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Slack narrows losses, displays healthy revenue growth

Workplace messaging powerhouse Slack filed an amended S-1 with the U.S. Securities and Exchange Commission on Friday weeks ahead of a direct listing expected June 20.

In the document, Slack included an updated look at its path to profitability, posting first-quarter revenues of $134.8 million on losses of $31.8 million. Slack’s Q1 revenues represent a 67% increase from the same period last year when the company lost $24.8 million on $80.9 million in revenue.

For the fiscal year ending January 31, 2019, the company reported losses of $138.9 million on revenue of $400.6 million. That’s compared to a loss of $140.1 million on revenue of $220.5 million the year prior.

Slack is in the process of completing the final steps necessary for its direct listing on The New York Stock Exchange, where it will trade under the ticker symbol “WORK.” A direct listing is an alternative approach to the stock market that allows well-known businesses to sell directly to the market existing shares held by insiders, employees and investors, instead of issuing new shares. The method lets companies bypass the traditional roadshow process and avoid a good chunk of Wall Street’s IPO fees.

Spotify completed a direct listing in 2018; Airbnb, another highly valued venture capital-backed business, is rumored to be considering a direct listing in 2020.

Slack is currently valued at $7 billion after raising $1.22 billion in VC funding from investors, including Accel, which owns a 24% pre-IPO stake, Andreessen Horowitz (13.3%), Social Capital (10.2%), SoftBank, T. Rowe Price, IVP, Kleiner Perkins and many others.

CFIUS Cometh: What this obscure agency does and why it matters to your fund or startup

On January 12, 2016, Grindr announced it had sold a 60% controlling stake in the company to Beijing Kunlun Tech, a Chinese gaming firm, valuing the company at $155 million. Champagne bottles were surely popped at the small-ish firm.

Though not at a unicorn-level valuation, the 9-figure exit was still respectable and signaled a bright future for the gay hookup app. Indeed, two years later, Kunlun bought the rest of the firm at more than double the valuation and was planning a public offering for Grindr.

On March 27, 2019, it all fell apart. Kunlun was putting Grindr up for sale instead.

What went wrong? It wasn’t that Grindr’s business ground to a halt. By all accounts, its business seems to actually be growing. The problem was that Kunlun owning Grindr was viewed as a threat to national security. Consequently, CFIUS, or the Committee for Foreign Investment in the United States, stepped in to block the transaction.

So what changed? CFIUS was expanded by FIRRMA, or the Foreign Risk Review Modernization Act, in late 2018, which gave it massive new power and scale. Unlike before, FIRRMA gave CFIUS a technology focus. So now CFIUS isn’t just an American problem—it’s an American tech problem. And in the coming years, it will transform venture capital, Chinese involvement in US tech, and maybe even startups as we know it.

Here’s a closer look at how it all fits together.

What is CFIUS?

Image via Getty Images / Busà Photography

CFIUS is the most important agency you’ve never heard of, and until recently it wasn’t even more than a committee. In essence, CFIUS has the ability to stop foreign entities, called “covered entities,” from acquiring companies when it could adversely affect national security—a “covered transaction.”

Once a filing is made, CFIUS investigates the transaction and both parties, which can take over a month in its first pass. From there, the company and CFIUS enter a negotiation to see if they can resolve any issues.

The Exit: Getarounds $300M roadtrip

In August of last year, Getaround scored $300 million from Softbank. Eight months later they handed that same amount to Drivy, a Parisian peer-to-peer car rental service that was Getaround’s ticket to tapping into European markets.

Alven Capital’s Jeremy Uzan

Both companies shared similar visions for the future of car ownership, they were about the same size, both were flirting with expanding beyond their home market, but only one had the power of the Vision Fund behind it.

The Exit is a new series at TechCrunch. It’s an exit interview of sorts with a VC who was in the right place at the right time but made the right call on an investment that paid off. [Have feedback? Shoot me an email at lucas@techcrunch.com] 

Alven Capital partner Jeremy Uzan first invested in Drivy’s seed round in 2013. Uzan joined Index Ventures co-leading a $2 million round that valued the company at less than $10 million. The firms would later join forces again for the company’s $8.3 million Series A.

I chatted at length with Uzan about what lies ahead for the Drive team, what Paris’s startup scene is still in desperate need of, and how Softbank’s power is becoming even more impossible to ignore.

The interview has been edited for length and clarity. 


Getting the checkbook

Lucas Matney: So before we dive into this acquisition, tell me a little bit about how you got to the point where you were writing these checks in the first place.

Jeremy Uzan: So, I studied computer science and business and then spent three years as a tech banker. I was actually in a very small investment banking boutique in Paris helping young startups to raise their Series A rounds. They were all French companies, my first deal was with the YouTube competitor DailyMotion.

Startups Weekly: Zoom CEO says its stock price is too high

When Zoom hit the public markets Thursday, its IPO pop, a whopping 81 percent, floored everyone, including its own chief executive officer, Eric Yuan.

Yuan became a billionaire this week when his video conferencing business went public. He told Bloomberg that he actually wished his stock hadn’t soared quite so high. I’m guessing his modesty and laser focus attracted Wall Street to his stock; well, that, and the fact that his business is actually profitable. He is, this week proved, not your average tech CEO.

I chatted with him briefly on listing day. Here’s what he had to say.

“I think the future is so bright and the stock price will follow our execution. Our philosophy remains the same even now that we’ve become a public company. The philosophy, first of all, is you have to focus on execution, but how do you do that? For me as a CEO, my number one role is to make sure Zoom customers are happy. Our market is growing and if our customers are happy they are going to pay for our service. I don’t think anything will change after the IPO. We will probably have a much better brand because we are a public company now, it’s a new milestone.”

“The dream is coming true,” he added. 

For the most part, it sounded like Yuan just wants to get back to work.

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IPO corner

You thought I was done with IPO talk? No, definitely not:

  • Pinterest completed its IPO this week too! Here’s the TLDR: Pinterest popped 25 percent on its debut Thursday and is currently trading up 28 percent. Not bad, Pinterest, not bad.
  • Fastly, a startup I’d admittedly never heard of until this week, filed its S-1 and displayed a nice path to profitability. That means the parade of tech IPOs is far from over.
  • Uber… Surprisingly, no Uber IPO news this week. Sit tight, more is surely coming.

$1B for self-driving cars

While I’m on the subject of Uber, the company’s autonomous vehicles unit did, in fact, raise $1 billion, a piece of news that had been previously reported but was confirmed this week. With funding from Toyota, Denso and SoftBank’s Vision Fund, Uber will spin-out its self-driving car unit, called Uber’s Advanced Technologies Group. The deal values ATG at $7.25 billion.

Robots!

The TechCrunch staff traveled to Berkeley this week for a day-long conference on robotics and artificial intelligence. The highlight? Boston Dynamics CEO Marc Raibert debuted the production version of their buzzworthy electric robot. As we noted last year, the company plans to produce around 100 models of the robot in 2019. Raibert said the company is aiming to start production in July or August. There are robots coming off the assembly line now, but they are betas being used for testing, and the company is still doing redesigns. Pricing details will be announced this summer.

Digital health investment is down

Despite notable rounds for digital health businesses like Ro, known for its direct-to-consumer erectile dysfunction medications, investment in the digital health space is actually down, reports TechCrunch’s Jonathan Shieber. Venture investors, private equity and corporations funneled $2 billion into digital health startups in the first quarter of 2019, down 19 percent from the nearly $2.5 billion invested a year ago. There were also 38 fewer deals done in the first quarter this year than last year, when investors backed 187 early-stage digital health companies, according to data from Mercom Capital Group.

Startup capital

Byton loses co-founder and former CEO, reported $500M Series C to close this summer
Lyric raises $160M from VCs, Airbnb
Brex, the credit card for startups, raises $100M debt round
Ro, a D2C online pharmacy, reaches $500M valuation
Logistics startup Zencargo gets $20M to take on the business of freight forwarding
Co-Star raises $5M to bring its astrology app to Android
Y Combinator grad Fuzzbuzz lands $2.7M seed round to deliver fuzzing as a service

Extra Crunch

Hundreds of billions of dollars in venture capital went into tech startups last year, topping off huge growth this decade. VCs are reviewing more pitch decks than ever, as more people build companies and try to get a slice of the funding opportunities. So how do you do that in such a competitive landscape? Storytelling. Read contributor’s Russ Heddleston’s latest for Extra Crunch: Data tells us that investors love a good story.

Plus: The different playbook of D2C brands

And finally, for the first of a new series on VC-backed exits aptly called The Exit. TechCrunch’s Lucas Matney spoke to Bessemer Venture Partners’ Adam Fisher about Dynamic Yield’s $300M exit to McDonald’s.

#Equitypod

If you enjoy this newsletter, be sure to check out TechCrunch’s venture-focused podcast, Equity. In this week’s episode, available here, Crunchbase News editor-in-chief Alex Wilhelm and I chat about rounds for Brex, Ro and Kindbody, plus special guest Danny Crichton joined us to discuss the latest in the chip and sensor world.

Indias OYO enters Japan in partnership with SoftBank

Fresh from closing a notable investment from Airbnb, India’s OYO has expanded its footprint into Japan. The move comes through a joint venture with investor SoftBank — which led OYO’s $1 billion round last year through its Vision Fund — which will cover hotel-based accommodation and home rentals.

Financial details around the joint venture were not disclosed. An OYO representative declined to go into details when asked.

OYO started in India, where it initially aggregated budget hotels; it has since expanded into China, Malaysia, Nepal, the U.K., the UAE, Indonesia, the Philippines and — now — Japan. China, in particular, has shown promise, with OYO’s room inventory there reportedly double what it is in India.

The evolution has not just been a geographical one. Its business has moved from a laser focus on the long-tail of budget hotels to a broader “hospitality” play. It now includes managed private homes and, in India, wedding venues, holiday packages and co-working — while its hotel supply is a mixture of franchised and leased. It has also advanced its focus from budget-minded consumers to cover business travelers, too.

The Japanese JV will be led by Prasun Choudhary, whom OYO describes as a founding member of its team. Like OYO business elsewhere in the world, the company is appealing to small and medium hotel franchises and owners. On the consumer side, its prime segment is domestic and international travelers who seek “budget to mid-segment hospitality,” to use part of a statement from OYO founder and CEO Ritesh Agarwal, who is pictured in the image at the top of this post.

Agarwal is a Thiel fellow who started the company in 2011 when aged just 18. His original business, called Oravel, was an Airbnb clone that pivoted to become OYO. Today, that company is valued at $5 billion after raising more than $1.5 billion from investors.

SoftBank has previously struck joint ventures to bring other Vision Fund companies to Japan. Those include WeWork, Chinese ride-hailing firm Didi Chuxing and India’s Paytm, which launched a payment service in the country.

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