SPAC
Auto Added by WPeMatico
This SPAC is betting that a British healthcare company can shake up the US market
Welcome back to the week, and welcome back to The Exchange. Robinhood has yet to file its IPO, so we’re looking at other companies in the meantime. Today it’s Babylon Health, a British health tech company that is pursuing a U.S. listing via a blank-check company, or SPAC.
You have questions. I have questions. We’ll get to some answers.
But before we do, we wanted to note that Anna and I are looking into the AI startup market tomorrow morning. If you are a VC with notes regarding the current pace of investment into the sector or thoughts on where customer traction is highest, let us know. If you are a founder building an AI-powered startup, we’d also like to hear from you about what you are seeing. Use the subject line “AI startups,” please.
The Exchange explores startups, markets and money.
Read it every morning on Extra Crunch or get The Exchange newsletter every Saturday.
With that out of the way, let’s get into Babylon Health. We’ll kick off with a short riff on its fundraising history, talk about its product, and then dive into its numbers and, bracing ourselves for impact, its projections.
The larger context this morning is that we’re doing legwork ahead of what could be a super active Q3 2021 IPO cycle. Kanzhun, a Chinese company, has also filed for a U.S. listing. Toss in Robinhood whenever it gets off its duff and gives us its own filing, and we’re being promised a good time.
Babylon Health
Per Crunchbase data, Babylon has raised north of $600 million as a private company. Its funding, however, has not come from sources that we tend to discuss here at TechCrunch. Instead, the company raised some money from more traditional investors like Hoxton Ventures and Kinnevik, but the bulk of its capital was raised from the Saudi Arabian “Public Investment Fund,” or PIF. The PIF led a $550 million round into the British health tech company back in August 2019.
PitchBook has the round cut into two parts, the larger, first portion of which valued the company at $1.9 billion on a post-money basis.
That figure brings us to the SPAC deal that Babylon is now pursuing. The company’s new equity value after its SPAC deal will land around $4.2 billion, with Babylon sitting on around $540 million in cash after the deal is completed. The company will sport a lower, $3.6 billion enterprise valuation after its merger with SPAC Alkuri.
Powered by WPeMatico
The SPAC trash ticker is counting down
Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast, where we unpack the numbers behind the headlines.
This week had the whole crew aboard to record: Grace and Chris making us sound good, Danny to provide levity, Natasha to actually recall facts and Alex to divert us from staying on topic. It’s teamwork, people — and our transitions are proof of it.
And it’s good that we had everyone around the virtual table, as there was quite a lot to get through:
- The team felt all kinds of ways about the Amazon-MGM deal. Some of us are more positive than the rest, but what gists out from the transaction is that for Amazon, the purchase price is modest and the company is famously playing a supposedly long-game. Let’s see how James Bond fits into it. Alex receives four points for not bringing up F1 thanks to the Bond-Aston Martin connection.
- Turning to the SPAC game, we chatted through the recent Lordstown Motors earnings results, and what we can parse from them regarding blank-check companies, promises and reality.
- After launching last June with just $2 million, Collab Capital has closed its debut fund at its target goal: $50 million. The Black-led firm invests exclusively in Black-led startups, and got checks from Apple, PayPal and Mailchimp to name a few. We talk about this feat, and note a few other Black-led venture capital firms making waves in the industry lately.
- We Resolved our transition puns and eventually spoke about the Affirm spin-out, which raised $60 million in a funding round for BNPL for businesses. There are bigger questions there around the accessibility and point of BNPL, and if it’s really re-inventing the wheel or just repackaging it with simpler UX.
- Next up, we got into a can of worms about the future of meetings thanks to Rewatch, which raised a $20 million Series A this week led by Andreessen Horowitz. The startup helps other startups create internal, private YouTubes to archive their meetings and any video-based comms. We could only spend a second on this, so if you want our longer thoughts in the form of text, check out our three views on the topic on Extra Crunch! (Discount Code: Equity)
- From there we had Interactio and Fireflies.ai, two more startups that are tackling the complexities of meetings in the COVID-19 era, and whatever comes next. Both recently raised new funding, and Alex brought up Kudo to add one more upstart to the mix.
- Noom, a weight loss platform, bulked up with $540 million in funding after nearly doubling its revenue from 2019 to 2020. The pandemic has made many people gain weight, but we chew into why Noom’s moment might be right now after a decade in the works.
Thanks for hanging out this week, Equity is back on Tuesday with our usual weekly kickoff, thanks to the American holiday on Monday. Chat then, unless you want to follow us on Twitter and get a first-look at all of Chris’ meme work.
Equity drops every Monday at 7:00 a.m. PST, Wednesday, and Friday morning at 7:00 a.m. PST, so subscribe to us on Apple Podcasts, Overcast, Spotify and all the casts.
Powered by WPeMatico
EV fast charger developer Tritium to go public via SPAC merger at $1.2B valuation
Another day, another mobility SPAC deal. This time, it’s Tritium, a Brisbane-based developer and producer of direct current fast EV chargers that is taking the SPAC path to the public market in a deal valuing the company at $1.2 billion.
Tritium said Wednesday it will be heading to the Nasdaq via a merger with special purpose acquisition company Decarbonization Plus Acquisition Corp. II, or DCRN, though it declined to provide a timeline for when the transaction is expected to close. The transaction is expected to generate gross proceeds of up to $403 million. Tritium will be listed under the ticker “DCFC.”
This particular SPAC deal is unusual in that it does not include private investment in public equity, or PIPE — a fundraising round that typically occurs at the time of the merger and injects more capital into the company.
“We didn’t need a PIPE because DCRN is a more than $400 million SPAC and our shareholder group agreed to a minimum cash closing of just $200 million, which significantly reduces redemption risk,” Tritium CEO Jane Hunter told TechCrunch. “Also, our revenue has grown at a compound annual growth rate (CAGR) of 56% since 2016 as we expand our presence in major markets where we have a significant market share, such as the U.S. and Europe. This revenue growth helps to reduce our reliance upon new funds to implement our growth strategy.”
Founded in 2001, Tritium manufactures charger hardware and software for direct current fast chargers. Its products can recharge an EV battery, adding 20 miles in a minute or 100 miles in five minutes, DPAC II chairman Robert Tichio said during an investors call Wednesday. DC chargers are more costly than alternating current (AC) chargers but they send power to the vehicle much more quickly. Generally, AC chargers are installed at home, where a driver can plug in their vehicle overnight, while DC chargers are more frequently found at public charging stations.
“Drivers will want the experience of public charging to be as close as possible to their current experience at the gas pump — just a few minutes to get enough range to get on with your day,” Hunter said.
Tritium’s largest market is Europe, which composes around 70% of the company’s revenue, followed by North America at 20% and Asia at 10%, Hunter told investors Wednesday. The company will use the capital from the transaction to expand its manufacturing capacity and grow sales.
Demand for public EV charging stations is expected to mushroom over the next two decades alongside the growing market share of EVs. According to analysts Grandview Research, the EV charging infrastructure market was valued at $2 billion in 2020. It is expected to grow by nearly 39% through 2028. President Joe Biden said building out a national EV charging network was a key priority under his proposed $2 trillion infrastructure plan.
Powered by WPeMatico
As Zynga impresses, rival mobile-gaming shop Jam City looks to list via SPAC
While it would be nice to write about something other than yet another tech company looking to list via a SPAC, the deals keep dropping, so our more traditional fare of covering startup trends will remain on hold for at least one day more.
This morning, we’re looking at the Jam City deal to merge with DPCM Capital. Jam City is a bit like Zynga, but unless you are a mobile-gaming aficionado, you might not have heard of it.
The Exchange explores startups, markets and money.
Read it every morning on Extra Crunch or get The Exchange newsletter every Saturday.
You likely have not heard of DPCM Capital, either, but you know more about it than you’d think.
As Jam City notes in a release, the SPAC is “led by Emil Michael.” Michael is most famous for his time at Uber, where he served as chief business officer. He left the firm, as The New York Times wrote in 2014, after a board-called “investigation into [the company’s] culture and business practices” led to a “recommendation for Mr. Michael to exit Uber.”
He’s the gentleman who floated the idea of funding a team to “dig up dirt” on Uber’s “critics in the media,” as BuzzFeed News reported in late 2014.
Regardless, we’re not here to go back through Uber and its various cultural messes. We’re here to dig into the Jam City SPAC deck to see if the company is similar to Zynga. Why do we want to know that? Because Zynga has done great in recent quarters, including posting record revenue and bookings in the first three months of 2021.
With lots of folks stuck at home in the last year, gaming has done well in aggregate. And mobile gaming is a huge chunk of the larger gaming world.
More broadly, why do we care about Jam City’s SPAC transaction? Because the mobile gaming concern has raised more than $300 million, including a $145 million round in 2019 that TechCrunch covered here.
The company attracted capital from Austin Ventures, Netmarble, Bank of America Merrill Lynch and JP Morgan Chase while private, per Crunchbase, so we’re very curious if Jam City has enjoyed a Zynga-like last few years and how it’s being valued as part of the SPAC deal. Let’s find out.
Jam City’s SPAC transaction
When Jam City raised that huge 2019 round, co-founder and CEO Chris DeWolfe said that the “global mobile games market [is] consolidating.” At the time, the company intended to use some of its new funding to acquire other mobile gaming companies.
Powered by WPeMatico
Bird’s SPAC filing shows scooter-nomics just don’t fly
Scooter unicorn Bird is going public, per an agreement to merge with a special purpose acquisition company, or SPAC. After rumors and reports circulated for months about an imminent deal, it has finally arrived.
First, a quick overview of the agreement and the players involved: Bird is merging with Switchback II at an implied valuation of $2.3 billion. Fidelity Management & Research Company will lead the deal’s $160 million in private investment in public equity, or PIPE. Apollo Investment Corp. and MidCap Financial Trust provided an additional $40 million in asset financing. (Disclosure: Apollo is buying TechCrunch’s parent company.)
Historically — and based on what we’re seeing in this fantastical filing — Bird proved to be a simply awful business. Its results from 2019 and 2020 describe a company with a huge cost structure and unprofitable revenue, per filings. After posting negative gross profit in both of the most recent full-year periods, Bird’s initial model appears to have been defeated by the market.
What drove the company’s hugely unprofitable revenues and resulting net losses? Unit economics that were nearly comically destructive.
Some of the numbers Bird shared in its investor deck show a business that is growing, in terms of users and geographic footprint. Bird is in 200 cities globally and reports more than 95 million rides to date, and 3 million new riders added during the pandemic. The investor deck also touts year-round positive economics during the COVID-19 era. That all looks positive. But looking into the line-item financials, a different story emerges.
The scooter shop managed to convert a $135.7 million gross loss in 2019 to a smaller gross deficit of $23.5 million in 2020, but it did not manage to shake up its upside-down economics during its full fiscal 2020.
Update: Bird provided a response to questions about its newer fleet management business and how it expects to stem losses. Their response:
Bird’s history to date has been one of milestones. First was securing product market fit and delivering an eco-friendly way for people to travel in their communities and access opportunities – education, health and economic. The second milestone focused on unit economics and laying the foundation for a sustainable business. Then came the pandemic, which served as a catalyst for us to identify how to scale in a way that allowed us to be profitable at a ride level. As a result, in H2 2020 our ride profit (after vehicle depreciation) was positive and people are continuing to embrace naturally social distanced eco-friendly options.
Powered by WPeMatico
The morality and efficacy of going public earlier
Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast where we unpack the numbers behind the headlines.
For this week’s deep dive Natasha and Alex and Chris dug into the world of the IPO. Not just the numbers and the metrics and the calculations of valuations at diluted, and non-diluted, share counts. No. We wanted to talk about the morality and efficacy of going public.
So to round out our conversation we enlisted Steve Cakebread, the CFO of Yext, and Garth Mitchell, the CFO of Latch. Cakebread is known for being aboard the Salesforce, Pandora and Yext IPOs. Mitchell has sat on both sides of the table during the IPO process, and is currently helming the money equations as Latch approaches the public markets via a SPAC.
For more context, Yext, a company that first launched at a TechCrunch event back in 2009, provides data tooling and search software to businesses, while Latch builds software and hardware for rental-focused buildings. Yext is public. Latch will be in a few months.
Back to our topic, we asked Cakebread to talk about his thesis on why going public earlier than later can help a company’s maturity process and can help provide greater returns to the general public. The CFO has written a rather good book about the IPO process more generally and what it means for a company’s internal processes, but his morality notes especially stood out because it’s an argument far less noisy than the POP critics. Baked beans come up, somehow!
We also asked Mitchell to talk about Latch’s choice to go public, and what opportunities and challenges the SPAC route brings for the company. Of course, there’s a SPAC joke in there (or two), but we get into broader “what’s next” debates about if more companies will start to leave the private world, venture capital’s role in this whole mess and the financial lift of going to the public market.
Hope you enjoy the show, and get excited: Equity is going to have more guests on from time to time, and we welcome any suggestions you want to throw at us.
Equity drops every Monday at 7:00 a.m. PST, Wednesday, and Friday at 6:00 AM PST, so subscribe to us on Apple Podcasts, Overcast, Spotify and all the casts!
Powered by WPeMatico
As Q2’s lull fades, unicorn IPOs are revving up
The public markets give, and the public markets take away. Earlier this morning, enterprise cloud storage and productivity company Box got into a more public spat with some of its shareholders upset with its performance and management decisions. But while Box endures the more difficult chapters of being a public company, other companies are racing to join the ranks of the listed concerns of the world.
If it feels like IPO news slowed for a few weeks at the start of the second quarter, your gut is correct. Investors previously told The Exchange that the first, third and fourth quarters of 2021 would be hot periods for public debuts, but that Q2 would be slower. Their argument revolved around reporting cadences and how long it takes for certain periods of accounting work to be completed.
The Exchange explores startups, markets and money. Read it every morning on Extra Crunch or get The Exchange newsletter every Saturday.
So we weren’t surprised when the second quarter’s IPO cycle began to feel a bit soft compared to the rapid-fire first quarter. And, as we’ve all heard in recent days, the great SPAC rush is slowing.
But that hasn’t stopped a number of firms from defying expectations and going public all the same. Online hosting and website builder Squarespace has not only filed but filled in its public filing with notes on its anticipated direct listing. We have to talk about its choice to list directly in light of new financial information we have concerning its recent performance.
But there’s more: Expensify filed to go public yesterday, albeit privately. And the SmartRent SPAC combination, though now slightly dated, is also worth a moment of our time.
The final element in the current IPO landscape is the recent Darktrace IPO in the United Kingdom, which, after that market had a rough start to its tech IPO calendar, is now seeing better results. So, let’s discuss IPOs to fully understand where we stand today in the realm of unicorn liquidity.
Squarespace’s direct listing
When The Exchange first dug into Squarespace’s IPO filing, we did our best to parse its full-year results because we lacked its quarterly details. This leaves us with two things to chew on: Why is Squarespace pursuing a direct listing over another listing technique, and what can its current and more granular operating results tell us about the choice?
On the first count, if Squarespace is direct listing, we can presume that it doesn’t need more cash to operate. So, how much cash does the company have on hand? A good chunk of change: $183.3 million.
Powered by WPeMatico
5 questions about Grab’s epic SPAC investor deck
As expected, Southeast Asian superapp Grab is going public via a SPAC.
The combination, which TechCrunch discussed over the weekend, will value Grab on an equity basis at $39.6 billion and will provide around $4.5 billion in cash, $4 billion of which will come in the form of a private investment in public equity, or PIPE. Altimeter Capital is putting up $750 million in the PIPE — fitting, as Grab is merging with one of Altimeter’s SPACs.
Ride-sharing is a profitable business for Grab, though the segment did take a pandemic-induced whacking.
Grab, which provides ride-hailing, payments and food delivery, will trade under the ticker symbol “GRAB” on Nasdaq when the deal closes. The announcement comes a day after Uber told its investors it was seeing recovery in certain transactions, including ride-hailing and delivery.
Uber also told the investing public that it’s still on track to reach adjusted EBITDA profitability in Q4 2021. The American ride-hailing giant did a surprising amount of work clearing brush for the Grab deal. Extra Crunch examined Uber’s ramp toward profitability yesterday.
This morning, let’s talk through several key points from Grab’s SPAC investor deck. We’ll discuss growth, segment profitability, aggregate costs and COVID-19, among other factors. You can read along in the presentation here.
How harshly did COVID-19 impact the business?
The impact on Grab’s operations from COVID-19 resembles what happened to Uber in that the company’s deliveries business had a stellar 2020, while its ride-hailing business did not.
From a high level, Grab’s gross merchandise volume (GMV) was essentially flat from 2019 to 2020, rising from $12.2 billion to $12.5 billion. However, the company did manage to greatly boost its adjusted net revenue over the same period, which rose from $1 billion to $1.6 billion.
Powered by WPeMatico
Private equity, a SPAC and an IPO walk into a bar
The first quarter of 2021 was a busy season for technology exits. Coming off a hot period in the final quarter of 2020, it was no surprise that tech upstarts pursued liquidity through a variety of mechanisms as the new year began.
There were IPOs, there were direct listings, there were PE deals. Hell, we even saw enough SPACs that we lost track of a few; amid all the noise, you’ll miss the occasional note no matter how well-tuned your ear.
The Exchange explores startups, markets and money. Read it every morning on Extra Crunch, or get The Exchange newsletter every Saturday.
Each path is still open for later-stage startups to pursue exits: The IPO market was welcoming until a few minutes ago and private equity firms are stacked with cash and willing to pay higher multiples than they might in more normal times. And there are sufficient SPACs to take the entire recent Y Combinator class public.
Choosing which option is best from a buffet’s worth of possibilities is an interesting task for startup CEOs and their boards.
DigitalOcean went public via a traditional IPO, raising a slug of capital in the process. The SMB-focused public cloud company likely felt like a somewhat obvious IPO candidate when you read its results. The Exchange spoke with the company’s CEO, Yancey Spruill, about the choice.
Latch, in contrast, decided that a SPAC was its best route out the gate. The Exchange caught up with the company’s CFO, Garth Mitchell, about the transaction and why it made sense for his company.
And, finally, The Exchange spoke with AlertMedia’s founder and CEO, Brian Cruver, about his decision to sell his Texas-based company to a private equity firm.
To prevent this post from reaching an astronomic word count, we’ll give a brief overview of each deal and then summarize the company’s views about why their liquidity choice was the right one.
Three paths to liquidity
Kicking off with DigitalOcean, a few notes: First, the company has been pretty darn public about its growth in the last few years. We knew that it had an annualized run rate of around $200 million in 2018, $250 million in 2019 and around $300 million in the first half of 2020. It later announced that it hit that mark in May of last year.
So when DigitalOcean decided to go public, we weren’t bowled over. The company wound up pricing at $47 per share, the high end of its range. Since then, its stock has struggled somewhat, falling below $37 per share before recovering to $43.80 at the end of trading yesterday.
Enough of all that. Why did the company choose to go public via a traditional IPO? Spruill said his company looked at SPAC deals and direct listings. It selected the IPO route because it fit the company’s goals of generating a broad base of shareholders while creating a branding opportunity.
The cost of an IPO is comparable, he added, to other exit options. Spruill also praised the IPO process itself, noting that its rigorous requirements made DigitalOcean a better company.
Earlier in our chat, I asked Spruill a question that I put to every CEO on IPO day: How are you feeling? It’s a bit of a sop, but it sometimes elicits insights from executives and founders who, after weeks of discussing their companies’ inner workings, are asked a rare personal question.
Spruill said he felt incredible and that nothing could replicate an IPO as the culmination of so much work put into building a company and its team. If you add up the wins and losses over time, with more of the former than the latter, and can cross the finish line with the right metrics and market, you can earn a spot to be “grilled” by the “best investors,” he said.
Those investors put $750 million or so into his company, Spruill added. Funds that it can use to retire debt and free up more cash flow. Not a bad day, I’d say.
Powered by WPeMatico
Acquisition-happy space infrastructure company Redwire set to go public via SPAC
The latest in a string of space tech SPACs announced this year is Redwire, an entity created by a PE firm in 2020, which has acquired a number of smaller companies including Adcole Space, Roccor, Made in Space, LoadPath, Oakman Aerospace, Deployable Space Systems and more — all within the last year or so. Redwire announced that it will go public through a merger with special purpose acquisition company Genesis Park Acquisition Corp., and the combined company will list on the NYSE.
The deal puts Redwire’s pro forma enterprise value at $615 million, and is expected to provide an additional $170 million to Redwire’s coffers post-merger, including a PIPE valued at over $100 million. Unsurprisingly, one of the uses of the proceeds that Redwire intends to pursue is continued M&A activity to build out its list of service offerings in the space domain.
Redwire’s mandate isn’t specifically to go after new space companies, and instead its targets share in common expertise in a particular, rather narrow slice of the severally crowded space market. It’s capabilities include on-orbit manufacturing and servicing; satellite design, manufacture and assembly; payload integration; sensor design and development; and more. The idea appears to be to build a full-stack infrastructure company that can offer tip-to-tail space technology services, exclusive really only of launch and ground station components (for now).
It’s a smart approach for a bourgeoning new space economy where increasingly, technology companies who want to operate in space would rather focus on their unique value proposition, and outsource the complex, but mostly settled business of actually getting to, and operating in, space. Other companies are addressing the market in similar ways, with launchers bringing more of that part of the process in-house so their payload customers basically only have to show up with the sensor or communication device they want to send to space, and the launcher providing everything else — including even the satellite, in the relatively near future.
Redwire has proven revenue-generating power, with projected 2021 revenue of $163 million, and many of the companies now operating under its umbrella are fairly mature and have been operating cash flow positive for many years. Accordingly, a SPAC as a path to public markets likely does make sense in this particular instance, but the increasing frequency and volume of space companies choosing this route, is, on the whole, a trend to watch with healthy skepticism.
Powered by WPeMatico