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.


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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

Healthcare & Biotech Software Pricing strategy?

I want to learn more about pricing strategies for software products in the healthcare field, particularly with respect to biotech / AI / analytics.

Any companies or software you guys recommend I look into so I can inquire about their pricing and business models? Don't even know where to start.

Appreciate the help in advance!

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Startups – Rapid Growth and Innovation is in Our Very Nature!

Pricing on a value-based approach is almost 10x a comps-based approach. What am I missing?

I've built a platform that transforms Excel models into interactive dashboards. Just load an Excel model, pick the inputs and outputs you care about and go. The product will do all the work of creating sensitivity analysis, run Monte Carlo simulations, tell you which inputs are most important, and even allow you to control the model with simple sliders from a browser.

The target market is the financial modelling space – investment banks, hedge funds, consulting firms etc. where we can save them hundreds of hours in sensitizing and analyzing models that they deal with on a daily basis.

The key differentiator vs. Tableau/PowerBI/AirTable etc. is that the product can actually analyze the formulas and logic inside a spreadsheet (i.e. a model), while Tableau and friends are only mostly focused on raw data.

I am struggling however on how to price this or even come up with pricing comps. I've read up on value-based pricing approaches and the results vs a comps-based approach are very different.

A value based approach implies a almost a $ 20,000 / seat / year price.

But a comps based approach would land me at only $ 2,000 / seat / year with the caveat that there are literally no perfect comps for this product as everyone else is just doing raw data visualizations.

Questions:

  • How do I square the 2 very different pricing results that are 10x apart?
  • Should I consider have a free or low-cost consumer option? Benefit of this would be more awareness of the product, but the disadvantage is lower pricing potential on the enterprise side. What am I missing?

Would appreciate anyone's input.

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Startups – Rapid Growth and Innovation is in Our Very Nature!

[Lemonade in Business Wire] Lemonade Announces Pricing of Initial Public Offering

Lemonade, Inc. (“Lemonade”) today announced the pricing of its initial public offering of 11,000,000 shares of its common stock at a price of $ 29.00 per share. Lemonade has granted the underwriters a 30-day option to purchase up to an additional 1,650,000 shares of its common stock at the initial public offering price. 

Read more here.

The post [Lemonade in Business Wire] Lemonade Announces Pricing of Initial Public Offering appeared first on OurCrowd.

OurCrowd

Agora’s above-range IPO pricing underscores a welcoming IPO market

In a move that highlights how open the American IPO window may be at the moment, China-based Agora priced its public offering at $ 20 per share last night, ahead of its $ 16 to $ 18 proposed price range. (Update: As noted here, the company has a second HQ in California.)

At $ 20 per share, the 17.5 million shares sold in its debut raised $ 350 million, a huge haul for a company that reported around 10% of that figure in Q1 2020 revenue. Provided that your humble servant is doing his Class A to ADS share conversion calculations correctly, Agora is worth about $ 2 billion at its IPO price.

Agora raised well over $ 100 million while a private company, backed by GGV Capital, Coatue and others, according to Crunchbase data.


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Agora is an API-powered company that allows customers to embed real-time video and voice abilities in their applications; appropriately, the company’s ticker symbol in America will be “API.”

With an annual run rate of $ 142.2 million, a $ 2 billion valuation gives Agora a run-rate multiple of around 14x. That’s rich, but not stratospheric. Perhaps Agora wasn’t able to command a higher multiple due to its sub-70% margins (68.8% in Q1)?

Agora’s financials make its IPO pricing a neat puzzle, so let’s pull apart the good and the bad to better understand why the market was willing to pay more than the company anticipated.

After that short exercise, we’ll make note of the current IPO climate, inclusive of what we learn from Agora. (Spoiler for unicorns out there: Things look good.)

The good, the bad, the odd

We can’t calculate Agora’s enterprise value with confidence until we get updated filings. But taking into account the company’s pre-IPO cash and liabilities, its implied enterprise value/run rate is something around 13x. (That figure will dip if the company’s shares don’t rise after its debut, as its cash position rises from its share sale; more on enterprise values here.)

Startups – TechCrunch

Lemonade targets down-round pricing in impending IPO

Earlier today, insurtech unicorn Lemonade filed an S-1/A, providing context into how the former startup may price its IPO and what the company may be worth when it begins to trade.

According to its new filing, Lemonade expects its IPO to price at $ 23 to $ 26 per share. As the company intends to sell 11 million shares in its debut, the rental and home insurance-focused unicorn would raise between $ 253 million and $ 286 million at those prices.

Counting an additional 1.65 million shares that it will make available to its underwriting banks, the company’s fundraise grows to $ 291 million to $ 328.9 million. Including shares offered to underwriters, Lemonade’s implied valuation given its IPO price range runs from $ 1.30 billion to $ 1.47 billion.

That’s the news. Now, is that expected valuation interval strong, and, if not, what might it portend for other insurtech startups? Let’s talk about it.

Not great, not terrible

TechCrunch is speaking with the CEOs of Hippo (homeowner’s insurance) and Root (car insurance) later today, so we’ll get their notes in quick order regarding how Lemonade’s IPO is shaping up, and if they are surprised by its pricing targets.

But even without external commentary, the pricing range that Lemonade is at least initially targeting is not terribly impressive. That said, it’s stronger than I anticipated.

Startups – TechCrunch

Yorkshire-based Bubo.ai snaps up €720K to expand its pricing optimisation platform to Europe and N. America

British startup Bubo.AI, which aims to revolutionise the way companies price their products, has raised around €720K from NPIF – Mercia Equity Finance, which is managed by Mercia and is part of the Northern Powerhouse Investment Fund, and private investors. It’ll use the funds to accelerate development internationally, focusing on North America and the rest of Europe.

Bubo.AI, founded in 2019, uses artificial intelligence to analyse customers’ behaviour and understand what they are willing to pay, then recommends the optimum price to sales staff. The company also supports sales staff to avoid them giving unnecessary discounts.

The platform, which is designed for wholesalers and distributors such as builders’ merchants and food services, allows them to base their prices on customer value rather than cost or other methods, yielding on average a 3% increase in profit.

Bubo.AI, which is based in Middlesbrough, was co-founded by serial entrepreneur Alan Timothy and Polish data analyst Marcin Lisowski, who had previously worked together to create a pricing system for a global auto parts supplier.  After failing to find a solution on the market that satisfied their need, they decided to build one themselves. As a result, the company increased profits by almost €2.2 million in just six months.

The two men joined forces with leading AI expert Professor Huseyin Seker of Staffordshire University, and ex-Microsoft marketing veteran David Shell to develop their ideas and create an off-the-shelf solution. Bubo.AI, which was launched in 2019, is now used by clients including Tarmac, while the company has partnered with Teesside University and other institutions to promote the use of AI in pricing.

Alan Timothy, who is CEO of Bubo.AI and who is also founder of software firm i-snapshot, says: “Pricing has previously appeared like a dark art, and traditional approaches are problematic and not very effective. Trying to price match with competitors can lead to price erosion, especially in a downturn, while sales staff often resort to discounting to meet targets. Now for the first time our solution means companies can use customer value-based pricing, which could be key for them to recover revenue and build a roadmap to profitability in the post-Covid world.”

Simon Crabtree, Investment Manager at Mercia added: “Research shows that smart pricing is the most effective way to increase profits. However getting it right is difficult, especially for big distributors or wholesalers with many different products and branches. Bubo.AI could help companies to revolutionise their approach to pricing and transform their profitability.”

The Northern Powerhouse Investment Fund project is supported financially by the European Union using funding from the European Regional Development Fund (ERDF) as part of the European Structural and Investment Funds Growth Programme 2014-2020 and the European Investment Bank. 

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