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Grading the final tech IPOs of 2019

As the holiday slowdown looms, the final U.S.-listed technology IPOs have come in and begun to trade.

Three tech, tech-ish or venture-backed companies went public this week: Bill.com, Sprout Social and EHang. Let’s quickly review how each has performed thus far. These are, bear in mind, the last IPOs of the year that we care about, pending something incredible happening. 2020 will bring all sorts of fun, but, for this time ’round the sun, we’re done.

Pricing

Our three companies managed to each price differently. So, we have some variety to discuss. Here’s how each managed during their IPO run:

How do those results stack up against their final private valuations? Doing the best we can, here’s how they compare:

So EHang priced low and its IPO is hard to vet, as we’re guessing at its final private worth. We’ll give it a passing grade. Sprout Social priced mid-range, and managed a slight valuation bump. We can give that a B, or B+. Bill.com managed to price above its raised range, boosting its valuation sharply in the process. That’s worth an A.

Performance

Trading just wrapped, so how have our companies performed thus far in their nascent lives as public companies? Here’s the scorecard:

  • EHang’s Friday closing price: $12.90 (+3.2%)
  • Sprout Social’s Friday closing price: $16.60 (-2.35%)
  • Bill.com’s Friday closing price: $38.83 (+76.5%)

You can gist out the grades somewhat easily here, with one caveat. The Bill.com IPO’s massive early success has caused the usual complaints that the firm was underpriced by its bankers, and was thus robbed to some degree. This argument makes the assumption that the public market’s initial pricing of the company once it began trading is reasonable (maybe!) and that the company in question could have captured most or all of that value (maybe!).

Bill.com’s CEO’s reaction to the matter puts a new spin on it, but you should at least know that the week’s most successful IPO has attracted criticism for being too successful. So forget any chance of an A+.

Image via Getty Images / Somyot Techapuwapat / EyeEm

This Week in Apps: Apple Arcade’s new franchise, Fortnite takes on Google Play, the Disney+ app footprint

Welcome back to This Week in Apps, the Extra Crunch series that recaps the latest OS news, the applications they support and the money that flows through it all.

The app industry is as hot as ever, with 194 billion downloads last year and more than $100 billion in consumer spending. People spend 90% of their mobile time in apps and more time using their mobile devices than watching TV. Apps aren’t just a way to waste idle hours — they’re big business, and one that often seems to change overnight.

In this Extra Crunch series, we help you to keep up with the latest news from the world of apps.

This week, we’re taking a look at Apple Arcade’s new gaming franchise, Fortnite maker Epic Games calling out the Google Play Store for its monopolistic practices, Android’s new AR features, Disney+’s one-month app footprint, and more.

Headlines

Apple Arcade scores a big sports game franchise, “Ultimate Rivals”

Apple Arcade launched in September offering over 100 games for $4.99 per month. Since launch, the service stays fresh by adding new releases on a regular basis. This week, Apple touted one of Arcade’s biggest wins to date — an all-new sports franchise from Bit Fry Game Studios, called “Ultimate Rivals.” The new game brings together athletes from across hockey, basketball, football, baseball, and soccer to play in a licensed video game that’s a first for the mobile gaming industry. The debut title in the franchise, out now on Apple Arcade, is “Ultimate Rivals: The Rink,” which lets players choose from over 50 athletes to compete in two-on-two hockey matches.

For example, you could pit Alex Ovechkin and Alex Morgan against De’Aaron Fox and Jose Altuve or Skylar Diggins-Smith and Wayne Gretzky, Apple says.

The game was made possible by Bit Fry’s groundbreaking licensing deals with nine pro sports organizations,  the NHL, NHL Players’ Association (NHLPA), NBA, National Basketball Players Association (NBPA), MLB, MLB Players Association (MLBPA), NFL Players Association (NFLPA), Women’s National Basketball Players Association (WNBPA), the USWNTPA, as well as Wayne Gretzky.

Next spring, the Bit Fry will launch “Ultimate Rivals: The Court” as the next title in the series.

The franchise is a big win for Apple Arcade, which doesn’t yet have many sports-themed titles. In fact, with the addition of “Ultimate Rivals,” it now has only a half dozen. And because of the numerous pro sports deals, the game has the potential to appeal to a wider audience.

Fornite tries to bypass the Google Play Store’s 30% cut

Consumer sous vide startup Nomiku is winding down operations

Founded in 2012, Nomiku became a plucky Silicon Valley darling by bringing affordable sous vide cooking to home kitchens. A Kickstarter project that same year generated $750,000, several times its $200,000 goal. The company scored a glowing TechCrunch profile the following year, as well, thanks in part to a great backstory.

Today, however, the company noted on its site and various social media channels that it is winding down operations:

Well, I am sorry to say that we have reached the end of the road. It is with a heavy heart (and deep-felt gratitude for your patronage) that we are writing to let you know that we are discontinuing the Nomiku Smart Cooker and Nomiku Meals effective immediately, and suspending operations. While we still believe in the concept, we simply were not able to get to a place of sustainability to keep the business going. Thank you very much for your support, it has meant a lot to myself and everyone here at Nomiku.

“The total climate for food tech is different than it used to be,” Lisa Fetterman said in a call to TechCrunch. “There was a time when food tech and hardware were much more hot and viable. I think a company can survive a few hurdles, and a few challenges [ …] For me, it was the perfect storm of all these things.”

In total, the company raised more than $1.3 million over two Kickstarter campaigns, putting it in the upper echelons of food crowdfunding. In 2015, the startup joined Y Combinator and launched a cooking app called Tender, featuring recipes from prominent chefs.

In some ways, Nomiku appears to be a victim of its own popularity. The company was able to bring a cost-prohibitive cooking technology down to an affordable price point, only to see the market flooded by competitors. Fetterman highlighted some of those issues in a recent Extra Crunch interview.

In 2017, Samsung Ventures invested in the company, with plans to integrate it into its SmartThings connected platform. That same year, Nomiku began to pivot into subscription meal plans, but had difficulty getting the word out. Fetterman says the company was seeking funding toward the end, but ultimately couldn’t make things work.

Even with a buzzy company and a great product, the startup world can still be unforgiving. 

Adobe turns it up to 11, surpassing $11B in revenue

Yesterday, Adobe submitted its quarterly earnings report and the results were quite good. The company generated a tad under $3 billion for the quarter at $2.99 billion, and reported that revenue exceeded $11 billion for FY 2019, its highest ever mark.

“Fiscal 2019 was a phenomenal year for Adobe as we exceeded $11 billion in revenue, a significant milestone for the company. Our record revenue and EPS performance in 2019 makes us one of the largest, most diversified, and profitable software companies in the world. Total Adobe revenue was $11.17 billion in FY 2019, which represents 24% annual growth,” Adobe CEO Shantanu Narayen told analysts and reporters in his company’s post-earnings call.

Adobe made a couple of key M&A moves this year that appear to be paying off, including nabbing Magento in May for $1.7 billion and Marketo in September for $4.75 billion. Both companies fit inside its “Digital Experience” revenue bucket. In its most recent quarter, Adobe’s Digital Experience segment generated $859 million in revenue, compared with $821 million in the sequentially previous quarter.

Obviously buying two significant companies this year helped push those numbers, something CFO John Murphy acknowledged in the call:

“Key Q4 highlights include strong year-over-year growth in our Content and Commerce solutions led by Adobe Experience Manager and success with cross-selling and up-selling Magento; Adoption of Adobe Experience Platform, Audience Manager and Real-Time CDP in our Data & Insights solutions; and momentum in our Marketo business, including in the mid-market segment, which helped fuel growth in our Customer Journey Management solutions.”

All of that added up to growth across the Digital Experience category.

But Adobe didn’t simply buy its way to new market share. The company also continued to build a suite of products in-house to help grow new revenue from the enterprise side of its business.

“We’re rapidly evolving our CXM product strategy to deliver generational technology platforms, launch innovative new services and introduce enhancements to our market-leading applications. Adobe Experience Platform is the industry’s first purpose-built CXM platform. With real-time customer profiles, continuous intelligence, and an open and extensible architecture, Adobe Experience Platform makes delivering personalized customer experiences at scale a reality,” Narayan said.

Of course, the enterprise is just part of it. Adobe’s creative tools remain its bread and butter with the Creative tools accounting for $1.74 billion in revenue and Document Cloud adding another $339 million this quarter.

The company is talking confidently about 2020, as its recent acquisitions mature and become a bigger part of the company’s digital experience offerings. But Narayan feels good about the performance this year in digital experience: “When I take a step back and look at what’s happened during the year, I feel really good about the amount of innovation that’s happening. And the second thing I feel really good about is the alignment across Magento, Marketo and just call it, the core DX business in terms of having a more unified and aligned go-to-market, which has not only helped our results, but it’s also helped the operating expense associated with that business,” he said.

It is no small feat for any software company to surpass $11 billion in trailing revenue. Consider that Adobe, which was founded in 1982, goes back to the earliest days of desktop PC software in the 1980s. Yet it has managed to transform into a massive cloud services company over the last five years under Narayan’s leadership and flourish there.

India shuts down internet once again, this time in Assam and Meghalaya

India maintained a shutdown of the internet in the states of Assam and Meghalaya on Friday, now into 36 hours, to control protests over a controversial and far-reaching new citizen rule.

The shutdown of the internet in Assam and Meghalaya, home to more than 32 million people, is the latest example of a worrying worldwide trend employed by various governments: preventing people from communicating on the web and accessing information.

And India, the world’s second largest internet market with more than 650 million connected users, continues to exercise this measure more than any other nation.

On Thursday, India’s president Ram Nath Kovind approved the Citizenship Amendment Bill, a day after the country’s Parliament passed it. The law offers a path to Indian citizenship for non-Muslim minorities from three neighboring countries (Afghanistan, Pakistan and Bangladesh) — not for the country’s own Muslim minority.

Shortly after the bill was passed, protests broke out in the streets in the northeastern states of Assam and Meghalaya, where residents have long been concerned about immigration from the aforementioned nations. In Meghalaya, texting services have been suspended, too.

Soldiers are seen through the wreckage of a vehicle which was set on fire by demonstrators during a protest against the government’s Citizenship Amendment Bill (CAB) in Guwahati on December 13, 2019. (Photo by BIJU BORO/AFP via Getty Images)

To contain the situation, the Indian government sent in troops and shut down the internet — a measure that the United Nations has condemned in the past, calling it a violation of human rights.

Officials in the state of Assam said, “Social media platforms like Facebook, WhatsApp, Twitter, and YouTube are likely to be used for spreading of rumors and also for transmission of information like pictures, videos and text that have the potential to inflame passions and thus exacerbate the law and order situation.”

There is currently no official word on when the internet services would be resumed at these two places.

Preventing people from a medium that enables them to stay in touch with one another, and access news and information, is becoming a common phenomenon in several nations, though none come close to India.

Access Now, a digital rights group, reported earlier this year that India alone had about 134 of 196 documented shutdowns in 2018. According to Internet Shutdowns, a service operated by New Delhi-based digital advocacy group Software Law and Freedom Centre, there have been about 91 documented cases of internet shutdowns in India this year.

In Jammu and Kashmir, the Indian government shut down the internet for 133 days after stripping the majority Muslim territory of its autonomy in August. The service has only been partially restored.

When and how to build out your data science team

Increasingly, startups across the spectrum are looking to artificial intelligence (AI) to help them solve business problems and drive efficiency. The numerous benefits of building AI capability in  your startup shouldn’t come as a surprise to anyone — in fact, the advantages for business are so far-reaching that PwC predicts that AI will add $15.7 trillion to the global economy by 2030.

Contrary to popular belief, successfully implementing AI to drive impactful decisions requires a diverse team with expertise in several skill sets. Launching your AI journey is no simple feat — you need to ask probing questions to ensure that the relevant data science projects are embarked upon at the right time. Plus, you need to make sure that you build out an effective team that can turn data into decisions.

When should businesses take the AI leap?

The newest members of the $100M ARR club

Hello and welcome back to our regular morning look at private companies, public markets and the grey space in between.

Today we’re taking stock of a cohort of special companies: still-private startups that have reached $100 million in annual recurring revenue (ARR). Our goal is to understand which startup companies are actually exceptional. This late in the unicorn era, hundreds of companies around the world have reached a valuation of $1 billion, making the achievement somewhat pedestrian.

Reaching $100 million in ARR, however, still stands out.

We explored the idea earlier this week, citing Asana, Druva and WalkMe as private companies that recently reached $100 million ARR. In addition to that trio, Bill.com and Sprout Social, both of which went public this week, also crossed the nine-figure annual recurring revenue mark in 2019.

After we posted that short list, four other companies either just shy of $100 million ARR, or with a little bit more, reached out to TechCrunch, touting their own successes. Given that our point was that companies which reach the revenue threshold million are neat, it’s worth taking a moment to look at the other companies joining the $100 million ARR club.

For extra fun I got on the phone with a number of their CEOs to chat about their progress. We’ll start with a look at a company that is nearly a member of the club, and then talk about a few that recently punched their membership cards.

The $100M ARR club’s up-and-comers

GitLab: Expects to reach $100M ARR in January, 2020

To be frank, I did not know that GitLab was as large as it is. Backed by more than $400 million in private capital, GitLab competes with the now-purchased GitHub as a developer resource and service. Its backers include Goldman Sachs, ICONIQ, GV, August Capital and Khosla.

GitLab became a unicorn back in September of 2018, when it raised $100 million at a $1 billion post-money valuation. Its more recent $268 million Series E raised this September pushed that valuation to nearly $2.8 billion.

It’s a good company for us to include, as it provides a good example of how far in advance a $1 billion valuation can precede a $100 million ARR business; in GitLab’s case, provided that it grows as expected, its unicorn valuation came nearly 1.5 years before reaching nine-figure ARR.

To understand more about the company’s growth, we caught up with its CEO Sid Sijbrandij (full discussion here), learning that he views the unicorn tag as a way to help a company brand itself, but something that is outside of his company’s control. Revenue, in his view, is “much more within your control.” According to Sijbrandij, GitLab is aiming for $1 billion in revenue in 2023 and has a November, 2020 IPO targeted.

GitLab is sharing its impending ARR milestone as it runs its whole business very transparently (hence why my chat with its CEO was live-streamed, and archived on YouTube). It will be super interesting to see if the company hits the ARR target on time, and then if it can also stick the landing with a Q4 2020 IPO.

The $100 million ARR club’s newest members

Egnyte: Reached $100M ARR in November 2019

Egnyte, a player in the enterprise productivity, storage and security spaces, has kept growing since its $75 million Series E it raised last October.

The company, backed by Goldman Sachs (again), GV (again) and Kleiner Perkins, has raised just $137.5 million to date. Reaching $100 million ARR on that level of funding means that Egnyte has run efficiently as a business. In fact, as TechCrunch has reported, Egnyte has occasionally made money on its path to the public markets.

TechCrunch has spoken to Egnyte’s CEO Vineet Jain a number of times, but it seemed appropriate to get him back on the phone now that his company is nearly ready to go public (at least in terms of size). According to Jain, in fresh data released to Extra Crunch:

  • Egnyte passed the $100 million ARR threshold in November
  • The company grew about 30% in 2019
  • Egnyte expects growth to accelerate in 2020

Bonobos founder Andy Dunn to leave Walmart in 2020

Andy Dunn, the founder of menswear site Bonobos which sold to Walmart in 2017 for $310 million, is now parting ways with the retail giant. The executive, who joined Walmart as SVP of digital consumer brands at the time of the acquisition, officially announced his departure in a LinkedIn post titled “A Love Letter to Walmart.”

In it, Dunn praises the time he spent with the company and the knowledge he gained while working there. Specifically, he references several of Walmart’s bigger initiatives, including its transformation into an omnichannel retail serving customers online and offline, without distinction.

This is an area of Walmart’s business that’s been under pressure as the battle with Amazon heats up. A recent report by Bloomberg, for example, highlighted the internal corporate culture clash underway as Walmart’s e-commerce investments impacted stores and thinned margins.

Dunn also referenced Walmart’s growing grocery business, now helping to fuel its online sales, and the development of new Walmart brands like Allswell.

“I learned a lot more about retail transformation in the digital age at the world’s biggest company. I watched our strategy evolve as we uncorked our unique advantages on a new omni playing field – and began to identify where we aren’t just catching up, but where we are winning. The momentum with online grocery pickup opened my eyes: our thousands of supercenters are an asset nobody else has, so let’s use them,” wrote Dunn. “In our digital brands group, that led to development of a strategy built on omni, as we married our talent with the power of Walmart distribution to build brands like Allswell. With my departure, that incubator will now be plugged directly into the Walmart mothership,” he said.

Bonobos is one of several online brands that Walmart has now acquired to fill out its virtual shelves, along with Moosejaw ($51M), ShoeBuy, Jet.com ($3B), Hayneedle, in addition to Bonobos ($310M) and ModCloth ($75M). Dunn’s letter noted the more recent deal to buy plus-sized clothing brand ELOQUII ($100M) — an example of Walmart’s desire to deliver a better life for its core customers.

Walmart’s acquisition streak has since slowed. It also sold off Modcloth just two years after buying it, to stem the losses from its e-commerce business. Bonobos saw layoffs in 2019 and Walmart’s biggest acquisition, Jet.com, has been folded into the rest of Walmart’s e-commerce operations.

Dunn’s letter also spoke to Walmart’s more controversial decision to fully exit the handgun and handgun ammunition businesses, and ban open carry in its stores, following the mass shooting in its El Paso store.

“It’s a testament to what kind of company Walmart is that I entered thinking mostly about what I could offer, and ended up being the one who received so much,” said Dunn. “When it comes to making the world a better place, the world’s largest company is, 57 years later, just getting started. It’s a credit to the remarkable teamwork of 2.4 million of the hardest working people on planet Earth, all working together. As Sam said, the fact that we’re all in this together is the secret. At Walmart, it’s hidden in plain sight,” he concluded.

Vox previously reported on Dunn’s departure, citing a source, ahead of the official announcement.

Dunn’s departure will take place in 2020.

Chicago’s Sprout Social prices IPO mid-range at $17 per share, raising $150M

On the heels of Bill.com’s debut, Chicago-based social media software company Sprout Social priced its IPO last night at $17 per share, in the middle of its proposed $16 to $18 per-share range. Selling 8.8 million shares, Sprout raised just under $150 million in its debut.

Underwriters have the option to purchase an additional 1.3 million shares if they so choose.

The IPO is a good result for the company’s investors (Lightbank, New Enterprise Associates, Goldman Sachs, and Future Fund), but also for Chicago, a growing startup scene that doesn’t often get its due in the public mind.

At $17 per share, not including the possible underwriter option, Sprout Social is worth about $814 million. That’s just a hair over its final private valuation set during its $40.5 million Series D in December of 2018. That particular investment valued Sprout at $800.5 million, according to Crunchbase data.

So what?

Sprout’s debut is interesting for a few reasons. First, the company raised just a little over $110 million while private, and will generate over $100 million in trailing GAAP revenue this year. In effect, Sprout Social used less than $110 million to build up over $100 million in annual recurring revenue (ARR) — the firm reached the $100 million ARR mark in between Q2 and Q3 of 2019. That’s a remarkably efficient result for the unicorn era.

And the company is interesting as it gives us a look at how investors value slower-growth SaaS companies. As we’ve written, Sprout Social grew by a little over 30% in the first three quarters of 2019. That’s a healthy rate, but not as fast as, say, Bill.com . (Bill.com’s strong market response puts its own growth rate in context.)

Thinking very loosely, Sprout Social closed Q3 2019 with ARR of about $105 million. Worth $814 million now, we can surmise that Sprout priced at an ARR multiple of about 7.75x. Thats a useful benchmark for private companies that sell software: if you want a higher multiple when you go public, you’ll have to grow a little faster.

All the same, the IPO is a win for Chicago, and a win for their number of investors. We’ll update this piece later with how the stock performs, once it begins to trade.

Equity Dive: Direct Listings

Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast, where we unpack the numbers behind the headlines.

We have something special this week and it’s not just because Kate’s in Berlin for TechCrunch Disrupt Europe and Alex’s in the throws of a cross country move! No, we’ve had this episode in the works for a while, and we’re excited to finally present our deep dive on direct listings with Chris Mayo, the head of primary markets at the London Stock Exchange.

If you’re unfamiliar with direct listings, no need for concern. Chris walks us through the basics and even the more complicated stuff. Before you jump in. Here’s a quick refresher on the new and innovative method of going public. Direct listings allow companies to exit by listing existing shares held by insiders, employees and investors directly to the market, rather than the traditional method of issuing new shares. If you’re interested, we’ve written quite a bit on the subject like this, this, this and more.

As for Mayo, before landing at the London Stock Exchange in 2014 he was a consultant at EcoLogic Systems and a director of equity capital markets, Central and Eastern Europe.

Hope you enjoy our conversation. Thanks for stopping by once again.

Equity drops every Friday at 6:00 am PT, so subscribe to us on Apple PodcastsOvercastSpotify and all the casts.

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