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Extra Crunch roundup: Corp dev handbook, Chicago startups, Brazil’s e-commerce landscape
If you’re a founder who finds yourself in a meeting with a VC, try to remember two things:
- You’re the smartest person in the room.
- Investors are looking for a reason to say “yes.”
Even so, many entrepreneurs squander this opportunity, often because they direct questions or fail to understand their BATNA (best alternative to a negotiated agreement).
“As the venture landscape becomes more a meritocratic environment where resumes and institutional affiliations matter less, these strategies can make the difference between a successful fundraise and a fruitless meeting,” says Agya Ventures co-founder Kunal Lunawat.
Whether you’re already in the fundraising process or plan to be in the future, be sure to read “A crash course on corporate development” that Venrock VP Todd Graham shared with us this week.
“If you’re going to get acquired, chances are you’re going to spend a lot of time with corporate development teams,” says Graham. “With a hot stock market, mountains of cash and cheap debt floating around, the environment for acquisitions is extremely rich.”
Full Extra Crunch articles are only available to members.
Use discount code ECFriday to save 20% off a one- or two-year subscription.
On Wednesday, August 24 at 3 p.m. PDT/6 p.m. EDT/11 p.m GMT, Managing Editor Danny Crichton will host a conversation on Twitter Spaces with Eric Dean Wilson, author of “After Cooling: On Freon, Global Warming, and the Terrible Cost of Comfort.”
Wilson’s book explores the history of freon, a common refrigerant that was later banned due to its devastating impact on the ozone layer. After their discussion, they’ll take questions from the audience.
Thanks very much for reading Extra Crunch this week! I hope you have an excellent weekend.
Walter Thompson
Senior Editor, TechCrunch
@yourprotagonist
Apple is changing Mail Privacy Protection and email marketers must prepare
Image Credits: Carol Yepes (opens in a new window) / Getty Images
Apple iPhone, Apple Mail and Apple iPad account for nearly half of all email opens, but the privacy features included with iOS 15 will allow consumers to block marketers from seeing their physical location, IP address and tracking data like invisible pixels.
Email marketers rely heavily on these and other metrics, which means they should prepare now for the changes to come, advises Litmus CMO Melissa Sargeant.
In a detailed post, she shares several action items that will help marketing teams leverage their email analytics so they can “continue delivering personalized experiences consumers crave.”
Let’s make a deal: A crash course on corporate development
Image Credits: Cimmerian (opens in a new window) / Getty Images
Venrock Vice President Todd Graham has some frank advice for founders at venture-backed startups: “It would be wise to generate a return at some point.”
With that in mind, he authored a primer on corporate development that lays out the three most common categories of acquisitions, tips for dealing with bankers, and explains why striking a partnership with a big company isn’t always the best way forward.
Regardless of the path you choose, “you need to take the meeting,” advises Graham.
“In the worst-case scenario, you’ll get a few new LinkedIn connections and you’re now a known quantity. The best-case scenario will be a second meeting.”
When VCs turned to Zoom, Chicago startups were ready for their close-up
Image Credits: Nigel Sussman (opens in a new window)
The pandemic failed to slow the momentum of venture capitalists pouring money into startups, but Chicago stands out as an “outlying benefactor of accelerating venture capital activity and the rise of remote investing,” Alex Wilhelm and Anna Heim write for The Exchange.
When the world shut down and it didn’t matter if you were in NYC or SF (because everyone was on Zoom), the Windy City was ready to present itself as the venture champion of the Midwest.
What does Brazil’s new receivables regulation mean for fintechs?
Image Credits: Priscila Zambotto (opens in a new window) / Getty Images
The Brazilian Central Bank made a major reform to the way payments are processed that may throw the doors open for e-commerce in South America’s largest market.
Historically, merchants who accepted credit card payments had two options: Receive the full payment distributed over two to 12 installments, or offer a deep discount to receive a smaller sum up front.
But in June 2021, the BCB created new “registration entities” that permit “any interested receivables buyer/acquirer to make an offer for those receivables, forcing buyers to become more competitive in their discount offers,” says Leonardo Lanna, head of payment products at Monkey Exchange.
The new framework benefits consumers and sellers, but for the region’s startups, “it opens the door to a plethora of opportunities and new business models, from payments to credit.”
As its startup market accelerates, Brazil could be in for an IPO bonanza
Image Credits: Nigel Sussman (opens in a new window)
An inflow of VC dollars, notable acquisitions and rising unicorn counts are all features of the Brazilian tech startup market, Anna Heim and Alex Wilhelm note in The Exchange.
“The IPO market in Brazil is changing,” they write. “TechCrunch noted last year that in the decade leading up to 2020, just two of the 56 IPOs in Brazil were technology companies. More recently, the number of technology companies listed in the country has swelled to at least 16, up from just four in 2019.”
Insider hacks to streamline your SOC 3 certification application
Image Credits: Andriy Onufriyenko / Getty Images
“For good reason, security certifications like the SOC 3 really put you through the wringer,” Waydev CEO Alex Cercei writes in a guest column.
Waydev, a Git analytics tool that helps engineering leaders measure team performance automatically, just attained the SOC 3 certification.
“We learned so much from the process, we felt it was right to share our experience with others that might be daunted by the prospect,” Cercei writes.
“So here’s our advice on how teams can smoothly reach an SOC 3 while simultaneously balancing workloads and minimizing disruption to users.”
Dear Sophie: Tips on EB-1A and EB-2 NIW?
Image Credits: Bryce Durbin/TechCrunch
Dear Sophie,
I’m on an H-1B living and working in the U.S. I want to apply for a green card on my own. I’m concerned about only relying on my current employer and I want to be able to easily change jobs or create a startup. I’ve been looking at the EB-1A and EB-2 NIW.
I’m not sure if I would qualify for an EB-1A, but since I was born in India, I face a much longer wait for an EB-2 NIW.
Any tips on how to proceed?
— Inventive from India
How to establish a health tech startup advisory board
Image Credits: Cordelia Molloy Science Photo Library (opens in a new window) / Getty Images
Most startups could use an advisory board, but in health tech, it’s a core requirement.
Founders seeking to innovate in this area have a unique need for mentors who have experience navigating regulations, raising capital and managing R&D, to name just a few areas.
Based on his own experience, Patrick Frank, co-founder and COO of PatientPartner, shared some very specific ideas about who to recruit, where to find them and how to fit them into your cap table.
“You want to leverage these individuals so you are able to focus on the full view of the company to ensure it is something that both the market and investors want at scale,” says Frank.
Crypto world shows signs of being rather bullish
Image Credits: Nigel Sussman (opens in a new window)
There’s no shortage of tech news to analyze, Alex Wilhelm notes, but this week, he took a fresh look at crypto.
How come?
“Because there are some rather bullish trends that indicate the world of blockchain is maturing and creating a raft of winning players,” he writes.
4 common mistakes startups make when setting pay for hybrid workers
Image Credits: kentoh (opens in a new window) / Getty Images (Image has been modified)
In one recent survey, 58% of workers said they plan to quit if they’re not allowed to work remotely.
Startups that don’t offer employees work-from-home flexibility are at a competitive disadvantage, but figuring out how to pay hybrid workers raises a complex set of questions:
- Should you localize salaries for workers in different areas?
- How should you pay workers who have the same job when one is WFH and the other is at their desk?
- Are you being transparent with your staff about how their compensation is set?
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Kleiner spots Spot Meetings $5M to modernize walk-and-talks for the Zoom generation
Trees, those deciduous entities you can occasionally see outdoors when not locked down or strapped down at a desktop ruminating on a video call, have long been the inspiration for fresh new ideas. Stories abound of how founders built companies while walking the foothills in Silicon Valley or around parks in San Francisco, and yet, we’ve managed over the past year to take movement mostly out of our remote work lives.
Chicago-based Spot Meetings wants to reinvigorate our meetings — and displace Zoom as the default meeting medium at the same time.
The product and company are just a few months old and remain in closed beta (albeit opening up a bit shortly here), and today the company is announcing $5 million in seed funding led by Ilya Fushman at Kleiner Perkins. That follows a $1.9 million pre-seed round led by Chapter One earlier this year.
CEO and co-founder Greg Caplan said that the team is looking to rebuild the meeting from the ground up for an audio-only environment. “On mobile, it needs to be abundantly simple to be very functional and understood for users so that they can actually use it on the go,” he described. In practice, that requires product development across a wide range of layers.
The product’s most notable feature today is that it has an assistant, aptly named Spot, which listens in on the call and which participants can direct commands to while speaking. For instance, saying “Spot Fetch” will pull the last 40 seconds of conversation, transcribe it, create a note in the meeting and save it for follow-up. That prevents the multi-hand tapping required to save a note or to-do list for follow-up with our current meeting products. You “don’t even need to take your phone out,” Caplan points out.
What gets more interesting is the collaboration layer the company has built into the product. Every audio meeting has a text-based scratch pad shared with all participants, allowing users to copy and paste snippets into the meeting as needed. Those notes and any information that Spot pulls in are saved into workspaces that can be referenced later. Spot also sends out emails to participants with follow-ups from these notes. If the same participants join another audio meeting later, Spot will pull in the notes from their last meeting so there is a running timeline of what’s been happening.
Spot’s product design emphasizes collaboration within an audio-focused experience. Image Credits: Spot Meetings
Obviously, transcription features are built-in, but Spot sees opportunities in offering edited transcripts of long calls where only a few minutes of snippets might be worth specifically following up on. So the product is a bit more deliberate in encouraging users to select the parts of a conversation that are relevant for their needs, rather than delivering a whole bolus of text that no one is ever actually going to read.
“Collaboration from now and the future is going to be primarily digital … in-person is forever going to be the exception and not the rule,” Caplan explained. Longer term, the company wants to add additional voice commands to the product and continue building an audio-first (and really, an audio-only) environment. Audio “very uniquely helps people focus on the conversation at hand,” he said, noting that video fatigue is a very real phenomenon today for workers. To that end, more audio features like smarter muting are coming. When a participant isn’t talking, their background noise will automatically melt away.
Before Spot Meetings, Caplan was the CEO and co-founder of Remote Year, a startup that was designing a service for company employees to take working trips overseas. I first covered it back in 2015, and it went on to raise some serious venture dollars before the pandemic hit last year and the company laid off 50% of its workforce. Caplan left as CEO in April last year, and the company was ultimately sold to Selina, which offers co-working spaces to travelers, in October.
Caplan’s co-founder who leads product and engineering at Spot Meetings is Hans Petter “HP” Eikemo. The duo met during the very first Remote Year cohort. “He has been a software engineer for two decades [and was] literally the first person I called,” Caplan said. The team will grow further with the new funding, and the company hopes to start opening its beta to its 6,000 waitlist users over the next 3-4 weeks.
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Amount raises $99M at a $1B+ valuation to help banks better compete with fintechs
Amount, a company that provides technology to banks and financial institutions, has raised $99 million in a Series D funding round at a valuation of just over $1 billion.
WestCap, a growth equity firm founded by ex-Airbnb and Blackstone CFO Laurence Tosi, led the round. Hanaco Ventures, Goldman Sachs, Invus Opportunities and Barclays Principal Investments also participated.
Notably, the investment comes just over five months after Amount raised $86 million in a Series C round led by Goldman Sachs Growth at a valuation of $686 million. (The original raise was $81 million, but Barclays Principal Investments invested $5 million as part of a second close of the Series C round). And that round came just three months after the Chicago-based startup quietly raised $58 million in a Series B round in March. The latest funding brings Amount’s total capital raised to $243 million since it spun off from Avant — an online lender that has raised over $600 million in equity — in January of 2020.
So, what kind of technology does Amount provide?
In simple terms, Amount’s mission is to help financial institutions “go digital in months — not years” and thus, better compete with fintech rivals. The company formed just before the pandemic hit. But as we have all seen, demand for the type of technology Amount has developed has only increased exponentially this year and last.
CEO Adam Hughes says Amount was spun out of Avant to provide enterprise software built specifically for the banking industry. It partners with banks and financial institutions to “rapidly digitize their financial infrastructure and compete in the retail lending and buy now, pay later sectors,” Hughes told TechCrunch.
Specifically, the 400-person company has built what it describes as “battle-tested” retail banking and point-of-sale technology that it claims accelerates digital transformation for financial institutions. The goal is to give those institutions a way to offer “a secure and seamless digital customer and merchant experience” that leverages Amount’s verification and analytics capabilities.
Image Credits: Amount
HSBC, TD Bank, Regions, Banco Popular and Avant (of course) are among the 10 banks that use Amount’s technology in an effort to simplify their transition to digital financial services. Recently, Barclays US Consumer Bank became one of the first major banks to offer installment point-of-sale options, giving merchants the ability to “white label” POS payments under their own brand (using Amount’s technology).
“The pandemic dramatically accelerated banks’ interest in further digitizing the retail lending experience and offering additional buy now, pay later financing options with the rise of e-commerce,” Hughes, former president and COO at Avant, told TechCrunch. “Banks are facing significant disruption risk from fintech competitors, so an Amount partnership can deliver a world-class digital experience with significant go-to-market advantages.”
Also, he points out, consumers’ digital expectations have changed as a result of the forced digital adoption during the pandemic, with bank branches and stores closing and more banking done and more goods and services being purchased online.
Amount delivers retail banking experiences via a variety of channels and a point-of-sale financing product suite, as well as features such as fraud prevention, verification, decisioning engines and account management.
Overall, Amount clients include financial institutions collectively managing nearly $2 trillion in U.S. assets and servicing more than 50 million U.S. customers, according to the company.
Hughes declined to provide any details regarding the company’s financials, saying only that Amount “performed well” as a standalone company in 2020 and that the company is expecting “significant” year-over-year revenue growth in 2021.
Amount plans to use its new capital to further accelerate R&D by investing in its technology and products. It also will be eyeing some acquisitions.
“We see a lot of interesting technology we could layer onto our platform to unlock new asset classes, and acquisition opportunities that would allow us to bring additional features to our platform,” Hughes told TechCrunch.
Avant itself made its first acquisition earlier this year when it picked up Zero Financial, news that TechCrunch covered here.
Kevin Marcus, partner at WestCap, said his firm invested in Amount based on the belief that banks and other financial institutions have “a point-in-time opportunity to democratize access to traditional financial products by accelerating modernization efforts.”
“Amount is the market leader in powering that change,” he said. “Through its best-in-class products, Amount enables financial institutions to enhance and elevate the banking experience for their end customers and maintain a key competitive advantage in the marketplace.”
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With a team that helped build the brain behind Alexa, HomeX raises $90M
HomeX, a home services platform for homeowners and service providers, has raised $90 million in a funding round led by New Mountain Capital.
New Mountain Capital, a New York-based investment firm with more than $30 billion in assets under management, was the only institutional investor to put money in this round alongside company executives. The company was bootstrapped until a 2019 $50 million-plus debt financing.
Founded in 2017, Chicago-based HomeX aims to “radically improve” home services by pairing service workers with homeowners, both virtually and in person. It also has built software, and offers services for, contractors that are aimed at helping them drive and manage demand “more efficiently.”
Notably, one of the company’s co-founders, CTO Simon Weaver, and several team members were on the development team of Evi, a startup that had built an AI program that can be communicated with using natural language via an app, that was acquired by Amazon in 2012. That technology was essentially the brain behind Amazon’s virtual assistant Alexa.
HomeX uses artificial intelligence to diagnose home issues virtually before a contractor even goes out to a home, with the goal of helping them resolve a problem faster (by having the necessary equipment ahead of time for example), which in turn makes customers happier.
“We’re using machine-generated content to create solutions that are specific to a homeowner’s issues,” said co-founder and president Vincent Payen. “Using machines to understand symptoms, the questions to ask and to actually get to a diagnosis and a recommendation or resolution is where AI absolutely shines and allows us to do things that were not possible even three or five years ago.”
Founder and CEO Michael Werner worked in the $500 billion services industry for years (his family founded Werner Ladders) and recognized just how fragmented it was. He also acknowledges that, especially in certain markets, “there’s a terrible imbalance between very high demand and not enough contractors to do the work, or rather, a terrible labor shortage.”
HomeX Remote Assist in particular virtually connects homeowners (via phone, video or chat) with HomeX’s licensed technicians to diagnose and repair common home issues. That business unit has experienced more than 400% growth in less than a year, according to Werner. Last year, the company grew by “about 5x” the number of contractors on its platform. It declined to reveal revenue figures.
Image courtesy of HomeX
“For homeowners, we’re making home maintenance less complicated,” Werner said. “At the same time, we want to help the contractor succeed. Similar to how telemedicine has changed how medicine is delivered, HomeX Remote Assist is going to change the service experience for taking care of your home.”
Another area of HomeX’s business that is growing rapidly is its B2B offering. Home warranty and insurance companies see remote services “as very additive to make their business more efficient,” notes Payen.
“We are using some of our capital toward a pilot program and a number of business development opportunities there,” he said.
For now, while the company is not profitable overall, it is profitable in the services side of its business, according to Werner. In the last 12 months alone, it has served “hundreds of thousands” of clients via its platform, defined by unique virtual and physical appointments.
New Mountain Capital Managing Director Harris Kealey said his firm viewed HomeX as a business that is primed to reshape the home and commercial services industry.
“The market is massive and the need for change and innovation is substantial,” he said in a written statement.
Another company in the space, Thumbtack, recently expanded into video home checkups. Thumbtack, a marketplace where you can hire local professionals for home improvement and other services such as repairs, in December acquired Setter, a startup which provided its customers with video home checkups conducted by experts, and then offered personalized plans for how to address any issues.
Thumbtack had laid off 250 employees at the end of March 2020, after the company saw big declines in its major markets. Since then, however, CEO Marco Zappacosta told TechCrunch there’s been “a renewed focus on the home and an acceleration of digital adoption.”
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Chicago’s ShoppingGives gets served a seed round from Serena Williams’ VC firm, Serena Ventures
ShoppingGives, a Chicago-based startup pitching retailers a service that can integrate nonprofit donations into their sales and shopping platforms, has raised an undisclosed amount from Serena Williams’ venture capital firm, Serena Ventures, the company said.
ShoppingGives allows retailers to offer a donation on behalf of a shopper to any of over 1.5 million nonprofits that are on its list — all without leaving the retailer’s website.
The company said that retailers can use the donation data to create a more authentic and personalized engagement with customers based on the causes they support.
“ShoppingGives aligned with my values of investing in businesses and entrepreneurs who are making a difference. By creating opportunities to grow social impact with a seamless approach for retailers and brands, ShoppingGives is charting the course for all businesses to stand forth as agents of change in our society,” said Williams in a statement.
The company’s technology helps retailers manage and report donations and is already recommended by Shopify as one of a collection of apps for merchants setting up their online stores. Its service integrates with e-commerce content management systems and is already a partner for the PayPal giving fund.
ShoppingGives has already donated to more than 6,000 nonprofit organizations selected by customers, according to the company. Brands like Kenneth Cole, Natori, White + Warren, Margaux, Solstice Sunglasses, Tomboyx, Fresh Clean Tees, Blind Barber, Huron and Neighborhood Goods use the service already.
Image Credit: ShoppingGives
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New York-based indoor ag company Gotham Greens raises $87 million
Lettuce celebrate the rise of indoor agriculture.
In the past few months, AppHarvest, a developer of greenhouse tomato farms, went public through a special purpose acquisition vehicle, vertical farming giant Plenty raised $140 million, and now Gotham Greens, which is developing its own network of greenhouses, is announcing the close of $87 million in new funding.
These new agriculture companies certainly have a green thumb when it comes to raising a cornucopia of capital.
Gotham Greens’ latest round takes the company to a whopping total of $130 million in funding since its launch. Investors in the round included Manna Tree and The Silverman Group.
While AppHarvest has taken to tomatoes in its attempt to ketchup with the leading agricultural companies, Gotham Greens has decided to let its hydroponically grown leafy greens lead the way to riches.
The company said it would use the latest funding to continue developing more greenhouses across the U.S. and bring new vegetables to market.
“Given increasing challenges facing centralized food supply chains, combined with rapidly shifting consumer preferences, Gotham Greens is focused on expanding its regional growing operations and distribution capabilities at one of the most critical periods for America,” said Viraj Puri, the co-founder and chief executive of Gotham Greens, in a statement.
The company already sells its greens in more than 40 states and operates greenhouses in Chicago, Providence, Rhode Island, Baltimore and Denver. From those greenhouses the company distributes to 2,000 retail locations, including Whole Foods Markets, Albertsons stores, Meijer, Target, King Soopers, Harris Teeter, ShopRite and Sprouts.
And Gotham Greens has already begun to expand its product portfolio. The company now sells packaged salads, cooking sauces and salad bowls in addition to its greens.
Assorted packages of Gotham Greens lettuces on a white field. Image Credit: Gotham Greens
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M1 Finance closes $45M Series C mere months after it raised its $33M Series B
Just months after it announced a $33 million Series B, Chicago-based M1 Finance today disclosed a $45 Series C.
The new financing event was led by Left Lane Capital, the same investor that led M1’s Series B. Bear in mind that so-called inside rounds are now a bullish sign in 2020, as opposed to in prior VC eras when they were viewed more cooly. Other M1 investors include Jump Capital, Clocktower Technology Ventures and Chicago Ventures, though only the first two appear to have taken part in this round.
Per M1, the Series C comes just 120 days after it raised a Series B. A good question is why M1 has raised more capital, and why Left Lane Capital wanted to lead two rounds for the consumer-focused fintech provider. Going back to our prior coverage, we can figure it out.
In February, we reported that M1 Finance had reached the $1 billion assets under management mark, or AUM.
The startup combines three different traditional fintech services into one (roboadvising, neobanking and lending), allowing it to price the package aggressively. The model appears to be working. When M1 raised its Series B a few months later in June, it had reached the $1.45 billion AUM, or about 45% growth in just over a quarter. That’s very good.
Today, the company announced that it has surpassed the $2 billion AUM mark, up more than 38% in the last four months.
M1 posted slower AUM growth in percentage terms and greater growth in raw AUM over a similar time frame heading into its Series C. But regardless of that nuance, the company’s AUM grew quickly.
That fact helps explain its new round. If you were Left Lane Capital, had just led a round into the company, and then watched it keep growing rapidly, you’d want to double-down quickly. Not only to buy more of the company, but also to get the round done before another investor could show up and buy its own piece of M1, diluting you and nabbing your ascendant position as the startup’s most recent lead investor.
So Left Lane led the Series C, hoping that M1 keeps growing like the proverbial garden irritant.
Revenue, growth
Something fun about M1 is that it shared a revenue target as a percent of AUM earlier in the year, namely that it aims to generate around 1% of its AUM in revenue each year. The company’s CEO Brian Barnes re-confirmed the number for TechCrunch this week.
So, with more than $2 billion in AUM, we can see that M1’s revenues are probably on a run rate of more than $20 million today, and could crest a $25 million run rate by the end of the year, provided that growth continues as it has for the startup.
How is M1 adding so much capital to its platform? Barnes told TechCrunch that M1 has tripled its userbase since the start of the year, and that its current users are bringing more funds in from other financial platforms. The combination is making M1 larger, and quickly.
To wrap, our notes above about Left Lane probably wanting to lead the Series C to keep some other firm from doing it — pre-emption is a regular thing in today’s hot VC market — weren’t mere idle speculation. Barnes told TechCrunch in response to a question about its Series C that his company was “fortunate to have significant investor demand for our Series C, partly due to hitting milestones as quickly” as it has. That sounds like the possibility of competing lead investors to us, at least from our present remove.
The M1 round continues the savings and investing boom we’ve tracked this year. And the round is a win for the Midwest at the same time. More when M1 reaches $3 billion in AUM. Start your countdown.
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How Roblox completely transformed its tech stack
Picture yourself in the role of CIO at Roblox in 2017.
At that point, the gaming platform and publishing system that launched in 2005 was growing fast, but its underlying technology was aging, consisting of a single data center in Chicago and a bunch of third-party partners, including AWS, all running bare metal (nonvirtualized) servers. At a time when users have precious little patience for outages, your uptime was just two nines, or less than 99% (five nines is considered optimal).
Unbelievably, Roblox was popular in spite of this, but the company’s leadership knew it couldn’t continue with performance like that, especially as it was rapidly gaining in popularity. The company needed to call in the technology cavalry, which is essentially what it did when it hired Dan Williams in 2017.
Williams has a history of solving these kinds of intractable infrastructure issues, with a background that includes a gig at Facebook between 2007 and 2011, where he worked on the technology to help the young social network scale to millions of users. Later, he worked at Dropbox, where he helped build a new internal network, leading the company’s move away from AWS, a major undertaking involving moving more than 500 petabytes of data.
When Roblox approached him in mid-2017, he jumped at the chance to take on another major infrastructure challenge. While they are still in the midst of the transition to a new modern tech stack today, we sat down with Williams to learn how he put the company on the road to a cloud-native, microservices-focused system with its own network of worldwide edge data centers.
Scoping the problem
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SaaS Ventures takes the investment road less traveled
Most venture capital firms are based in hubs like Silicon Valley, New York City and Boston. These firms nurture those ecosystems and they’ve done well, but SaaS Ventures decided to go a different route: it went to cities like Chicago, Green Bay, Wisconsin and Lincoln, Nebraska.
The firm looks for enterprise-focused entrepreneurs who are trying to solve a different set of problems than you might find in these other centers of capital, issues that require digital solutions but might fall outside a typical computer science graduate’s experience.
Saas Ventures looks at four main investment areas: trucking and logistics, manufacturing, e-commerce enablement for industries that have not typically gone online and cybersecurity, the latter being the most mainstream of the areas SaaS Ventures covers.
The company’s first fund, which launched in 2017, was worth $20 million, but SaaS Ventures launched a second fund of equal amount earlier this month. It tends to stick to small-dollar-amount investments, while partnering with larger firms when it contributes funds to a deal.
We talked to Collin Gutman, founder and managing partner at SaaS Ventures, to learn about his investment philosophy, and why he decided to take the road less traveled for his investment thesis.
A different investment approach
Gutman’s journey to find enterprise startups in out of the way places began in 2012 when he worked at an early enterprise startup accelerator called Acceleprise. “We were really the first ones who said enterprise tech companies are wired differently, and need a different set of early-stage resources,” Gutman told TechCrunch.
Through that experience, he decided to launch SaaS Ventures in 2017, with several key ideas underpinning the firm’s investment thesis: after his experience at Acceleprise, he decided to concentrate on the enterprise from a slightly different angle than most early-stage VC establishments.
Collin Gutman, founder and managing partner at SaaS Ventures (Image Credits: SaaS Ventures)
The second part of his thesis was to concentrate on secondary markets, which meant looking beyond the popular startup ecosystem centers and investing in areas that didn’t typically get much attention. To date, SaaS Ventures has made investments in 23 states and Toronto, seeking startups that others might have overlooked.
“We have really phenomenal coverage in terms of not just geography, but in terms of what’s happening with the underlying businesses, as well as their customers,” Gutman said. He believes that broad second-tier market data gives his firm an upper hand when selecting startups to invest in. More on that later.
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GoHealth’s shares dip after upsized IPO
On the heels of nCino’s blockbuster debut, GoHealth’s public offering proved a more sedate affair, at least when comparing the two companies’ initial trading days.
GoHealth priced above its anticipated IPO range, selling more shares than initially planned in the process. By vending 43.5 million shares at $21 apiece — $1 per share more than the top of its preceding $18 to $20 range, and four million shares more than its target of 39.5 million — the insurance technology company put more than $900 million onto its balance sheet this week.
The debut is a win for Chicago’s industry and tech scenes. GoHealth was worth a little less than $6.7 billion at its IPO price, not counting shares that may be sold to its underwriters, which would boost its valuation.
Despite its better-than-anticipated pricing, however, GoHealth shares sagged in afternoon trading, slipping to $19.00 per share, down 9.5% as of the time of writing. The declines stand in contrast to the recent debuts of nCino, Lemonade and others, which saw their shares instantly gain value after going public.
GoHealth’s CEO, however, stressed the long-term vision of his company in an interview with TechCrunch. Speaking with Clint Jones during GoHealth’s first trading day, the executive told TechCrunch that his company’s offering was oversubscribed, and had met its goal of accumulating long-term investors during its IPO process.
The company intends to hire with its new funds, including 1,000 more licensed insurance agents, the CEO said.
Asked whether the company has plans to acquire smaller companies with its IPO funds, Jones told TechCrunch that it could be “opportunistic” regarding buying tech platforms, or smaller teams with particular talent. For the many startups competing in other parts of the insurance marketplace world — TechCrunch has covered the space extensively, including a bevy of funding rounds for insurtech startups — a newly wealthy public company could provide an interesting exit opportunity.
The company’s strong IPO pricing, if somewhat slack first-day’s trading, feels akin to a wash for related, smaller firms watching its public offering with interest; how GoHealth trades moving forward could help set the tone for select insurtech startup valuations.
For today, however, we have yet another unicorn tech-ish offering all wrapped up. GoHealth’s path to the public market’s wasn’t as straightforward as some, but it got there all the same.
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