Business News

What Square’s acquisition of Afterpay means for startups

Startup News - 6 hours 26 min ago

On Sunday Square announced it was gobbling up Afterpay in a deal worth $29 billion at the time of announcement. Alex followed up yesterday with more details on why the deal made sense for Square and Afterpay over here, but we wanted to ask some notable VCs what it means for the startup market.

For context, the Square deal follows a ton of money and interest flowing into the BNPL market. Just this year, VCs have invested in companies like Alma ($59.4 million, January 2021), Scalapay ($48 million, January 2021), Wisetack ($19 million, February 2021), Zilch ($80 million, April 2021) and Dividio ($30 million, June 2021).

Most of the investors we reached out to were generally bullish on the Square and Afterpay integration, but they were less excited about opportunities for other consumer BNPL businesses to emerge.

Then there’s Klarna, which raised $639 million at a post-money valuation of $45.6 billion in June, after raising $1 billion in March at a post-money valuation of $31 billion.

There’s also interest from some major public companies. After a slow start, PayPal is aggressively pushing BNPL services with merchants that offer it as a payment option. And there are reports that Apple is building its own BNPL offering through Apple Pay.

We reached out to Commerce Ventures founder and GP Dan RosenBetter Tomorrow Ventures founding partner Jake Gibson, Fika Ventures partner TX Zhuo, and Matthew Harris of Bain Capital Ventures to see what they thought of the deal, as well as what it might mean for the opportunity for other BNPL companies and startups.

The main takeaways? “Buy now, pay later” may be effective at driving retail conversion, but scale matters and long-term margins look slim for BNPL startups.

Now, let’s hear from the venture community.

The venture view

Why is the BNPL market so hot?

Categories: Business News

Extra Crunch roundup: Square buys Afterpay, paid search basics, career advice for devs

Startup News - 7 hours 7 min ago

Square paid around a quarter of its present-day value for Afterpay, Alex Wilhelm notes in The Exchange. That seems like a lot. But was it too much?

“Afterpay brings global revenues, global users and a more diverse merchant network to Square,” Alex notes. “It would have had to spend to derive those assets over time. Square is willing to pay up to snag them now.”

Dana Stalder, a partner at Matrix Partners and Afterpay’s only institutional investor, describes the deal as part of a recurring “critical innovation cycle” in fintech that “determines the winners and losers” for decades to come.

“I’ve never seen a combination that has such potential to deliver extraordinary value to consumers and merchants,” says Stalder. “Even more so than eBay + PayPal.”

Thanks very much for reading Extra Crunch this week!

Walter Thompson
Senior Editor, TechCrunch
@yourprotagonist

The next generation of global payments: Afterpay + Square

Why Square is shelling out $29B to snag BNPL player Afterpay

The best way to grow your career? Treat it like an app

Image Credits: jayk7 (opens in a new window) / Getty Images

Developers may delight in solving complex technical problems, but the problem of a career path is one many don’t think much about, Juniper Networks CTO Raj Yavatkar writes in a guest column.

He offers a solution that should appeal to developers and engineers: “​​Treat career advancement as you would a software project.”

The best way to grow your tech career? Treat it like an app

Design expert Scott Tong outlines 4 concepts founders should consider when designing products

Image Credits: Scott Tong

At Early Stage 2021, design expert Scott Tong shared some ways founders should think about design and branding.

If you can link your brand with your company’s reputation, I think it’s a really great place to start when you’re having conversations about brands. What is the first impression? What are the consistent behaviors that your brand hopes to repeat over and over? What are the memorable moments that stand out and make your brand, your reputation memorable?

Design expert Scott Tong outlines 4 concepts founders should consider when designing products

You can’t afford to make poor decisions about incentive stock options

Image Credits: Nora Carol Photography (opens in a new window) / Getty Images

If you’re fortunate enough to be considering cashing in on vested stock options, this guest column is worth a read.

“Most companies admit they need to be better at explaining how ISOs work in general, but they can’t legally work one-on-one with employees to help them exercise and sell shares the right way,” Wealthramp’s Pam Krueger and John Chapman write.

“That’s why, when the time is right, many employees actively look for help from a qualified fiduciary financial adviser who can walk these could-be ‘options millionaires’ through various cash-in scenarios.”

You can’t afford to make poor decisions about incentive stock options

Demand Curve: Questions you need to answer in your paid search ads

Image Credits: metamorworks (opens in a new window) / Getty Images

At some point, almost every early-stage startup will use paid search ads to connect with customers and throw down the gauntlet with their competitors.

Most of these initial attempts at paid search are unsuccessful. There’s a steep learning curve when it comes to transforming passive searchers into paying customers, and almost no one gets it right the first time.

In a comprehensive guest post, growth marketing expert Stewart Hillhouse identified “14 questions your paid search should answer to ensure you’re only paying for the highest-intent shoppers.”

Question 1? “What’s in it for me?”

Demand Curve: Questions you need to answer in your paid search ads

5 lessons from Duolingo’s bellwether edtech IPO of the year

Image Credits: Duolingo

Duolingo’s debut last week was a bright spot, Alex Wilhelm and Natasha Mascarenhas write, with the language learning app’s stock price landing above a raised IPO range.

Alex and Natasha detail five lessons to take from Duolingo’s flotation:

  1. The IPO event will bring “more sophistication” to Duolingo’s core service.
  2. Roadshow investors didn’t view Duolingo as an edtech company.
  3. China’s edtech crackdown will have a “neutral” impact on Duolingo.
  4. In certain cases, post-COVID growth declines aren’t lethal.
  5. Growth can still absolve rising losses.

5 lessons from Duolingo’s bellwether edtech IPO of the year

Can your startup support a research-based workflow?

Image Credits: Andriy Onufriyenko (opens in a new window) / Getty Images

In the U.S. alone, yearly spending on AI R&D is expected to reach $100 billion by 2025.

But can your humble startup attract and retain users while it conducts research and product development?

“For obvious reasons, companies want to make things that matter to their customers, investors and stakeholders. Ideally, there’s a way to do both,” says João Graça, CTO and co-founder of Unbabel, an AI-powered language operations platform.

Can your startup support a research-based workflow?

Kodiak Robotics’ founder says tight focus on autonomous trucks is working

Image Credits: Bryce Durbin

As part of an ongoing series with transportation startup founders, Rebecca Bellan interviews Kodiak Robotics CEO and co-founder Don Burnette about why the autonomous trucking company remains private when so many of its rivals have gone public.

“I think there’s also lots of opportunity within the VCs and the private markets,” said Burnette.

“Kodiak is one of the only remaining serious AV trucking companies still in the private sector, and so I think that gives us some advantages in a lot of ways.”

Kodiak Robotics’ founder says tight focus on autonomous trucks is working

How public markets can help address venture capital’s limitations

Image Credits: Nigel Sussman (opens in a new window)

After interviewing Draper Esprit co-founder Stuart Chapman, Alex Wilhelm and Anna Heim took a look at the trend of European VCs floating themselves.

Traditional VC models “can foist artificial time constraints on investors and force them to focus their deal flow into particular stages for fund-construction reasons,” Alex and Anna write for The Exchange.

“As we found out researching this piece, the public venture model highlights some of these limitations — and may be able to alleviate them in part.”

How public markets can help address venture capital’s limitations

Robinhood’s CFO says it was ready to go public

Image Credits: Nigel Sussman (opens in a new window)

After Robinhood failed to burn up the stock charts, Alex Wilhelm wondered why, exactly, the investing and trading app’s IPO didn’t live up to expectations.

He spoke to Robinhood CFO Jason Warnick, who shared a few reasons why it was time for the company to float:

… Warnick indicated that there were a few factors at play, including that Robinhood had built out its leadership team and its internal processes, and that it had worked on user-safety-related tasks and expanded the site’s use cases. All of that is true.

Robinhood’s CFO says it was ready to go public

Categories: Business News

Demand Curve: Tested tactics for growing newsletters

Startup News - 9 hours 20 min ago
Stewart Hillhouse Contributor Share on Twitter Stewart Hillhouse writes actionable growth marketing insights as senior content lead at Demand Curve. By night, he interviews marketers and creatives on his podcast, Top Of Mind. Before getting into marketing, Stewart was a semi-professional lumberjack. He also writes at stewarthillhouse.com. More posts by this contributor

There are very few marketing channels as well rounded as email newsletters. They provide a direct, owned line of communication with your audience; nearly 40x return on investment (~$40 generated per every dollar spent), are infinitely scalable and virtually free.

But to unlock these benefits, you’re going to need to be strategic. In this article, I’m going to share tactics we’ve used at Demand Curve to grow our newsletter list to over 50,000 highly-qualified subscribers and maintain an open rate of over 50%.

Increase popup conversion using the 60% rule

While they’re often thought of as intrusive, pop-ups work. On average, they convert 3% of site visitors, and strategic, high-performing pop-ups can reach conversion of about 10%.

To make higher-converting, less intrusive pop-ups, try the 60% rule.

  1. Choose a page you’d like to put a pop-up on. We recommend pages that aren’t conversion-focused (like product pages, checkout and sign-ups). We’ve found content pages work the best and they can act as a signal for visitors who are looking for something specific.
  2. Open your website’s analytics and see what the average time spent on that page is.
  3. Set your pop-up to appear after 60% of the average time of that page has elapsed.

So if the average time spent on a page is 50 seconds, set your pop-up to appear 30 seconds (60% of total time) after visitors land on that page.

Why 60%? Readers have shown interest in your content, but are nearing the end of their session. Prompting them to join your newsletter to see more relevant content in exchange for their email will feel fair.

To encourage new subscribers to open your welcome email, try breaking the welcome email pattern using delayed gratification and a recognizable sender.

Give samples of your newsletter to prove quality

If a visitor is new to your content, asking them to sign up for your newsletter can be a big step, and most new visitors won’t convert. To narrow the gap between a new reader and subscriber, provide a sample on the sign-up page. Use your most engaging newsletter as a sample to prove that your content is high quality.

To source your most engaging content, filter by open rate and replies. In your email service provider, sort your previous editions by open rate. This will help you identify which subject lines are most popular with existing readers. Modify your most popular subject line to turn it into a header on your newsletter sign-up page.

Next, go into your inbox and sort by replies to your newsletter. Identify which newsletter got the most replies from your readers. This is a positive signal that the content from that edition resonated the most and would be a solid choice for your free sample.

Image Credits: Demand Curve

Emails from real people are opened more often

People reflexively ignore welcome emails after they sign up. But, those who do open your welcome email are more likely to consistently open your newsletters.

To encourage new subscribers to open your welcome email, try breaking the welcome email pattern using delayed gratification and a recognizable sender.

Delay your welcome email by 45 minutes. This will bypass the reflex that new subscribers have to ignore an email that pings them seconds after signing up. We’ve found 45 minutes to be ideal, because the delay is long enough that it breaks the pattern, but not so long that your email gets buried in their inbox.

Send your welcome from a person, not from a business account. We’ve found this tactic to be especially effective when the sender is the founder of the business or someone with an established audience. Use a photo of that person and not your company logo to help the email stand out.

To avoid overflowing the sender’s real inbox, create a subdomain for your website that will be used exclusively for sending emails. Create an account for your sender and begin using it for your newsletter. This avoids overwhelming their inbox and maintains the health of your sending domain.

Image Credits: Demand Curve

Send a superissue to new subscribers

A new subscriber will be keen to receive their first issue. To ensure they’re satisfied, piece together your best content from past issues into a superissue. But be careful not to use the same content you included as samples on your sign-up page.

Send this first superissue with the welcome email so that your new subscribers are immediately receiving value from your newsletter. Starting with your best content first will get your subscribers excited to open future emails.

We’ve found that shorter welcome emails perform better than long-winded ones. Keep your welcome message short and your opening issue tight. Once they’ve received the welcome email and the first superissue, add them to the regular email cadence.

Image Credits: Demand Curve

Consider sending fewer emails

We polled over 24,000 marketers on Twitter asking whether people suffer from “newsletter fatigue,” causing them to unsubscribe.

The results: 80% of respondents unsubscribe when they get too many emails.

To avoid overwhelming your subscribers:

Give your subscribers control over how often they are emailed: Some subscribers want them weekly, while others want monthly. In the footer of your email, create opt-out links that allow subscribers to customize the cadence they’ll receive emails. Giving them the opportunity to opt out of frequent emails while still remaining subscribed keeps them as valid contacts on your email list. You want to avoid losing them completely as a subscriber.

Send fewer emails: Putting a constraint on how many emails you’re allowed to send every quarter will force you to be more thoughtful about the contents of those emails. A high volume of emails just for the sake of being in your subscribers’ inbox can burn you and your readers out. We’ve seen very little correlation between volume of emails and the resulting conversion rate.

Make your emails fun — not just educational

Most emails in your inbox are serious. To stand out, consider injecting some lighthearted memes, jokes or interesting links from around the web.

We’ve found this tactic works extremely well, because it gives your readers a dopamine hit in every email. Not every piece of newsletter content you write will resonate with every subscriber. Humor, on the other hand, can have broad appeal. Including interesting and fun content will ensure that every reader is left feeling satisfied.

It also helps build a habit. If every edition is slightly different, your reader will never be sure what they’re opening when a new edition hits their inbox. We’ve found that including something fun at the bottom of the newsletter gives readers a reward: Read the serious stuff, then get rewarded with the fun stuff.

We add a meme to each issue. People reply to tell us how much they appreciate it.

Image Credits: Demand Curve

Make referrals seamless

Referrals are a free way to grow your newsletter. To increase the chances of subscribers referring you to others, make sure the process takes no longer than 25 seconds.

Remind readers at the end of each issue that they can refer others. A simple way is to ask them to forward the email to a friend who would find it interesting. Include a short sentence in the intro to your newsletter telling people being referred where they can subscribe. Include a link.

An advanced tactic is to include a subscriber’s unique link to a referral program so they can track how many people they’ve invited. Give them the option to share through email or social media.

You should also have a web version of every issue so that your content can be easily shared outside of email. Most email service providers will automatically generate a web link that you can promote through social media or elsewhere. You can also copy the content and post it to your website as a blog post to generate traffic from search engines.

Consider providing rewards to those who refer your newsletter. Merchandise will likely only work as an incentive if your brand is well known or very unique. We suggest incentivizing referrals using exclusive content. Send a monthly bonus issue to subscribers who have referred five or more friends. This will keep your costs down and give your subscribers more of what they already want.

Note that you will need a critical mass of subscribers before referrals will prove to be effective. We’ve found the threshold is about 10,000 subscribers. But if your audience is extremely engaged or the community you serve is active, implementing a free referral program has virtually no downside.

How to turn followers into subscribers

Your subscribers will likely become aware of your content through a social media channel, but social media audiences are rented from the platform — you do not own a direct channel to communicate with them. Converting followers into newsletter subscribers is one way to control a direct line of communication and deepen your relationship with your audience.

When pitching your followers to subscribe to your newsletter, include a link in your bio. This may sound obvious, but many people don’t do it. When someone comes across your social media profile, make signing up for your newsletter the call to action. Otherwise, they’ll have no idea that you even have a newsletter.

You could also cut a Twitter thread or LinkedIn post short and tell people to subscribe for the rest of the insights. You probably don’t want to overuse this tactic.

Create an offer or unique piece of content that can only be accessed through the newsletter. This will motivate your followers to join your email list to get access to exclusive content or unique offers.

Recap

Getting new subscribers: Use pop-ups that are relevant and only to high-intent readers on your site. Provide proof of why they should subscribe to your newsletter with sample content. Make your welcome email stand out and front-load the first issue with your best content.

Keeping subscribers: To keep your subscribers wanting more, send fewer emails. Sprinkle in humor and interesting links to turn your newsletter into a habit.

Promoting your newsletter: Use exclusivity and offers to hook your social media followers into subscribing to your newsletter. Ask your subscribers to refer your newsletter to others to grow your subscriber base.

Demand Curve: 7 ad types that increase click-through rates

Categories: Business News

India’s BharatPe valued at $2.85 billion in Tiger Global-led $370 million funding

Startup News - 10 hours 17 min ago

Indian fintech startup BharatPe has raised $370 million in a new round of financing as it looks to aggressively scale its business in the next two years. It’s the nineteenth Indian startup to become a unicorn this year (up from 11 last year) as several high-profile global investors double down in the South Asian market.

The new round — a Series E — was led by Tiger Global and valued the New Delhi-based startup at $2.85 billion (post-money), it said in a statement Tuesday evening. Dragoneer Investor Group and Steadfast Capital also participated in the new round, which brings the startup’s to-date raise to over $580 million against equity.

Tuesday’s news confirms a TechCrunch scoop from June in which we reported that the four-year-old startup was looking to raise about $250 million at a pre-money valuation of $2.5 billion. BharatPe was valued at about $900 million in its Series D round in February this year, and $425 million last year.

BharatPe co-founder Ashneer Grover confirmed that the startup was indeed looking to raise $250 million until inbound requests from investors prompted an oversubscription. The new investment also includes some secondary transactions.

Tiger Global in talks to back BharatPe at $2.5 billion valuation

BharatPe, which counts Coatue, Ribbit Capital and Sequoia Capital India among its existing investors, operates an eponymous service to help offline merchants accept digital payments and secure working capital.

Even as India has already emerged as the second-largest internet market, with more than 650 million users, much of the country remains offline.

Among those outside of the reach of the internet are merchants running small businesses, such as roadside tea stalls and neighborhood stores. To make these merchants comfortable with accepting digital payments, BharatPe relies on QR codes and point of sale machines that support government-backed UPI payments infrastructure.

Scores of giants and startups are attempting to serve neighborhood stores in India. Image Credits: Bank of America Research

The startup, which serves more than 7 million merchants in over 130 Indian cities, said it has disbursed close to $300 million to merchant partners. It does not charge merchants for universal QR code access, but is looking to make money by lending.

The startup plans to expand its product offerings as well as work with Centrum Financial Services, with which it was recently granted the license by India’s central bank (Reserve Bank of India) to set up a small finance bank. (Centrum Financial Services has collaborated with BharatPe for the license, and the Indian startup says the two are “equal” partners.)

Tuesday’s development further illustrates the growing interest of Tiger Global in India. The New York-headquartered firm has backed dozens of Indian startups, including social commerce startup DealShare, edtech Classplus, Apna (an app that helps blue-collar workers connect with recruiters) and home services platform Urban Company in recent months.

On Tuesday, Infra.Market, an Indian startup that helps construction and real estate companies procure materials and handle logistics for their projects, said it had raised $125 million in a round led also by Tiger Global.

India’s Infra.Market valued at $2.5B in Tiger Global-led $125M funding

India poised for record VC year as unicorns head for decisive IPOs

 

Categories: Business News

Edtech startup bina raises $1.4M to teach 4- to 12-year-olds, launch School-as-a-Service

Startup News - 12 hours 49 min ago

With the pandemic wreaking havoc amongst early years education amid school lockdowns, it’s no wonder edtech startups have piled into the space. But it has also served to highlight the abysmal nature of early years teaching: Some 40 million teachers across the globe are leaving the sector, according to the World Bank. Of the 1.5 billion primary-age children, only a few can access high-quality education, and approximately 58 million primary-age children are out of education, most of whom are girls.

So the opportunity to make a difference, using online teaching, in these very young years, is great, because classes sizes can be reduced online, and the quality of teaching improved.

This is the idea behind bina, which bills itself as a “digital primary education ecosystem”. It has now raised $1.4 million to aim at the education of 4- to 12-year-olds.

The funding round was led by Taizo Son, one of Japan’s billionaires. Other investors and advisors include Jutta Steiner, founder at Parity Technologies, the company behind Polkadot decentralized protocol, and Lord Jim Knight, ex-Minister of Education (U.K.).

Bina’s “schtick” is that it has very small online class sizes of six students (3x smaller than the OECD average).

It also boasts of “adaptive learning paths” that cover international standards; teachers with a minimum of eight years of digital teaching experience; and data-driven decision making for its pedagogical approach.

Noam Gerstein, bina’s CEO and founder said: “I’ve interviewed students, teachers and parents globally for years, and it is clear a new systemic design is needed. With our founding families, we are building a world in which every child has access to quality education, educators’ skills are valued and continuously developed, and parents don’t need to choose between their work and family life.”

He says it also grants pupils company shares (RSUs) as they grow with the school. Currently available to English-speaking students in the CET time zone, the bina School is planning a SaaS product for governments, NGOs and school systems.

“We right now compete against companies like Outschool, Pearson’s online Academy, Primer and Prisma,” he told me over a call. “So these are the big names of the last year for the first phase. But the strategy is that we’re building it in two phases. The first phase is actually building a school that we operate as a ‘lab’ school. And the second phase is what we call ‘bina as a service’. So it’s a SaaS ‘school as a service’. The idea is that we offer collaboration with NGOs and governments, doing accreditation and training and licencing of the product. So for that second part we’re actually competing against the big accreditation system.”

The 2021 edtech avalanche has just begun

Categories: Business News

CELA Innovation holds a master class on Lean Startup Methodology for the Startup Alley+ cohort

Startup News - 12 hours 54 min ago

Startup Alley is the place to be at TechCrunch Disrupt 2021 on September 21-23. The sold-out expo area is the virtual home to hundreds of innovative startups ready to demo their tech and talent. While exhibiting offers plenty of opportunity for all, a VIP experience kicked off in July for 50 startup exhibitors the TechCrunch staff chose to form the first Startup Alley+ cohort.

Part of that experience includes a series of master classes in the run-up to Disrupt. Case in point, on August 24, Dan Olsen will lead a master class called “How to Create Product-Market Fit.” Now, we’re ready to share the next presentation, and it’s another great one, folks.

On August 17th, John Lynn, co-founder of CELA Innovation, and Jade Kearney, Lean Startup expert and co-founder and CEO of She Matters, will present a master class called, “The Key Principles of the Lean Startup Methodology.”

A quick tangent: If you’re not already familiar with CELA or what it does, the NYC-based company matches early-stage startups to world-class accelerators and incubators that align with a startup’s vertical and business goals. Last year, at Disrupt 2020, CELA connected the winners of our Pitchers and Pitches mini pitch-off competitions with an accelerator to boost their business.

Meanwhile, back at the master class: Change — positive or negative — is inevitable, and this master class will focus on what founders can do when change arrives on their doorstep. Examples of change can include receiving funding, running out of funding, losing a co-founder or a key customer or anything else that’s shaking up their situation.

John and Jade will help each cohort founder produce a Lean Startup transformation for one current business situation. Founders can then use it as a template for optimizing anything in their business the next time change comes calling.

The session begins by examining why you should use the Lean Startup methodology at inflection points — when there is a sudden change to your company, good or bad.

You’ll learn how you can use the Lean Startup methodology to create resources when you are overwhelmed by opportunity or just feel like you have gone as far as you can go with what you have.

Next, John and Jade will show how this methodology makes the difference between knowing what you want to build and learning what you need know about your customers, industry or product.

Lastly, Team CELA will isolate some of your key business activities as they exist right now. Then they will walk you through a process to turn that activity into a Lean Startup experiment that produces insights, new value and new opportunities.

TechCrunch Disrupt 2021 takes place September 21-23. Don’t miss your opportunity to meet the Startup Alley+ cohort and hundreds of other innovative startups in our expo area. Opportunity is knocking — buy your TC Disrupt 2021 pass and go kick down the door.

Is your company interested in sponsoring or exhibiting at Disrupt 2021? Contact our sponsorship sales team by filling out this form.

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Categories: Business News

How public markets can help address venture capital’s limitations

Startup News - 13 hours 1 min ago

British venture capital firm Draper Esprit recently moved its listing from the AIM to the main board in London, the LSE. The investing group also moved its secondary listing from Dublin’s Euronext Growth Market to its larger sister exchange, Euronext Dublin, which makes sense given its long connection to Irish capital.

Draper has always felt like something of an anomaly from our perspective, a generalist venture capital firm that was itself public. But this July, Forward Partners listed its shares on the AIM, and there are other venture firms in Europe that are also listed.

At first blush, the setup may seem odd; venture capital firms invest in companies that they hope to see go public one day — why would they float themselves? But Draper Esprit co-founder Stuart Chapman told TechCrunch in an interview that he finds it shocking “that venture capital backs some of the most mind-blowing tech advances in our history over the last 70 years, using the same legal structure as a 1958 property vehicle in New York.” It’s a reasonable point.

Perhaps fundraising success is part of why the venture model has not seen much disruption in recent decades, apart from rising fund sizes. But the model is not perfect. It can foist artificial time constraints on investors and force them to focus their deal flow into particular stages for fund-construction reasons. As we found out researching this piece, the public venture model highlights some of these limitations — and may be able to alleviate them in part.

The Exchange explores startups, markets and money.

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

And yet we can’t come up with a single U.S. venture capital firm, for example, that has publicly listed in the same manner as Draper Esprit or Forward Partners.

To better understand why we’re seeing European VCs float, and not their peers in other markets, The Exchange reached out to Draper Esprit, Forward Partners, and fellow listed venture investors Mercia and Augmentum Fintech. From the group, we’ve learned that there are plenty of reasons why the model may be popular in the U.K. and not in the U.S.

But there are also reasons why being a public venture capitalist can make the VC game a rather different, longer-term effort. The firms in question did not go public on a whim.

So let’s talk about the good, the bad, and the regulatory concerning publicly listed venture capital firms. The future? Or just a regional quirk?

From exception to trend?

Following its move, Draper Esprit is now the largest “purely tech VC” listed on London’s Main Market. Its initial listing had also been a market milestone: “Listing Draper Esprit five years ago was a radical and unusual step for a venture capital business,” Chapman said of Draper’s 2016 dual-listing on London’s AIM and Dublin’s Enterprise Securities Market (ESM) — now Euronext Growth.

Why Draper Esprit doubled down on its status as a publicly listed VC

Just last month, two tech-related investment funds IPO’d on the London Stock Exchange: space-focused Seraphim Capital and Nic Brisbourne’s Forward Partners. In both cases, Draper Esprit was happy to assist with information, Chapman told us, adding that the firm also invested in Forward via its fund-of-funds effort.

The news adds up to a roster of listed investors that also includes fintech fund Augmentum Fintech, asset manager Mercia Asset Management PLC and intellectual property commercialization company IP Group. “We’re supportive of others following in our footsteps and we will be big fans of having much wider diversity,” Chapman told TechCrunch in an interview, which you can read in full here.

Having recently joined the club, Forward Partners’ founder and CEO Nic Brisbourne gave us a good overview of the three high-level reasons that could lead a fund to list: open opportunities to create more value from new initiatives that sit outside traditional investment capital; breaking the cycle of fundraising; and opening access to the early-stage venture capital asset class. Let’s take a closer look.

Categories: Business News

Rani Therapeutics’ $73M IPO will fund upcoming clinical trials

Startup News - 13 hours 33 min ago

Rani Therapeutics, a San Jose-based company developing a pill to replace medical injections, went public on Friday. 

According to S-1 filings, shares were estimated to price between $14 and $16 last week. On Friday, shares debuted slightly lower, around $11. Rani raised about $73 million in its debut.

Rani’s debut comes amidst a flurry of IPO activity in therapeutics. In 2020, 71 biotech companies went public. Already in 2021, 59 companies have IPO’ed, and even more are on the way. On July 30 alone, eight biotech companies were expected to begin trading, including Rani Therapeutics. 

Rani Therapeutics, is, as founder Mir Imran puts it, “laser focused” on itself, rather than the IPO activity around it. The decision to go public was partially bolstered by the results of a phase I study — early evidence that the RaniPill, the company’s flagship product, could be brought into the clinic. 

“We are already in humans, and clearly on a strong path to make oral biologics [a] reality. This is a hot and unique market for life science direction and we’re excited to be driving innovation in this area,” Imran tells TechCrunch. 

Rani Therapeutics’ flagship product is RaniPill, essentially, a capsule designed to deliver medicines that would usually be delivered via injections. TechCrunch covered the pill in more detail here, but it works according to a few basic steps. 

The pill is covered by a coating resistant to stomach acid. Once the pill enters the small intestine, the coating dissolves, allowing for a small balloon to inflate. Once that small balloon inflates, medication is delivered by a microneedle (which dissolves after the drug is administered). Then, the rest of the balloon is “excreted through normal digestive processes,” per the company’s S-1 filing. 

How Rani Therapeutics’ robotic pill could change subcutaneous injection treatment

This whole process occurs in a pill that, on the outside, looks like a gel capsule. 

There is evidence for some conditions suggesting patients prefer oral drugs to injections: for example, studies on cancer patients have illuminated patient preference for oral therapies rather than regular injections. That’s not the case for every condition. Some patients show preference to long-acting medicines delivered via injection rather than having to take lots of pills (this is the case for some HIV patients)

However, it’s fair to say that needles aren’t exactly pleasant. A 2019 review and meta analysis of 35 studies found that between 20% and 30% of young adults are afraid of needles, a fear that can lead some people to avoid medical treatments or vaccines. 

Rani Therapeutics has been developing capsules for drugs that have already been approved by the FDA, but are often administered via regular injections. They include: 

  • Octreotide for acromegaly or neuroendocrine tumors in the GI tract (NETs) 
  • TNF-alpha inhibitors for psoriatic arthritis 
  • Parathyroid hormone (PTH) for osteoporosis 
  • Human growth hormone (HGH) for HGH deficiency 
  • Parathyroid hormone for hypothyroidism 

The product furthest along in the research cycle is the pill developed to administer octreotide (called RT-101), which was tested in a phase I clinical trial on 62 participants. The trial results, partially reported in the S-1 filing, showed 65% bioavailability of the octreotide drug, compared to an injection. That suggests that the pills can get the drugs into the body efficiently, though these results are early. 

Next year, the company plans to initiate two additional Phase I studies on PTH for osteoporosis, and human growth hormone. Studies on the rest of the drugs in the pipeline are scheduled for 2023. 

Ultimately, the company’s goal is to validate the RaniPill independently of specific drugs. The company is pursuing an Investigational Device Exemption (IDE), which would allow the company to test RaniPill in a clinical study without a drug involved. This study aims to establish how safe the product is for repeated dosing, and is slated to begin next year. 

“I think we want to continue to generate data with drugs, because we will be making drugs. But nonetheless, it’s important to establish what the platform’s safety and tolerability is,” said Imran. So that’s quite important as well.” 

In an increasingly hot biotech market, protecting IP is key

The company’s leadership does have a track record of successful exits in the biotech space. 

Rani Therapeutics was founded in 2012 by Mir Imran, who has already overseen several exits and acquisitions of medical device companies. In 1985, Imran developed an implantable cardiac defibrillator as part of his first company, Intec Systems, which was later acquired by Eli Lilly. Since, he has started 20 medical device companies, of which 15 have either IPOed or been acquired. 

However, for now, Rani Therapeutics financials report significant losses. Net losses for 2019 and 2020 totaled $26.6 million and $16.7 million, respectively. As of March 2021, the company was running a deficit of $119.6 million. 

In total, the company has raised about $211.5 million in funding since inception, without counting cash generated from today’s IPO. Rani Therapeutics has plans to use the $73 million raised during the IPO to fund the IDE study and pursue additional clinical trials. 

Categories: Business News

Marvell nabs Innovium for $1.1B as it delves deeper into cloud ethernet switches

Startup News - 2021, August 3 - 11:32pm

Marvell announced this morning it has reached an agreement to acquire Innovium for $1.1 billion in an all-stock deal. The startup, which raised over $400 million according to Crunchbase data, makes networking ethernet switches optimized for the cloud.

Marvell president and CEO Matt Murphy sees Innovium as a complementary piece to the $10 billion Inphi acquisition last year, giving the company, which makes copper-based chips, more ways to work across modern cloud data centers.

“Innovium has established itself as a strong cloud data center merchant switch silicon provider with a proven platform, and we look forward to working with their talented team who have a strong track record in the industry for delivering multiple generations of highly successful products,” Marvell CEO Matt Murphy said in a statement.

Innovium founder and CEO Rajiv Khemani, who will remain as an advisor post-close, told a familiar tale from a startup CEO being acquired, seeing the sale as a way to accelerate more quickly as part of a larger organization than it could on its own. “As we engaged with Marvell, it became clear that our data center optimized portfolio combined with Marvell’s scale, leading technology platform and complementary portfolio, can accelerate our growth and vision of delivering breakthrough switch silicon for the cloud and edge,” he wrote in a company blog post announcing the deal.

2021 will be a calmer year for semiconductors and chips (except for Intel)

The company, which was founded in 2014, raised more than $143 million last year on a post-money valuation of $1.3 billion, according to PitchBook data. The question is, was this a reasonable deal for the company given that valuation?

No company wants to sell for less than it was last valued by its investors. In some cases, such deals can still be accretive for early backers of the selling concern, but not always. In this case TechCrunch is not privy to all the details of the Innovium cap table and what its later investors may have built into their deals with the company in the form of downside protection; such measures can tilt the value of the sale of a company more toward its later and final investors. This is usually managed at the expense of its earlier backers and employees.

Still, the Innovium deal should not be seen as a failure. Building a company that sells for north of $1 billion in equity value is impressive. The deal appears to be slightly smaller in enterprise value terms. In the business world, enterprise value is a useful method of valuing the true cost of an acquisition. In the case of Innovium, a large cash position, what was described as “Innovium cash and exercise proceeds expected at closing of approximately $145 million,” lowered the cost of the transaction to a more modest $955 million in net outlays.

Our general perspective is that the sale is probably not the outcome that Innovium’s backers had hoped for, but that it may still prove lucrative to early workers and early investors, and still works at that lower figure. It’s also notable how in today’s market of mega-rounds and surfeit unicorns, an exit north of the $1 billion mark in equity terms can be viewed as a disappointment in any terms. Innovium is selling for around the price that Facebook paid for Instagram in 2012, a deal that at the time was so large that it dominated technology headlines around the world.

But with so much capital available today, private valuations are soaring and mega deals abound. And recent rounds north of $100 million, much like Innovium’s 2020-era, $143 million round, can set companies up with rich valuations and a narrow path in front of them to beat those heightened expectations.

What likely happened? Perhaps Innovium found itself with more cash than opportunities to spend it; perhaps it simply needed a large partner to help it better sell into its market. With expected revenues of $150 million in Marvell’s fiscal 2023, its next fiscal period, Innovium did not fail to reach scale. It may have simply grown well as a private, independent company, and stalled out after its last round.

Regardless, a billion-dollar exit is a billion-dollar exit. The deal is expected to close by the end of this year. While both company boards have approved the deal, it still must clear regular closing hurdles, including approval by Innovium’s private stock holders.

More chip industry action as Marvell is acquiring Inphi for $10B

Categories: Business News

Why Draper Esprit doubled down on its status as a publicly listed VC

Startup News - 2021, August 3 - 10:49pm

We cover a lot of venture capital news here at TechCrunch. New funds, partner changes, the funding rounds themselves — the list is long. Lately, we’ve had to touch on rolling funds, solo GPs and a faster-than-ever investing cadence that has rewritten the rules of venture investing. Gone are the days when investors can take weeks, let alone months, to get into a hot deal in today’s turbocharged private markets.

But there’s another venture capital trend worth discussing: venture capital firms going public. This July, for example, London-based Forward Partners went public on the AIM, a sub-market of the well-known London Stock Exchange. Augmentum Fintech is another example of a London-listed venture capital firm. The investing group focuses on European fintech.

Most recently, Draper Esprit, another British venture capital firm, moved from the AIM to the LSE proper, with a secondary listing on Euronext Dublin. TechCrunch has cited Draper Esprit partners in our explorations of the European venture capital scene in the past, especially in our regular digs through the startup hub’s numbers.

To understand why Draper Esprit not only decided to stay public but doubled down on its structure by moving to the main boards in London and Dublin, we got on the horn with the firm’s co-founder, Stuart Chapman. What follows is an edited and condensed transcript of our call. Coming up, The Exchange has analysis and further interviews about whether the trend of floating venture capital firms may spread, and why other investing groups opted in. But first, highlights from our chat with Chapman.

TechCrunch: We have a bunch of questions about the change in listing, but let’s start with how long ago you began this transition.

Stuart Chapman: I co-founded Esprit with Simon Cook back in 2006, and after a 10-year journey of raising conventional funds, we were coming to the point of raising our fourth fund. But we were having frustrating meetings with limited partners who were trying to pigeonhole us, and at the same time, the London market was getting more and more frustrated that private companies were staying private longer and they would not have access to them. I think we were down to ARM as the last true bastion of tech companies on the London Exchange, so we were approached by a group of City funds to raise our fourth fund through a public market listing.

The junior market in London was very helpful for that, and we spent five happy years on AIM, raising money annually — until we crossed over the billion [sterling] capitalization mark. By then, it was quite obvious that if we want to fulfill the same ambition and growth over the next five years, we were going to need to step up onto a bigger market that was going to give us wider access to funds and [expand our] attraction to a much larger group of people. Part of our mission at Draper Esprit is to democratize venture capital, as Simon would say; and [being listed on the main market] increases that opportunity.

When we started out on the AIM, we raised capital from professional funds’ tech enthusiasts, who were positively biased. Unfortunately, there’s not very many of them, and once you have exhausted that, then you move down into the more general funds — maybe funds with an angle on the U.K., funds with an angle on technology. But by their very nature, they tend to be small-cap funds, and there’s not that many of them in the U.K. So, by stepping up, we enable ourselves to go into more generous funds as well as tech funds [that] have a minimum bar.

And should we now expect to see Draper Esprit raise more capital per annum?

In a perfect world, the answer is no, because realizations equal investments, so you are self-sustaining. The one thing I would say about Draper Esprit is that we are trying to be innovative. It shocks me that venture capital backs some of the most mind-blowing tech advances in our history over the last 70 years using the same legal structure as a 1958 property vehicle in New York. I don’t get it! Surely, we can reinvent and push ourselves forward as much as we push our entrepreneurs. So long story short, Simon and I never opted to rest. We always wanted to see if we could create the next thing that would help entrepreneurs be more successful.

Talking about innovation in venture capital models, what’s the main motivation for your use of retail investment platform PrimaryBid? Is it to open the door for more regular folks to invest, or is it a really material way to add capital to Draper Esprit?

It’s the former. If you go back to 2010, we launched our [Enterprise Investment Scheme] product — in the U.K., the EIS is a tax wrapper, where private individuals can invest into tech businesses and receive 30% tax credit; and then, if it goes well, it’s tax-free. It’s a great government initiative. However, whenever a government interferes in a market, it goes to the lowest denominator, and most people in the industry were using it to enable investors to gain tax credit. Whereas we said: That’s silly; you should use it to enable people to back the best possible businesses, and then the tax credit is just a bonus.

So what we did back in 2010 [was] we enabled X entrepreneurs, X people in the tech ecosystem, to participate in the Draper Esprit EIS program to be part of this democratizing equity. Today, that’s about £150 million in the EIS vehicle, and about £50 million in the VCT, which is another U.K. tax-related vehicle where you get the same benefits — so it’s now over £200 million from small individuals. The idea for us is to extend our ecosystem out into influential people.

UK’s PrimaryBid raises $50M as its retail investing platform sees a COVID-19 surge of activity

How do you feel about having opened the way for other funds to go public?

Personally, and at Draper Esprit, we are big supporters of innovation, so we have helped Mark Boggett at Seraphim [and shared information and] our path. And then Nic Brisbourne … was an ex-colleague of mine and Simon’s, so we actually helped Nic, but we also invested in Forward Partners as a way of showing our support to what he was doing through our fund of funds program.

I think where we are very different is where we get confused with the more technology transfer shops. IP Group [for example is] a great model and it’s got real longevity [and has been] in the market much longer than us. But that’s not what we do. They’re looking to back computer science from an early stage in universities. And so, yes, we’re supportive of others following in our footsteps and we will be big fans of having much wider diversity.

Why are you investing in other funds, and does it open up your capital’s geographic footprint?

Two reasons, to be very honest with you. One is consistent with the previous point, which is [that] Europe wins when it has a really strong ecosystem. And, historically, Europe has founded seed funds in a haphazard way. Finland, for example, had 80 programs to raise early-stage capital. Regions were granted seed funds, but they had no follow-on capital.

No one realized that venture capital was an escalator, and unless you could pass the baton to the next person, [startups] have to do it themselves. But if you have to do it yourself, you don’t create an ecosystem.

The first point was how do we build an ecosystem, consistent with how we get more people into venture capital. If you have a solid ecosystem, then you bring in headhunters, you bring in talent, you bring in bankers, lawyers, you bring in advisers, you bring in the geniuses.

The second reason is that venture capital is quite constrained. If you raise a fund, it is very, very rarely permissible to invest it in other funds. Going back to Simon and I and our quest to be innovative, [we asked] well, why can’t we invest in early-stage funds, and work with them as partners, and [be their] go-to Series A, Series B fund.

[TechCrunch note: The firm then drew up a 2×2 matrix, with geography on one side, and skillset on the other. Draper Esprit divided the world into niches where it was strong and weak, and geographies where it was strong and weak. Where it was weak twice, it would partner with other funds, perhaps investing in them. This helped ensure ready deal flow.]

By partnering, we put ourselves into an area where we could benefit from their talent [and geographic focus], and they benefit from our capital, and it has been a phenomenal success. We are now in about 42 funds across Europe. The first commitment was with £75 [million] and we’ve just committed a second £75 [million] to the program. So, we’re at £150 million, [making us] one of the largest private commercial investors.

What’s your take on Ireland, and do you see it as more than a gateway to Europe?

The Irish story has a very long heritage. They always used to be our largest shareholder, the Irish government, through the Ireland Strategic Investment Fund. They might be the second or third largest shareholder that we still have, but there is a very long relationship between Simon and I and the investment group over there.

And Ireland is renowned for great education, whether that be in the south through Trinity and UCD [in Dublin], or whether that be the north through Queen’s [University Belfast]. So, there’s been a great education system, great engineering infrastructure. They have greatly benefited from the Facebooks of the world, and the Googles of the world having [offices] in Ireland. That’s all the positives, and we have two investors in Ireland.

The downside is that it is relatively small. The numbers of Series A and later-stage growth deals that come out of Ireland are still a lot less than other cities. So we are fans of Ireland; the talent there is fantastic, but it’s a part of an ecosystem instead of another London or another Berlin.

Where is Draper Esprit hoping to find the next great startups? Is there a sector or two that you find particularly exciting?

In fintech, we’re taking an unfashionable approach. You have large incumbents with very outdated systems, but a very loyal and a very high degree of trust customer base. And then you have the regulators in Europe which are very positive towards innovation and incumbents and challengers. I hear my American colleagues are less complimentary about the SEC.

You’re in an environment where people are being encouraged to challenge the big banks. But they don’t have trust, and they don’t have the balance sheet. So, where we are currently attacking — we genuinely believe that the big guys need to update these legacy systems, and they’re not going to throw them away. And so, the only way you can update is you have to take off slivers of your book, of your market, and update it bit by bit. These projects are, if not tens, hundreds of millions [of pounds]. [It’s a] lucrative customer base that needs to adopt technology.

But updating that old tech would likely require fintech startups?

Yeah, that’s our strategy. The reason why I say it is not fashionable is because it doesn’t touch the consumer. It’s quite dull, and [it has] very long sales cycles. When you look at the genius within the teams that we’re backing, it’s that very in-depth [knowledge] where the sector views them as experts, the sector views and as the go-to people. So it’s a very high barrier to entry, which is why I think Europe does very well compared to [the U.S.] in this area because to actually try and attack those European startups from an overseas perspective is quite difficult.

More to come shortly; stay tuned.

Categories: Business News

Wireless charging firm Aira raises $12M

Startup News - 2021, August 3 - 10:00pm

Founded in 2017, Arizona-based Aira didn’t waste any time proving out its technology. We’ve written about the company’s wireless charging a few times over the years, including the “FreePower” technology it has baked into Nomad’s charging pads, which brings a more streamlined version of the Apple’s abandoned AirPower. The tech allows for users to charge up to three objects at once, without having to futz with their precise placement on the pad.

Nomad’s new Base Station Pro offers a taste of what Apple’s AirPower had promised

Today, the startup announced that it has raised a $12 million seed round, primarily led by private investors, including Jawad Ashan, Lori Greiner and Robert Herjavec.  The funding will go toward expanding the company’s reach beyond consumer device charging, into the worlds of enterprise, automotive and hospitality, as well as the development of a 2.0 version of its charging tech.

“This new round of funding is a game changer when it comes to accelerating our capacity for innovation,” co-founder and CEO Jake Slatnick said in a release. “With so many partnerships in our pipeline, a 2.0 version of FreePower on the horizon, and Jawad having just joined our board, this is an inflection point for Aira.”

Image Credits: Aira

As we noted late last year, Aira has already made some headway in automotive. Late last year, it announced funding from auto parts supply giant Motherson, which is also part of this round. The deal was a pretty clear indication that the firm was pushing into integrating its wireless modules into cars — a welcome addition, as many automakers have traditionally lacked consumer electronics-friendly amenities.

Neither party announced any specific car partners at the time — or now, for that matter. But Aira notes that it and Motherson are teaming up to create automotive-grade FreePower modules.

Image Credits: Aira

“Current wireless charging technology is not built for moving environments, leaving consumers and automakers underwhelmed,” Aira says in a release issued today. “In-car charging surfaces with FreePower, on the other hand, are able to support devices shifting around while driving, multi-device charging, surfaces of any size, and firmware updates for future enhancements and compatibility. They can also deliver high-power charging while maintaining stringent safety and regulatory standards.”

The news also sees Axon  CFO Jawad Ashan joining Aira’s board of directors.

Aira takes key investment to build its fantastic smartphone wireless charging pad into vehicles

Categories: Business News

Kenya’s Wapi Pay raises $2.2M pre-seed for cross-border payments between Africa and Asia

Startup News - 2021, August 3 - 9:10pm

According to the World Bank, it is more expensive to send money to sub-Saharan Africa than to any region in the world. It is also the most expensive region to send money from. In Q1 2020, people spent an average of 8.9% to send money to the region, much higher than the global average of 6.8%.

There’s much talk around sending money from Africa to the West, which has led to many startups using traditional (fiat) and nontraditional (crypto) means to facilitate cross-border payments between the two corridors. However, there’s little noise about the corridors between Africa and other regions like Latin America or Asia.

South Asia, for instance, has the lowest average remittance costs across all regions at 4.95% (these percentages are reported on a standard $200 transfer); therefore, it makes sense to tap into the opportunities the market presents. Wapi Pay, a Kenyan startup with offices in China and Singapore, is carrying out this play and has carved a market for itself by facilitating payments between both extreme remittance worlds of Africa and Asia.

Founded in 2019 by brothers Paul Ndichu and Eddie Ndichu, Wapi Pay provides a payments gateway for African businesses to receive and send money from Asia via mobile money platforms and bank accounts.

Most of the focus on remittance has been the flow of money into Africa for sustenance. Therefore, digitizing has been mostly around delivery rather than building new infrastructure and payment processing models for African individuals and businesses to make cross-border payments.

Financial institutions are left with traditional systems and correspondence models to offer service to their customers. These transactions are inherently complex in nature, given their compliance requirements. The lack of new infrastructure or processes make them further opaque, longer to process and far too expensive. Crypto remittance startups claim to solve this problem, but no one has successfully scaled to effective usage.

“We started Wapi Pay having seen how fragmented the payment infrastructure is and how horrifying the experience and expense of making or receiving a payment to and from Asia,” Paul Ndichu told TechCrunch.

“We spent some time in Asia, given the growing trade relationship between the two corridors [Africa and Asia], and saw the growing need to make this more efficient, faster and cheaper, evolving from remittances to global payments. These transactions are already complex in nature; how do we make them as simple and easy as mobile money?” he added.

In Q1 2021, Africa-China trade jumped 27%, to $52.1 billion compared, with 2020. Despite the economic recovery from the pandemic, African merchants still find it expensive to send and receive money. In some cases, these costs can be as high as 20%, especially in Southern African regions. The wait time can also be ridiculous, with some spending up to a week before payment is processed. Wapi Pay says it can process payments within a day and charges as low as 3%.

“Wapi Pay bypasses traditional payment networks, optimizing efficiency and cost for our customers. Users choose the delivery channels they want, such as bank to bank, wallet to wallet, bank to wallet and wallet to bank options to transfer funds as well as make merchant payments, with settlement done within 24 hours,” said CEO Eddie in a statement.

Presently, Wapi Pay works with local banks and platforms in China, Indonesia, India, Japan, Malaysia, Philippines, Singapore, Taiwan, Thailand and Vietnam. The company claims to be growing at 396% year-on-year since 2019 and has hopes to continue in that fashion. By the end of next year, Wapi Pay wants to process $500 million in remittances and increase the number of African merchants and Asian suppliers to half a million and 100,000, respectively.

African startups join global funding boom as fintech shines

The $2.2 million pre-seed investment announced today will be vital to meeting those targets to scale up global payments and remittances between Africa and Asia.

The round is one of the largest of its kind in East Africa and the continent. The venture firms that took part include China-based fund MSA Capital, known to have invested in unicorns Meituan, Nubank and Klarna; Pan-African and Africa-focused firms EchoVC, Kepple Africa and Future Hub; and Pan-Asian firms Transsion Holdings and Gobi Ventures.

Wapi Pay will use the investments to engage regulators for licensing across Africa and for scale, product and geographical expansion.

“These funds will help Wapi Pay diversify our products range and drive growth so that we can evolve remittances into real-time global cross-border payments, starting with Africa and Asia. All while minimising the cost of transactions, it needs to be as easy as sending M-PESA,” Eddie added.  

“Africa to Asia is a large trading corridor overlooked and underserved by tech today. We believe Wapi Pay is the best team to build the necessary infrastructure to support its growing trade volumes. We are excited to support them with our extensive China fintech network and playbook,” Tim Chen, vice president at MSA Capital, said in a statement. 

Categories: Business News

Rapyd raises $300M on $8.75B valuation as fintech-as-a-service continues to boom

Startup News - 2021, August 3 - 9:00pm

Neobanks, other financial startups and the basic concept of “finance anywhere” are seeing huge gains at the moment, and today one of the key companies building the infrastructure that powers services like these is announcing a major growth round of funding to double down on the opportunity.

Rapyd — which provides a range of financial services like payments, mobile wallets, money transfers, card issuing, fraud protection and more, all by way of an API for third parties to integrate quickly into their own services — has raised $300 million, a Series E that TechCrunch understands from reliable sources values the company at $8.75 billion.

The company has been on a fast pace of growth in the last year, spurred in no small part by the global shift to carrying out life and business online in the wake of the COVID-19 pandemic. Rapyd’s total payment volume is on target to pass $20 billion this year, a four-fold increase on 2020’s volume of $5 billion. The company has some 12,000 small and medium-sized businesses using its services, with another 650 large enterprise clients.

Target Global — the European VC that has been making some big bets on fintech and commerce lately — is leading this round, with new backers Fidelity Ventures, Altimeter Capital, Whale Rock Capital, BlackRock and Dragoneer, and previous backers General Catalyst, Latitude, Durable Capital Partners, Tal Capital, Avid Ventures and Spark Capital also participating. Past strategic investors in the startup have included the payments behemoth Stripe.

Rapyd’s CEO and co-founder Arik Shtilman said in an interview that the plan will be to use part of the investment for acquisitions, and part for R&D.

Rapyd has been starting the M&A march in earnest already this year, acquiring payments and card issuing company Valitor in July for $100 million to expand deeper into Europe, and starting an investment arm called Rapyd Ventures. Acquisitions will likely be to continue getting deeper into its current markets.

On the R&D front, the company already has some 900 different services that cover 100 countries within its API. I’ve likened Rapyd’s approach in the past to being akin to a “Swiss Army knife” of services, and Shtilman says that these roughly fall into several distinct categories. 

“At the end of the day there are five things on planet earth for financial services, whether you are a bank or a mom-and-pop shop: payment collection, money dispersing, funds storage, card issuing and foreign exchange. From these you can build endless capabilities,” he said. One priority now, he added, will be to focus on expanding its technology related to identity management and fraud to complement what it already does.

“Know your customer [KYC] and compliance tools will help us bring on more customers even faster,” Shtilman said.

The timing of this latest round is a big deal for Rapyd. For starters, it’s coming just seven months after Rapyd announced another $300 million round, its Series D (that round actually closed in November, I’ve found out). Notably, that last round was at a $2.5 billion valuation, and while the company is not disclosing its funding, Shtilman told me that revenues have grown 3.5 times since then. A source very close to the company told me that the valuation was, simply, the multiple of those two figures: $8.75 billion.

Rapyd raises $300M on a $2.5B valuation to boost its fintech-as-a-service API

Secondly, it’s important in the context of the wider market and where Rapyd fits into it.

We’re currently seeing a huge profusion of companies tapping into the potential of so-called embedded finance — financial services that are built and operated by one party and integrated by APIs into another party’s service — to build new products, ranging from neobanks around the world, to e-commerce companies building checkout services, or companies only tangentially in the business of commerce who are now launching products to improve customer engagement or make their first moves into the space.

That’s meant a lot of competition for Rapyd, with some other big players including Fast, Checkout, Mambu and Railsbank, all of which have also raised huge rounds.

In other words, not only is this round a sign of Rapyd’s own growth, but a signal to the market of how it is positioning itself and faring in what is shaping up to be an interesting and competitive field.

Rapyd — which is now based in Silicon Valley but has its R&D and CEO based in Tel Aviv — was one of the earlier players in this space, and Shtilman likes to recall how, when he first started the company, he was met with a lot of skepticism from others in the financial services community, not just because the idea sounded too hard to execute but because they saw financial infrastructure as essentially the crown jewels of most financial services companies.

“When we started in 2016 everyone thought we were crazy because the concept was too big and too wide,” he said. “Then, like mushrooms after the rain, everyone saw it. Everyone understands now that the future of fintech is fintech infrastructure. Like cloud computing.”

Indeed, it’s taken a little while, but these days most acknowledge that the basics of these services are, yes, super hard to build, but essentially work the same for everyone, so they can be built once, and then packaged and turned into something you can tap by way of cloud services, and thus turned into commodities that you can spend your resources, time and strategy to personalize.

Maybe neobanks will break even after all

Meanwhile, the crown jewels are, in fact, your customers. And therefore, building transactional services that either complement what you already do as a business, or augment it in an interesting and useful enough way, is how you end up deepening your engagement with them, and commitment from them.

The fact that this is something that might apply to just about any business online today means that the opportunities are vast as well, one reason investors are so keen to be in this market. (And that goes for more than just Rapyd, as it’s big enough not to be a winner-takes-all market.)

“Rapyd has built a borderless embedded fintech infrastructure critical to all digital businesses that operate globally. Their platform incorporates payments, compliance, FX, fraud management, escrow, virtual account and card issuing, and more. But now, as the world sees growing traction across global eCommerce, Gig Economy, Fintech Solutions and Technology platforms, Rapyd must take the next step,” said Mike Lobanov, general partner at Target Global, in a statement. “There is currently an unprecedented need for a single partner serving as a bridge between a vast array of local payment services and merchants, providing them access to the flexible, fast-to-integrate, and scalable solutions they need to thrive. Having led Rapyd’s Series A in 2018, we are confident that Rapyd can be such a partner, and are now renewing our bet in this round.”

Categories: Business News

Revery gets $2M to improve mental health with mobile gaming techniques

Startup News - 2021, August 3 - 7:00pm

In “Macbeth,” Shakespeare described sleep as the “chief nourisher in life’s feast.” But like his titular character, many adults aren’t sleeping well. Revery wants to help with an app that combines cognitive behavioral therapy (CBT) for insomnia with mobile gaming concepts.

Founded in March 2021, Revery is currently in beta stealth mode and plans to launch its app in the United States later this year. The company announced today it has raised $2 million, led by Sequoia Capital India’s Surge program. Participants included GGV Capital, Pascal Capital, zVentures (Razer’s corporate venture arm) and angel investors like MyFitnessPal co-founder Albert Lee; gaming entrepreneur Juha Paananen; CRED founder Kunal Shah; Mobile Premier League founder Sai Srinivas; Carolin Krenzer; and Josh Lee.

Lee, a mutual friend, first introduced Revery’s founders, Tammie Siew and Khoa Tran, to one another. Before launching the startup, Siew worked at Sequoia Capital India, Boston Consulting Group and CRED, while Tran was a former product manager at Google.

Revery plans to focus on other mental health issues in the future, but it’s starting with sleep because “it has such a strong correlation with mental health and we’re leveraging protocols, cognitive behavioral therapy for insomnia, that’s robust and have been tried and tested for 30 years,” Siew told TechCrunch. “That is the first indication, but the goal is to build multiple games for other wellness indications as well.”

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A study by research firm Infinium found that about 30% to 45% of adults in the world experience insomnia, a problem exacerbated by the COVID-19 pandemic. Chronic lack of sleep is linked to a host of health issues, including high blood pressure, strokes, depression and lowered immunity.

For Revery’s team, which also includes former Zynga and King lead game designer Kriti Sawa and software engineer Stephanie Wong, their focus on sleep is personal.

Revery’s team on a Zoom call

“Everyone on our team has a deeply personal connection to the mission, because everyone on our team has experienced, or had a family member or friends go through challenges in mental health,” said Siew. “They’ve seen how late intervention creates consequences that could have been avoided if they had gotten help earlier.”

When Tran was 15, he was diagnosed with hypertension and several other health conditions that needed medication. It wasn’t until he was 26 that Tran found out that sleep apnea was at the root of his medical issues. After getting surgery, Tran’s blood pressure became normal and many of his other conditions also improved.

“When I finally got treatment for my sleep disorder, only then did I realize the impact of sleep on mental health,” Tran said. “For me, I was really lucky that a doctor caught my sleep disorder and super lucky to have the time and resources to get treatment. For many people, it’s incredibly inaccessible.”

Revery’s medical advisory team includes the doctor who performed Tran’s surgery, Stanford Sleep Surgery Fellowship director Dr. Stanley Liu; Stanford professor and behavioral sleep medicine expert Dr. Fiona Barwick; and Dr. Ryan Kelly, a clinical psychologist who researches how video games can be used in therapy.

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When people think of sleeping apps, ones that focus on meditation (Calm and Headspace, for example) or soothing noises usually come to mind. The Revery team isn’t sharing a lot of details about its app before launch, but says it draws from casual mobile games, which are designed to get people to return for short play sessions over a long period of time. The goal is to use gamification to make CBT practices interactive and fun, so it becomes part of users’ daily routines.

“That’s the same kind of gameplay that Zynga and King have used, which is why Kriti’s experience is super helpful,” said Siew. Casual games revolve around rewarding people for small actions, and for the Revery app, that means positive reinforcement for habits that contribute to better sleep. For example, it will reward people for putting down their phones.

“I think a lot of people have the misconception that solving sleep is only at the time you fall asleep. They don’t realize that sleep is impacted by what you do throughout the day,” Siew said. “A big part is also what are your thoughts, behavior and the other things that you do, so in order to effectively and sustainably improve sleep, we also have to change your thoughts and behaviors outside of the time you’re trying to fall asleep.”

In a statement, GGV Capital managing director Jenny Lee said, “We are excited about the growing mental wellness market, and believe that Revery’s unique mobile game-based approach has the opportunity to create immense impact. We are happy to back such a mission-driven team in this space.”

Mental health startups are raising spirits and venture capital

Categories: Business News

India’s Infra.Market valued at $2.5B in Tiger Global-led $125M funding

Startup News - 2021, August 3 - 4:43pm

Infra.Market, an Indian startup that is helping construction and real estate companies in the world’s second-most populated nation procure materials and handle logistics for their projects, said on Tuesday it has secured its third financing round in the past nine months.

Tiger Global, which led the startup’s Series C round in February this year, has led the $125 million Series D financing round in the five-year-old startup. The new round valued Mumbai-headquartered Infra.Market at $2.5 billion (post-money), up from $1 billion in February and $200 million in December last year. The startup, which counts Nexus, Foundamental and Accel Partners among its investors, has raised about $275 million to date.

“We are delighted to double-down on our investment in Infra.Market. The team has demonstrated exceptional growth and continues to disrupt the construction materials industry. Over the past year, Infra.Market has become the go-to partner, especially during the pandemic when the traditional supply chains were disrupted,” said Scott Shleifer, partner, Tiger Global Management, in a statement.

Infra.Market, which competes with Lightspeed-backed Zetwerk, helps small businesses such as manufacturers of paints and cements improve the quality of their production and meet various compliances.

The startup adds its load cells to the manufacturing facilities of these small businesses to ensure there is no lapse in quality, and also helps them work with other businesses that can provide them with better raw material and provide guidance on pricing. It also works closely with businesses to ensure that their deliveries are made on time.

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These improvements, explained co-founder Souvik Sengupta, help small manufacturers land larger clients that have higher expectations from the businesses with which they engage. He said the startup has helped small manufacturers reach customers outside of India as well. Some of its clients are in Bangladesh, Malaysia, Singapore and Dubai.

“We continue to build on our vision of creating India’s largest multiproduct construction materials brand and transform the construction materials supply chain, not only in India, but also globally,” he said.

“We are also embarking on new business verticals within the construction ecosystem beyond materials to enable us to provide end to end solutions to our customers across the life cycle of a construction project. We are seeing huge growth in buyer wallet share as we are rapidly expanding our product portfolio and market presence and the launch of new verticals will help us fulfill our vision of creating a technology backed end to end construction solutions company.”

The startup, which said it expects to surpass $1 billion in sales by the end of this calendar year, plans to deploy the fresh fund to expand to new markets and also expand into new categories. It’s also looking to acquire younger firms, the startup said.

Tiger Global goes super aggressive in India

Categories: Business News

Independent retailer platform Creoate raises $5M seed led by Fuel Ventures

Startup News - 2021, August 3 - 4:00pm

Creoate, a startup that lets independent retailers buy sustainable products from brands and wholesalers, has raised a $5 million seed round led by Fuel Ventures, with participation from Vinted founder Justas Janauskas.

Its competitors include traditional wholesalers that have supplied independent retailers for decades, and other startups such as Faire (U.S., raised $696 million) and Ankorstore (France, raised €115 million).

Founders Ashley Horn and Fahad Khan say the company aims at helping independent businesses and “reclaims the supply chain from global giants”. Khan says “Mom and Pop” are “faced with poor information, discriminatory pricing and unpredictable cash flows.”

Creoate, which doesn’t own inventory, says it helps retailers forecast which products will sell well so they can buy and manage inventory levels more easily. It says its cataloging software allows retailers to deal with fewer middlemen.

Launched in January 2020, the platform now claims 25,000 retailers across the U.K., France and Netherlands.

Creoate co-founder Horn said: “Sourcing brands as an independent retailer is close to impossible… We could see that this system was not sustainable and there had to be a better way”.

Mark Pearson, founder and managing partner at Fuel Ventures, said: “Unless you’re in the world of retail, it can be difficult to truly grasp just how broken the system is for the 2.5 million retailers and 30 million emerging brands that Creoate serves. We are captivated by Creoate’s technology which is inspired by the founding team’s real-world experience and empathy.”

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Categories: Business News

Health and wellness apps maker Palta raises $100M Series B led by VNV Global

Startup News - 2021, August 3 - 2:50pm

Health and wellness apps startup Palta has raised $100 million in a Series B round led by Per Brilioth at VNV Global, with the participation of Target Global and other existing and new investors. The cash will be used to generate more products, such as its existing products Flo.Health, Simple Fasting, Zing Fitness Coach and others.

Palta claims to have 2.4 million active, paid subscribers in their apps.

Yuri Gurski, CEO and founder of Palta said: “Palta Brain platform, the foundational powerhouse that drives our consumer digital apps, allows for much faster scaling of both products that we envisage internally, as well as those that come to us from the market.”

“Mobile and preventative health services are the future of the health industry,” said Per Brilioth, CEO of VNV Global. “As a result, Palta has proven its capabilities to develop and scale its wide range of leading mobile subscription products.”

Headquartered in London with offices in Munich, Vilnius, Warsaw and other locations, the company says most of its revenue comes from customers in the U.S. (60%) and Western Europe (20%).

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Categories: Business News

You can’t afford to make poor decisions about incentive stock options

Startup News - 2021, August 3 - 6:45am
Pam Kreuger Contributor Share on Twitter Pam Kreuger is the founder and CEO of Wealthramp.com, a free online service that matches consumers with qualified, fee-only financial advisers, and the creator and host of the investor-education television series “MoneyTrack.” John Chapman Contributor Share on Twitter John Chapman is a certified financial planner professional with WorthPointe Financial Planners in Newport Beach, California, and a fee-only fiduciary adviser on the Wealthramp network.

One of the big reasons you’re giving 110% of your talent and effort to your private company is because you’re hoping to eventually cash in on all those vested incentive stock options (ISOs) that have been sitting in some account, waiting for the day your company goes public.

There’s nothing wrong with that. Who doesn’t dream of reaping an options windfall and using it to retire early, buy a house, pay off their college loans, travel around the world or become a full-time philanthropist?

Unfortunately, when it comes to figuring out how to cash in their stock awards, most employees are on their own.

Their employers can’t always provide the answers they need — especially when the questions relate to personal finances. Most companies admit they need to be better at explaining how ISOs work in general, but they can’t legally work one-on-one with employees to help them exercise and sell shares the right way.

Most companies admit they need to be better at explaining how ISOs work in general, but they can’t legally work one-on-one with employees to help them exercise and sell shares the right way.

That’s why, when the time is right, many employees actively look for help from a qualified fiduciary financial adviser who can walk these could-be “options millionaires” through various cash-in scenarios.

Here’s a real-life example (using a pseudonym).

Kurt is a 50-year-old VP of product management at a healthcare startup that just went public. Over his three years with the company, Kurt had amassed 350,000 ISOs worth approximately $6 million. Unlike many options millionaires, he didn’t intend to cash in everything and retire early. He planned to stay with the firm but wanted to liquidate enough ISOs to pay for a vacation home and add greater diversification to his investment portfolio. This presented significant tax risks that Kurt wasn’t aware of.

If Kurt exercised his ISOs and sold the shares before a year had passed, his profits would be characterized as short-term capital gains, which are taxed as ordinary income.

To illustrate the potential tax implications of this action, we created a hypothetical scenario that showed if Kurt exercised all of his ISOs and sold the shares immediately, he would incur approximately $6 million in ordinary income, which would push him into the top tax bracket and put him on the hook for almost $3 million in combined federal and state taxes.

Categories: Business News

Novakid’s investors bet $35M that it can teach kids English

Startup News - 2021, August 3 - 5:28am

If you’re trying to develop fluency in a non-native tongue, language immersion is a crucial part of the learning process. Surrounding yourself with native speakers helps with pronunciation, context building, and most of all, confidence.

But what if you’re an eight-year-old kid in Spain learning English and can’t swing a solo trip to the United States for the summer?

Novakid, founded by Maxim Azarov, wants to be your next best option. The San Francisco-based edtech startup offers virtual-only, English language immersion for kids between the ages of four through 12, by combining a mix of different services from live tutors to gamification.

After closing its $4.25 million Series A round last December, Novakid announced today that it is back with a $35 million Series B financing, led by Owl Ventures and Goodwater Capital. Existing investors also participated in the round, including PortfoLion, LearnStart, TMT Investments, Xploration Capital, LETA Capital and BonAngels.

The startup is raising capital in response to an active start to its year. The company’s active client base grew 350% year over year, currently at over 50,000 paying students. The money will be used to get more students into its universe of tools, as well as help Novakid expand into international markets with high populations of speakers who want to learn English.

The company’s suite of services are built around two principles: First, that it can immerse early-age learners into the world of English at scale, and second, that it can actually be fun to use.

Novakid’s ESL app for children raises $4.25M Series A led by PortfoLion and LearnStart investors

When a user signs up, they are first connected to one of Novakid’s 2,000 live tutors for their first class. Tutors must be native English speakers with a B.A. degree or higher, as well as an international teaching certificate such as DELTA, CELTA, TESOL or TEFL.

“One of the things that is really important, even psychologically, is to start listening to the language, start interacting with a live person, and remove being afraid of not understanding something,” Azarov said. The company wants to recreate the conditions of how a kid likely learned their first language.

In the class, the tutors only speak English, and users are encouraged to do the same to slowly build and mistake their way into confidence. While the live, video-based classes are a key part of Novakid’s product, Azarov said it was important that his company “was not just giving you access to a teacher” as its main value proposition.

“Most of the competitors are taking teachers and making them available remotely so you don’t have to travel and you have a bigger selection,” he said. But if you look at the industry in the bigger picture, guys like Oxford, Cambridge, Pearson who provide content for the language learning industry, their product basically sucks. It’s really bad.” So, Novakid puts most of its energy into rebuilding a curriculum that works with better design, and includes games.

Gamified content lives both in and out of classes. Within the classroom, a teacher may take a student on a VR-enhanced tour through famous landmarks and museums to practice vocabulary. Self-paced content could look like a multiplayer “battle” between two students answering questions within a certain time period to get a better score. Novakid has an entire team dedicated to game design and development.

Students are clicking in. Novakid users spend two-thirds of their time on the website with tutors, and one-third with self-paced content that the company built in-house. The company wants to switch those concentrations because more students are spending time with the asynchronous content around grammar and vocabulary, and teachers are reserved for more complex information like speaking and conversation.

Part of the difficulty of scaling up a language learning business is that users need to stay motivated. Gamification helps with engagement, but Novakid’s clientele of children could also be fast to churn compared to adult learners, simply due to priorities. Azarov said that he sees how some would view selling exclusively to children as a disadvantage, but he views their focus as differentiation.

“You get better brand equity when you’re more focused,” he said. “The way kids learn language is vastly different from the way adults learn language, and I don’t think the general players who do ‘everything from everybody’ will be able to do [the former] as well as we are.” Duolingo recently launched Duolingo ABC, a free English literacy app with hundreds of short-form exercises. While the now-public company has strong branding, Novakid’s strategy differs by adding in more services around live learning and speaking.

So far, the company has proven that its strategy is sticking. Its revenue in 2020 was $9 million, and in 2021 it is expected to hit between $36 million to $45 million in revenue. It declined to disclose the specifics around diversity of the team, but plans to kick off a quite intensive recruiting spree going forward. Azarov plans to add 200 people to his 300-person company in the next six months.

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Categories: Business News

Demand Curve: Questions you need to answer in your paid search ads

Startup News - 2021, August 3 - 4:50am
Stewart Hillhouse Contributor Share on Twitter Stewart Hillhouse writes actionable growth marketing insights as senior content lead at Demand Curve. By night, he interviews marketers and creatives on his podcast, Top Of Mind. Before getting into marketing, Stewart was a semi-professional lumberjack. He also writes at stewarthillhouse.com. More posts by this contributor

Around 15% of website traffic comes through paid search ads. But to turn passive searchers into active shoppers, your ads should answer their question and entice them to click.

We’ve tested thousands of paid search ads at Demand Curve and through our agency Bell Curve. This post breaks down 14 questions your paid search ads should answer to ensure you’re only paying for the highest-intent shoppers.

Question 1: “What’s in it for me?”

An important distinction between paid search and organic search is that paid ads are an interruption. Users of search engines are simply looking for an answer to their question. The people who see your ads don’t owe you anything. Just because you’re paying to have your ad show up first doesn’t mean they’re going to pay attention to it.

To generate genuine interest in your paid ads, reframe your offer as a favor.

You can do this in two ways:

  • Describe the features of your product as the solution to your customers’ problem.
  • Emphasize the outcome your customer seeks.

For example, reframing free delivery as an extra convenience makes the offer that much more attractive.

Use ad extensions by listing additional benefits in the description of the page. For example, including “customized plans” in the pricing extension page signals to your customer that they’ll have control over the cost. This will help to attract the curiosity of even the most cost-conscious buyers.

Image Credits: Demand Curve

Question 2: “Why should I buy now?”

Approximately 80% of e-commerce shopping carts are abandoned, mostly because shoppers don’t feel any urgency to complete the transaction. Online shoppers aren’t in any rush, as the internet is open 24/7 and inventory feels unlimited.

Use ad copy that bridges the gap between their problem and your solution. The easiest way to create that curiosity bridge is by asking a question.

To answer the question, “Why should I buy now?”, you’re going to have to create an incentive to get them to take action now.

Categories: Business News

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