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Sisense nabs $100M at a $1B+ valuation for accessible big data business analytics

Published January 9, 2020

Sisense, an enterprise startup that has built a business analytics business out of the premise of making big data as accessible as possible to users — whether it be through graphics on mobile or desktop apps, or spoken through Alexa — is announcing a big round of funding today and a large jump in valuation to underscore its traction. The company has picked up $100 million in a growth round of funding that catapults Sisense’s valuation to over $1 billion, funding that it plans to use to continue building out its tech, as well as for sales, marketing and development efforts.

For context, this is a huge jump: The company was valued at only around $325 million in 2016 when it raised a Series E, according to PitchBook. (It did not disclose valuation in 2018, when it raised a venture round of $80 million.) It now has some 2,000 customers, including Tinder, Philips, Nasdaq and the Salvation Army.

This latest round is being led by the high-profile enterprise investor Insight Venture Partners, with Access Industries, Bessemer Venture Partners, Battery Ventures, DFJ Growth and others also participating. The Access investment was made via Claltech in Israel, and it seems that this led to some details of this getting leaked out as rumors in recent days. Insight is in the news today for another big deal: Wearing its private equity hat, the firm acquired Veeam for $5 billion. (And that speaks to a particular kind of trajectory for enterprise companies that the firm backs: Veeam had already been a part of Insight’s venture portfolio.)

Mature enterprise startups have proven their business cases are going to be an ongoing theme in this year’s fundraising stories, and Sisense is part of that theme, with annual recurring revenues of over $100 million speaking to its stability and current strength. The company has also made some key acquisitions to boost its business, such as the acquisition of Periscope Data last year (coincidentally, also for $100 million, I understand).

Its rise also speaks to a different kind of trend in the market: In the wider world of business intelligence, there is an increasing demand for more digestible data in order to better tap advances in data analytics to use it across organizations. This was also one of the big reasons why Salesforce gobbled up Tableau last year for a slightly higher price: $15.7 billion.

Sisense, bringing in both sleek end user products but also a strong theme of harnessing the latest developments in areas like machine learning and AI to crunch the data and order it in the first place, represents a smaller and more fleet of foot alternative for its customers. “We found a way to make accessing data extremely simple, mashing it together in a logical way and embedding it in every logical place,” explained CEO Amir Orad to us in 2018.

“We have enjoyed watching the Sisense momentum in the past 12 months, the traction from its customers as well as from industry leading analysts for the company’s cloud native platform and new AI capabilities. That coupled with seeing more traction and success with leading companies in our portfolio and outside, led us to want to continue and grow our relationship with the company and lead this funding round,” said Jeff Horing, managing director at Insight Venture Partners, in a statement.

To note, Access Industries is an interesting backer which might also potentially shape up to be strategic, given its ownership of Warner Music Group, Alibaba, Facebook, Square, Spotify, Deezer, Snap and Zalando.

“Given our investments in market leading companies across diverse industries, we realize the value in analytics and machine learning and we could not be more excited about Sisense’s trajectory and traction in the market,” added Claltech’s Daniel Shinar in a statement.

Spotify prototypes Tastebuds to revive social music discovery

Published December 18, 2019

Spotify is prototyping a new way to see what friends have been listening to, called “Tastebuds.” Despite how discovering music is inherently social, Spotify has no features for directly interacting with friends within its mobile app after axing its own inbox in 2017 and keeping its Friend Activity ticker restricted to desktop.

It seemed like Spotify was purposefully restricting social features to force users to rely on the company’s own playlists and discovery surfaces. This gave Spotify the power to play king-maker, massively influencing which artists got featured and rose to stardom. This in turn gave it leverage in its combative negotiations with record labels, which worried their artists might get left off playlists if they don’t play nice with Spotify in terms of sustainable royalty rates and access to exclusives.

That strategy seems to have paid off with Spotify improving its licensing deals and becoming a critical promotional partner for the labels, paving the way to its IPO. Spotify’s shares sit around $152, up from its direct listing price of $132, though down from its first-day pop that saw it rise to $165. More comfortable in its position, now Spotify seems ready to relinquish more control of discovery and enable users to be better inspired by what friends are playing.

Spotify Tastebuds code via Jane Manchun Wong

Tastebuds is designed to let users explore the music taste profiles of their friends. Tastebuds lives as a navigation option alongside your Library and Home/Browse sections. Anyone can access a non-functioning landing page for the feature at https://open.spotify.com/tastebuds. The feature explains itself, with text noting “What’s Tastebuds? Now you can discover music through friends whose taste you trust.”

The prototype feature was discovered in the web version of Spotify by reverse engineering sorceress and frequent TechCrunch tipster Jane Manchun Wong, who gave us some more details on how it works. Users tap the pen icon to “search the people you follow.” From there they can view information about what users have been playing most and easily listen along or add songs to their own library.

Without Tastebuds, there are only a few buried ways to interact socially on Spotify. You can message friends a piece of music through buttons for SMS, Facebook Messenger and more, or post songs to your Instagram or Snapchat Story. Spotify used to have an in-app inbox for trading songs, but removed it in favor of shuttling users to more popular messaging apps. On the desktop app, but not mobile or web, you can view a Friend Activity ticker of songs your Facebook friends are currently listening to. Or you can search for specific users and follow them or view playlists they’ve made public, though Spotify doesn’t promote user search much.

Spotify has a few other social features it has experimented with but never launched. Those include a Friends Weekly playlist spotted last year by The Verge’s Dani Deahl. Then this May, we reported Wong had spotted a shared-queue Social Listening feature that let you and friends play songs simultaneously while apart. Back in 2014, I wrote that Spotify should move beyond blog-esque browsing to create a “PlayFeed” playlist that would dynamically update with algorithmic recommendations, new releases from your top artists and friends’ top listens. It has since launched Discovery Weekly and Release Radar, and Tastebuds could finally bring in that final social piece.

Spotify’s simultaneous social listening prototype

The result is that you can only see either a myopic snapshot of friends’ current songs, the few and often outdated playlists they manually made public or you message them songs elsewhere. There was no great way to get a holistic view of what a friend has been jamming to lately, or their music preferences overall.

We’ve reached out to Spotify seeking more information about how Tastebuds works, how privacy functions around who can see what and if and when the feature might launch. We’re also interested to see if Spotify has any deal in place with a music dating startup called Tastebuds.fm which launched way back in 2010 to help people connect and flirt through song sharing. [Update: A Spotify spokesperson confirms that “We’re always testing new products and experiences, but have no further news to share at this time.” They also said this is not related to the Tastebuds.fm startup.]

Social is a huge but under-tapped opportunity for Spotify. Not only could social recommendations get users listening to Spotify for longer, thereby hearing more ads or becoming less likely to cancel their subscription, it also helps Spotify lock in users with a social graph they can’t find elsewhere. While competitors like Apple Music or YouTube might offer similar music catalogs, users won’t stray from Spotify if they become addicted to social discovery through Tastebuds.

How Spotify is finally gaining leverage over record labels

Is a direct listing the right choice for your company?

Published December 18, 2019

Ran Ben-Tzur
Contributor

Ran Ben-Tzur is a corporate partner at Fenwick & West. Ran’s issuer-side initial public offerings include Facebook, Fitbit, Upwork, Zuora and Peloton Interactive.

Jamie Evans
Contributor

Jamie Evans is the co-chair of Fenwick & West’s Capital Markets & Public Companies group. Jamie’s representative initial public offerings include Smartsheet, Redfin, Fitbit and Facebook.

Spotify did it. Slack did it. Many other late-stage private technology companies are reported to be seriously considering it. Should yours?

If you are a board member of a late-stage, venture-backed company or part of its management team, you likely have heard of the term “direct listing.” Or you may have attended one or all of the slew of recent conferences being hosted by big-name investment banks and others, including tech investor guru Bill Gurley, who recently debated the pros and cons of choosing a direct listing over a traditional IPO.

Before you decide what’s right for your company, here are a few things you need to know about direct listings.

Direct listings vs. IPOs

For people not familiar with the term, a direct listing is an alternative way for a private company to “go public,” but without selling its shares directly to the public and without the traditional underwriting assistance of investment bankers.

In a traditional IPO, a company raises money and creates a public market for its shares by selling newly created stock to investors. In some instances, a select number of pre-IPO investors, usually very large stockholders or management, may also sell a portion of their holdings in the IPO. In an IPO, the company engages investment bankers to help promote, price and sell the stock to investors. The investment bankers are paid a commission for their work that is based on the size of the IPO—usually seven percent for a traditional technology company IPO.

In a direct listing, a company does not sell stock directly to investors and does not receive any new capital. Instead, it facilitates the re-sale of shares held by company insiders such as employees, executives and pre-IPO investors. Investors in a direct listing buy shares directly from these company insiders.

Does this mean that a company doing a direct listing doesn’t need investment banks? Not quite. Companies still engage investment banks to assist with a direct listing and those banks still get paid quite well (to the tune of $35 million in Spotify and $22 million in Slack).

However, the investment banks play a very different role in a direct listing. Unlike a traditional IPO, in a direct listing, investment banks are prohibited under current law from organizing or attending investor meetings and they do not sell stock to investors. Instead, they act purely in an advisory capacity helping a company to position its story to investors, draft its IPO disclosures, educate a company’s insiders on process and strategize on investor outreach and liquidity.

Understanding the current direct listings trend

The concept of a direct listing is actually not a new one. Companies in a variety of industries have used similar structures for years. However, the structure has only recently received a lot of investor and media attention because high-profile technology companies have started to use it to go public. But why have technology companies only recently started to consider direct listings?

The rise of massive pre-IPO fundraising rounds

With an abundance of investor capital, especially from institutional investors that historically hadn’t invested in private technology companies, massive pre-IPO fundraising rounds have become the norm. Slack raised over $400 million in August 2018—just over a year prior to its direct listing. Because of this widespread availability of capital, some technology companies are now able to raise sufficient capital before their actual IPO to either become profitable or put them on a path to profitability.

Criticism of current IPO process

There has been increasing negative sentiment, especially amongst well-known venture capitalists, about certain aspects of the traditional IPO process—namely IPO lock-up agreements and the pricing and allocation process.

IPO lock-up agreements. In a traditional IPO, investment bankers require pre-IPO investors, employees and the company to sign a “lock-up agreement” restricting them from selling or distributing shares for a specified period of time following the IPO—usually 180 days. The bankers put these agreements in place in order to stabilize the stock immediately after the IPO. While the merits of a lock-up agreement can certainly be debated, by the time VCs (and other insiders) are allowed to sell following an IPO, oftentimes the stock price has fallen significantly from its highs (sometimes to below the IPO price) or the post lock-up flood of selling can have an immediate negative impact on the trading price.

In a direct listing, there is no lock-up agreement, which allows for equal access to the offering to all of the company’s pre-IPO investors, including rank-and-file employees and smaller pre-IPO stockholders.

IPO pricing and allocation: In a traditional IPO, shares are often allocated directly by a company (with the assistance of its underwriters) to a small number of large, institutional investors. Traditional IPOs are often underpriced by design to provide large institutional investors the benefit of an immediate 10-15% “pop” in the stock price. Over the last few years, some of these “pops” have become more pronounced. For example, Beyond Meat’s stock soared from $25 to $73 on its first day of trading, a 163% gain. This has fueled a concern, particularly shared amongst the VC community, that investment banks improperly price and allocate shares in an IPO in order to benefit these institutional investors, which are also clients of the same investment banks that are underwriting the IPO. While the merits of this concern can also be debated, in instances where there is a large price discrepancy between the trading price of the stock following the IPO and the price of the IPO, there is often a sense that companies have left money on the table and that pre-IPO investors have suffered unnecessary dilution. If the IPO had been priced “correctly,” the company would have had to sell fewer shares to raise the same amount of proceeds.

Because a company is not selling stock in a direct listing, the trading price after listing is purely market driven and is not “set” by the company and its investment bankers. Moreover, since no new shares are issued in a direct listing, insiders do not suffer any dilution.

The Spotify effect

Before Spotify’s direct listing, technology companies hadn’t used the direct listing structure to go public. Spotify was, in many ways, the perfect test case for a direct listing. It was well known, didn’t need any additional capital and was cash flow positive. In addition, prior to its direct listing, Spotify had entered into a debt instrument that penalized the company so long as it remained private. As a result, it just needed to go public. After clearing some regulatory hurdles, Spotify successfully executed its direct listing in April 2018. After Spotify’s direct listing, Slack (relatively) quickly followed suit. Slack’s direct listing was notable because it represented the first traditional Silicon Valley-based VC-backed company to use the structure. It was also an enterprise software company, albeit one with a consumer cult following.

Is a direct listing right for my company?

While a direct listing offers many benefits, the structure does not make sense for every company. Below is a list of key benefits and drawbacks:

Domio raises $100M in equity and debt to take on Airbnb and hotels with its curated apartments

Published December 17, 2019

Airbnb has well and truly disrupted the world of travel accommodation, changing the conversation not just around how people discover and book places to stay, but what they expect when they get there, and what they expect to pay. Today, one of the startups riding that wave is announcing a significant round of funding to fuel its own contribution to the marketplace.

Domio, a startup that designs and then rents out apart-hotels with kitchens and other full-home experiences, has raised $100 million ($50 million in equity and $50 million in debt) to expand its business in the U.S. and globally to 25 markets by next year, up from 12 today. Its target customers are millennials traveling in groups or families swayed by the size and scope of the accommodation — typically five times bigger than the average hotel room — as well as the price, which is on average 25% cheaper than a hotel room.

The Series B, which actually closed in August of this year, was led by GGV Capital, with participation from Eldridge Industries, 3L Capital, Tribeca Venture Partners, SoftBank NY, Tenaya Capital and Upper90. Upper90 also led the debt round, which will be used to lease and set up new properties.

Domio is not disclosing its valuation, but Jay Roberts, the founder and CEO, said in an interview that it’s a “huge upround” and around 50x the valuation it had in its seed round and that the company has tripled its revenues in the last year. Prior to this, Domio had only raised around $17 million, according to data from PitchBook.

For some comparisons, Sonder — another company that rents out serviced apartments to the kind of travelers who have a taste for boutique hotels — earlier this year raised $225 million at a valuation north of $1 billion. Others like Guesty, which are building platforms for others to list and manage their apartments on platforms like Airbnb, recently raised $35 million with a valuation likely in the range of $180 million to $200 million. Airbnb is estimated to be valued around $31 billion.

Domio plays in an interesting corner of the market. For starters, it focuses its accommodations at many of the same demographics as Airbnb. But where Airbnb offers a veritable hodgepodge of rooms and homes — some are people’s homes, some are vacation places, some never had and never will have a private occupant, and across all those the range of quality varies wildly — Domio offers predictability and consistency with its (possibly more anodyne) inventory.

“We are competing with amateur hosts on Airbnb,” said Roberts, who previously worked in real estate investment banking. “This is the next step, a modern brand, the next Marriott but with a more tech-powered brain and operating model.” These are not to be confused with something like Hilton’s Homewood Suites, Roberts stressed to me. He referred to Homewood as “a soulless hotel chain.”

“Domio is the anti-hotel chain,” he added.

Roberts is also quick to describe how Domio is not a real estate company as much as it is a tech-powered business. For starters, it uses quant-style algorithms that it’s built in-house to identify regions where it wants to build out its business, basing it not just on what consumers are searching for, but also weather patterns, economic indicators and other factors. After identifying a city or other location, it works on securing properties.

It typically sets up its accommodations in newer or completely new buildings, where developers — at least up to now — are not usually constructing with short-term rentals in mind. Instead, they are considering an option like Domio as an alternative to selling as condominiums or apartments, something that might come up if they are sensing that there is a softening in the market. “We typically have 75%-78% occupancy,” Roberts said. He added that hotels on average have occupancy rates in the high 60% nationally.

As Domio lengthens its track record — its 12 U.S. markets include Miami, Los Angeles, Philadelphia and Phoenix — Roberts says that they’re getting a more select seat at the table in conversations.

“Investors are starting to go out to buy properties on our behalf and lease them to us,” he said. This gives the startup a much more favorable rate and terms on those deals. “The next step is that Domio will manage these directly.” The most recent property it signed, he noted, includes a Whole Foods at the ground level, and a gym.

Using technology to identify where to grow is not the only area where tech plays a role. Roberts said that the company is now working on an app — yet to be released — that will be the epicenter of how guests interact to book places and manage their experience once there.

“Everything you can do by speaking to a human in a traditional hotel you will be able to do with the Domio app,” he said. That will include ordering room service, getting more towels, booking experiences and getting restaurant recommendations. “You can book your Uber through the Domio app, or sync your Spotify account to play music in the apartment.

Ans there are plans to extend the retail experience using the app. Roberts says it will be a “shoppable” experience where, if you like a sofa or piece of art in the place where you’re staying, you can order it for your own home. You can even order the same wallpaper that’s been designed to decorate Domio apartments.

Ripe for the booking

Although Airbnb has grown to be nearly as ubiquitous as hotels (and perhaps even more prominent, depending on who you are talking to), the wider travel and accommodation market is still ripe for the taking, estimated to reach $171 billion by 2023 and the highest growth sector in the travel industry.

“Airbnb has taught us that hotels are not the only place to stay,” said Hans Tung, GGV’s managing partner. “Domio is capitalizing on the global shift in short-term travel and the consumer demand for branded experiences. From my travels around the world, there is a large, underserved audience — millennials, families, business teams — who prefer the combined benefits of an apartment and hotel in a single branded experience.”

I mentioned to Roberts that the leasing model reminded me a little of WeWork, which itself does not own the property it curates and turns into office space for its tenants. (The SoftBank investor connection is interesting in that regard.) Roberts was very quick to say that it’s not the same kind of business, even if both are based around leased property re-rented out to tenants.

“One of the things we liked about Domio is that is very capital-efficient,” said Tung, “focusing on the model and payback period. The short-term nature of customer stays and the combination of experience/price required to maintain loyal customers are natural enforcers of efficient unit economics.”

“For GGV, Domio stands out in two ways,” he continued. “First, CEO Jay Roberts and the Domio team’s emphasis on execution is impressive, with expansion into 12 cities in just three years. They have the right combination of vision, speed and agility. Domio’s model can readily tap into the global opportunity as they have ambition to scale to new markets. The global travel and tourism spend is $2.8 trillion with 5 billion annual tourists. Global travelers like having the flexibility and convenience of both an apartment and hotel — with Domio they can have both.”

Atomico partner Tom Wehmeier reviews ‘The State of European Tech’ 2019 report

Published December 2, 2019

Atomico, the European venture capital firm founded by Skype’s Niklas Zennström, has released its latest annual The State of European Tech report, published in partnership with Slush and Orrick.

As part of the report, the authors surveyed 5,000 members of the ecosystem — including 1,000 founders — as well as pulling in robust data from other sources, such as Dealroom and the London Stock Exchange .

This year, the report reveals that the European tech ecosystem continues to mature and shows no sign of slowing — particularly highlighting the contrast from five years ago when the The State of European Tech report made its debut. Almost every key indicator is up and to the right, except, rather depressingly, diversity.

The data shows, for example, that competition for talent and access to the best founders has increased ferociously. And from a funding perspective, European founders have more choice than ever, especially with U.S. and Asian VC firms investing more and more in the region. Progress with gender diversity stalled, however, such as 92% of funding going to all-male teams.

I caught up with the report’s author Tom Wehmeier, Partner and Head of Insights at Atomico (also sometimes jokingly referred to as the “Mary Meeker of Europe”), where we discuss in more detail some of the key findings and why, it seems, that the rest of the world has finally woken up to Europe’s tech potential.

But first, a few headlines from the report:

European technology companies are on track to raise a record 30$B+ in funding in 2019, up from $25B the year before. (Source: Dealroom)
Despite failing to match the level of venture-backed exits of 2018, there was a record number of 40 $100M-plus deals as of September 2019, a size that many European tech sceptics did not believe was possible. (Source: Dealroom)
A number of multi-billion-dollar non-venture backed companies like Nexi and Trainline made their debut on the public markets.
European tech policymaking remains a mystery to many European founders.
When asked to describe the top priority of the European Commission in terms of tech policy, 40% of founders and startup employees say they don’t feel informed enough to comment. (Source: survey)
Despite this reported lack of awareness on policy issues, all respondents voted EU competition commissioner Margrethe Vestager as the person who had the most influence on European tech in 2019, good or bad. (Source: survey)
European parliamentarians aren’t talking about fintech and digital health, two sectors which investors poured a combined $12.7bn into last year (Source: Politico and Dealroom)
Europe’s diversity figures are still grim reading.
In 2019, 92% of funding went to all-male teams, a similar level to 2018. (Source: Dealroom)
There is still only one woman CTO in the 119 companies (<1%) based on a sample of executives in CxO positions at 251 European VC-backed tech companies that raised a Series A or B round between 1 October 2018 and 30 September 2019 with more than $10M funding, even though 7.5% of software engineers are women. (Source: Stack Overflow, Craft, Dealroom)
Looking beyond gender diversity, ethnic minorities in tech experienced discrimination at a much high rate than white peers. (Source: survey)
At least 80% of Black/African/Caribbean respondents who reported experiencing discrimination linked it to their ethnicity. (Source: survey)
63% of women VCs reported increased focus on attending events with stronger participation from diverse founders. The corresponding number for men VCs was only 33% of female respondents suggested that their male counterparts are leaving female VCs to fix Europe’s diversity problem. (Source: survey)
European founders aren’t just aiming for commercial success — they are trying to solve some of the world’s largest problems.
One in five European founders states that their company is already measuring its societal and/or environmental impact. (Source: survey)
Only 14% of founders don’t believe it’s relevant for their company. Founders that are women are much more likely to be advanced in their approach to measuring impact. (Source: survey)
Employees are placing a greater emphasis on corporate social responsibility, with 57% citing its importance in the State of European Tech survey. (Source: survey)

Extra Crunch: It is 5 years since Atomico published the first The State of European Tech report, which really attempted to capture a data-driven snapshot of the entire ecosystem. What are some of the biggest changes you’ve seen within European tech in the intertwining years or in this year in particular?

Tom Wehmeier: If I think back to when we did the first report, people who believe that Europe could actually be an interesting player in global technology, were largely limited to people who were in the tech industry in Europe itself. If you then fast forward to today, what has clearly happened — and I think 2019 was the year where this really materialized and became part of the narrative — was that belief translating from people on the inside to a bunch of people that were on the outside.

Most obviously has been the strength of interest from from the U.S. and the number of top-tier U.S. funds that are not just increasing their level of investment activity but committing to spending more and more time here on the ground, hiring people, building teams, building a network, and getting to know companies. I think it probably surprises people to know that 19% of all rounds this year will involve at least one U.S. investor in Europe, which is more than double since since the first year we did the report.

I think the other thing, where I come back to this idea that now we have finally convinced a certain group of people about the role that Europe can play, is mainstream institutional investors. I know it is not going to be lost on you, [but] this is going to be another record year for VC fund raising from Europe. And whilst the headline numbers might not be a surprise, I think what should catch people’s attention is that the composition of the LP base here in Europe is now shifting. And finally, there’s an unlocking of institutional investors, [by which] I mean pension funds, funds of funds, insurance companies, sovereign wealth funds, who are committing to European VC at levels that are significantly increased and elevated from where they had been in the past. So, if you just take pension funds, we’re going to see close to a billion dollars invested which is up nearly three fold.

It’s a validation of what’s happening around European tech to see that now coming through and I think is ultimately something that helps to build a foundation for the next five years of success. As much as this is a report that’s looking back, it’s also about trying to understand where things go from here.

With regards to the pension funds, do you think that is driven by the general bullishness towards European tech, or do you think it’s more the macro economic reality that maybe other places where they could put their money aren’t very attractive at the moment?

I think it’s really a reflection that there’s a strong level of belief that European venture as an asset class is an attractive investment opportunity. And that is reflected by the numbers. One of the charts that we’ve got in the report is from Cambridge Associates who do the benchmarking for the VC indices… And when you look back over a 1, 3, 5, or even a 10 year horizon, the performance from European VC is demonstrating that this is a place where for anyone building a diversified portfolio, they should have some allocation. I think it’s fundamentally the strength of the investment opportunity. That is the single biggest driver for why you’re seeing this happen.

I think the biggest thing that Europe has been able to prove is that it can take a great idea and turn it into a great company and that company can scale to not just a billion dollar outcome but to a multi-billion dollar outcome and go all the way through into an IPO or into a large scale acquisition. What you’ve seen happen in 2019 is in part A reflection of what happened last year where it was obviously this record year with Spotify, Adyen, Farfetch, Elastic and others that really showed you can go full cycle from start all the way to finish. And that the magnitude of those outcomes can be at a scale that makes them globally relevant.

Are the pension funds shifting their allocation of VC away from other geographies or are they just doing more VC as a whole?

Startups Weekly: Chinese investors double down on African startups

Published November 30, 2019

Hello and welcome back to Startups Weekly, a weekend newsletter that dives into the week’s noteworthy startups and venture capital news. Before I jump into today’s topic, let’s catch up a bit. Last week, I wrote about Airbnb’s issues. Before that, I noted Uber’s new “money” team.

Remember, you can send me tips, suggestions and feedback to kate.clark@techcrunch.com or on Twitter @KateClarkTweets. If you’re new, you can subscribe to Startups Weekly here.

China’s pivot to Africa

Three African fintech startups; OPay, PalmPay and East African trucking logistics company Lori Systems, closed large fundraises this year. On their own, the deals aren’t particularly notable, but together, they expose a new trend within the African startup ecosystem.

This year, those three companies brought in a total of $240 million in venture capital funding from 15 different Chinese investors, who’ve become increasingly active in Africa’s tech scene. TechCrunch reporter Jake Bright, who covers African tech, writes that 2019 marks “the year Chinese investors went all in on the continent’s startup scene” — particularly its fintech projects. Why?

“The continent’s 1.2 billion people represent the largest share of the world’s unbanked and underbanked population — which makes fintech Africa’s most promising digital sector,” Bright notes. “In previous years, the country’s interactions with African startups were relatively light compared to deal-making on infrastructure and commodities. Chinese actors investing heavily in African mobile consumer platforms lends to looking at new data-privacy and security issues for the continent.”

Active Chinese investors in Africa include Hillhouse Capital, Meituan-Dianping, GaoRong, Source Code Capital, SoftBank Ventures Asia, BAI, Redpoint, IDG Capital, Sequoia China, Crystal Stream Capital, GSR Ventures, Chinese mobile-phone maker Transsion and NetEase .

Here’s more of TechCrunch’s recent coverage of Africa startup activity:

VC Deals

It was a short week (Happy Thanksgiving, by the way). But here’s a quick look at the top deals of the last few days.

M&A (VR edition)

Last week, Facebook announced it was buying Beat Games, the game studio behind Beat Saber, a rhythm game that’s equal parts Fruit Ninja and Guitar Hero. Heard of the company? Maybe if you’re a gamer, but if you’re readying this newsletter because of your interest in VC, this company may not have come across your radar.

Why? It’s one of virtual reality’s biggest successes today, but it’s just an eight-person team with no funding.

“I’m really proud that we were able to build the company with this mindset of making decisions based on what is good for the game and not what is the most profitable thing,” Beat Games CEO told TechCrunch earlier this year. Read about Facebook’s acquisition here and an in-depth profile of the small team here.

Equity

If you like this newsletter, you will definitely enjoy Equity, which brings the content of this newsletter to life — in podcast form! Join myself and Equity co-host Alex Wilhelm every Friday for a quick breakdown of the week’s biggest news in venture capital and startups.

This week, we discussed Weekend Fund’s new vehicle, Cocoon’s new friend-tracking app and the unfortunate demise of a startup called Omni. You can listen here.

Equity drops every Friday at 6:00 am PT, so subscribe to us on Apple Podcasts, Overcast, Spotify and all the casts.

NYSE proposes big change to direct listings

Published November 26, 2019

The New York Stock Exchange filed paperwork this morning with the U.S. Securities and Exchange Commission to allow companies to raise capital as part of a direct listing.

Direct listings are a way for companies to go public by selling existing shares held by insiders, employees and investors directly to the market, rather than the traditional method of issuing new shares. Direct listings have become increasingly popular since Spotify’s 2018 exit, which allowed its employees immediate liquidity, removed preferred access from bankers and allowed for market-driven price discovery. Companies, like Spotify, that opt to complete a direct listing are able to bypass the financial roadshow, thus avoiding some of Wall Street’s exorbitant fees. Historically, however, these companies have not been able to raise fresh capital as part of the process.

The NYSE’s new proposal seeks to change that. Specifically, the stock exchange plans to amend Chapter One of the Listed Company Manual, which outlines the NYSE’s initial listing requirements for companies completing initial public offerings or direct listings. If the amendment is approved—the NYSE is subject to the regulatory oversight of the SEC—companies going public on the NYSE will be permitted to raise capital through a direct listing.

The document states the proposed change “would allow a company that has not previously had its common equity securities registered under the Act, to list its common equity securities on the Exchange at the time of effectiveness of a registration statement pursuant to which the company will sell shares in the opening auction on the first day of trading on the Exchange (a “Primary Direct Floor Listing”). The proposal would permit a company to conduct a Primary Direct Floor Listing in addition to, or instead of, a Selling Shareholder Direct Floor Listing.”

The proposed hybrid model is likely to appeal to Silicon Valley tech startups, who’ve grown more familiar with the innovate route to the public markets following Spotify and Slack’s direct listings. On the backs of these exits, tech industry leaders have touted direct listings as the latest and greatest path to the public markets. Venture capitalist Bill Gurley, in particular, has encouraged companies to consider the method. Meanwhile Silicon Valley darling Airbnb, which has stated its intent to go public in 2020, is said to be considering a direct listing rather than a traditional IPO.

Gurley, who has expressed his discontent with bankers’ inability to adequately price IPOs, recently hosted a one-day conference focused on direct listings titled Direct Listings: A Simpler and Superior Alternative to the IPO. The event was attended by members of tech’s elite, including Sequoia Capital’s Mike Moritz and Spotify chief financial officer Barry McCarthy .

“Most people are afraid of backlash from the banks so they don’t speak out,” Gurley told CNBC earlier this year of his decision to publicly advocate for direct listings. “I’m at a point in my career where I can handle the heat.”

TechCrunch Conversations: Direct listings

Equity Dive: Poshmark’s origin story with co-founder & CEO Manish Chandra

Published November 22, 2019

Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast, where we unpack the numbers behind the headlines.

We have something a bit different for you this week. Equity co-host Kate Clark recently sat down with Manish Chandra, the co-founder and chief executive officer of Poshmark, and one of his earliest investors, NFX managing partner James Currier.

If you haven’t heard of Poshmark, it’s an online platform for buying and selling clothes. Basically, it’s the thrift shop of the 21st century. We asked Chandra how he and co-founders Tracy Sun, Gautam Golwala and Chetan Pungaliya cooked up the idea for Poshmark, what bumps they faced along the way, how they raised venture capital and, of course, what details of their upcoming initial public offering he could share with us. Meanwhile, Currier dished about the company’s early days, when the Poshmark team worked hard on the floor of Currier’s office.

Unfortunately, neither Chandra or Currier were willing to share deets about Poshmark’s IPO, reportedly expected soon. But they both shared interesting insights into building a successful venture-backed company, battling competition and putting your best foot forward.

Glad you guys came back for another episode, we’ll see you soon.

Equity drops every Friday at 6:00 am PT, so subscribe to us on Apple Podcasts, Overcast, Spotify and all the casts.

Spotify turns its personalization technology to podcasts with launch of Your Daily Podcasts

Published November 19, 2019

Spotify is taking the personalization technology that powers its music playlists, like Discover Weekly and Daily Mix, and turning it to podcasts. The company announced this morning the launch of a new podcast playlist called Your Daily Podcasts, that allows users to discover new shows and keep up with their favorites. In other words, it’s a discovery mechanism for finding new podcasts — similar to how Discovery Weekly will recommend new music.

The playlist will only appear when you’ve listened to at least four podcasts in the past 90 days, Spotify says. It will be available in the “Your Top Podcasts” shelf in the Home tab or in the “Made for You” hub in the app.

As with Spotify’s music playlists, algorithms will be used to analyze your podcast listening behavior like what’s you’ve recently streamed and what you follow. It will then recommend what episode to listen to next based on this history and what sort of podcasts you like. This could be the next episode in something you’re already listening to, a standalone evergreen episode from a popular podcast, or a more timely episode from a daily updating podcast, the company says. It also promises it won’t skip ahead if you’re listening to a story-driven sequential series.

After a few recommended episodes from your own subscriptions or history, Spotify will suggest new shows and begin playing their episodes after a brief intro that says, “And now, something new based on your listening.”

But unlike Discover Weekly, where the main goal is to keep users engaged and subscribed to Spotify’s service, Your Daily Podcasts has a secondary motive as well — to point users to Spotify’s own, in-house programs. While the new playlist at launch doesn’t appear to be favoring Spotify’s shows over others, it certainly is including them.

Over time, Spotify’s playlist could help grow the fan bases for its own programming, which listeners can’t get elsewhere. That also keeps them subscribed. Plus, podcasts are another surface against which Spotify can advertise, and they don’t have the hefty licensing fees associated with streaming music — especially when their creation is handled in-house.

In the third quarter, Spotify launched 22 original and exclusive titles from Spotify Studios, including The Ringer: The Hottest Take and The Conversation with Amanda de Cadenet in the U.S. It also launched a number of originals from the studios it recently acquired, Gimlet and Parcast, the company said. As a result of its efforts, it’s seeing exponential growth in podcast hours streamed (up 39% from the prior quarter).

However, podcast adoption among the overall user base lags…just under 14% of users are listening to the audio programs. A new playlist like this could help, but it also misunderstands how some people listen to audio shows. They don’t necessarily want to hear any ol’ program they like at any time. Much like selecting something to watch on TV, people will be in the “mood” for one type of podcast over another at different times. Sometimes, it may be true crime, sometimes news, sometimes pop culture, sometimes comedy, etc. Throwing all those genres into the same mix is a disjointed experience.

If anything, Spotify should be trying to design a podcast experience that looks more like Netflix than a music app. Perhaps with rows where there are different grouping by genre or topic, or rows featuring short-form quick bites or longer, in-depth shows. A row with clips where you could check out new shows then click “subscribe” to keep following them. It could even put easy-to-access buttons next to these rows in order to launch a stream of favorites from a given genre. Basically, personalize the whole podcast interface so it feels like your own rather than trying to do that within a single playlist.

This is not Spotify’s first attempt at a podcast playlist. It also recently launched “Your Daily Drive” which combines music and podcasts. And it now allows users to create their own playlists using podcasts.

Spotify says the new playlist is available free and Premium users in U.S., U.K., Germany, Sweden, Mexico, Brazil, Canada, Australia, and New Zealand.

Spotify confirms it’s testing real-time lyrics synced to music

Published November 14, 2019

With the launch of iOS 13, Apple added perfectly timed live lyrics to its Apple Music app. Now Spotify may do the same. Several users in international markets are now seeing a similar synced lyrics feature in their Spotify mobile app, where lyrics scroll by in time with the music. The feature is powered by Musixmatch, according to the screenshots. Spotify confirmed to TechCrunch the feature is a test in a limited number of markets.

While Spotify didn’t confirm which regions have access, we’re seeing that users in Canada, Indonesia and Mexico appear to be among the test markets.

The feature sits beneath the playback controls where today, other enhancements like Behind the Lyrics or Storyline, currently appear. And users say they can also view the lyrics in a full-screen experience.

We were not able to duplicate the same experience here in the U.S., which indicates it’s still limited by geography.

Spotify kalian ada lirik nya tak?:”V
Ini tiba tiba ada:”V kaget gw:”V eh trnyta dari musixmatch:V pic.twitter.com/DFO54qFzuQ

— Aku sayang Wandireksen :(( (@notfndm) November 14, 2019

Bisa full screen juga

Terus ternyata dari musixmatch sepertiny mereka bekerjasm pic.twitter.com/EFqZom2Wmm

— 𝙉𝙤𝙧𝙖▯ (@lasttosleep) November 13, 2019

ahora spotify ha vuelto con ponerte los lyrics (gracias musicxmatch) y obvio lo más importante era hacer esto pic.twitter.com/Ip9goVs7SI

— mar crocs (@hijodeIaluna) November 14, 2019

Spotify had lyrics support on the desktop several years ago, but that feature was later removed. Since then, users have repeatedly asked when it would return. On Spotify’s user feedback community, for example, a request asking the company to “bring back lyrics” was upvoted more than 14,300 times. Spotify wouldn’t respond to user requests except to point users to its Genius integration, Behind the Lyrics.

Genius, however, doesn’t provide full lyrics. Instead, it’s a way to annotate tracks with a combination of lyrics and stories. While the feature can be both informative and entertaining, it’s not necessarily the experience people want when they’re trying to learn the words to a song.

Currently, neither Spotify’s desktop or mobile app has lyrics support, with the exception of Japan. It also regularly runs tests like this, so this is not a confirmation of a near-term launch.

Spotify’s decision to not make lyrics integration a priority has given Apple Music a competitive advantage in terms of its feature set. While it may not be a key selling point, per se — Spotify now has 113 million paying customers to Apple Music’s 60 million — it could help to retain users who don’t want to lose access by switching. Amazon has also capitalized on Spotify’s lack of lyrics with integrations of music and lyrics on Alexa devices.

Reached for comment, a Spotify spokesperson confirmed a synced lyrics experience is something it’s testing.

“We can confirm we are testing this feature in a small number of markets,” the spokesperson said. “At Spotify, we are always testing new products and experiences but have no further news to share at this time.”