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Startups Weekly: Will the real unicorns please stand up?
Hello and welcome back to Startups Weekly, a newsletter published every Saturday that dives into the week’s noteworthy venture capital deals, funds and trends. Before I dive into this week’s topic, let’s catch up a bit. Last week, I wrote about the sudden uptick in beverage startup rounds. Before that, I noted an alternative to venture capital fundraising called revenue-based financing. Remember, you can send me tips, suggestions and feedback to kate.clark@techcrunch.com or on Twitter @KateClarkTweets.
Here’s what I’ve been thinking about this week: Unicorn scarcity, or lack thereof. I’ve written about this concept before, as has my Equity co-host, Crunchbase News editor-in-chief Alex Wilhelm. I apologize if the two of us are broken records, but I think we’re equally perplexed by the pace at which companies are garnering $1 billion valuations.
Here’s the latest data, according to Crunchbase: “2018 outstripped all previous years in terms of the number of unicorns created and venture dollars invested. Indeed, 151 new unicorns joined the list in 2018 (compared to 96 in 2017), and investors poured more than $135 billion into those companies, a 52% increase year-over-year and the biggest sum invested in unicorns in any one year since unicorns became a thing.”
2019 has already coined 42 new unicorns, like Glossier, Calm and Hims, a number that grows each and every week. For context, a total of 19 companies joined the unicorn club in 2013 when Aileen Lee, an established investor, coined the term. Today, there are some 450 companies around the globe that qualify as unicorns, representing a cumulative valuation of $1.6 trillion. 
We’ve clung to this fantastical terminology for so many years because it helps us classify startups, singling out those that boast valuations so high, they’ve gained entry to a special, elite club. In 2019, however, $100 million-plus rounds are the norm and billion-dollar-plus funds are standard. Unicorns aren’t rare anymore; it’s time to rethink the unicorn framework.
Petition to stop using the term “unicorn” unless the company is valued at more than $1 billion *and* profitable.
— Kate Clark (@KateClarkTweets) May 22, 2019
Last week, I suggested we only refer to profitable companies with a valuation larger than $1 billion as unicorns. Understandably, not everyone was too keen on that idea. Why? Because startups in different sectors face barriers of varying proportions. A SaaS company, for example, is likely to achieve profitability a lot quicker than a moonshot bet on autonomous vehicles or virtual reality. Refusing startups that aren’t yet profitable access to the unicorn club would unfairly favor certain industries.
So what can we do? Perhaps we increase the valuation minimum necessary to be called a unicorn to $10 billion? Initialized Capital’s Garry Tan’s idea was to require a startup have 50% annual growth to be considered a unicorn, though that would be near-impossible to get them to disclose…
While I’m here, let me share a few of the other eclectic responses I received following the above tweet. Joseph Flaherty said we should call profitable billion-dollar companies Pegasus “since [they’ve] taken flight.” Reagan Pollack thinks profitable startups oughta be referred to as leprechauns. Hmmmm.
The suggestions didn’t stop there. Though I’m not so sure adopting monikers like Pegasus and leprechaun will really solve the unicorn overpopulation problem. Let me know what you think. Onto other news.
Image by Rafael Henrique/SOPA Images/LightRocket via Getty Images
CrowdStrike has set its IPO terms. The company has inked plans to sell 18 million shares at between $19 and $23 apiece. At a midpoint price, CrowdStrike will raise $378 million at a valuation north of $4 billion.
Slack inches closer to direct listing. The company released updated first-quarter financials on Friday, posting revenues of $134.8 million on losses of $31.8 million. That represents a 67% increase in revenues from the same period last year when the company lost $24.8 million on $80.9 million in revenue.
Online lender SoFi has quietly raised $500M led by Qatar
Groupon co-founder Eric Lefkofsky just-raised another $200M for his new company Tempus
Less than 1 year after launching, Brex eyes $2B valuation
Password manager Dashlane raises $110M Series D
Enterprise cybersecurity startup BlueVoyant raises $82.5M at a $430M valuation
Talkspace picks up $50M Series D
TaniGroup raises $10M to help Indonesia’s farmers grow
Stripe and Precursor lead $4.5M seed into media CRM startup Pico
Maveron, a venture capital fund co-founded by Starbucks mastermind Howard Schultz, has closed on another $180 million to invest in early-stage consumer startups. The capital represents the firm’s seventh fundraise and largest since 2000. To keep the fund from reaching mammoth proportions, the firm’s general partners said they turned away more than $70 million amid high demand for the effort. There’s more where that came from, here’s a quick look at the other VCs to announce funds this week:
- EV Growth closes $200M fund to cover Southeast Asia’s Series B funding gap
- Northwestern Mutual has carved out another $150M for a fintech and insurtech fund
- Future Positive Capital gets $57M to invest in European startups tackling the world’s ‘most pressing problems’
This week, I penned a deep dive on Slack, formerly known as Tiny Speck, for our premium subscription service Extra Crunch. The story kicks off in 2009 when Stewart Butterfield began building a startup called Tiny Speck that would later come out with Glitch, an online game that was neither fun nor successful. The story ends in 2019, weeks before Slack is set to begin trading on the NYSE. Come for the history lesson, stay for the investor drama. Here are the other standout EC pieces of the week.
- Fundraising 101: How to trigger FOMO among VCs by Eric Peckham
- Airbnb’s J Crowley on what makes a great product manager by Jordan Crook
- The savage genius of SoftBank by Josh Constine
If you enjoy this newsletter, be sure to check out TechCrunch’s venture-focused podcast, Equity. In this week’s episode, available here, Crunchbase News editor-in-chief Alex Wilhelm and I debate whether the tech press is too negative or too positive in its coverage of tech startups. Plus, we dive into Brex’s upcoming round, SoFi’s massive raise and CrowdStrike’s imminent IPO.
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Startups Weekly: VCs are drunk on beverage startups
Hello and welcome back to Startups Weekly, a newsletter published every Saturday that dives into the week’s most noteworthy venture deals, fundraises, M&A transactions and trends. Let’s take a quick moment to catch up. Last week, I wrote about an alternative to venture capital called revenue-based financing and before that, I jotted down some notes on one of VCs’ favorite spaces: cannabis tech. Remember, you can send me tips, suggestions and feedback to kate.clark@techcrunch.com or on Twitter @KateClarkTweets.
This week, I want to share some thoughts — questions, rather — on beverages. Just as my inbox has been full of cannabis-related pitches, it’s also been packed with descriptions of new…drinks. Perhaps the most noted so far is Liquid Death, canned water for the punk rock crowd, because why not? Liquid Death has attracted nearly $2 million in funding from angel investors like Away co-founder Jen Rubio and Twitter co-founder Biz Stone. Before I tell you about a few other up-and-coming beverage makers, I must beg the question: Does the beverage industry need disrupting?
Founders say yes. Why? For one, because millennials, according to various studies, are consuming less alcohol than previous generations and are therefore seeking non-alcoholic beverage alternatives. Enter Seedlip, a non-alcoholic spirits company, for example. Or Haus, launching this summer, an all-natural apéritif distilled from grapes that has a lower alcohol content than most hard liquors. Haus, like any good consumer startup in 2019, is shipped directly to your door.
Beverages are being disrupted, there’s no stopping it. pic.twitter.com/DMEg88t4iO
— Kate Clark (@KateClarkTweets) May 21, 2019
Bev, a canned wine business that recently raised $7 million in seed funding from Founders Fund, thinks marketing in the alcohol industry is the problem. Founder Alix Peabody designed a line of female-focused canned rosé. If you’re wondering why alcohol needs to be gendered in such a way, you’re not alone. Peabody explained most alcohol brands cater to men, and that’s a problem.
“The joke I like to make is there’s a go-to type of alcohol for every type of bro and we just don’t have that for women,” Peabody told TechCrunch earlier this year.
Finally, the wellness movement is taking over, driving VCs toward some odd upstarts. From wellness chat and journaling apps to therapy substitutes to fitness companies, stick wellness in a pitch and investors will take a second look. More Labs, for example, is backed with $8 million in VC funding. The company is readying the launch of Liquid Focus, a biohacking-beverage that claims to “solve modern-day stressors without the negative side effects.” Finally, Elements, “an elevated functional wellness beverage formulated with clinical levels of adaptogens to give your body exactly what it needs in four categories (focus, vitality, calm, and rest) for specific cognitive functions” (damn, what copy), recently launched. It doesn’t appear to be funded yet, but let’s just give it a few months.
There’s more where that came from, but I’m done for now. On to other news.
I almost skipped IPO corner this week because no big-name companies dropped or amended their S-1s or completed a highly anticipated IPO, as has been the case basically every week of 2019. But I decided I better give a quick update on Luckin Coffee’s tough second week on the stock market. Luckin Coffee, if you aren’t familiar, is Starbucks’ Chinese rival. The company raised more than $550 million after pricing at $17 per share a little over a week ago. Immediately the stock skyrocketed 20 percent to a roughly $5 billion market cap; then came concerns of the company’s lofty valuation, major cash burn and uncertain path to profitability. Luckin has dropped around 25 percent since closing its debut trading day. It closed Friday down 3 percent.
Y Combinator, the popular accelerator program and investment firm announced this week that it has promoted longtime partner Geoff Ralston to president. This comes two months after former president Sam Altman stepped down to focus his efforts full-time on OpenAI. The promotion of Ralston is an unsurprising choice for YC, an organization that employs roughly 60 people, many of whom have been affiliated with it in one way or another for years.
Automattic acquires subscription payment company Prospress
Shopify quietly acquires Handshake, an e-commerce platform for B2B wholesale purchasing
Streem buys Selerio in an effort to boost its AR conferencing tech
As Amex scoops up Resy, a look at its acquisition history
The Los Angeles ecosystem is $76 million stronger this week as Fika Ventures, a seed-stage venture capital firm, announced its sophomore investment fund. Fika invests roughly half of its capital exclusively in startups headquartered in LA, with a particular fondness for B2B, enterprise and fintech companies. The firm was launched in 2017 by general partners Eva Ho and TX Zhuo, formerly of Susa Ventures and Karlin Ventures, respectively. The pair raised $41 million for the debut effort, opting to nearly double that number the second time around as a means to participate in more follow-on fundings.
DoorDash raises $600M at a $12.7B valuation
TransferWise completes $292M secondary round at a $3.5B valuation
Auth0 raises $103M, pushes its valuation over $1B
Canva gets $70M at a $2.5B valuation
Payment card startup Marqeta confirms $260M round at close to $2B valuation
Modsy scores $37M to virtually design your home
Sun Basket whips up $30M Series E
Zero raises $20M from NEA for a credit card that works like debit
Nigeria’s Gokada raises $5.3M for its motorcycle ride-hail biz
Our premium subscription service had another great week of interesting deep dives. This week, TechCrunch’s Lucas Matney went deep on Getaround’s acquisition of Drivy for his latest installment of The Exit, a new series at TechCrunch where we chat with VCs who were in the right place at the right time and made the right call on an investment that paid off. Here are some of the other Extra Crunch pieces that stood out this week:
- 10 immigration tips for luck-struck tech workers
- When will customers start buying all those AI chips?
- Takeaways from KubeCon; the latest on Kubernetes and cloud-native development
- Why startups need to be careful about export licenses and the Huawei ban
If you enjoy this newsletter, be sure to check out TechCrunch’s venture-focused podcast, Equity. In this week’s episode, available here, Crunchbase News editor-in-chief Alex Wilhelm and I discuss how startups are avoiding IPOs and VC’s insatiable interest in food delivery startups.
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Startups Weekly: There’s an alternative to raising VC and it’s called revenue-based financing
Revenue-based financing is on the rise, at least according to Lighter Capital, a firm that doles out entrepreneur-friendly debt capital.
What exactly is RBF you ask? It’s a relatively new form of funding for tech companies that are posting monthly recurring revenue. Here’s how Lighter Capital, which completed 500 RBF deals in 2018, explains it: “It’s an alternative funding model that mixes some aspects of debt and equity. Most RBF is technically structured as a loan. However, RBF investors’ returns are tied directly to the startup’s performance, which is more like equity.”
Source: Lighter Capital
What’s the appeal? As I said, RBFs are essentially dressed up debt rounds. Founders who opt for RBFs as opposed to venture capital deals hold on to all their equity and they don’t get stuck on the VC hamster wheel, the process in which you are forced to continually accept VC while losing more and more equity as a means of pleasing your investors.
RBFs, however, are better than traditional debt rounds because the investors are more incentivized to help the companies they invest in because they are receiving a certain portion of that business’s monthly revenues, typically 1% to 9%. Eventually, as is explained thoroughly in Lighter Capital’s newest RBF report, monthly payments come to an end, usually 1.3 to 2.5X the amount of the original financing, a multiple referred to as the “cap.” Three to five years down the line, any unpaid amount of said cap is due back to the investor. When all is said in done, ideally, the startup has grown with the support of the capital and hasn’t lost any equity.
At this point, they could opt to raise additional revenue-based capital, they could turn to venture capital or they could tap a tech bank to help them get to the next step. The idea is RBF is easier on the founder and it allows them optionality, something that is often lost when companies turn to VCs.
IPO corner, rapid-fire edition
Slack’s direct listing will be on June 20th. Get excited.
China’s Luckin Coffee raised $650 million in upsized U.S. IPO
Crowdstrike, a cybersecurity unicorn, dropped its S-1.
Freelance marketplace Fiverr has filed to go public on the NYSE.
Plus, I had a long and comprehensive conversation with Zoom CEO Eric Yuan this week about the company’s closely watched IPO. You can read the full transcript here.
Silicon Valley entrepreneur Hosain Rahman, the man behind Jawbone, has managed to raise $65.4 million for his new company, according to an SEC filing. The paperwork, coincidentally or otherwise, was processed while most of the world’s attention was focused on Uber’s IPO. Jawbone, if you remember, produced wireless speakers and Bluetooth earpieces, and went kaput in 2017 after burning up $1 billion in venture funding over the course of 10 years. Ouch.
- Amazon leads $575M investment in Deliveroo
- GetYourGuide picks up $484M
- Impossible Foods raises $300M
- Away packs on $100M at $1.4B valuation
- Innowatts raises $18M for its energy monitoring toolkit
- D2C underwear brand TomboyX raises $18M
On the heels of enterprise startup UiPath raising at a $7 billion valuation, the startup’s biggest investor is announcing a new fund to double down on making more investments in Europe. VC firm Accel has closed a $575 million fund — money that it plans to use to back startups in Europe and Israel, investing primarily at the Series A stage in a range of between $5 million and $15 million, reports TechCrunch’s Ingrid Lunden. Plus, take a closer look at Contrary Capital. Part accelerator, part VC fund, Contrary writes small checks to student entrepreneurs and recent college dropouts.
Our paying subscribers are in for a treat this week. Our in-house venture capital expert Danny Crichton wrote down some thoughts on Uber and Lyft’s investment bankers. Here’s a snippet: “Startup CEOs heading to the public markets have a love/hate relationship with their investment bankers. On one hand, they are helpful in introducing a company to a wide range of asset managers who will hopefully hold their company’s stock for the long term, reducing price volatility and by extension, employee churn. On the other hand, they are flagrantly expensive, costing millions of dollars in underwriting fees and related expenses…”
Read the full story here and sign up for Extra Crunch here.
If you enjoy this newsletter, be sure to check out TechCrunch’s venture-focused podcast, Equity. In this week’s episode, available here, Crunchbase News editor-in-chief Alex Wilhelm and I chat about the notable venture rounds of the week, CrowdStrike’s IPO and more of this week’s headlines.
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Startups Weekly: Raising huge sums quickly
Hey, did you know that TechCrunch sends out a weekly newsletter rounding up the latest startup news? Well, we do! But for as-yet-unidentified technical reasons, it doesn’t seem to have gone out today, so I’m publishing it here. And if you haven’t subscribed yet, what are you waiting for? 1. What does it take to be a startup that raises huge sums quickly? “Trait No. 1:… Read More
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