As UiPath closes above its final private valuation, CFO Ashim Gupta discusses his company’s path to market

After an upward revision, UiPath priced its IPO last night at $56 per share, a few dollars above its raised target range. The above-range price meant that the unicorn put more capital into its books through its public offering.

For a company in a market as competitive as robotic process automation (RPA), the funds are welcome. In fact, RPA has been top of mind for startups and established companies alike over the last year or so. In that time frame, enterprise stalwarts like SAP, Microsoft, IBM and ServiceNow have been buying smaller RPA startups and building their own, all in an effort to muscle into an increasingly lucrative market.

In June 2019, Gartner reported that RPA was the fastest-growing area in enterprise software, and while the growth has slowed down since, the sector is still attracting attention. UIPath, which Gartner found was the market leader, has been riding that wave, and today’s capital influx should help the company maintain its market position.

It’s worth noting that when the company had its last private funding round in February, it brought home $750 million at an impressive valuation of $35 billion. But as TechCrunch noted over the course of its pivot to the public markets, that round valued the company above its final IPO price. As a result, this week’s $56-per-share public offer wound up being something of a modest down-round IPO to UiPath’s final private valuation.

Then, a broader set of public traders got hold of its stock and bid its shares higher. The former unicorn’s shares closed their first day’s trading at precisely $69, above the per-share price at which the company closed its final private round.

So despite a somewhat circuitous route, UiPath closed its first day as a public company worth more than it was in its Series F round — when it sold 12,043,202 shares sold at $62.27576 apiece, per SEC filings. More simply, UiPath closed today worth more per-share than it was in February.

How you might value the company, whether you prefer a simple or fully-diluted share count, is somewhat immaterial at this juncture. UiPath had a good day.

While it’s hard to know what the company might do with the proceeds, chances are it will continue to try to expand its platform beyond pure RPA, which could become market-limited over time as companies look at other, more modern approaches to automation. By adding additional automation capabilities — organically or via acquisitions — the company can begin covering broader parts of its market.

TechCrunch spoke with UiPath CFO Ashim Gupta today, curious about the company’s choice of a traditional IPO, its general avoidance of adjusted metrics in its SEC filings, and the IPO market’s current temperature. The final question was on our minds, as some companies have pulled their public listings in the wake of a market described as “challenging”.

Why did UiPath not direct list after its huge February raise?

UiPath raises IPO range, still targets lower valuation than final private round

Robotic process automation unicorn UiPath is set to go public this week, concentrating our focus on its value.

The well-known company was last valued on the private markets at $35 billion in February when it closed a $750 million round. Living up to that price as a public company, however, at least when it comes to its formal IPO price, is proving to be challenging.

In a sense, that’s not too surprising given that the red-hot IPO market cooled as Q1 2021 came to a close. UiPath raised its last private round when the markets were most interested in public offerings, and is now going public in a slightly altered climate.

In numerical terms, UiPath raised its IPO range from $43 to $50 per share, to $52 to $54 per share. That’s a 21% jump in the value of the lower-end of its range, and an 8% gain to the value of the upper-end of its per-share IPO price interval.

UiPath is also selling more shares than before, which should make its total valuation slightly larger at the top-end than a mere 8% gain. So let’s go through the math one more time. Afterwards, we’ll stack its new simple, fully-diluted IPO valuations against its final private price, ask ourselves if our musings on the company’s recent profitability bore out, and close by asking where the company might finally price, and if we expect it to do so above its new price range.

UiPath at $54

What does it take to create a startup ecosystem?

Say it louder for the people in the back: As tech grows bigger by the minute and venture capital adds dollar signs by the day, a startup hub’s success is not an either/or situation. The next Silicon Valley is a tired narrative, when in reality startups look, innovate and create differently all over the world.

On that note, my colleagues spent the past few months digging into the market in Detroit, Michigan:

While StockX is the startup darling that may have put the region in the generalist spotlight, I soon learned that the sneaker marketplace company wasn’t at all where the city’s story started and ended. Instead, it started a little more at ground level.

Detroit techies consistently point to billionaire Dan Gilbert, the co-founder of Quicken Loans and the owner of the Cleveland Cavaliers, as the reason behind the region’s startup growth. It made me immediately wonder if all it takes to create a startup ecosystem is deep pockets.

Turns out it’s a little more complicated than that.

Gilbert has poured at least $2.5 billion into rehabilitating buildings in the core of Detroit. Then he invested in the companies that took office space in those buildings, the restaurants that would feed those new families in the area and the retailers that would fill up the side blocks. It wasn’t one check by one billionaire, but instead a measured and consistent approach to try to reestablish Detroit as a city of innovation within the United States.

I think one founder put it best: “there are a lot of people who hate him, but the reality is that, while he wasn’t the only billionaire in town, he’s the only one who heavily invested in Detroit.”

Beyond Gilbert, the vitalization is spread throughout different sectors. There’s a 12-year-old early-stage venture firm that was one of the first to ever bet on mobility as an investment thesis; there’s a thriving garden startup; and there’s a hardware company that, despite remote work, is finding space to scale:

We’ll continue exploring emerging tech hubs, so throw us suggestions as we virtually (and one day physically) road trip across the country.

 

In the rest of this newsletter, we’ll talk about Tiger Global, IPOs and a few exciting upcoming events. Make sure to follow me on Twitter @nmasc_ to hang during the week.

Tiger Global has a spending problem

This week on Equity, we talked about Tiger Global’s aggressive investment approach and what it could mean for early-stage firms and founders.

Here’s what to know: One of the reasons Tiger Global is feeling spendy is that it just closed one of the biggest venture funds ever. In 2020, the firm closed $3.75 billion in capital commitments. In 2021, it nearly doubled its own record, with $6.7 billion raised for its latest fund.

And if you don’t believe me, below is a list of just some of the New York-based firms’ recent activity:

Crypto’s Coinbase moment

Cryptocurrency trading giant Coinbase went public this week. The company opened at $381 per share, valuing the exchange at nearly $100 billion. It was a massive exit for the company, which underwent scrutiny last year when it banned politics at work.

Here’s what to know: It’s fairly obvious that Coinbase’s successful IPO was a big moment for fintech and crypto startups, as well as the decentralized finance movement. My colleagues Alex Wilhelm and Anna Heim dug into how the crypto ripple effect could look from the perspective of a few venture capitalists. There are too many good bits for me to choose an excerpt, so read it for yourself here, and a take sneak peek below:

So while there is an ocean of bullish sentiment that the Coinbase listing will lead to rising venture capital investment into crypto startups, there’s also some caution to be had; how much of the growing market that Coinbase can capture and control is not yet clear, though IVP’s Loverro was very bullish during our interview about the company’s expanding feature set — things like staking Tezos, or buying Uniswap. Its backers think that Coinbase is well-positioned to absorb future market upside in its niche.

Around TechCrunch

As always, we have a ton of exciting events coming up. Here’s just a taste:

Across the week

Seen on TechCrunch

Pakistan temporarily blocks social media

Republican antitrust bill would block all Big Tech acquisitions

Can the tech trade show return in 2021?

Garry Kasparov launches a community-first chess platform

Seen on Extra Crunch

What’s fueling hydrogen tech?

Billion-dollar B2B: cloud-first enterprise tech behemoths have massive potential

For startups choosing a platform, a decision looms: build or buy?

Building customer-first relationships in a privacy-first world is critical

The IPO market is sending us mixed messages

Best,

N

The IPO market is sending us mixed messages

If you only stayed up to date with the Coinbase direct listing this week, you’re forgiven. It was, after all, one heck of a flotation.

But underneath the cryptocurrency exchange’s public debut, other IPO news that matters did happen this week. And the news adds up to a somewhat muddled picture of the current IPO market.

To cap off the week, let’s run through IPO news from UiPath, Coinbase, Grab, AppLovin and Zenvia. The aggregate dataset should help you form your own perspective about where today’s IPO markets really are in terms of warmth for the often-unprofitable unicorns of the world.

Recall that we’re in the midst of a slightly more turbulent IPO window than we saw during the last quarter. After seemingly watching every company’s IPO price above-range and then charge higher on opening day, several companies pulled their offerings as the second quarter started. It was a surprise.

Since then we’ve seen Compass go public, but not at quite the level of performance it might have anticipated, and, then, this week, much has happened.

What follows is a mini-digest of IPO news from the week, tagged with our best read of just how bullish (or not) the happening really was:

Do you need a SPAC therapist?

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

Natasha and Danny and Alex and Grace were all here to chat through the week’s biggest tech happenings. It was yet another busy week, but that just means we had a great time putting the show together and recording it. Honestly, we had a lot of fun this week, and we hope you crack a smile while we dig through the latest as a team.

Ready? Here’s the rundown:

  • The Coinbase direct listing! Here are our notes on its S-1, its direct listing reference price and its results. And we even wrote about the impact that it might have on other startup verticals!
  • Grab’s impending SPAC! As it turns out, Natasha loves SPACs now, and even Danny and Alex had very little to say that was rude about this one.
  • Degreed became a unicorn, proving yet again that education for the enterprise is a booming sub-sector.
  • Outschool also became an edtech unicorn, thanks to a new round led by Coatue and everyone’s rich cousin, Tiger Global. The conversation soon devolved into how Tiger Global is impacting the broader VC ecosystem, thanks to a fantastic analysis piece that you have to read here. 
  • Papa raised $60 million, also from Tiger Global. What do you call tech aimed at old folks? Don’t call it elder tech, we have a brand new phrase in store. Let’s see if it catches on.
  • AI chips! Danny talks the team through grokking Groq, so that we can talk about TPUs without losing our minds. He’s a good egg.
  • And, finally, Slice raised more money. Not from Tiger Global. We have good things to say about it.

And that is our show! We are back on Monday morning!

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!

Nonobvious acquisitions are on my 2021 bingo board

At the end of 2020, I argued that edtech needs to think bigger in order to stay relevant after the pandemic. I urged founders to think less about how to bundle and unbundle lecture experience, and more about how to replace outdated systems and methods with new, tech-powered solutions. In other words, don’t simply put engaging content on a screen, but innovate on what that screen looks like, tracks and offers.

A few months into 2021, the exit environment in edtech…feels like it’s doing exactly that. The same startups that hit billion and multi-billion valuations during the pandemic are scooping up new talent to broaden their service offerings.

Ruben Harris, the founder of Career Karma, a platform that matches aspiring coding professionals to bootcamps, put together a massive report recently with his team to talk about the pandemic’s impact on the bootcamp market.

James Gallagher, the author of the report, tells me:

It is important to note that the full potential of bootcamps has not yet been realised. We are now seeing more exploration of niches like technology sales which provide gateways into new careers in tech for people who otherwise may not have been able to acquire training. To scale such models, new businesses will need venture capital.

He went on to explain how a notable acquisition from 2020 was K12 scooping up Galvanize, “which would give K12 exposure into corporate training and the coding bootcamp space, a market outside of K12’s focus at the moment.”

To me this report signal two things: the financial interest in boot camps isn’t simply stemming from other bootcamps (although that is happening), but it’s surprising partnerships. Leaving this subsector, we see creative acquisitions such as a Roblox for edtech buying a language learning tool, and a startup known for flashcards scooping up a tech tutoring service.

Readers should know by this point that I love a nonobvious acquisition (except when this almost happened), so if you have any more tips on coming deals in edtech, please Signal me or direct message me on Twitter.

I’ll end with this: Successful startup founders are innately ambitious, finding opportunity in moonshots and convincing others that the odds are in their favor. However, the ceiling for what defines ambition heightens almost everyday. What used to be a win is now a nonnegotiable, and a feat is only a feat until your competitor hits the exact same milestone.

Acquisitions are one way to scoop up competition and synergistic talent, but it’s what happens next that matters the most.

In the rest of this newsletter, we will talk about Clubhouse competitors, how a homegrown experiment became one of the fastest growing companies in fitness tech and a cool-down in public markets (?!). As always, you can get this newsletter in your inbox each Saturday morning, so subscribe here to join the cool kids.

Clubhouse might create billions in value, but could capture none of it

Remember when everyone was buzzing around about building Stories? That’s so pre-pandemic. A number of companies recently announced plans to build their own versions of Clubhouse, after the buzzy app unearthed the consumer love for audio.

Here’s what to know: It might be easier to start guessing who isn’t building a Clubhouse clone at this point. Our predictions are already starting, but jokes aside, the rise in clones could mean that Clubhouse might have to make a run for its pre-monetized money (cough, cough, Twitter spaces). It doesn’t matter if a startup is first in unlocking a key insight, all that matters is who executes that key insight the best.

Image Credits: Getty Images

A strong unicorn, literally

Tonal, a fitness tech startup, became a unicorn this week after raising a new tranche of capital.

Here’s what to know: The new status underscores market growth for at-home fitness solutions. And while we don’t have a Tonal S-1 yet, we do have a Tonal EC-1. EC-1’s are TechCrunch’s riff on an S-1, and are essentially a deep dive into a company.

Reporter JP Mangalindan wrote thousands and thousands of words about Tonal, from its origin story to business model, its focus on communities and its biggest hurdles ahead.

Image Credits: Nigel Sussman

Initial public o….no

You’ve probably had a better week than Compass, Deliveroo and Kaltura. The three companies all had different events that illustrate a potential damper on the part that has been the public markets.

Here’s what to know: Compass cut its shares and lowered pricing of said shares, Deliveroo had a rough debut as a delivery company on the public markets, and Kaltura postponed its IPO after valuation demand didn’t hit expectations.

In other news, though:

Photo Taken In Arizona, United States. Image Credits: Jure Batagelj / 500px / Getty Images

Around TechCrunch

Thanks to everyone who tuned in to TechCrunch Early Stage! If you enjoyed the event (or missed it), don’t worry: Disrupt is almost here.

Across the week

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Niantic CEO shares teaser image of AR glasses device

The Weeknd will sell an unreleased song and visual art via NFT auction

Seen on Extra Crunch

Embedded procurement will make every company its own marketplace

5 mistakes creators make building new games on Roblox

E-commerce roll-ups are the next wave of disruption in consumer packaged goods

How our SaaS startup improved net revenue retention by more than 30 points in two quarters

Compass CEO hails IPO as a fundraising event amid ‘challenging’ market

While several tech companies are opting to delay their IPOs in the face of less-than-enthusiastic market demand for their shares, real estate tech company Compass forged ahead and went public today. After pricing its shares at $18 apiece last night, the low end of a lowered IPO price range, Compass shares closed the day up just under 12% at $20.15 apiece.

TechCrunch caught up with Compass CEO and founder Robert Reffkin to chat about his company’s debut in the market’s suddenly choppy waters for tech and tech-enabled debuts.

Regarding whether Compass is a tech company or a real estate brokerage, Reffkin — who raised the comparison himself — used the opportunity to note that companies like Amazon or Tesla aren’t only one thing. Amazon is a logistics company, an e-commerce company, a cloud-computing business and a media concern all at the same time. Price that.

The argument was good enough for Compass to sell 25 million shares — a lowered amount — at its IPO price for a gross worth $450 million. That, the CEO said, was his company’s goal for its public offering.

Sparing TechCrunch the usual CEO line about an IPO not being a destination but merely one stop on a longer journey at that juncture, Reffkin instead argued that putting nine figures of capital into his company was his objective, not a particular price or resulting valuation.

That might sound simple, but as Kaltura and Intermedia Cloud Communications have pushed their IPOs back, it’s a bit gutsy. Still, if financing was the key objective, Compass did succeed in its debut. And it was even rewarded with a neat little bump in value during its first day’s trading.

Reffkin did confirm to TechCrunch what we’ve been reporting lately, namely that the IPO market has changed for the worse in recent weeks. He described it as “challenging.”

So why go public now when there is so much capital available for private companies?

Reffkin cited a few numbers, but centered his view around having what he construes as the “right team” and the “right results.” We’ll get a bit more on the latter when Compass reports its first set of public earnings.

For now, it’s a company that braved stormier seas than we might have expected to see so soon after a blistering first few months of the year for IPOs.

And because I would also bring her along if I ever took a company public, here’s the company’s founder and CEO with his mother:

Via the company.

 

As Compass downsizes its IPO, signs of weakness appear for high-growth companies

On the same day that Deliveroo’s IPO fizzled at the start of trading, Compass announced via a fresh S-1 filing that it will reduce the number of shares in its impending flotation and sell them at a lower price.

Taken together, the various market signs could point to a modest to moderate cooling in the tech IPO market.

The move by Compass, a venture-backed residential brokerage, to lower its implied public-market valuation and sell fewer shares is a rebuke of the company’s earlier optimism regarding its valuation and ability to raise capital. The company’s IPO is still slated to generate as much as a half-billion dollars, so it can hardly be called a failure if it executes at its rejiggered price range, but the cuts matter.

Especially when we consider several other factors. The Deliveroo IPO, as discussed this morning, was impacted by more than mere economics. And there are questions regarding how interested seemingly more conservative countries’ stock exchanges will prove in growth-oriented, unprofitable companies.

But added to the mix are recent declines in the valuation of public software companies, effectively repricing the value of high-margin, recurring revenue. The reasons behind that particular change are several, but may include a rotation by public investors into other asset categories, or an air-letting from a sector that may have enjoyed some valuation inflation in the last year.

In that vein, SMB cloud provider DigitalOcean’s own post-IPO declines from its offering price are a bit more understandable, as is a lack of a higher price interval from Kaltura, a video-focused software company, as it looks to list.

Taken together, the various market signs could point to a modest to moderate cooling in the tech IPO market. For a host of companies looking to debut via a SPAC, that could prove to be bad news.

Coursera prices IPO at top end of its range in boon to edtech valuations

Coursera, an edtech unicorn, will begin its life today as a public company after pricing its IPO at $33 per share yesterday evening. Using a simple share count, the company’s valuation comes to $4.30 billion, or $4.38 billion if its underwriters exercise their option to purchase shares at its offering price.

A more diluted share count pushes the valuation of Coursera over the $5 billion mark.

Coursera was last valued at $2.57 billion after raising $130 million in mid-2020, per PitchBook data. The company’s simple valuation is around a 67% gain on that final private figure; that gain rises to just over 70% if its underwriters purchase their available shares.

Using a diluted valuation, Coursera has roughly doubled its final private price. In under a year. For edtech investors looking to Coursera to help determine public market sentiment regarding the exit-value of their investments, TechCrunch reckons it’s a pretty good day.

The amount of private capital at play in edtech startups is staggering; billions and billions of potential returns could get a further shot in the arm if Coursera trades well this morning. And the very same billions of invested capital could lose the smile that Coursera’s seemingly-strong IPO pricing brought them.

There are other edtech debuts in the wings. TechCrunch has covered Nerdy’s plans to go public, via a SPAC, for example.

Private investors, who put well north of $10 billion into edtech companies globally in 2020, are modestly bullish on edtech exit volume this year. In a prior TechCrunch venture capitalist survey, GSV managing partner Deborah Quazzo said the following:

Exit volume is rising already with a wide range of strategic and financial buyers of edtech companies — something that didn’t exist before. You will see numerous high-value exits in the first half of 2021. It’s the public market “exits” that have really lagged and that I hope turns around in 2021 and 2022. There are numerous global companies that could go public and the addition of SPAC IPOs creates another positive dynamic.

The Coursera IPO pricing at least, meets the mark for a high-value exit. Which could lead where? Extending Quazzo’s thinking a single step, perhaps a strong Coursera first-day trading session will bolster SPAC interest in taking more edtech startups and unicorns public.

Such a move could lock-in valuations for a number of currently illiquid edtech startups, and perhaps begin to return chunks of invested capital in the historically out-of-fashion technology sector.

Adding to that sentiment is Owl Ventures’ managing director Ian Chiu, who told TechCrunch in the same survey that “the pipeline for potential IPO candidates coming from the edtech sector continues to grow larger.” Let’s hope — parsing the Coursera S-1 filing was good fun and we’d like another at-bat with an edtech IPO document.

More when Coursera trades.

Sequoia Capital India on its early investment in Appier, the fund’s latest exit

Chih-Han Yu, chief executive officer and co-founder of Appier Group Inc., right, holds a hammer next to a bell during an event marking the listing of the company on the Tokyo Stock Exchange, at the company's office in Taipei, Taiwan on Tuesday, March 30, 2021. Photographer: Billy H.C. Kwok/Bloomberg via Getty Images

Chih-Han Yu, chief executive officer and co-founder of Appier Group Inc., right, holds a hammer next to a bell during an event marking the listing of the company on the Tokyo Stock Exchange, at the company’s office in Taipei, Taiwan on Tuesday, March 30, 2021. Photographer: Billy H.C. Kwok/Bloomberg via Getty Images

Appier’s initial public offering on the Tokyo Stock Exchange yesterday was a milestone not only for the company, but also Sequoia Capital India, one of its earliest investors. Founded in Taiwan, Appier was the fund’s first investment outside of India, and is now also the first company in its portfolio outside of India to go public. In an interview with TechCrunch, Sequoia Capital managing director Abheek Anand talked about what drew the firm to Appier, which develops AI-based marketing software.

Before shifting its focus to marketing, Appier’s founders—chief executive officer Chih-Han Yu, chief operating officer Winnie Lee and chief technology officer Joe Su—worked on a startup called Plaxie to develop AI-powered gaming engines. Yu and Su came up with the idea when they were both graduate students at Harvard, but found there was little demand at the time. Anand met them in 2013, soon after their pivot to big data and marketing, and Sequoia Capital India invested in Appier’s Series A a few months later.

“It’s easy to say in retrospect what worked and what didn’t work. What really stands out without trying to write revisionist history is that this was just an incredibly smart team,” said Anand. “They had probably the most technical core DNA of any Series A company that we’ve met in years, I would argue.” Yu holds a PhD in computer science from Harvard, Wu earned a PhD in immunology at Washington University in St. Louis and Su has a M.S. in computer science from Harvard. The company also filled its team with AI and machine learning researchers from top universities in Taiwan and the United States.

At the time, Sequoia Capital “had a broad thesis that there would be adoption of AI in enterprises,” Anand said. “What we believed was there were a bunch of people going after that problem, but they were trying to solve business problems without necessarily having the technical depth to do it.” Appier stood out because they “were swinging at it from the other end, where they had an enormous amount of technical expertise.”

Since Appier’s launch in 2012, more companies have emerged that use machine learning and big data to help companies automate marketing decisions and create online campaigns. Anand said one of the reasons Appier, which now operates in 14 markets across the Asia-Pacific region, remains competitive is its strategy of cross-selling new products and focusing on specific use cases instead of building a general purpose platform.

Appier’s core product is a cross-platform advertising engine called CrossX that focuses on user acquisition. Then it has products that address other parts of their customers’ value chain: AiDeal to help companies send coupons to the customers who are most likely to use them; user engagement platform AIQUA; and AIXON, a data science platform that uses AI models to predict customer actions, including the likelihood of repeat purchases.

“I think the number one thing that the company has spent a lot of time on is focusing on efficiency,” said Anand. “Customers have tons of data, both external and first-party, that they’re processing to drive business outcomes. It’s a very hard technical problem. Appier starts with a solution that is relatively easy to break into a customer, and then builds deeper and deeper solutions for those customers.”

Appier’s listing is also noteworthy because it marks the first time a company from Taiwan has listed in Japan since Trend Micro’s IPO in 1998. Japan is one of Appier’s biggest markets (customers there include Rakuten, Toyota and Shiseido), making the Tokyo Stock Exchange a natural fit, Anand said, even though most of Sequoia Capital India’s portfolio companies list in India or the United States.

The Tokyo Stock Exchange also stood out because of its retail investor participation, liquidity and total volume. Some of Appier’s other core investors, including JAFCO Asia and SoftBank Group Corp., are also based in Japan. But though it has almost $30 billion in average trading volume, the vast majority of listings are domestic companies. In a recent report, Nikkei Asia cited a higher corporate tax rate and lack of potential underwriters, especially for smaller listings, as a potential obstacles for foreign companies.

But Appier’s debut may lead the way for other Asian startups to chose the Tokyo Stock Exchange, said Anand. “Getting ready for the Japanese exchange meant having the right accounting practices, the right reporting, a whole bunch of compliance stuff. It was a long process. In some ways we were leading the charge for external companies to get there, and I’m sure over time it will keep getting easier and easier.”