Tuesday, 18 February 2020

Startups Weekly: A pre-IPO list of unicorn companies that also generate lots of revenue(!)

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My colleague Alex Wilhelm has been researching the companies that are both getting impressive valuations and also generating annual recurring revenues of around $100 million on more. These are the sorts of companies that any savvy public-market tech investor might want to take a closer look at, particularly the sort of investor who is comfortable digesting modern online subscription metrics. That is, the startup-oriented types who read this kinda newsletter.

The following is not investment advice, but this week Alex added Seismic, ThoughtSpot, Noom, Riskified and Movable Ink to the club, based on their funding histories, growth metrics and his own interviews with the teams. “Perhaps we’re really just compiling an IPO watchlist, a grouping of firms that will probably go (or should go) public in the next 18 months,” he mused along the way.

He then assembled a list of the dozen existing companies he’s covered in the last few months that form “The $100M ARR Club.” Read the full thing on Extra Crunch, and get ready for more coverage as the hundreds of unicorns produced in this era continue running the public gauntlet.

Raising a seed round? You have more options in 2020

You have more options than ever if you want to raise a seed round today. But you have to know how to pitch the right investors at the right time.

In recent years investors have come up with more ways to back companies that are still finding product-market fit or still figuring out how to grow. But there are approximately six stages of seed today — and each investor who writes these sorts of checks has their own preferences within the stages. Some are fine with just a big idea, some want to see the start of long-term traction.

So! Our resident former VC, Danny Crichton, has put together for Extra Crunch the latest tips that he’s hearing from founders and early-stage investors about the following stages of young companies:

0. Team – deck: This might be dubbed the “hello world” stage of a startup’s journey. There is at least one person looking to build some form of company, but the full team, product, market and target aren’t fleshed out at all.

1. Team + deck: In this stage, there is leadership for the startup and the founder(s) have identified a working hypothesis for a product or at least a market they want to tackle. Because there is no product, there is obviously no product-market fit (PMF).

2. On course to product-market fit: There is a real product, there are users, maybe even a bit of revenue, but everything is sort of ambiguous and the team is still actively experimenting and testing ideas around the product.

3. Product-market fit, pre-scaling: The startup has identified and developed a product that has clear signs of product-market fit, which might come in the form of high NPS scores, strong word-of-mouth marketing, excited feedback from users or some other data that says users of the product love it.

4. On course to scalable growth: There is a product people love, but now the company needs to prove it knows how to spend money to buy growth. This means setting up marketing channels, handling growth marketing within the product itself (on-boarding, sharing tools, etc.) and, if relevant, building out a sales team. Many of these functions haven’t been fully tested by the startup yet.

5. Proven, if early growth: Growth channels have real and positive data that’s comparable with other startups.

This list is focused on funding for venture-oriented companies — he’ll be exploring the booming world of alternative finance in the coming weeks. On that note, don’t miss Alex Wilhelm’s coverage on TechCrunch this week about the rise of venture debt.

Where top investors are putting money in construction robotics

With our 2020 Robotics + AI sessions event on the horizon in early March, we’re going deeper into some of the most dynamic real-life uses through our regular investor survey series.

With global housing, material and labor shortages, and new technologies becoming commercially available, construction robotics has become a major subcategory of investment. Arman Tabatabai, our in-house research analyst, identified 16 of the investors most ready to write checks for startups in the space this year, and got nearly 6,000 words of detailed responses on what they are looking for. Click through to Extra Crunch for more. 

Married founders are making it work

Speaking of newly popular ways to build a company, over on TechCrunch Anna Escher identifies a striking number of married couples who also have founded successful startups together.

“We got into a momentum of talking about work all the time,” explains Lidia Yan of logistics startup NEXT Trucking. “Not only at the office but at home.” The solution that she and her husband Elton Chung developed is a simple rule enforced by an iPhone alarm: All work-related talk must cease after 8pm every day after the alarm goes off. They use the time for shared side passions, like exploring local restaurants.

Earlier couple-founder success like Eventbrite and VMware have helped break the ice for investors. NEXT, for example, has raised nearly $100 million from top investors.

However, the couples that Escher talked to were clear about the risks (from chronic disharmony to divorce) and the trade-offs (from less travel to later starts on a family).

Across the week

TechCrunch:

Mike Volpi on the art of board membership

Portfolio bloat: What’s happening to thousands of startups going nowhere fast

FTC votes to review influencer marketing rules & penalties

Catching up on China’s tech influence operations in America

Peru’s startup scene is ready for more

Extra Crunch:

Understanding Airbnb’s new, stubborn lack of profits

4 factors to consider before entering international markets

How to advertise a podcast in 2020

Meet 5 cybersecurity unicorns that could IPO in 2020

This co-op wants to put money back into patients’ hands

#EquityPod

Alex and Danny sat down with Elliot Robinson, a growth-focused partner at Bessemer. Key topics this week included funding rounds from Headspace and Nova Credit, Battery’s new capital vehicles, why some firms need more capital for the same number of checks and much more.



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