A fistful of IPOs, Affirm’s Peloton problem, Zoom Apps and more – TechCrunch – Best gaming pro

A fistful of IPOs, Affirm’s Peloton problem, Zoom Apps and more – TechCrunch  Best gaming pro
“startups when:1d” – Google News

Extra Crunch roundup: A fistful of IPOs, Affirm’s Peloton problem, Zoom Apps and more

DoorDash, Affirm, Roblox, Airbnb, C3.ai and Wish all filed to go public in recent days, which means some venture capitalists are having the best week of their lives.

Tech companies that go public capture our imagination because they are literal happy endings. An Initial Public Offering is the promised land for startup pilgrims who may wander the desert for years seeking product-market fit. After all, the “I” in “ISO” stands for “incentive.”

A flurry of new S-1s in a single week forced me to rearrange our editorial calendar, but I didn’t mind; our 360-degree coverage let some of the air out of various hype balloons and uncovered several unique angles.

For example: I was familiar with Affirm, the service that lets consumers finance purchases, but I had no idea Peloton accounted for 30% of its total revenue in the last quarter.

“What happens if Peloton puts on the brakes?” I asked Alex Wilhelm as I edited his breakdown of Affirm’s S-1. We decided to use that as the subhead for his analysis.

The stories that follow are an overview of Extra Crunch from the last five days. Full articles are only available to members, but you can use discount code ECFriday to save 20% off a one or two-year subscription. Details here.

Thank you very much for reading Extra Crunch this week; I hope you have a relaxing weekend.

Walter Thompson
Senior Editor, TechCrunch
@yourprotagonist


What is Roblox worth?

Gaming company Roblox filed to go public yesterday afternoon, so Alex Wilhelm brought out a scalpel and dissected its S-1. Using his patented mathmagic, he analyzed Roblox’s fundraising history and reported revenue to estimate where its valuation might land.

Noting that “the public markets appear to be even more risk-on than the private world in 2020,” Alex pegged the number at “just a hair under $ 10 billion.”

What China’s fintech can teach the world

Alibaba Employees Pay For Meals With Face Recognition System

HANGZHOU, CHINA – JULY 31: An employee uses face recognition system on a self-service check-out machine to pay for her meals in a canteen at the headquarters of Alibaba Group on July 31, 2018 in Hangzhou, Zhejiang Province of China. The self-service check-out machine can calculate the price of meals quickly to save employees’ queuing time. (Photo by Visual China Group via Getty Images)

For all the hype about new forms of payment, the way I transact hasn’t been radically transformed in recent years — even in tech-centric San Francisco.

Sure, I use NFC card readers to tap and pay and tipped a street musician using Venmo last weekend. But my landlord still demands paper checks and there’s a tattered “CASH ONLY” taped to the register at my closest coffee shop.

In China, it’s a different story: Alibaba’s employee cafeteria uses facial recognition and AI to determine which foods a worker has selected and who to charge. Many consumers there use the same app to pay for utility bills, movie tickets and hamburgers.

“Today, nobody except Chinese people outside of China uses Alipay or WeChat Pay to pay for anything,” says finance researcher Martin Chorzempa. “So that’s a big unexplored side that I think is going to come into a lot of geopolitical risks.”

Inside Affirm’s IPO filing: A look at its economics, profits and revenue concentration

Consumer lending service Affirm filed to go public on Wednesday evening, so Alex used Thursday’s column to unpack the company’s financials.

After reviewing Affirm’s profitability, revenue and the impact of COVID-19 on its bottom line, he asked (and answered) three questions:

  • What does Affirm’s loss rate on consumer loans look like?
  • Are its gross margins improving?
  • What does the unicorn have to say about contribution profit from its loans business?

If you didn’t make $ 1B this week, you are not doing VC right

Image Credits: XiXinXing (opens in a new window) / Getty Images

“The only thing more rare than a unicorn is an exited unicorn,” observes Managing Editor Danny Crichton, who looked back at Exitpalooza 2020 to answer “a simple question — who made the money?”

Covering each exit from the perspective of founders and investors, Danny makes it clear who’ll take home the largest slice of each pie. TL;DR? “Some really colossal winners among founders, and several venture firms walking home with billions of dollars in capital.

5 questions from Airbnb’s IPO filing

The S-1 Airbnb released at the start of the week provided insight into the home-rental platform’s core financials, but it also raised several questions about the company’s health and long-term viability, according to Alex Wilhelm:

  • How far did Airbnb’s bookings fall during Q1 and Q2?
  • How far have Airbnb’s bookings come back since?
  • Did local, long-term stays save Airbnb?
  • Has Airbnb ever really made money?
  • Is the company wealthy despite the pandemic?

Autodesk CEO Andrew Anagnost explains the strategy behind acquiring Spacemaker

Andrew Anagnost, President and CEO, Autodesk.

Andrew Anagnost, president and CEO, Autodesk.

Earlier this week, Autodesk announced its purchase of Spacemaker, a Norwegian firm that develops AI-supported software for urban development.

TechCrunch reporter Steve O’Hear interviewed Autodesk CEO Andrew Anagnost to learn more about the acquisition and asked why Autodesk paid $ 240 million for Spacemaker’s 115-person team and IP — especially when there were other startups closer to its Bay Area HQ.

“They’ve built a real, practical, usable application that helps a segment of our population use machine learning to really create better outcomes in a critical area, which is urban redevelopment and development,” said Anagnost.

“So it’s totally aligned with what we’re trying to do.”

Unpacking the C3.ai IPO filing

On Monday, Alex dove into the IPO filing for enterprise artificial intelligence company C3.ai.

After poring over its ownership structure, service offerings and its last two years of revenue, he asks and answers the question: “is the business itself any damn good?”

Is the internet advertising economy about to implode?

Image Credits: jayk7 / Getty Images

In his new book, “Subprime Attention Crisis,” writer/researcher Tim Hwang attempts to answer a question I’ve wondered about for years: does advertising actually work?

Managing Editor Danny Crichton interviewed Hwang to learn more about his thesis that there are parallels between today’s ad industry and the subprime mortgage crisis that helped spur the Great Recession.

So, are online ads effective?

“I think the companies are very reticent to give up the data that would allow you to find a really definitive answer to that question,” says Hwang.

Will Zoom Apps be the next hot startup platform?

Logos of companies in the Zoom Apps marketplace

Image Credits: Zoom

Even after much of the population has been vaccinated against COVID-19, we will still be using Zoom’s video-conferencing platform in great numbers.

That’s because Zoom isn’t just an app: it’s also a platform play for startups that add functionality using APIs, an SDK or chatbots that behave like smart assistants.

Enterprise reporter Ron Miller spoke to entrepreneurs and investors who are leveraging Zoom’s platform to build new applications with an eye on the future.

“By offering a platform to build applications that take advantage of the meeting software, it’s possible it could be a valuable new ecosystem for startups,” says Ron.

Will edtech empower or erase the need for higher education?

Image Credits: Bryce Durbin

Without an on-campus experience, many students (and their parents) are wondering how much value there is in attending classes via a laptop in a dormitory.

Even worse: Declining enrollment is leading many institutions to eliminate majors and find other ways to cut costs, like furloughing staff and cutting athletic programs.

Edtech solutions could fill the gap, but there’s no real consensus in higher education over which tools work best. Many colleges and universities are using a number of “third-party solutions to keep operations afloat,” reports Natasha Mascarenhas.

“It’s a stress test that could lead to a reckoning among edtech startups.”

3 growth tactics that helped us surpass Noom and Weight Watchers

3D rendering of TNT dynamite sticks in carton box on blue background. Explosive supplies. Dangerous cargo. Plotting terrorist attack. Image Credits: Gearstd / Getty Images.

I look for guest-written Extra Crunch stories that will help other entrepreneurs be more successful, which is why I routinely turn down submissions that seem overly promotional.

However, Henrik Torstensson (CEO and co-founder of Lifesum) submitted a post about the techniques he’s used to scale his nutrition app over the last three years. “It’s a strategy any startup can use, regardless of size or budget,” he writes.

According to Sensor Tower, Lifesum is growing almost twice as fast as Noon and Weight Watchers, so putting his company at the center of the story made sense.

Send in reviews of your favorite books for TechCrunch!

Image via Getty Images / Alexander Spatari

Every year, we ask TechCrunch reporters, VCs and our Extra Crunch readers to recommend their favorite books.

Have you read a book this year that you want to recommend? Send an email with the title and a brief explanation of why you enjoyed it to bookclub@techcrunch.com.

We’ll compile the suggestions and publish the list as we get closer to the holidays. These books don’t have to be published this calendar year — any book you read this year qualifies.

Please share your submissions by November 30.

Dear Sophie: Can an H-1B co-founder own a Delaware C Corp?

Image Credits: Sophie Alcorn

Dear Sophie:

My VC partner and I are working with 50/50 co-founders on their startup — let’s call it “NewCo.” We’re exploring pre-seed terms.

One founder is on a green card and already works there. The other founder is from India and is working on an H-1B at a large tech company.

Can the H-1B co-founder lead this company? What’s the timing to get everything squared away? If we make the investment we want them to hit the ground running.

— Diligent in Daly City

Startups – TechCrunch

Inside Affirm’s IPO filing: A look at its economics, profits and revenue concentration

Last night Affirm filed to go public, herding yet another unicorn into the end-of-year IPO corral. The consumer installment lending service joins DoorDash and Airbnb in filing recently, as a number of highly valued, venture-backed private companies look to float while the public markets are more interested in growth than profits.

TechCrunch took an initial dive into Affirm’s numbers yesterday, so if you need a broad overview, please head here.

This morning we’re going deeper into the company’s economics, profitability and the impact of COVID-19 on its business. The last element of our investigation involves Peloton and the historical examples of Twilio and Fastly, so it should be fun.


The Exchange explores startups, markets and money. Read it every morning on Extra Crunch, or get The Exchange newsletter every Saturday.


Affirm is a company that TechCrunch has long tracked. I was assigned an interview with founder Max Levchin at Disrupt 2014, giving me a reason to pay extra attention to the company over the last six years. This S-1 has been a long time coming.

But is Affirm another pandemic-fueled company going public on the back of a COVID-19 bump, or are its business prospects more durable?

Let’s get into the numbers.

Economics

First, let’s discuss Affirm’s core economics. I want to know three things:

  • What does Affirm’s loss rate on consumer loans look like?
  • Are its gross margins improving?
  • What does the unicorn have to say about contribution profit from its loans business?

These are related questions, as we’ll see.

Starting with loss rates, Affirm thinks it is getting smarter over time, writing in its S-1 that its “expertise in sourcing, aggregating, protecting and analyzing data” provides it with a “core competitive advantage.” Or, more simply, Affirm writes that it has “data advantages that compound over time.”

So we should see improving loss rates, yeah? And we do. The company has a very pretty chart up top in its IPO filing that makes its model’s improvement appear staggeringly good over time:

Image Credits: Affirm

But, things aren’t improving as fast inside its results, as Affirm later explains when discussing its aggregate, as opposed to cohort-delineated, results.

Here’s Affirm discussing its provision for credit losses in its most recent quarter (calendar Q3 2020) and the period’s year-ago analog (calendar Q3 2019):

Image Credits: Affirm

As we can see, the percentage of total revenue that Affirm has to provision for expected credit losses is going down over time. That’s what you’d hope to see.

To better explain what’s going on, let’s explore what Affirm means by “provision for credit losses.” Affirm defines the metric as “the amount of expense required to maintain the allowance of credit losses on our balance sheet [that] represents management’s estimate of future losses,” which is “determined by the change in estimates for future losses and the net charge offs incurred in the period.”

And it got quite a lot better in the last year, which the company says was “driven by lower credit losses and improved credit quality of the portfolio.” So, Affirm is getting better at lending as time goes along. What does that mean for its gross margins?

Well, Affirm doesn’t provide direct gross margin results. So we’re left to do the work ourselves. For reference, this is the income statement we’re working off of:

Image Credits: Affirm

Fun, right? Annoying, but fun.

How should we calculate the company’s gross margins? We can’t drill down on a per-product basis given that costs aren’t apportioned in a manner that would allow us to, so we’ll have to take Affirm’s revenue as a bloc, and its costs as a bloc as well.

Startups – TechCrunch

Working to understand Affirm’s reported IPO pricing hopes

News broke last night that Affirm, a well-known fintech unicorn, could approach the public markets at a valuation of $ 5 to $ 10 billion. The Wall Street Journal, which broke the news, said that Affirm could begin trading this year and that its IPO options include debuting via a special purpose acquisition company, also known as a SPAC.

That Affirm is considering listing is not a surprise. The company is around eight years old and has raised north of $ 1 billion, meaning it has locked up investor cash during its life as a private company. And liquidity has become an increasingly attractive possibility in 2020, when new offerings of all quality levels are enjoying strong reception from investors and traders who are hungry for equity in growing companies.


The Exchange explores startups, markets and money. You can read it every morning on Extra Crunch, or get The Exchange newsletter every Saturday.


But $ 10 billion? That price tag is a multiple of what Affirm was worth last year when it added $ 300 million to its coffer at a post-money price of $ 2.9 billion. There were rumors that the firm was hunting a far larger round later in 2019, though it doesn’t appear — per PitchBook records — that Affirm raised more capital since its Series F.

This morning let’s chat about the company’s possible IPO valuation. The Journal noted the strong public performance of Afterpay as a possible cognate for Affirm — the Australian buy-now, pay-later firm saw its value dip to $ 8.01 per share inside the last year before soaring to around $ 68 today. But given the firm’s reporting cycle, it’s a hard company to use as a comp.

Happily, we have another option to lean on that is domestically listed, meaning it has more regular and recent financial disclosures. So let’s how learn much revenue it takes to earn an eleven-figure valuation on the public markets by offering consumers credit.

Affirm’s business

Affirm loans consumers funds at the point of sale that are repaid on a schedule at a certain cost of capital. Affirm customers can select different repayment periods, raising or lowering their regular payments, and total interest cost.

Synchrony offers similar installment loans to consumers, along with other forms of capital access, including privately-branded credit cards. (Verizon, TechCrunch’s parent company, recent offered a card with the company, I should note.)  Synchrony is worth $ 13.5 billion as of this morning, making it a company of similar-ish value compared to the top end of the possible Affirm valuation range.

Startups – TechCrunch