New York’s BounceX reaches $100M ARR, rebrands

Welcome to the $100 million ARR club, BounceX.

This morning (evening, timezone depending), BounceX, a New York-based marketing technology startup, announced that it has reached the $100 million annual recurring revenue (ARR) threshold, adding its name to our running list of companies that have crossed over into nine-figure revenue while remaining private.

BounceX also announced a name change to Wunderkind, a move that its CEO Ryan Urban told TechCrunch signaled “a new chapter” for the firm. Summarizing the executive’s comments: After seven years in business and quite a lot of work building out its product line and revenue base, BounceX wants to think of itself as something more than merely another SaaS company; the name Wunderkind, in his view, demands that what they create “has to be extraordinary,” fitting into the idea.

Normally we’d gently tease such plainly stated aspirations, but with $100 million in ARR and a history of efficient growth behind the goal, we won’t. Instead, let’s talk about what the company does, and how it has grown to the size that it has.

What’s a BounceX?

I’ll spare you the details and explain what the company does without buzzwords, as best I can.

It starts with Web traffic. Everyone has it. But often you, an online retailer, don’t know who is coming to your website. BounceX (Wunderkind) can help you figure that out, matching anonymous web traffic to email addresses. Now you know some of the folks coming to your site, and how to reach them. Next, Wunderkind can help you send those identified folks targeted emails that match what is known about that person, or email address. The result of all this work is material revenue scale — the company claims that its technology boosts “behaviorally triggered emails to over 9%, on average, of a retailer’s digital revenue.”

For those doing the math at home, 9% is a lot.

All this works out for Wunderkind as well, with its ability to help companies drive revenue assisting it in landing deals. The company closes new customers pretty efficiently, with Urban telling TechCrunch that his company’s CAC-to-LTV ratio is “is probably the highest in [its] industry,” and has “been going up over time.”

How does it do that? By the company having what it called “really high [deal] close rates.” Fine, but how does the tech drive the company’s close rate? By promising results and cutting itself off if it fails.

Wunderkind runs short-term pilots with potential customers, say four months long. The company will only move to a more traditional SaaS contract if it sufficiently drives revenue for the potential customer. According to Urban, “90 to 95% of the time” his company “deliver[s] the guaranteed revenue.”

And the customer converts, voila!

This method of snagging customers led to Wunderkind having some pretty stellar SaaS metrics. Picking one from TechCrunch’s call with the CEO, “a lot of [Wunderkind sales] reps have north of $3 million quotas a year and they hit,” he said, meaning that they meet that high expectation.

So what?

You can probably see where this is going: What happens when a company has a very strong customer value to customer acquisition cost structure, and a very efficient sales team? It doesn’t burn a lot of capital. Unsurprisingly, Wunderkind has been super efficient to date, with Urban telling TechCrunch that “the amount of equity [his company has] actually put to work is probably sub-$35 million,” with less than $50 million in equity capital raised. The company also has debt lines that it can use, the CEO noted.

Getting from $0 in ARR to $100 million while spending around $35 million in equity-sourced funds is pretty bonkers, but perhaps even more nuts is the fact that, per the CEO, Wunderkind got through its first four years on $1.5 million in external money. Urban chalked the low-burn results to the founding team and early employees having experience working with one another, and building features “purely focused on improving experience [and] driving revenue.”

That’s enough for now, we’ll write about the company more when it reaches its next ARR threshold, executes a secondary transaction to put off an IPO, or files. The lesson from today is that it’s possible to build a SaaS company to-scale with far less revenue than I thought possible. Anyhoo, Wunderkind joins the $100 million ARR cadre with what I think is the second-best result in terms of efficient growth. Only boostrapped Cloudinary has cleaner metrics, though with a smaller ARR total for now.

For more on the $100 million ARR club, you can check out this and this to read about other companies that have been inducted this year.

For investors, late-stage fintech startups are a lucrative bet

Hello and welcome back to our regular morning look at private companies, public markets and the gray space in between.

Over the past three months, a number of financial events have occurred in the fintech and finservices world that have caught our eye. Between two rounds at $500 million and two exits in the billions of dollars, financial technology and services startups have been on fire.

Today I’d like to rewind and go over the four largest events from the past three months in fintech and finservices (total value: $13.4 billion) and pull in data on other rounds that have happened recently. This will help us get a handle on what’s going on in the two heated startup sectors.

Recall that our last look into fintech’s venture activity wrapped up its Q4 2019 results. Today, thanks to the punishing news cycle that the sector has kept up over the last few weeks, we’re going a bit further. Into the breach!

Four events

We have two rounds ($500 million rounds for Revolut and Chime) and two sales (exits for Plaid and Credit Karma) to wrap up today. Here’s what each of those deals might tell us about the current market for money-focused startups and investment, starting with our two rounds and followed by our two exits:

  • Chime raises $500 million, boosting its valuation from $1.5 billion (March 2019) to $5.8 billion (December 2019). Chime’s round demonstrated that the neobanking boom, at least in terms venture interest, is far from over. The America-focused financial services company grew its accounts figure to 6.5 million, giving it a valuation of a little under $1,000 per account; how much revenue and margin it can extract from its existing accounts is almost a red herring given its current pace of growth. But even with the growth caveat, investors have bet big that its long-term revenues will help support a valuation of over $10 billion in time. (The company’s most recent investors expect material return on their funds.) This implies confidence in the long-term economics of neobanking and general bullishness on the company’s category — so the existing 6.5 million accounts better churn out good chunks of top line.

TripActions secures $500M credit facility for its new corporate travel product

TripActions, a Palo Alto-based, corporate travel-focused unicorn, has secured a new, half-billion-dollar credit facility to help support the launch of its second product line. Called TripActions Liquid, the service helps companies that do not offer corporate cards to workers a way to avoid forcing those employees to use their personal cards to float costs for corporate travel.

Liquid plugs into the broader TripActions corporate travel service, which TechCrunch has written about here.

You can see where the debt fits into the news; if TripActions is going to float a lot of spend for other companies so that they can avoid temporarily offload travel spend to employee’s personal cards (which frankly should be illegal), it’s going to involve a lot of money — money that TripActions would rather not deduct from the business equivalent of its checking account. So, a short-term revolving credit line — the corporate version of a high-limit credit card, merely minus the usurious interest rates — is the answer.

Per the company, the money comes from “Silicon Valley Bank with participation from Goldman Sachs and Comerica Bank.” Or more specifically, the dollars are coming from the Iron Bank of California, its East Coast equivalent and Drake’s credit union. Jokes aside, it’s a good trio, showing presumably wide interest in helping funding TripActions’ new product.

Not that the company is itself short on funds. Crunchbase has more than $480 million in tracked equity funding down for the company, including a $250 million Series D from last June (a16z, Group 11, Lightspeed and Zeev Ventures). That funding round valued the company at around $3 billion, according to Crunchbase data.

Context

According to a TripActions interview with TechCrunch, travel costs are “the second biggest expenditure that’s controllable for companies and most finance leaders feel like they’re not managing it well,” putting its Liquid product in a spot in the market where there’s demand from both employees and management for a better service.

With TripActions Liquid helping workers avoid taking on company expenses, and the TripActions product theoretically making booking travel itself a less onerous task, this news item could make life less bad for the working corporates among us.

On that note, a story. Watching members of the TripActions brass walk me through a product demo during a briefing for this post was actually a bit annoying. I am currently in a back-and-forth with various elements of my corporate home regarding travel that I booked through our current provider — I will not name them, but their moniker rhymes with fun-purr — about whether I booked the trip inside that same software suite. So I was curious about Liquid for the perspective of a corporate traveler who, you know, has other things to do than expenses. It did look less irksome and deleterious to my mental health than what I use today.

And with $500 million in available spend, TripActions has lots of room to fund it.

All this is well and good, but with a new product fired up, when is TripActions going to go public? It claimed to be growing quickly in 2019, when discussing its 2018 performance. Get on with it!

A boom, a bust, a reckoning, a race: four takes on today’s startup market

Hello and welcome back to our regular morning look at private companies, public markets and the gray space in between.

Today let’s try to figure out where the startup and private markets stand, as there are a few different takes out there that I can’t reconcile. Our efforts to better understand how young companies are faring comes, of course, in the shadow of the impending $7 billion Intuit-Credit Karma deal — the second, multi-billion dollar fintech exit so far in 2020.

So where are we today in the startup business cycle? We’ll summarize a few different perspectives on the question, and then come up with our best synthesis of the group.

If you observe the behavior of the venture class, it’s a full-speed-ahead market. This is contrasted by a summary of recent private-market tech stumbles compiled by New York Times’s Erin Griffith. Bolstering Griffith’s take are a set of long-running complaints by select tech leaders regarding the health of some of the private market’s most valuable companies.

But as Credit Karma looks set to exit at a huge valuation, it’s hard to tease out which perspective is the most correct. So let’s try to answer that for ourselves.

Equity Monday: Stocks fall, Square earnings, and Capiche raises $1.1M

Good morning friends, and welcome back to TechCrunch’s Equity Monday, a short-form audio hit to kickstart your week. Regular Equity episodes still drop Friday morning, so if you’ve listened to the show over the years don’t worry — we’re not changing the main show. (Here’s last week’s episode with Danny Crichton if you want to listen; I also just got the pun in the headline.)

Starting off this week the news is not very good.

I start to prep for Equity Monday on Fridays, keeping tabs of themes and news cycles. By the time it’s Sunday night I have a good idea of what the show is going to focus on. And I’m a little tired it being bad news about the coronavirus. Here’s to hoping that we, as a species, make material progress to stopping the damn thing.

In more mundane terms, the disease continued to shutter cities and countries, slowing the global economy. I’d rather focus on the human side of the story, but I’m a financial and technology journalist, so here we are.

Markets around the world are down sharply. Stocks in the United States are set to fall. Tech companies are pipped by pre-market trading to fall even further. Growth and SaaS public shops look set to take the sharpest hit.

Turning to funding rounds this week, just one. Instead of covering a number of funding events in the early-stage market, we’re discussing a single round raised by Capiche — a $1.1 million investment sourced from a number of small angel groups and venture firms. The company — here, on the Internet — is working to connect SaaS customers and power users so that they can share tips, pricing information, and negotiation tactics. As literally everyone knows, the SaaS market is too opaque. Also major tracking entities are thought by some to be too favored towards vendors. Capiche wants to tilt the balance of power towards users, instead.

If that will prove a lucrative model isn’t yet clear, but Capiche is a young company with its first real check. It has time to prove itself. According to CEO Austin Smith, his company has nearly two years (seven quarters) of runway in the bank without generating revenue. The startup intends to turn on income far before its money runs out, of course.

I think we’ll cover more individual rounds on Equity Monday over time as it’s more fun than running through a short, partially-themed list.

Finally, I riffed for you on the Credit Karma-Intuit deal that is supposed to be coming very, very soon, in a formal sense. $7 billion is a lot of money to start the week.

Happy Monday!

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

Do AI startups have worse economics than SaaS shops?

A few days ago, Andreessen Horowitz’s Martin Casado and Matt Bornstein published an interesting piece digging into the world of artificial intelligence (AI) startups, and, more specifically, how those companies perform as businesses. Core to the argument presented is that while founders and investors are wagering “that AI businesses will resemble traditional software companies,” the well-known venture firm is “not so sure.”

Given that TechCrunch cares a lot about startup business fundamentals, the notion that one oft-discussed and well-funded category of venture-backed startup might sport materially less attractive economics than we expected captured our attention.

The Andreessen Horowitz (a16z) perspective is straightforward, arguing that AI-focused companies have lesser gross margins than software companies due to cloud compute and human-input costs, endure issues stemming from “edge-cases” and enjoy less product differentiation from competing companies when compared to software concerns. Today, we’re drilling into the gross margin point, as it’s something inherently numerical that we can get other, informed market participants to weigh in on.

If a16z is correct about AI startups having slimmer gross margins than SaaS companies, they should — all other things held equal — be worth less per dollar of revenue generated; or in simpler terms, they should trade at a revenue multiple discount to SaaS companies, leaving the latter category of technology company still atop the valuation hierarchy.

This matters, given the amount of capital that AI-focused startups have raised.

Is a16z correct about AI gross margins? I wanted to find out. So this week I spoke to a number of investors from firms that have made AI-focused bets to get a handle on their views. Read the full a16z piece, mind. It’s interesting and worth your time.

Today we’re hearing from Rohit Sharma of True Ventures, Jeremy Kaufmann of Scale Venture Partners, Nick Washburn of Intel Capital and Ben Blume of Atomico. We’ll start with a digest of their responses to our questions, with their unedited notes at the end.

AI economics and optimism

We asked our group of venture investors (selected with the help of research from TechCrunch’s Arman Tabatabai) three questions. The first dealt with margins themselves, the second dealt with resulting valuations and, finally, we asked about their current optimism interval regarding AI-focused companies.

Why Dropbox shares are soaring after it reported earnings

Hello and welcome back to our regular morning look at private companies, public markets and the gray space in between.

This morning we’re digging into Dropbox’s earnings report (Q4 2019), and why its recent financial performance and plans for 2020 are making the storage and productivity-focused SaaS player shares soar.

While the broader SaaS category has seen huge valuation gains in recent quarters, Dropbox has not. Along with Box, the two file-sharing focused companies were left behind as their broader unicorn cohort’s value surged. Why? Slowing growth, mostly. But with Dropbox shares up 13% pre-market to more than $21 this morning — its original IPO price — perhaps things are changing for one of the two firms.

To figure out what happened, we’ll start by unearthing what Dropbox managed to pull off in Q4 and compare its projections with market expectations. At the end, we’ll translate what we’ve learned from public SaaS companies for their private, startup brethren. As always, when we look at public companies, we’re hunting for market signals that will impact startup fundraising and valuations.

Equity is not always the answer

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

This week was a fun combination of early-stage and late-stage news, with companies as young as seed-stage and as old as PE-worthy joining our list of topics.

Danny and Alex were back on hand to chat once again. Just in case you missed it, they had some fun talking Tesla yesterday, and there are new Equity videos on YouTube. Enjoy!

Here’s what the team argued about this week:

  • HungryPanda raises $20 million from 83North and Felix Capital. With a focus on Chinese food, Chinese language users, and Chinese payment options like Alipay, it’s a neat play. According to TechCrunch, the service is live in 31 cities in the U.K., Italy, France, Australia, New Zealand and the U.S and is targeting $200 million in GMV by early Summer.
  • The Org raises $8.5 million, ChartHop raises $5 million. Hailing from two different product perspectives, these two org chart-focused companies both raised capital Thursday morning. That made them interesting to Alex as they formed yet another startup cluster, and Danny was transfixed by their differing starting points as businesses, positing that they will possibly move closer to each other over time.
  • DigitalOcean’s $100 million debt raise. The round — an addition of capital to a nearly-profitable, SMB-focused cloud infra provider — split our hosts, with one leaning more towards a PE-exit and the other an IPO. Whether it can drive margins in the smaller-spend cloud customer segment will be critical to watch in the coming months.
  • (For more on venture debt writ large, head here.)
  • And finally, the E-Trade sale to Morgan Stanley, and what it might mean for Robinhood’s valuation. As Danny points out, the startup has found a good business in selling the order flow of its customers. Alex weighed in that the company has more revenue scaling to do before it grows into its last private valuation. So long as the market stays good, however, Robinhood is probably in good shape.

Equity is nearly three years old, and we have some neat stuff coming up that you haven’t heard about yet. Stay tuned, and thank you for sticking with for so long.

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

What the $13B Etrade deal says about Robinhood’s valuation

Hello and welcome back to our regular morning look at private companies, public markets and the gray space in between.

Today we’re living up to the introduction of this daily column by digging into the recently announced Etrade sale and what its new price and recent financial performance can tell us about Robinhood, a startup competitor, and the unicorn’s valuation.

As always, when we’re comparing a fast-growing, private company in contrast to a larger, more mature, slower-growing, and profitable business, we’re working in broad strokes. But if we don’t take our contrasts too literally, we’ll be able to learn a thing or two.

After all, Robinhood is not only a richly-valued unicorn, it’s also a leading player in the burgeoning fintech and finservices startup niches, a sector we recently learned has capital flowing in at nearly record rates. So what we can learn about the value of Robinhood comps should prove illustrative and important.

We’ll start with an overview of the Etrade sale, dig into its 2019 results and then compare the resulting multiples (with reasonable amounts of caveating, of course) to what we know about Robinhood. This will be fun!

Equity shot: What’s going on with Tesla’s stock price?

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

This is the first Equity Shot in what feels like a long time, so, let me explain. Most of the time Equity comes out on Friday. It’s a mix of news and chat and venture happenings. It’s fun! But sometimes, a topic comes up that demands more immediate attention. That’s what happened today as we stared at Tesla’s share price wondering what in the hell was going on.

Sure, Tesla isn’t a private company (yet, at least), but as the company made it into the first-ever episode of Equity, how can we resist a dive into what is going on today?

Shares of the electric car company are surging — again — today, pushing ever-closer to the $1,000 per-share mark. So, Danny, myself and Chris on the turntables got together to riff and chat about what is going on.

For those of you who want some links, here you go:

Today was all about fun. The main, more serious (kinda) show is back Friday. Stay cool!

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