Really, this market isn’t good enough?

It’s the first day of Disrupt, so things are a bit busy here at TechCrunch. In honor of that fact, entries from The Exchange concerning NFT volume viz recent marketplace valuations and how an accelerating pace of change helps startups by exposing more market voids will have to wait.

But we do have time this morning for a little incredulity, so let’s indulge.

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CNBC reported today that Klarna CEO Sebastian Siemiatkowski is not enthused about present-day market conditions, and thus isn’t in a hurry to take his company public.

There’s some merit to the idea; after all, Klarna has shown a strong ability to raise huge sums of capital while private.

Why not just keep at it? In short, because the company has to either go public or sell itself to a larger company at some point. Given that we’ve already seen PayPal and Square cut checks to buy BNPL volume, the list of potential acquirers for Klarna is not as long as you might think. The company, flush with billions in private-market funding, will need to go public. It’s a simple question of when. 

Which makes the following all the more surprising. Via CNBC:

“The volatility in the market right now makes me nervous to IPO to be honest,” Siemiatkowski told CNBC’s Karen Tso at the London Tech Week conference on Monday. “I think it would be nice to IPO when it’s a little bit more sound. And right now it doesn’t feel really sound out there.”

Huh. Color us confused.

The public market for BNPL companies actually feels pretty damn strong at the moment.

Affirm, for example, is a BNPL company publicly listed in the United States. In Q2 2021 (Q4 fiscal 2021 for the company), Affirm reported gross merchandise volume of $2.5 billion, and revenues of $261.8 million. Those figures were up 106% and 71%, respectively. Affirm also posted a net loss of $128.2 million in the quarter, and $430.9 million in red ink during its most recent fiscal year (the 12 months ending June 30, 2021).

Freshworks’ valuation could crest $10B in upcoming IPO

Earlier today, TechCrunch examined the new IPO price range for Toast. The U.S. software-and-fintech company moved its valuation materially higher in anticipation of pricing tomorrow after the bell and trading on Wednesday. It was not alone in doing so.

Freshworks is also targeting a higher IPO price range, it disclosed today in a fresh SEC filing. The customer service-focused software firm now expects to charge between $32 and $34 per share in its debut, up from the $28 to $32 per-share range that it initially disclosed.

Doing some back-of-the-envelope math, Freshworks’ IPO valuation could just pass the $10 billion mark, calculated on a fully diluted basis. Its simple IPO valuations, while rising, are lower than that figure.

Mathing that out, Freshworks expects to have 284,283,200 shares outstanding when public, inclusive of its underwriters’ option, but not inclusive of vested shares present in RSUs or options. At its new IPO price range, Freshworks would be worth between $9.1 billion and $9.7 billion.

Toast raises IPO price range, providing a Monday bump to fintech valuations

U.S. technology unicorn Toast filed a new S-1 document this morning detailing a higher IPO price range for its shares. The more expensive range indicates that Toast may be worth more in its debut than it initially expected, a bullish sign for technology companies more broadly.

Toast’s rising valuation may provide a boon to two different subsectors of technology: software and fintech. The restaurant-focused Toast sells software on a recurring basis (SaaS) to restaurants while also providing financial technology solutions. And while it is best known as a software company that dabbles in hardware, Boston-based Toast generates the bulk of its aggregate top line from financial services.

Software revenues are valuable thanks to their high margins and recurring structure. Toast’s financial-services revenues, by contrast, are largely transaction-based and sport lower gross margins. The company’s IPO price, then, could help the private markets more fairly price startups offering their own blend of software-and-fintech incomes.

The so-called “vertical SaaS” model, in which startups build software tailored to one particular industry or another, has become a somewhat two-part business effort; many startups today are pursuing both the sale of software along with fintech revenues. Toast’s IPO, then, could operate as a bellwether of sorts for a host of startups.

To see Toast raise its range, therefore, got our eyebrows up. Let’s talk money.

Toast’s new IPO range

From a previous range of $30 to $33, Toast now expects to price its IPO between $34 and $36.

Toast now expects its IPO price to clear its previous upper-end guidance at the low end of its new range. That’s bullish — and indicative of a thus-far receptive market for the company’s equity.

Equity Monday: A global selloff to kick off Disrupt week

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

This is Equity Monday, our weekly kickoff that tracks the latest private market news, talks about the coming week, digs into some recent funding rounds and mulls over a larger theme or narrative from the private markets. You can follow the show on Twitter here. I also tweet.

A few things this morning:

  • I shook up the show format a little, including how the script came together and how it was organized. Hit me up on Twitter if you have notes.
  • Disrupt is this week, so strap thyself in for the best tech event of the year, coming to your living room. The Equity team is hosting — between the group of us — a zillion panels and one of the two stages. Come hang out with us. It’s going to be on heck of a show.

It’s going to be a very busy few days. Pour some extra coffee, and get hype.

Equity drops every Monday at 7:00 a.m. PST, Wednesday, and Friday at 6:00 a.m. PST, so subscribe to us on Apple PodcastsOvercastSpotify and all the casts!

Inside GitLab’s IPO filing

While the technology and business world worked towards the weekend, developer operations (DevOps) firm GitLab filed to go public. Before we get into our time off, we need to pause, digest the company’s S-1 filing, and come to some early conclusions.

GitLab competes with GitHub, which Microsoft purchased for $7.5 billion back in 2018.

The company is notable for its long-held, remote-first stance, and for being more public with its metrics than most unicorns — for some time, GitLab had a November 18, 2020 IPO target in its public plans, to pick an example. We also knew when it crossed the $100 million recurring revenue threshold.

Considering GitLab’s more recent results, a narrowing operating loss in the last two quarters is good news for the company.

The company’s IPO has therefore been long expected. In its last primary transaction, GitLab raised $286 million at a post-money valuation of $2.75 billion, per Pitchbook data. The same information source also notes that GitLab executed a secondary transaction earlier this year worth $195 million, which gave the company a $6 billion valuation.

Let’s parse GitLab’s growth rate, its final pre-IPO scale, its SaaS metrics, and then ask if we think it can surpass its most recent private-market price. Sound good? Let’s rock.

The GitLab S-1

GitLab intends to list on the Nasdaq under the symbol “GTLB.” Its IPO filing lists a placeholder $100 million raise estimate, though that figure will change when the company sets an initial price range for its shares. Its fiscal year ends January 31, meaning that its quarters are offset from traditional calendar periods by a single month.

Let’s start with the big numbers.

In its fiscal year ended January 2020, GitLab posted revenues of $81.2 million, gross profit of $71.9 million, an operating loss of $128.4 million, and a modestly greater net loss of $130.7 million.

And in the year ended January 31, 2021, GitLab’s revenue rose roughly 87% to $152.2 million from a year earlier. The company’s gross profit rose around 86% to $133.7 million, and operating loss widened nearly 67% to $213.9 million. Its net loss totaled $192.2 million.

This paints a picture of a SaaS company growing quickly at scale, with essentially flat gross margins (88%). Growth has not been inexpensive either — GitLab spent more on sales and marketing than it generated in gross profit in the past two fiscal years.

Forge’s SPAC deal is a bet on unicorn illiquidity

As Warby Parker, Freshworks, Amplitude and Toast look to list in the coming weeks, we shouldn’t forget the SPAC boom. This week, for example, Forge Global (Forge), a technology startup that operates a market for secondary transactions in private companies, announced that it would go public via a blank-check combination.

And while we’re not unpacking every single SPAC combination that crosses our radar, the Forge deal is a good one to spend time parsing.

The Exchange explores startups, markets and money.

Read it every morning on Extra Crunch or get The Exchange newsletter every Saturday.

Why? Several reasons. First, we’re curious about how the company generates revenue and how diversified its revenue is. We’re also interested in how big the market may prove to be for trading secondary shares in unicorns — late-stage tech startup equity is popular on secondary exchanges. Additionally, we want to know whether the deal feels expensive, because that may help us get a heat-check on the SPAC market more broadly.

First, some details concerning the transaction. Then we get to have fun. To work!

The Forge SPAC

Forge is merging with Motive Capital, a blank-check company that raised $360 million in December 2020.

Per the company’s calculations, the combined entity will sport a roughly $2 billion valuation on a “fully diluted equity value on a pro forma basis.” The company’s anticipated enterprise value is a smaller $1.60 billion thanks to an expected $435 million in cash after the deal’s completion, though that number will change some before it trades.

Skipping the nuances of the transaction — there’s a PIPE, 90% equity rollover from existing shareholders and more, in case you wanted to get into it — what matters is that Forge will be worth around $2 billion in equity terms and have hundreds of millions of dollars in the bank after the deal.

The resulting valuation is notable not only for making Forge a unicorn, but also for representing a dramatic upward movement in the worth of the company. PitchBook and Crunchbase data agree that Forge was last valued at $700 million (post-money) when raising $150 million earlier this year. So, the company appears set to provide a solid return to more than just its early backers; even the private investors who put capital into the company rather recently should do well in the deal.

That brings us to the company’s business, and business model. Forge helps pre-IPO companies trade before they float. It’s somewhat ironic that price discovery is something that the company claims its platform can help companies with before they debut, while the company is set to see its private valuation quickly beaten by a public debut.

Regardless, let’s talk unicorns.

A solution to the unicorn traffic jam?

One of my favorite long-term issues with the late-stage startup market is that it is far better at creating value than it is at finding an exit point for that accreted value. More simply, the startup market is excellent at creating unicorns but somewhat poor at taking them public.

That antitrust regulatory concerns have made it harder for wealthy tech companies to snap up promising startups that could challenge them is only part of the matter. There just aren’t enough IPOs, even this year, to counterbalance the growth in the number of global unicorns.

That pressure is a good bit of why Forge is an interesting firm. The more unexited unicorns there are in the world, the more demand, presumably, there is for marketplaces like the one it operates, which allows existing shareholders in valuable private companies to drive liquidity for themselves ahead of eventual public-market debuts.

Airbase adds spend support for international subsidiaries

Airbase, a corporate spend management startup, announced this morning that it now supports subsidiaries in different countries for U.S.-based businesses. As more companies lean into remote work, and a great many startups are founding themselves on multiple continents, the new capability could boost Airbase’s effective total addressable market.

The product news is interesting, but more so when we consider Airbase’s feature decisions in the larger context of the corporate spend management space itself. Startups competing in the market offer customers corporate cards and a software suite to help them manage spend more generally, along with other functionality that varies based on the provider in question.

TechCrunch has spilled much ink in recent months tracking Airbase competitors Ramp and Brex, for example, as they raise capital and look to differentiate their products to better serve their target markets. They are doing so by both pricing decisions and feature choices.

Image Credits: Airbase

Airbase, while perhaps less well-known than its rivals, was early to the decision to charge for its software in addition to deriving interchange revenues from its business. Brex added a paid package of software at an SMB-friendly price point. Ramp is sticking to its zero-cost guns for now.

Now with support for international subsidiaries and currencies for U.S.-based companies, Airbase is executing against its vision to provide spend management services for companies from inception through IPO, founder and CEO Thejo Kote told TechCrunch an interview.

In more detailed terms, Airbase supports payouts to some 200 countries, as well as support for moving money around more generally in a more constrained geographic area.

The product news fits into Airbase’s goal of supporting companies even as they scale. Other competitors in its market have a greater SMB focus, it appears. Not that that is a diss; offering corporate spend services as a free package has proven lucrative for some companies looking to onboard a host of smaller enterprises. Divvy did so and sold for more than $1 billion. And Ramp and Brex are pricing their services to be well within the reaches of smaller firms.

Airbase does offer a free tier, but more as a method of attracting customers that could scale into large accounts in time, it explained. Those larger accounts are the startup’s goal. Kote said during a conversation that his company now has a number of customers paying six figures per year for its software, a change from when the company raised $60 million earlier this year, when such account sizes were rarer.

By adding more capabilities for multinational companies, Airbase may be able to land more large customers, which, in turn, would generate both software and interchange incomes for the startup.

Kote also disclosed new growth metrics for Airbase, though in relative instead of absolute terms. The startup has scaled annual recurring revenue — a metric that calculates annualized subscription software sales at a company — by 3.5x in the last 12 months, he said, and 2x in the last half-year. Kote also disclosed that his company is “approaching” $2 billion in annualized payment volume through its service, up 5x in the last 12 months.

Now in the process of digesting its Series B, Airbase has graduated from baby startup metrics, and we’ll expect something a bit harder the next time we cover the company.

Still, as Airbase looks to support larger companies longer, we’re seeing an interesting divergence between the corporate spend startups battling for North American market share. With three major players charging nothing, a little and a lot, it isn’t hard to guess where each will focus their product efforts in customer terms.

Apple sheds value during iPhone event

The TechCrunch crew is hard at work writing up the latest from Apple’s iPhone, iPad and Apple Watch event. They have good notes on the megacorp’s hardware updates. But what are the markets saying about the same array of products?

For those of us more concerned with effective S&P dividend yields than screen nit levels, events like Apple’s confab are more interesting for what they might mean for the value of the hosting company than how many GPUs a particular smartphone model has. And, for once, Apple’s stock may have done something a little interesting during the event!

Observe the following chart:

Image Credits: TechCrunch/Y Charts

This is a one-day chart, mind, so we’re looking at intraday changes. We’re zoomed in. And Apple kinda took a bit of a dive during its event that kicked off at 1 p.m. in the above chart.

Normally nothing of import happens to Apple’s shares during its presentations. Which feels weird, frankly, as Apple events detail the product mix that will generate hundreds of billions in revenue. You’d think that they would have more impact than their usual zero.

But today, we had real share price movement when the event wrapped around 2 p.m. ET. Perhaps investors were hoping for more pricey devices? Or were hoping Apple had more up its sleeve? How you rate that holiday Apple product lineup is a matter of personal preference, but investors appear to have weighed in slightly to the negative.

Worth around $2.5 trillion, each 1% that Apple’s stock moves is worth $10 billion. Apple’s loss of 1.5% today — more or less; trading continues as I write this — is worth more than Mailchimp. It’s a lot of money.

You can read the rest of our coverage from the Apple event here. Enjoy!

Read more about Apple's Fall 2021 Event on TechCrunch

Here’s what your BNPL startup could be worth

It’s a two-Exchange Tuesday, everyone. First up, we’re talking fintech valuations. Next up, we’re digging into Atlanta.

Last week’s news that PayPal intends to buy Japanese startup Paidy marked the second major acquisition of a buy now, pay later (BNPL) company this year. PayPal’s news followed an even larger deal by Square for the Australian BNPL company Afterpay.

The multibillion-dollar exits provided hard market proof that what BNPL startups are building has value beyond simple operating results; major fintech platforms are willing to shell out large sums for their revenues and possible strategic value.

The Exchange explores startups, markets and money.

Read it every morning on Extra Crunch or get The Exchange newsletter every Saturday.

Because both deals happened in 2021, they provide two data points for the value of BNPL companies operating at scale. And because both Square and PayPal provided some information to their investors concerning their transactions, we have a little bit of comparative work to do.

Let’s do a little math and figure out how much PayPal and Square investors are paying for transaction volume across both platforms. Then, we’ll peek at what Affirm is worth along similar lines. We’ll wrap with a look at Klarna’s numbers to see if there’s anything we can dig up there.

Our goal is to find out what sort of price floor or ceiling the Paidy and Afterpay deals imply, if other players in their space are matching that figure, and why. This will be fun!

What would you pay for $1 of BNPL GMV?

Square’s Afterpay deal is worth some $29 billion, a huge sum. It isn’t hard to see why the U.S. consumer- and business-focused fintech is willing to write so large a check — Afterpay does volume.

The Equity crew riffs on the Intuit-Mailchimp news

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

We are back! From this morning, I suppose. But the news cycle doesn’t wait for our publishing schedule, so the Equity crew got together to yammer all about the Intuit-Mailchimp acquisition.

A $12 billion deal composed of stock and cash, it’s a big one. And as Mailchimp has both a history of bootsrapping and a founding story in a non-Silicon Valley city we had lots to chat about.

As a general reminder, if you do listen to the show, hit us up on Twitter as we are doing more and more of these Spaces. They are good and relaxed fun, so don’t take them too seriously. We like to have fun.

Alright, Equity is back on Wednesday with our regularly scheduled programming. Chat then!

Equity drops every Monday at 7:00 a.m. PDT, Wednesday, and Friday at 6:00 a.m. PDT, so subscribe to us on Apple PodcastsOvercastSpotify and all the casts!