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.
Senior Editor, TechCrunch
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
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
“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
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?
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?
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?
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
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!
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 firstname.lastname@example.org.
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?
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
Stock markets worldwide are soaring on news that a vaccine candidate is 90% effective at preventing COVID-19, and could start coming to market in a matter of months. This is upending the stock market, sending futures shares shooting higher in pre-market trading. But while the euphoria is helping sectors that have taken punishment during COVID-19, not all companies are catching the same updraft.
Indeed, shares of airlines and cruise companies are coming up like Lazarus, the value of some formerly-favored concerns like Zoom and Peloton are down sharply this morning.
The value of Peloton, which saw its value skyrocket as stuck-at-home exercisers favored its equipment, is off nearly 13%. And the value of Zoom, a popular video chatting service used by companies, is also down 13%. Online retailers are also taking hit including Etsy and Wayfair, which are seeing double digit drops. Even Amazon is down in pre-market trading, off 2.3% its latest close.
The morning is an odd inversion of prior trends. The summer saw tech shares enjoy investor favor, but it now appears that money is leaving tech shares for other, perhaps less-pricey stocks.
While it is too soon to know, it could be that software stocks (the SaaS, cloud bucket TechCrunch pays close attention to) are about to see their multiples clipped as investors move their cash to a now-widened set of growth investments. If that happens, the technology industry would have to adapt to less-exuberant valuations for its public companies.
Any such move would impact startups, especially those in the later-stages that see their valuations track the public markets somewhat; late-stage startup investment has been active this year as investors could see liquidity options via IPOs and other mechanisms at high prices. If those prices drop, capital could tighten for tech startups.
Of course, it’s early. Things can, and may change. Investors could be trading too aggressively on what really is news that will take months to impact real economic activity. Today, however, feels like a new chapter in the 2020 markets story.
Ideally, mental wellness should be considered part of a healthy daily routine, like exercise. But even exercise is difficult to turn into a regular habit. Peloton addressed physical fitness by combining smart stationary bikes with live classes and community features to create an engaging experience. Now a new startup, MindLabs, is taking a similar approach to mental wellness.
Based in London, MindLabs announced today it has raised £1.4 million (about USD $ 1.82 million) in pre-seed investment led by Passion Capital, with participation from SeedCamp, as well as several founders of British consumer tech startups: Alex Chesterman (Cazoo and Zoopla); Neil Hutchinson (Forward Internet Group); Steve Pankhurst (FriendsReunited); James Hind (Carwow); and Jack Tang (Urban).
MindLabs was founded earlier this year by Adnan Ebrahim and Gabor Szedlak, who previously launched and ran Car Throttle, an online media and community startup that was acquired by Dennis Publishing last year. Ebrahim told TechCrunch that MindLabs’ goal is to “make taking care of your mental health as normal as going to the gym.”
Its platform will launch next year, first with a mobile app that combines live videos from mental health professionals who lead meditation and mindfulness sessions, and features to help users track their stress levels. The full platform will also include an EEG headband, called “Halo,” that measures signals, like heart and respiration rates, that can help show users how effective their sessions are.
Going from CarThrottle, sometimes described as “a BuzzFeed for cars” to mental wellness might seem like a big leap, but Ebrahim said their experience “running a media company in a tough market with a young, millennial workforce” inspired him and Szedlak to think more about the issue.
“We witnessed firsthand how there was a complete lack of investment in helping this generation with their mental health in a way that they’re used to: a community product that is mobile-first and video-led,” Ebrahim said.
“Alongside that, we had to find ways to deal with managing our own mental health given the stresses that can come when running a fast-paced, venture-backed company. And when we saw the alarming statistics in young adult suicide rates and depression, we realized that finding a solution for our own problems would help millions of others, too.”
The two left Dennis Publishing to begin work on MindLabs at the end of January. During the next few months, including time spent in COVID-19 lockdown, they began researching and developing initial concepts for the platform.
“It’s fair to say that the pandemic did end up altering the course of MindLabs,” Ebrahim said. “For example, we built more real-time community features into the app as a result of the isolation and loneliness we are all now facing as a result of lockdown. We really want to make sufferers feel less alone during the hard times, but with the added convenience now of being able to watch our videos at home.
“This has already become the new normal when it comes to physical fitness, with companies like Peloton exploding in growth, and we see the same trend happening with mental wellness, too,” he added.
The COVID-19 pandemic has also been described as a mental health crisis, and downloads of meditation and mindfulness apps like Calm, Headspace and Relax: Master Your Destiny, have grown as people try to deal with anxiety, isolation and depression at home.
Two of the main ways MindLabs’ platform differentiates from other mental wellness apps is the combination of its video classes and EEG headband. The videos will initially range in length from 10 to 40 minutes and, like Peloton’s classes, will be available on livestream or in pre-recorded, on-demand sessions.
Instead of categorizing videos by technique (for example, meditation, breathing or visualization), MindLabs decided to sort them into issues that users want to cope with, like anxiety, relationships, motivation or addiction. For example, meditation classes may include ones focused on “Overcoming COVID-19 Anxiety” or “Coping With Stress At Work.”
Community features will be linked to the classes: the number of concurrent users in a class will be displayed, along with a live feed showing subscriber achievements, like streaks or number of minutes spent in a “calm state,” that other people can react to for positive reinforcement.
Halo was developed with a hardware specialist that Ebrahim said has seven years of building and distributing medical grade wearables.
“Most importantly our headset will be going through the rigor of ISO 13485 so we can ensure the product is of the highest quality and the data we gather is the most accurate,” he added. “We want to make this technology accessible, so we expect the price of the Halo to be comparable to, say, an Apple Watch.”
Other EEG headbands, including products from Muse and Emotiv, have been on the market for a while. In MindLabs’ case, its headband will help users visualize data before, during and after their classes, including information about their brain waves, heart rates and muscle tension, and saved in the app so they can track their progress.
Turning mental wellness into a habit
One of the biggest challenges that all mental wellness apps need to address is user engagement. It can be hard staying motivated to use a self-directed mental health app when someone is already stressed, depressed or very busy. On the other hand, when they feel better, they might stop checking in.
Ebrahim sees this as a major opportunity for MindLabs, and its EEG headband and data visualization features will play a major role. “Even though there was been a proliferation of mental health apps, retention has proven difficult. But we think that is because these apps truly don’t understand their users,” he said.
“With the data we’re able to show, not just through the Halo but through syncing with Apple HealthKit, we can show our subscribers a positive progression of their mental health, similar to how you can see your weight change on a scale, or improvement in heart rate variability in an app. This helps build a powerful habit because we can finally help to close the loop when it comes to improving mental fitness.”
Participating in live classes provides accountability, too, he added. “The act of scheduling a class and tuning in with thousands of others is a powerful force, similar to having a personal trainer in the gym making sure you turn up and workout.”
MindLabs also plans to build communities around its instructors. During livestreams, instructors will welcome new subscribers and mention user achievements. After each workout, users will get a results screen they can share, similar to screenshots from fitness apps like Strava or Nike Training Club.
In terms of protecting personal privacy, Ebrahim said MindLabs is “firmly against any form of data commercialization.” Instead, it will monetize through monthly or yearly subscriptions, and user data collected through Halo or the app will only be used to make personalized content recommendations.
In a statement about Passion Capital’s investment in MindLabs, partner Eileen Burbidge said, “We’re incredibly excited to be working with MindLabs as they transform the way we look after our minds. Mindfulness is more important now than ever and we know that Adnan and Gabor’s commitment to best in class content, quality production and unparalleled user experience means they’re the best to bring this platform to market.”
In the vein of increasingly popular at-home connected fitness machines like Peloton, Mirror, and Hydrow, boxing fans now have an option when it comes to getting a good workout in at home.
Cofounded by Jeff Morin (CEO) and Todd Dagres (Chairman), Liteboxer is launching today with a platform that was built from the ground up to give users the chance to get an exciting boxing workout at home.
Dagres, cofounder and General Partner at Spark Capital, came up with the idea for Liteboxer after falling in love with boxing with a trainer in a gym. It was incredibly difficult to replicate that workout at home with a heavy bag, said Dagres.
“I only was able to work out with a trainer once a week, and once a week is not good enough as we all know,” said Dagres. “So I tried to replicate the workout at home and I bought a heavy bag. It was just a dismal experience for me. It was so boring. If I could get myself to do it, it was a good cardio workout. It just was tedious and unpleasant. The bag is just sitting there, and it’s not doing anything to you so you kind of feel guilty punching it.”
Heavy bags also require a suspension system, and can often be messy with weight provided by sand or water. Liteboxer is a free-standing replacement for the heavy bag, which is equipped with a lighting system that guides the user through a workout of their choice.
The lights aren’t random. Liteboxer works with expert boxing trainers to provide a guided workout, which is led both by the lights and by voice/music via an app that can run on iOS or Android. The unit is also equipped with force sensors to give users metrics around force, timing, and accuracy on their workout, allowing them to see their progress over time.
Like Peloton or other connected fitness devices, Liteboxer comes at an up-front cost for the hardware and a recurring cost for access to the content. The free-standing unit, which is available for pre-order now, costs $ 1,495, while the all-you-can-eat subscription costs $ 29/month.
There are several different modes on the content side, including a Training Camp that gets users familiar with the system and how it works. On the other end of the spectrum, there are expert-guided boxing sessions. But, perhaps most interestingly, there is a level in between the two called Quick Play. Quick Play uses a patented Rhythm Technology to match the system up to the beat of a song. This gives the user the flexibility to say they’d like to go for one or three or five rounds, and simply box along with the beat of the music, allowing for a bit of customization when it comes to the general length of a workout.
Plus, Liteboxer offers the ability to challenge friends to the same workout as you, allowing you to see the results side by side.
The most important goal for Dagres and Morin is to create a habit among users.
“Not only do you get stronger, but this is also a mental exercise and a huge stress reliever,” said Dagres. “It helps with your mental acuity, and it’s more than just a cardio machine type of thing. So we want people to be habitual about it.”
He added that the goal is to get users on the platform three times a week, saying that you can get massive results in a few months on that schedule. The key to delivering those results, however, is habitual engagement. Dagres explained that the music-based rounds, the leveling up with trainers, and the social challenges are elements that encourage that habit.
Liteboxer has raised a total of $ 6 million in funding, with $ 2 million coming from a friends and family round, and $ 4 million coming from a seed round led by Will Ventures (the fund led by former NFL player Isaiah Kacyvenski). Other investors include Raptor Capital and Camros Capital.