Shares of protein discovery platform Absci pop in market debut

Absci Corp., a Vancouver company behind a multifaceted drug development platform, went public on Thursday. It’s another sign of snowballing interest in new approaches to drug development — a traditionally risky business. 

Absci focuses on speeding drug development in the preclinical stages. The company has developed and acquired a handful of tools that can predict drug candidates, identify potential therapeutic targets and test therapeutic proteins on billions of cells and identify which ones are worth pursuing. 

“We are offering a fully integrated end-to-end solution for pharmaceutical drug development,” Absci founder Sean McClain tells TechCrunch. “Think of this as the Google index search for protein drug discovery and biomanufacturing.” 

The IPO was initially priced at $16 per share, with a pre-money valuation of about $1.5 billion, per S-1 filings. The company is offering 12.5 million shares of common stock, with plans to raise $200 million. However, Absci stock has already ballooned to $21 per share as of writing. Common stock is trading under the ticker “ABSI.” 

The company has elected to go public now, McClain says, to increase the company’s ability to attract and retain new talent. “As we continue to rapidly grow and scale, we need access to the best talent, and the IPO gives us amazing visibility for talent acquisition and retention,” says McClain.

Absci was founded in 2011 with a focus on manufacturing proteins in E. coli. By 2018, the company had launched its first commercial product called SoluPro — a bioengineered E. coli system that can build complex proteins. In 2019, the company scaled this process up by implementing a “protein printing” platform.

Since its founding Absci has grown to 170 employees and raised $230 million — the most recent influx was a $125 million crossover financing round closed in June 2020 led by Casdin Capital and Redmile Group. But this year, two major acquisitions have rounded out Absci’s offerings from protein manufacturing and testing to AI-enabled drug development. 

In January 2021, Absci acquired Denovium, a company using deep learning AI to categorize and predict the behavior of proteins. Denovium’s “engine” had been trained on more than 100 million proteins. In June, the company also acquired Totient, a biotech company that analyzes the immune system’s response to certain diseases. At the time of Totient’s acquisition, the company had already reconstructed 4,500 antibodies gleaned from immune system data from 50,000 patients. 

Absci already had protein manufacturing, evaluation and screening capabilities, but the Totient acquisition allowed it to identify potential targets for new drugs. The Denovium acquisition added an AI-based engine to aid in protein discovery. 

“What we’re doing is now feeding [our own data] into deep learning models and so that is why we acquired Denovium. Prior to Totient we were doing drug discovery and cell line development. This [acquisition] allows us to go fully integrated where we can now do target discovery as well,” McClain says. 

These two acquisitions place Absci into a particularly active niche in the drug development world. 

To start with, there’s been some noteworthy fiscal interest in developing new approaches to drug development, even after decades of low returns on drug R&D. In the first half of 2021, Evaluate reported that new drug developers raised about $9 billion in IPOs on Western exchanges. This is despite the fact that drug development is traditionally high risk. R&D returns for biopharmaceuticals hit a record low of 1.6% in 2019, and have rebounded to only about 2.5%, a Deloitte 2021 report notes. 

Within the world of drug development, we’ve seen AI play an increasingly large role. That same Deloitte report notes that “most biopharma companies are attempting to integrate AI into drug discovery, and development processes.” And, drug discovery projects received the greatest amount of AI investment dollars in 2020, according to Stanford University’s Artificial Intelligence Index annual report

More recently, the outlook on the use of AI in drug development has been bolstered by companies that have moved a candidate through the stages of preclinical development. 

In June, Insilico Medicine, a Hong Kong-based startup, announced that it had brought an AI-identified drug candidate for idiopathic pulmonary fibrosis through the preclinical testing stages — a feat that helped close a $255 million Series C round. Founder Alexander Zharaonkov told TechCrunch the PI drug would begin a clinical trial on the drug late this year or early next year. 

With a hand in AI and in protein manufacturing, Absci has already positioned itself in a crowded, but hype-filled space. But going forward, the company will still have to work out the details of its business model.  

Absci is pursuing a partnership business model with drug manufacturers. This means that the company doesn’t have plans to run clinical trials of its own. Rather, it expects to earn revenue through “milestone payments” (conditional upon reaching certain stages of the drug development process) or, if drugs are approved, royalties on sales. 

This does offer some advantages, says McClain. The company is able to sidestep the risk of drug candidates failing after millions of R&D cash is poured into testing and can invest in developing “hundreds” of drug candidates at once. 

At this point, Absci does have nine currently “active programs” with drug makers. The company’s cell line manufacturing platforms are in use in drug testing programs at eight biopharma companies, including Merck, Astellas and Alpha Cancer technologies (the rest are undisclosed). Five of these projects are in the preclinical stage, one is in Phase 1 clinical trials, one is in a Phase 3 clinical trial and the last is focused on animal health, per the company’s S-1 filing. 

One company, Astellas, is currently using Absci’s discovery platforms. But McClain notes that Absci has only just rolled out its drug discovery capabilities this year. 

However, none of these partners have formally licensed any of Absci’s platforms for clinical or commercial use. McClain notes that the nine active programs have milestones and royalty “potentials” associated with them. 

The company does have some ground to make up when it comes to profitability. So far this year, Absci has generated about $4.8 million in total revenue — up from about $2.1 million in 2019. Still, the costs have remained high, and S-1 filings note that the company has incurred net losses in the past two years. In 2019, the company reported $6.6 million in net losses in 2019 and $14.4 million in net losses in 2020. 

The company’s S-1 chalks up these losses to expenditures related to cost of research and development, establishing an intellectual property portfolio, hiring personnel, raising capital and providing support for these activities. 

Absci has recently completed the construction of a 77,000-square-foot facility, notes McClain. So going forward the company does foresee the potential to increase the scale of its operations. 

In the immediate future, the company plans to use money raised from the IPO to grow the number of programs using Absci’s technology, invest in R&D and continue to refine the company’s new AI-based products. 

 

Duolingo’s IPO could cast golden halo on edtech startups

Edtech giant Duolingo set an initial price range for its impending IPO today. The unicorn expects to price in its public debut at $85 to $95 per share, selling 3,700,000 in the deal.

Another 1,406,113 shares are being sold by existing shareholders, and 765,916 shares are being offered to underwriting banks as part of the transaction. All told, the company may see 5,872,029 shares trade hands in its IPO, worth some $557,842,755. Duolingo itself can raise as much as $424,262,020 in gross proceeds at its current range, provided that its underwriting banks exercise their option.

The IPO is a material fundraising event for the company. Before its public offering, the largest single hit of capital that Duolingo raised was a $45 million Series D from 2015.

Let’s dig into what Duolingo, which we profiled in much more detail here, is worth at its IPO price and peek at its preliminary second-quarter results. Our goal will be to understand its valuation in the context of its growth. From there, we’ll be able to draw some general conclusions about the larger edtech startup market.

What’s it worth?

After its IPO, Duolingo will have 35,892,152 shares outstanding, sans its underwriter’s option. At the lower and upper bounds of its simple IPO valuation, Duolingo is worth $3.1 billion to $3.4 billion.

As with every company going public, Duolingo’s IPO valuation rises if we include shares that have vested in RSU or options form, but have yet to be exercised. In the case of Duolingo, its share count rises to 43,776,271, per an initial TechCrunch analysis of the company’s RSU and options details provided in its S-1 filing. At that share count, Duolingo is worth $3.7 billion to $4.2 billion.

For every number provided, the company’s underwriter’s option adds modestly.

All valuations listed above are a premium over the company’s final private price set during its November 2020 Series H round of funding. That $35 million round valued the company at around $2.4 billion.

At first blush, then, the company’s IPO price range feels strong, regardless of whether we lean on simple or fully diluted share counts to come to a new price for the firm. But how do its new valuations stack against its recent revenue? Let’s find out.

Digital lending platform Blend valued at over $4B in its public debut

Mortgages may not be considered sexy, but they are a big business.

And if you’ve refinanced or purchased a home digitally lately, you may or may not have noticed the company powering the software behind it — but there’s a good chance that company is Blend.

Founded in 2012, the startup has steadily grown to be a leader in the mortgage tech industry. Blend’s white label technology powers mortgage applications on the site of banks including Wells Fargo and U.S. Bank, for example, with the goal of making the process faster, simpler and more transparent. 

The San Francisco-based startup’s SaaS (software-as-a-service) platform currently processes over $5 billion in mortgages and consumer loans per day, up from nearly $3 billion last July.

And today, Blend made its debut as a publicly-traded company on the New York Stock Exchange, trading under the symbol “BLND.” As of early afternoon, Eastern Time, the stock was trading up over 13% at $20.36.

On Thursday night, the company had said it would offer 20 million shares at a price of $18 per share, indicating the company was targeting a valuation of $3.6 billion.

That compares to a $3.3 billion valuation at the time of its last raise in January — a $300 million Series G funding round that included participation from Coatue and Tiger Global Management. Also, let’s not forget that Blend only became a unicorn last August when it raised a $75 million Series F. Over its lifetime, Blend had raised $665 million before Friday’s public market debut.

In filing its S-1 on June 21, Blend revealed that its revenue had climbed to $96 million in 2020 from $50.7 million in 2019. Meanwhile, its net loss narrowed from $81.5 million in 2019 to $74.6 million in 2020.

In 2020, the San Francisco-based startup significantly expanded its digital consumer lending platform. With that expansion, Blend began offering its lender customers new configuration capabilities so that they could launch any consumer banking product “in days rather than months.”

Looking ahead, the company had said it expects its revenue growth rate “to decline in future periods.” It also doesn’t envision achieving profitability anytime soon as it continues to focus on growth. Blend also revealed that in 2020, its top five customers accounted for 34% of its revenue.

Today, TechCrunch spoke with co-founder and CEO Nima Ghamsari about the company’s decision to go with a traditional IPO versus the ubiquitous SPAC or even a direct listing.

For one, Blend said he wanted to show its customers that it is an “around for a long time company” by making sure there’s enough on its balance sheet to continue to grow.

“We had to talk and convince some of the biggest investors in the world to invest in us, and that speaks to how long we’ll be around to serve these customers,” he said. “So it was a combination of our capital need and wanting to cement ourselves as a really credible software provider to one of the most regulated industries.”

Ghamsari emphasized that Blend is a software company that powers the mortgage process, and is not the one offering the mortgages. As such, it works with the flock of fintechs that are working to provide mortgages.

“A lot of them are using Blend under the hood, as the infrastructure layer,” he said.

Overall, Ghamsari believes this is just the beginning for Blend.

“One of the things about financial services is that it’s still mostly powered by paper. And so a lot of Blend’s growth is just going deeper into this process that we got started in years ago,” he said. As mentioned above, the company started out with its mortgage product but just keeps adding to it. Today, it also powers other loans such as auto, personal and home equity.

“A lot of our growth is actually powered by our other lines of business,” Ghamsari told TechCrunch. “There’s a lot to build because the larger digitization trends are just getting started in financial services. It’s relatively large industry that has lots of change.”

In May, digital mortgage lender Better.com announced it would combine with a SPAC, taking itself public in the second half of 2021.

 

Q3 IPO cycle starts strong with Couchbase pricing and Kaltura relisting

Today we have new filings from Couchbase and Kaltura: Couchbase set an initial price range for its IPO, something we’ve been waiting for, and Kaltura’s offering is back from hiatus with a new price range and some fresh financial information to boot.

Both bits of news should help us get a handle on how the Q3 2021 IPO cycle is shaping up at the start.

TechCrunch has long expected the third quarter’s IPO haul to prove strong; investors said as 2020 closed that quarters one, three and four would prove very active in terms of public market exits this year. Then the second quarter surpassed expectations, with more companies going public than at least some market observers anticipated.

With that in mind, you can imagine why the newly launched Q3 could prove an active period.

So! Let’s start with a dig into the filing from NoSQL provider Couchbase, working to understand its first price range and what the numbers may say about market demand for technology debuts. Here’s our first look at the company’s value. Then we are taking the Kaltura saga back up, checking into the pricing and second-quarter results from the technology company that provides video streaming software and services.

Frankly, I’ve been waiting for these filings to drop. So, let’s cut the chat and get into the numbers:

Couchbase’s IPO price range

In its new S-1/A filing, Couchbase reports that it anticipates a $20 to $23 per share IPO price. With a maximum sale of just over 8 million shares, Couchbase could raise as much as $185.15 million in its public offering.

The company will have 40,072,801 shares outstanding after its IPO, not including 1,050,000 shares that are reserved for possible release. The math from here is simple. To calculate Couchbase’s possible simple IPO valuation we can just do a little multiplication:

  • Couchbase simple valuation at $20 per share: ~$802 million
  • Couchbase simple valuation at $23 per share: ~$922 million

If you want to include the company’s reserved shares, add $21 million to the first figure, and $24.2 million to the second. Notably, TechCrunch wrote before it priced that using a historical analog from the Red Hat-IBM sale — both Couchbase and Red Hat work in the OSS space — the company would be worth around $900 million. So, we were pretty close.

California has no water and lots of liquidity

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

Danny, Natasha, and Alex were on-deck this week, with Grace on the recording and edit. But, if you want to hear more about Robinhood, this is not the episode for you. If you want to learn more about the consumer fintech company’s IPO filing this is the episode you want. Basically, Robinhood filed after we had wrapped taping, so we had to do a special pod for the news.

So, this is the everything-but-Robinhood episode. And here’s what’s inside of it:

A four-episode week! With only Grace handling production! She’s amazing.

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

Robinhood is going public and we’re very excited

It’s a sweltering day here in New York City, and that means Wall Street is on fire, and so is Robinhood, apparently. The popular stock trading app officially filed its Form S-1 with the SEC a few hours ago to go public, where it will trade under the ticker “HOOD.”

The Equity crew has been yammering about Robinhood for years now, and we have been chomping at the bit to see those S-1 results for what feels like ages. Well, we finally got the numbers, we chomped that bit (or at least Alex and Danny did, since Natasha went on vacation about 15 minutes before the IPO hit the wires), and so here’s a special Equity Shot to talk about all the highlights.

We talked about so much in an itsy-bitsy 15-minute episode: crazy revenue growth, crazy revenue concentration from two major sources, regulatory hurdles that the company has been clearing up, better financials with a bit of nuance on the company’s Q1 finances, and the company’s special plan for its IPO.

Wowza.

Here’s what we got up to:

  • Historical growth and profitability.
  • Revenue mix and revenue concentration, along with constituent concerns.
  • The importance of options-related incomes for the company.
  • Dogecoin.
  • Why the company’s adjusted income may help it assuage investors who have their eyes pop out of their skulls when they see its GAAP Q1 2021 results.

And a lot more. Of course, if you hate Robinhood, we will be back with our normally scheduled Friday episode of Equity tomorrow.

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

Robinhood files to go public after squeaking to profitability in 2020

This afternoon Robinhood, the popular investing app for consumers filed to go public. The company intends to list on the NASDAQ under the symbol “HOOD.”

That Robinhood released an S-1 filing today is not a surprise. The company privately filed to go public back in March, leaving the startup-watching world waiting for the eventual filing drop. Robinhood’s public offering document includes a placeholder $100 million raise figure, though that will change the closer we get to its debut.

The company is pursuing a public listing after a period of rapid growth. Robinhood saw its revenues soar from $277.5 million in 2019 to $985.8 million in 2020.

The company’s first-quarter numbers are even more impressive. During the first three months of 2021, Robinhood generated revenues of $522.2 million, up around four times from its Q1 2020 result of $127.6 million. TechCrunch expected Robinhood to post a strong first quarter based on previous filings relating to its payment-for-order-flow (PFOF) business.

Notably, Robinhood was profitable in 2020, generating net income of around $7.4 million during the one-year period. However, the company’s most recent period includes an epic $1.49 billion cost relating to “change[s] in fair value of convertible notes and warrant liability,” leading the company to post an astronomical net loss of $1.44 billion in the first quarter of the year. That compares with a net loss of $107 million for 2019.

For the three-month period ended March 31, Robinhood posted $463.8 million in operating expenses, inclusive of “brokerage and transaction” costs. The company’s business then, apart from its fair-value changes, had a good start to the year in profitability terms.

That Robinhood closed the first quarter of 2021 on a more than $2 billion annual run rate is notable; the firm has quickly scaled to mammoth size on the back of rising consumer interest in investing in both stocks and cryptocurrencies.

Robinhood has proved to be a lightning rod for oversight, fines, mass usage and culture in the last year. And it raised billions this year after running into operational issues regarding trading of certain stocks that retail investors found particularly appealing.

Turning to investor results, DST Global, Index Ventures, New Enterprise Associates and Ribbit capital are listed as shareholders with more than 5% of the company apiece, though certain information in the S-1 filing is yet to be included, including share counts for most of those groups. DST’s 58,102,765 Class A shares, however, are listed.

Robinhood has three classes of shares, including Class A shares with one vote, Class B shares with 10, and Class C shares with none.

TechCrunch is parsing the S-1 and will have more in a following piece. Update: Here!

 

Sources: SentinelOne expects to raise over $1B in NYSE IPO tomorrow, listing with a $10B market cap

After launching its IPO last week with an expected listing price range of $26 to $29 per share, cybersecurity company SentinelOne is going tomorrow with some momentum behind it. Sources close to the  tell us that the company, which will be trading under the ticker “S” on the New York Stock Exchange, is expecting to raise over $1 billion in its IPO, putting its valuation at around $10 billion.

Last week, when the company first announced the IPO, it was projected that it would raise $928 million at the top end of its range, giving SentinelOne a valuation of around $7 billion. Coming in at a $10 billion market capitalization would make SentinelOne the most valuable cybersecurity IPO to date.

A source said that the road show has been stronger than anticipated, in part because of the strength of one of its competitors, CrowdStrike, which is publicly traded and currently sitting at a market cap of $58 billion.

The other reason for the response is a slightly grimmer one: cybersecurity continues to be a major issue for businesses of all sizes, public organizations, governments and individuals. “No one wants to see another SolarWinds, and there is no reason that there shouldn’t be more than one or two strong players,” a source said.

As is the bigger trend in cybersecurity, Israel-hatched, Mountain View-based SentinelOne‘s approach to combat that is artificial intelligence — and in its case specifically, a machine learning-based solution that it sells under the brand Singularity that focuses on endpoint security, working across the entire edge of the network to monitor and secure laptops, phones, containerised applications and the many other devices and services connected to a network.

Last year, endpoint security solutions were estimated to be around an $8 billion market, and analysts project that it could be worth as much as $18.4 billion by 2024 — another reason why SentinelOne may have moved up the timetable on its IPO (last year the company’s CEO Tomer Weingarten had told me he thought the company had one or two years left as a private company before considering an IPO, a timeline it clearly decided was worth speeding up).

SentinelOne raised $267 million on a $3.1 billion valuation led by Tiger Global as recently as last November, but it has been expanding rapidly. Growth last quarter was 116% compared to the same period a year before, and it now has more than 4,700 customers and annual recurring revenue of $161 million, according to its S-1 filing. It is also still not profitable, posting a net loss of $64 million in the last quarter.

Duolingo just filed to go public

Duolingo, a Pittsburgh-based language learning business last valued at $2.4 billion, has officially filed to go public.

The 400-person company, which we explored in great detail in our EC-1, was co-founded by Luis von Ahn, the inventor of CAPTCHA and reCAPTCHA, and Severin Hacker. One of the most revealing bits of its story? It’s a route to monetization as a then rare edtech consumer business based outside of Silicon Valley. The company has had a somewhat circuitous journey — full of trial and error — on finding the perfect business model. It eventually landed on subscriptions, despite an original distaste for it thanks to its mission to provide free education.

Luckily, the S-1 reveals that its earlier decisions led to sharp revenue growth at the company.

The vast majority of Duolingo’s revenue comes from subscriptions. In the most recent calendar year, for example, the edtech giant generated 73% of its total top line from subscription incomes.That revenue was followed by advertising incomes and the Duolingo English Test (DET), which represented 17% and 10% of its top line in 2020. (Notably, von Ahn hoped that the DET would be 20% of Duolingo’s revenue by 2019, a figure that it failed to reach by some margin.)

Its multi-part business model appears to be paying off. The company’s revenue grew from $70.8 million in 2019 to $161.7 million in 2020, a 129% increase. Of course some of that growth would have happened sans the recent global pandemic, but it’s not hard to see some COVID-related acceleration in the figures. Duolingo also reported $55.4 million in revenue during the first quarter of 2021, representing a 97% growth from the year-ago period.

The company recently turned profitable on an adjusted basis.

But in more strict accounting terms, net losses have grown for Duolingo. In the three months ended March 31, 2021 for example, the company had net losses of 13.5 million, a sharp increase compared to the same period last year when it had net losses of $2.2 million. And from 2019 to 2020, the company’s GAAP net losses expanded from $13.6 million to $15.8 million.

It should be noted that the company’s net margin improved in 2020, as its revenue more than doubled and its losses barely crept higher. The company’s profitability or lack thereof should not prove to be a problem during its impending listing.

In its S-1 filing Duolingo provided a placeholder $100 million figure for the funds it expects to raise; we’ll get a better idea of how much capital the edtech unicorn may onboard during its IPO when it sets an IPO price range after its roadshow.

The former startup is effectively the kick-off to the Q3 2021 IPO season, one that several inventors have told TechCrunch will be more than active.

Duolingo has raised $183.3 million in venture capital to date. Investors that have meaningful stakes in the company include NewView Capital, Union Square Ventures, CapitalG, Kleiner Perkins, and General Atlantic, which recently got a spot on the cap table through a secondary transaction.

Thinking out loud, at a run rate of around $220 million today and growth of more than 100%, Duolingo should not have a problem clearing its privately-set $2.4 billion price tag. Unless public-market investors are concerned that the edtech market’s growth is mostly behind it. That Duolingo grew by nearly 100% in the first quarter could temper such concerns.

Factoids and other joy

TechCrunch is still digging its way through Duolingo’s IPO filing, but we’ve found a number of details that add more than a little color to its recent growth and business results. Here are some standouts:

  • A “record low” attrition rate in 2020 in which only four employees, or 2% of its workforce left the company.
  • The company eventually plans to launch a “Duolingo Proficiency Score” across its offered languages, with the hopes of creating a “widely accepted indicator of language proficiency level and make Duolingo a global proficiency standard.”
  • It cited Apple’s “Translate” tool, an iOS app launched in 2020 that allows users to translate text sentences or speech between several languages, as a competitor in the ‘risk factors’ section.
  • And finally, it confirmed that it is seeking potential acquisition candidates to add complementary services to its startup.

Duolingo plans to list on the NASDAQ stock exchange using the ticker symbol DUOL.

 

 

Equity Tuesday: Everyone is raising money at the same time

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

This is Equity Monday Tuesday, 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 and myself here.

We are back from a long weekend here in America. But not break here in the States can stop the flow of global tech news. So, here’s the rundown:

Welcome back, America, to the week. It’s nice to see you, everyone else. Maybe Robinhood will file this week.

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