bet on competing startups?

This morning I covered three funding rounds. One dealt with the no-code/low-code space, another focused on the OKR software market and the last dealt with a company in the consumer investing space. Worth a combined $420 million, the investments made for a contentedly busy morning.

But they also got me thinking about startup niches and competition. Back in the days when inside rounds were bad, SPACs were jokes and crypto a fever dream, there was lots of noise about investors who declined to place competing bets in any particular startup market.


The Exchange explores startups, markets and money. Read it every morning on Extra Crunch, or get The Exchange newsletter every Saturday.


This rule of thumb still holds up today, but we need to update it. The general sentiment that investors shouldn’t back competing companies is still on display, as we saw Sequoia walk away from a check it put into Finix after it became clear that the smaller company was too competitive with Stripe, another portfolio company.

But as startups get more broad and stay private longer, the space into which VCs can invest may narrow — especially if they have a big winner that stays private while building both horizontally and vertically (like Stripe, for example).

Does that mean Sequoia can’t invest elsewhere in fintech? No, but it does limit their investing playing field.

Which is dumb as hell. Nothing that Sequoia could invest in today is really going to slow Stripe’s IPO, unless the company decides to not go public for a half-decade. Which would be lunacy, even for today’s live-at-home-with-the-parents startup culture that leans toward staying private over going public.

Jan
15
2021
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Rapid growth in 2020 reveals OKR software market’s untapped potential

Last year, a number of startups building OKR-focused software raised lots of venture capital, drawing TechCrunch’s attention.

Why is everyone making software that measures objectives and key results? we wondered with tongue in cheek. After all, how big could the OKR software market really be?

It’s a subniche of corporate planning tools! In a world where every company already pays for Google or Microsoft’s productivity suite, and some big software companies offer similar planning support, how substantial could demand prove for pure-play OKR startups?


The Exchange explores startups, markets and money. Read it every morning on Extra Crunch, or get The Exchange newsletter every Saturday.


Pretty substantial, we’re finding out. After OKR-focused Gtmhub announced its $30 million Series B the other day, The Exchange reached out to a number of OKR-focused startups we’ve previously covered and asked about their 2020 growth.

Gtmhub had released new growth metrics along with its funding news, plus we had historical growth data from some other players in the space. So let’s peek at new and historical numbers from Gthmhub, Perdoo, WorkBoard, Ally.io, Koan and WeekDone.

Growth (and some caveats)

A startup growing 400% in a year from a $50,000 ARR base is not impressive. It would be much more impressive to grow 200% from $1 million ARR, or 150% from $5 million.

So, percentage growth is only so good, as metrics go. But it’s also one that private companies are more likely to share than hard numbers, as the market has taught startups that sharing real data is akin to drowning themselves. Alas.

As we view the following, bear in mind that a simply higher percentage growth number does not indicate that a company added more net ARR than another; it could be growing faster from a smaller base. And some companies in the mix did not share ARR growth, but instead disclosed other bits of data. We got what we could.

Gtmhub:

  • 400% ARR growth, 2019.
  • 300% ARR growth, 2020.
  • More: The company has seen strong ACV growth and its reportedly strong gross margins from 2019 held up in 2020, it said.
  • TechCrunch coverage

Perdoo:

  • 240% paid customer growth, 2020.
  • 340% user base growth, 2020.
  • Given strong market demand, a company representative told The Exchange that Perdoo had to restrict its free tier to 10 users.
  • TechCrunch coverage

WorkBoard:

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.


The Exchange explores startups, markets and money. Read it every morning on Extra Crunch, or get The Exchange newsletter every Saturday.


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:

Aug
27
2020
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COVID-19 is driving demand for low-code apps

Now that the great Y Combinator rush is behind us, we’re returning to a topic many of you really seem to care about: no-code and low-code apps and their development.

We’ve explored the theme a few times recently, once from a venture-capital perspective, and another time building from a chat with the CEO of Claris, an Apple subsidiary and an early proponent of low-code work.

Today we’re adding notes from a call with Appian CEO Matt Calkins that took place yesterday shortly after the company released its most recent earnings report.


The Exchange explores startups, markets and money. You can read it every morning on Extra Crunch, or get The Exchange newsletter every Saturday.


Appian is built on low-code development. Having gone public back in 2017, it is the first low-code IPO we can think of. With its Q2 results reported on August 6, we wanted to dig a bit more into what Calkins is seeing in today’s market so we can better understand what is driving demand for low- and no-code development, specifically, and demand for business apps more generally in 2020.

As you can imagine, COVID-19 and the accelerating digital transformation are going to come up in our notes. But, first, let’s take a look at Appian’s quarter quickly before digging into how its low-code-focused CEO sees the world.

Results, expectations

Appian had a pretty good Q2. The company reported $66.8 million in revenue for the three-month period, ahead of market expectations that it would report around $61 million, though collected analyst estimates varied. The low-code platform also beat on per-share profit, reporting a $0.12 per-share loss after adjustments. Analysts had expected a far worse $0.25 per-share deficit.

The period was better than expected, certainly, but it was not a quarter that showed sharp year-over-year growth. There’s a reason for that: Appian is currently shedding professional services revenue (lower-margin, human-powered stuff) for subscription incomes (higher-margin, software-powered stuff). So, as it exchanges one type of revenue for another with total subscription revenue rising a little over 12% in Q2 2020 compared to the year-ago quarter, and professional services revenue falling around 10%, the company’s growth will be slow but the resulting revenue mix improvement is material.

Most importantly, inside of its larger subscription result for the quarter ($41.4 million) were its cloud subscription revenues, worth $29.6 million for the quarter and up 30% compared to the year-ago period. Summing, the company’s least lucrative revenues are falling as its most lucrative accelerate at the fastest clip of any of its cohorts. That’s what you’d want to see if you are an Appian bull.

Shares in the technology company are up around 45% this year. With that, we can get started.

Jul
15
2020
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As companies accelerate their digital transitions, employees detail a changed workplace

The U.S.’s COVID-19 caseload continues to set records as major states move to re-shutter their economies in hopes of stemming its spread. For many workers the situation means more time in the home office and less time in their traditional workplace. My colleague Greg Kumparak spent some time talking to companies about how best to work remotely. You can read that on Extra Crunch here.

What the world will look like when safety eventually returns is not clear, but it’s becoming plain that the workplace will not revert to its old normal. New data details changed employee sentiment, showing that a good portion of the working world doesn’t want to get back to its pre-COVID commute, and, in many cases, is eyeing a move to a different city or state in the wake of the pandemic and its economic disruptions.


The Exchange explores startups, markets and money. You can read it every morning on Extra Crunch, and now you can receive it in your inbox. Sign up for The Exchange newsletter, which will drop every Saturday starting July 25.


The changing workplace has shifted — accelerated, you could say — demand for all sorts of products and services, from grocery delivery to software. The latter category of tools has seen quickening demand as the world moves to support newly remote workforces, helping keep them both productive and secure.

TechCrunch has covered the accelerating digital transformation — industry slang for companies moving to a more software-and-cloud world — before, noting that investors are making big bets on companies that might benefit from its ramping pace. Thanks to new data from a Twilio-led survey, we have a fresh look at that trend.

Undergirding the digital transformation is how today’s workers are adapting to remote work. If many workers don’t want to stop working from home, the gains that companies serving the digital transformation are seeing could prove permanent. New data from a Qualtrics -led survey may help us understand the new mindset of the domestic and global worker.

At the union of the two datasets is a lens into the future of not only how many information workers, to borrow an old phrase, will labor in the future, but how they’ll feel about it. So, this morning let’s explore the world through two data-driven lenses, helped as we go with notes from interviews with Qualtrics’ CEO Ryan Smith and Twilio’s chief customer officer, Glenn Weinstein.

What workers want

Jul
10
2020
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What do investors bidding up tech shares know that the rest of us don’t?

The biggest story to come out of the post-March stock market boom has been explosive growth in the value of technology shares. Software companies in particular have seen their fortunes recover; since March lows, public software companies’ valuations have more than doubled, according to one basket of SaaS and cloud stocks compiled by a Silicon Valley venture capital firm.

Such gains are good news for startups of all sizes. For later-stage upstarts, software share appreciation helps provide a welcoming public market for exits. And, strong public valuations can help guide private dollars into related startups, keeping the capital flowing.


The Exchange explores startups, markets and money. You can read it every morning on Extra Crunch, and now you can receive it in your inbox. Sign up for The Exchange newsletter, which drops every Friday starting July 24.


For software-focused startup companies, especially those pursuing recurring revenue models like SaaS, it’s a surprisingly good time to be alive.

Indeed, after COVID-19 hit the United States, layoffs and rising software sales churn were key, worrying indicators coming out of startup-land. Since then, the data has turned around.

As TechCrunch reported in June, startup layoffs have declined and software churn has recovered to the point that business and enterprise-focused SaaS companies are on the bounce.

But instead of merely recovering to near pre-COVID levels, software stocks have continued to rise. Indeed, the Bessemer Cloud Index (EMCLOUD), which tracks SaaS firms, has set an array of all-time highs in recent weeks.

There’s some logic to the rally. After speaking to venture capitalists over the past few weeks, notes from EQT VenturesAlastair Mitchell, Sapphire’s Jai Das, and Shomik Ghosh from Boldstart Ventures paint the picture of a possibly accelerating digital transformation for some software companies, nudged forward by COVID-19 and its related impacts.

The result of the trend may be that the total addressable market (TAM) for software itself is larger than previously anticipated. Larger TAM could mean bigger future sales for and more substantial future cash flows for some software companies. This argument helps explain part of the market’s present-day enthusiasm for public tech equities, and especially the shares of software companies.

We won’t be able explain every point that Nasdaq has gained. But the TAM argument is worth understanding if we want to grok a good portion of the optimism that is helping drive tech valuations, both private and public.

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