31 Oct

Brex has partnered with WeWork, AWS and more for its new rewards program

Brex, the corporate card built for startups, unveiled its new rewards program today.

The billion-dollar company, which announced its $125 million Series C three weeks ago, has partnered with Amazon Web Services, WeWork, Instacart, Google Ads, SendGrid, Salesforce Essentials, Twilio, Zendesk, Caviar, HubSpot, Orrick, Snap, Clerky and DoorDash to give entrepreneurs the ability to accrue and spend points on services and products they use regularly.

Brex is lead by a pair of 22-year-old serial entrepreneurs who are well aware of the costs associated with building a startup. They’ve been carefully crafting Brex’s list of partners over the last year and say their cardholders will earn roughly 20 percent more rewards on Brex than from any competitor program.

“We didn’t want it to be something that everyone else was doing so we thought, what’s different about startups compared to traditional small businesses?” Brex co-founder and chief executive officer Henrique Dubugras told TechCrunch. “The biggest difference is where they spend money. Most credit card reward systems are designed for personal spend but startups spend a lot more on business.”

Companies that use Brex exclusively will receive 7x points on rideshare, 3x on restaurants, 3x on travel, 2x on recurring software and 1x on all other expenses with no cap on points earned. Brex carriers still using other corporate cards will receive just 1x points on all expenses.

Most corporate cards offer similar benefits for travel and restaurant expenses, but Brex is in a league of its own with the rideshare benefits its offering and especially with the recurring software (SalesForce, HubSpot, etc.) benefits.

San Francisco-based Brex has raised about $200 million to date from investors including Greenoaks Capital, DST Global and IVP.  At the time of its fundraise, the company told TechCrunch it planned to use its latest capital infusion to build out its rewards program, hire engineers and figure out how to grow the business’s client base beyond only tech startups.

“This is going to allow us to compete even more with Amex, Chase and the big banks,” Dubugras said.


Source: TechCrunch – Startups

31 Oct

Monzo, the U.K. challenger bank, raises £85M Series E at a £1B pre-money valuation

Monzo, the U.K. challenger bank that now boasts more than a million customers, has raised £85 million in Series E funding. The round is led by U.S. venture capital firm General Catalyst, and Accel. Existing backers Passion Capital, Goodwater, Thrive Capital, Orange Digital Ventures, and Stripe also participated.

The latest funding was at a pre-money valuation of £1 billion (~$1.27b), meaning that Monzo is now a bonafide member of the U.K. fintech unicorn club, joining recent entrant Revolut.

Meanwhile, the bank upstart is also planning to launch a large crowdfunding round later this year. Like a lot of other fintechs — and before it was fashionable — Monzo has historically opened up its fundraising to its passionate community and other armchair investors.

In a brief call earlier today with Monzo co-founder and CEO Tom Blomfield, he told me the new funding will be primarily used for increasing headcount to further develop the Monzo product line and to cover other operational costs now that the challenger bank has reached “contribution margin positive”.

In other words, on average each customer is generating more revenue than the cost of servicing their current account, which is undoubtedly evidence of how much progress Monzo has made over the last year. This includes bringing down costs, such as weaning customers off costly debit card “top ups” and imposing a cap on fee-free foreign ATM withdrawals — as well as starting to generate meaningful revenue.

On where that revenue is now coming from, Blomfield cited lending in the form of Monzo’s overdraft product, interest it earns on deposits (currently Monzo doesn’t share that interest with customers, even if it is very small in percentage terms), and interchange fees (the money Monzo makes any time you spend on your Monzo debit card).

Another revenue stream is the nascent Monzo marketplace, which he says will be the next focus going forward now that the Monzo current account, with the omission of savings accounts and cash deposits, is basically “done“.

That’s noteworthy given that Monzo embraced developers extremely early on in its existence, holding four very popular hackathons and conducting a few early partnership pilots, but has since mostly stalled on the roll out of marketplace banking and other partnership integrations, sometimes to the frustration of the wider U.K. fintech ecosystem and developers. The exception being the recent integration with TransferWise for sending money abroad.

Blomfield doesn’t dispute this framing but says it wasn’t that Monzo changed course on offering an open API or working on deeper integrations that will put partner products inside of the Monzo banking app, but that gaining a banking license and building out all of the features of the current account had to be the short-term priority. Now that heavy lifting is complete and armed with new operational capital, it is marketplace game on.

To that end, the Monzo CEO says headcount over the next year could double again, from around 450 now to 900. And in terms of customer growth, extrapolating stats from a recent Nationwide annual report (PDF link), the challenger bank says it now accounts for 15 percent of all new bank accounts opened each month in the U.K. It also says it has 800,000 monthly active users.

Account switching — that is customers ditching their existing bank — still makes up the bulk of customer acquisition, even if Monzo recently began targeting 16-18 year olds who would be opening their first ever bank account. Another key metric: the number of customers who deposit their salary each month with Monzo is now at around 26 percent, although I’m told that this isn’t as important for Monzo as it might be for traditional banks and isn’t the main correlation with engagement or those accessing a Monzo overdraft.

Asked what Monzo’s biggest challenge will be over the next year, its CEO doesn’t mince his words: “Increasing revenue,” he says. This means ensuring that its lending models are correct (ie avoiding too many defaults as it scales) and steadfastly growing the marketplace and third-party product partnerships that will bring in additional revenue.

I was also intrigued to see a U.S. venture capital firm once again back the U.K. challenger bank — many of its existing backers have a U.S. bent and Blomfield has made no secret of his ambitions to expand across the pond at some stage. In an email exchange a few hours before publication, General Catalyst’s Adam Valkin (who was previously at Accel in London where he invested in GoCardless, which Blomfield also co-founded), gave me the following statement:

We’re investing in Tom and his team because they are delivering a high-quality banking experience for consumers at scale that is sorely missing from the market. Today’s incumbent UK banks represent billions of market cap but suffer from low NPS scores, reflecting their inability to meet their customers’ needs. Monzo, in contrast, explicitly builds product and banking features in a community-driven approach based on customers’ feedback and requests. This has driven very high organic growth, strong retention and engagement, and unprecedented customer love for and trust in Monzo. Beyond this, Tom and the Monzo team have improved upon the traditional business model of banking, removing the traditional offline retail-based banking model in favor of a highly scalable and lower cost mobile-only experience. All of this creates the potential for Monzo to become a leading U.K. bank, launch a successful financial marketplace, and eventually expand internationally.


Source: TechCrunch – Funding and Exits

03 Oct

Philippines SME lending startup First Circle raises $26M ahead of regional expansion

This year has been a breakout one for micro-financing startups in Southeast Asia, which are becoming among the most funded within the region’s fintech space. Next in line to raise capital is First Circle, an SME-lending service that’s based in the Philippines which has pulled in $26 million as it begins to consider regional expansion options.

The new financing is led by Venturra Capital with participation from Insignia Ventures Partners, Hong Kong’s Silverhorn Investment Advisors, and Tryb Group. First Circle has previously raised $2.5 million, including a $1.3 million seed round 18 months ago.

The company was founded by Irish duo CEO Patrick Lynch, formerly of CompareAsia Group and CTO Tony Ennis, previously with WebSummit, and the goal is to help small businesses scale by offering them short-term loans. The Philippines is an impact market since SMEs account for 99.6 percent of the country’s business, 65 percent of its workforce and a staggering 35 percent of national GDP. Yet, there’s no formal credit scoring system and existing loan coverage is patchy at best.

Most of First Circle’s loans are often transaction or working capital, such as financing to take on a new deal for a client with a guaranteed financial return that requires a fairly brutal wait of 90-120 days, Lynch told TechCrunch in an interview.

“A lack of access to capital is a problem that faces tens of thousands, if not hundreds of thousands, of businesses in the Philippines,” he explained. “Emerging markets are not capital developed, and our business model is quite different from the p2p lender model in that we do share risk with the investors.”

First Circle sources capital from third parties, including asset managers and family offices, who take half of the loan book. Unlike the P2P model, which is going through a spectacular crash in China, First Circle is invested in all deals and as such it does thorough due diligence before committing. However, after processing over $100 million in deals to “thousands” of businesses, Lynch said that the company has built up data on a number of suppliers and business partners to the point that a “significant” chunk of applications can be processed without human involvement.

For example, if a loan application is seeking financing in order to do a dealing with Multinational X, First Circle can move quickly if it has dealt with the application before or it has issued loans to other partners who have done business with Multinational X.

“Over time, as we acquire more customers, the degrees of separation are collapsing over time,” Lynch said.

First Circle’s executive team including co-founders Tony Ennis (third from left) and Patrick Lynch (middle)

The fact that there is little data available via a credit bureau makes things challenging. The need to built a solution from the ground up necessitates great time, cost and other resources but it can have major benefits, as First Circle is beginning to enjoy.

“Many new providers of financial services are rating customer for the first time. In 80 percent of the time in our case, it’s the first time our customer will have had a formal relationship” with a financial organization, Lynch explained. “That provides an opportunity, if done correctly, to provide a strong relationship and be a part of their future success for a long time.”

Indeed, the First Circle CEO said that, to date, customers will typically take a loan of around $10,000, but the average will balance is $30,000 — meaning that there are three loans active. That reflects the transactional nature of the loans the startup is issuing, but of course more business means more data, stronger relationships and a higher chance of word-of-mouth recommendations.

First Circle is staying focused on the Philippines for now, but Lynch revealed that there are plans to expand to other parts of Southeast Asia, the region of nearly 650 million consumers. This round may help the company “put a foot in a second market,” Lynch said, but it is likely to go out and raise more money to push its regional expansion plan next year.


Source: TechCrunch – Funding and Exits

02 Oct

Balderton’s $145M ‘secondary’ fund will give shareholders in European scale-ups the chance to exit early

In what looks like a European first, the London-based early-stage venture capital firm Balderton Capital is announcing it has closed a new $145 million “secondary” fund dedicated to buying equity stakes from early shareholders in European-founded “high growth, scale-up” technology companies.

Dubbed “Balderton Liquidity I,” the new fund will invest in European growth-stage companies through the mechanism of purchasing shares from existing, early shareholders who want to liquidate some or all of their shares “pre-exit.”

“Balderton will take minority stakes, between regular fund-raising rounds, making it possible for early shareholders — including angels, seed funds, current and former founders and employees — to realise early returns, reinvest capital in the ecosystem, or reward founders and early employees,” explains the firm.

The move essentially formalises the secondary share dealing that already happens — typically as part of a Series C or other later rounds — which often sees founders take some money off the table so they can improve their own financial situation and won’t be tempted to sell their company too soon, but also gives early investors a way out so they can begin the cycle all over again. Otherwise it can literally take five to 10 years before a liquidity event happens, either via IPO or through a private acquisition, if it happens at all.

“The bigger picture is there are lots of shareholders who either want or need or have to take liquidity at some point,” Balderton partner Daniel Waterhouse tells me on a call. “Founders are one part of that… but I think the majority of this fund is more targeted at other shareholders — business angels, seed funds, maybe employees who left, founders who left — who want to reinvest their money, want to solve a personal financial issue, want to de-risk their personal balance sheets, etc. So we’re not obsessed with founders in this fund, we’re obsessed with many different types of early shareholders, which for many different reasons would like to get liquidity before the grand exit event.”

Waterhouse says that one of the big drivers for doing this now is that Balderton’s analysis suggests there is “a critical mass of interesting companies” that are in the growth stage: “businesses that have got a scalable commercial engine” and a proven commercial model. This critical mass has happened only over the last two years, which is why — unlike in Silicon Valley — we haven’t yet seen a fund of this kind launch in Europe.

“We think there’s now about 500 companies in Europe that have raised over $20 million. That doesn’t mean they are all great companies but it’s an interesting, crude data point in terms of the scale they’ve got to. As a consequence, within that 500 we expect there to be quite a lot of interesting companies for this fund to help and we obviously have a pretty good lens on the market. Through our early-stage investing, and working with companies from the early-stage through to exit, and then obviously staying in touch with companies we don’t necessarily invest in, we have a pretty good sense of that from a bottom up perspective on how many opportunities are out there.”

He explained that there are three aspects behind the secondary funding strategy. First is that by investing via secondary funding, more companies will gain access to the “Balderton platform,” which includes an extensive executive and CEO network and support with recruitment and marketing. Secondly, it is good for the ecosystem as it will not only help relieve financial pressure from founders so they can “shoot for the next growth point” but will also let business angels cash out and recycle their money by investing in new startups. Thirdly, and perhaps most importantly, Balderton thinks it represents a good investment opportunity for the firm and its LPs as secondary liquidity is “underserved as a market.”

(Separately, one London VC I spoke to said a dedicated secondary fund in Europe made sense except in one scenario: that European valuations see a price correction sometime in the future promoted by the current trajectory of available funding slowing down, which he believes will eventually happen. “Funds are 10 years so they just have to get out in time,” is how said VC framed it.)

To that end, Waterhouse says Balderton is looking to do around 15-20 investments out of the fund, but in some instances may start slowly and then buy more shares in the same company at an even later stage. It will be managed by Waterhouse with support from investment principal Laura Connell, who recently joined the VC firm.

Struggling to see many downsides to the new fund — which by virtue of being later-stage is less risky and will likely command a discount on secondary shares it does purchase — I ask if perhaps Balderton is being a little opportunistic in bringing a reasonably large amount of institutional capital to the secondary market.

“No, I don’t think so,” he replies. “What we’ve seen in our portfolio is [that] the point in time when someone is looking for liquidity isn’t set on the calendar alongside when companies do fund raising. In particular as a company gets more mature, the gap between fund raises can stretch out because the businesses are more close to profitability. And so it’s not deterministic. We want to just be there to help people who are actually looking to sell out of cycle in those points of time and at the moment have very little options. If someone wants to wait, they’ll wait.”

Finally, I was curious to know how it might feel the first time Balderton buys a substantial amount of secondary shares in a company that it previously turned its nose down at during the Series A stage. After pointing out that companies usually look very different at Series A compared to later on in their existence — and that Balderton can’t and doesn’t invest in every promising company — Waterhouse replies diplomatically: “Maybe we kick ourselves a bit, but we’re quite happy with the performance of our early funds and obviously we’ll be happy to add other new companies that are doing really well into the family.”


Source: TechCrunch – Startups

05 Sep

WSJ reports that Theranos will finally dissolve

Theranos is reportedly finally closing down for good, nearly three years after a Wall Street Journal investigation called its blood testing technology into question. The WSJ said the company, whose dramatic downfall spawned a best-selling book that’s set to be filmed with Jennifer Lawrence starring as Theranos founder and CEO Elizabeth Holmes, sent shareholders an email saying it will formally dissolve and seek to pay unsecured creditors its remaining cash in the coming months.

Holmes resigned as CEO in June after she and Theranos’ former president, Ramesh “Sunny” Balwani, were charged with two counts of conspiracy to commit wire fraud and nine counts of wire fraud in June.

Both Holmes and Balwani had already been charged with fraud by the Securities and Exchange Commission (the criminal charges are separate from the civil ones filed by the SEC). In its complaint, the SEC said the two engaged in “an elaborate, years-long fraud in which they exaggerated or made false statements about the company’s technology, business and financial performance,” which ultimately enabled them to raise more than $700 million from investors.

Holmes and the SEC settled the charges by having Holmes agree to pay a $500,000 penalty and be barred from serving as an officer or director of a public company for 10 years. She was also required to return the remaining 18.9 million shares she obtained while engaging in fraud and relinquish voting control of Theranos.

TechCrunch has sent an email to Theranos’ public relations address asking for comment.


Source: TechCrunch – Startups

07 Aug

Don’t fear the big company ‘kill zones’

Do you worry about the so-called “kill zones” of big tech companies? The Economist thinks you should. The theory basically suggests that if your product or service is anyway threatening or accretive to one of these incumbents,  they will either force-buy your company or clone it and destroy your market.

Any entrepreneur that believes this should probably pack up now before it’s too late —  if it’s not a “kill-shot,” it will be some other perceived death-knell that ruins your company.

Starting a company has never been easier. But growing a sustainable business is still difficult  —  as it should be. If you build something customers will pay for ,  you’re going to attract competition from copycats and incumbents. Consider it another type of validation, like product-market fit: competitors think we’re right.

Welcome to being an entrepreneur  —  you are going to be constantly battling  –  lack of cash, lack of customers, aggressive competition, better-funded competitors, underperforming staff, slow-moving sales cycle, or some other as-yet-unknown. The list of pitfalls is long. But enough willpower and perseverance — “blood, sweat and tears” —  will get you to the other side. Eventually. Remember  –  the product of an overnight success is years of hard work.

If this is sounds too daunting  –  don’t do it!

If you enter a market large enough, with deep pocketed and dominant incumbents, you have your work cut out for you. Maybe a nice UI and faster workflow attracted customers and some early adopters  – but guess what  – they are copyable features. Features alone are rarely enough to win a defensible market position.

Try to ignore advice that says you should focus on building the best product as your differentiator — this does not set you up with the highest chance of success. Instead, focus on finding and serving a targeted segment of customers, with a unique set of needs, and tailor your product and service experience specifically for them.

It’s easy for features to be copied  –  but you can’t be both custom and generic at the same time. Custom is a great approach that new entrants can take to get a toehold in a larger market with larger players that must be generic (i.e. Salesforce is a generic CRM, but there are lots of vertical CRMs that successfully compete  — Wise Agent for realtors, Lead Heroes for health insurance).

Presenting a Total Addressable Market (TAM) is the bane of potentially good startups that have been schooled in “anything less than a billion-dollar opportunity isn’t interesting.” Maybe we should reframe it as Potentially Ownable Market (POM). What are the details you can build in the beginning — where your tailored approach gives you instant leadership?

Project management for chefs

Let’s use project management as an example. Maybe a new entrant starts as an app for restaurants, which helps chefs build new menus. Each task list is a “recipe,” each recipe has “ingredients,” with amounts and timing, kitchen location, suppliers, alternatives and “garnishes and sauces.” The app integrates with the stock system and POS, and helps chefs predict inventory needs and staffing based on recipe times/complexity.

The founder has looked around and this is the only project management app that focuses on chefs, giving him an instant potentially ownable market. The business might be able to thrive in this segment alone and become the dominant player with its own kill zone.

Maybe this is the first step; the company gets profitable early growth and becomes sustainable, which funds development to grow the business into other vertical and complementary areas. Over time the business will grow into a large TAM  —  a far better approach than starting off in a large market with clear winners already.

Avoid the battle entirely by creating your own category.


Source: TechCrunch – Startups

07 Aug

Shell Ventures backs UK car repair marketplace WhoCanFixMyCar

WhoCanFixMyCar, the U.K. online car repair marketplace, has secured £4 million in new funding. Backing the startup is Shell Ventures — the corporate venture arm of Shell — in addition to chairman Sir Trevor Chinn (who previously chaired the boards ofAA, Kwik Fit and RAC), Active Partners, and Venrex Investment Management.

Launched in 2011 by former investment bankers Al Preston and Ian Griffiths, WhoCanFixMyCar.com claims to be the biggest online marketplace in the U.K. for matching car owners with repair garages. Specifically, the company, which has offices in Newcastle upon Tyne, London and Kiev, operates a local garage and mechanic online comparison service, allowing drivers to post jobs and receive quotes from local garages and mechanics.

The platform currently has 11,500 garages registered to the site, and says it has processed 1 million repair requests from U.K. drivers and receives circa 60,000 new job requests from drivers every month.

This, I’m told, has seen single site garages obtaining around 600 new customers per year on average through WhoCanFixMyCar, with top regional garage groups securing 3,000-4,000 bookings per year.

Furthermore, Shell’s investment via Shell Ventures follows the development of the Shell Helix Service Specialist Network, a recently launched scheme which allows independent workshops on the WhoCanFixMyCar.com site to be officially associated with Shell. In other words, strike this up as potentially quite a strategic investment for Shell.

Armed with a cash injection, Al Preston, co-founder of WhoCanFixMyCar.com, says that the plan it to keep scaling the startup’s activities and consolidate its position in the UK.” We are also focusing on new products and solutions that will further benefit our garage network and provide car owners with a better, richer experience when it comes to car maintenance and repairs,” he says.

On the surface, ClickMechanic can be considered a similar-sized competitor, although it operates a different model, more akin to ‘Uber for car mechanics,’ by offering instant quotes and then putting the job out to a curated network of garages and mechanics who can choose to accept or reject. In contrast, WhoCanFixMyCar is a two sided marketplace in the truest sense, letting you request quotes and compare reviews, with much more emphasis on lead generation from the garage’s point of view.

Article updated to clarify how WhoCanFixMyCar and ClickMechanic operated very different models, despite being competitors on the consumer-facing side.


Source: TechCrunch – Funding and Exits

11 Jul

Aspire Capital offers fast finance for SMEs in Southeast Asia

Southeast Asia’s digital economy is tipped to grow more than six-fold to reach more than $200 billion per year, according to a report co-authored by Google, with e-commerce accounting for the dominant share. The emergence of e-commerce platforms like Alibaba’s Lazada and U.S.-listed Shopee have enabled online entrepreneurship across the region, but still financial support for online sellers, who are basically SMEs, is lagging.

That’s where Singapore-based Aspire Capital, a six-month-old organization focused on speedy SME lending, is hoping to make a difference.

The company certainly has opportunity. With a cumulative population of over 600 million consumers and a rising middle class, Southeast Asia is increasingly an attractive market for businesses of all kind, and online companies in particular. Chinese giants Alibaba and Tencent have long devoted significant resources to the region where, like India, they see significant growth potential. E-commerce is the clear winner, in terms of size, with the e-Conomy SEA report — a joint research project between Google and Singapore sovereign fund Temasek — forecasting e-commerce revenue will hit $88 billion by 2025 from $10.9 billion in 2017.

Data from the e-Conomy SEA report

The crux of its problem is that online sellers who use Lazada, Shopee or other platforms that are forgoing profit in order to grow, are ironically less able to scale their business since there are few ‘e-commerce friendly’ financing options.

That problem became apparent to Aspire founder and CEO Andrea Baronchelli during a four-year stint with Lazada Singapore where, as CMO, he identified a financing disconnect for Lazada merchants.

“I saw the problem while trying to rally small businesses trying to grow in the digital economy,” Baronchelli told TechCrunch in an interview.

“The problem is really about providing working capital to small business owners. We started with online sellers, but we have expanded a bit as we see demand. There are 65 million small businesses in Southeast Asia, that’s ten times more than the U.S. so we see so much potential,” he added.

Aspire founder and CEO Andrea Baronchelli pictured while at Lazada

Today, Aspire Capital covers Singapore where it has expanded beyond e-commerce merchants to cover other things of SMEs who seek loans, primarily for working capital as Baronchelli explains. So far, he added, it has served loans to over 100 businesses. Typically, its spread goes from as low as SG$5,000 to up to SG$100,000, that’s around $3,600-$73,500 in U.S. terms.

The company was founded in early 2018 and already it has done plenty. It was part of the Y Combinator Winter 2018 cohort and it has closed a $9 million seed round to kick its business off with the working capital that it needs itself.

That round included a range of investors such as Europe-based Hummingbird, New York’s Mark II Capital, ex-Sequoia partner Yinglan Tan’s Insignia Ventures Partners and Y Combinator.

The principle behind the business is to make business financing quick and simple, Baronchelli said.

So rather than stacks of paperwork, SME owners fill out online forms and get a response the same day. Large parts of the application and review process are automated using a proprietary risk assessment engine, but Baronchelli said that ultimately a human makes the final call on whether to accept the application or not.

“We want to really be fast,” Baronchelli explained. “SMEs need quick decisions, they cannot wait three months for a bank. They need super quick, fast and no paperwork.”

The application process for companies seeking loans from Aspire Capital

He paints an example of online merchants who typically buy inventory from China which is sold customers within three to six months. If the business has a track record, it can take a loan to increase its stock and grow its revenues and profit, he explained.

Singapore may be a key market in Southeast Asia, but with a population of just over five million expansion is top of mind for Aspire. Baronchelli said he is doing due diligence on the first market expansion which he expects will happen before the end of this year. He expects that the business will raise further capital, perhaps towards the tail end of this year, which would be used to expand more aggressively across Southeast Asia in 2019.

He is also occupied building out the team. Right now, Aspire has ten people but he is keen to bring in ten to fifteen more staff, particularly on the tech side of the business.


Source: TechCrunch – Funding and Exits

11 Jul

GrubMarket gobbles up $32M led by GGV for its healthy grocery ordering and delivery service

As consumers become more discerning about the food they eat, a wave of startups has emerged that is catering to that demand with convenient alternatives to the more ubiquitous options that are available today. One of these, GrubMarket — which sources organic and healthy food directly from producers and then delivers it to other businesses (Whole Foods is a customer) as well as consumers at a discount of 20-60 percent over other channels — is today announcing a $32 million round to grow its already profitable business, including making acquisitions and expanding on its own steam as it eyes a public listing.

“We are looking to buy companies to make more revenues ahead of an upcoming IPO,” said Mike Xu, the founder and CEO. He said GrubMarket is “in proactive steps” to expand from its home base in California to the East Coast, starting in New York and New Jersey, by October this year. The plan, he said, will be to file with the SEC sometime between the end of this year and early 2019, with the IPO taking place in the second half of 2019.

E-commerce, and in particular food-related businesses with perishable items and associated waste, can be tricky when it comes to margins, and indeed, there have been many casualties in the world of food startups. Xu said in an interview that GrubMarket is already profitable and working at a $100 million run rate.

One of the reasons it’s profitable may also be the same reason you may have never heard of GrubMarket. Currently, between 60 and 70 percent of its business is in the B2B space. Xu says that customers number in the thousands and include offices, grocery stores and restaurants across the San Francisco Bay Area, Los Angeles, Orange County and San Diego.

And so, if you don’t know GrubMarket, you might know some of its customers, which include all WeWorks between San Diego and San Francisco, Whole Foods, Blue Apron, Hello Fresh and Chipotle. GrubMarket has also cornered some very specific niches: It has become the biggest mushroom supplier in all of Northern California, and it’s the biggest supplier of Hawaiian farm produce in the Bay Area.

Another point in the company’s favor is the technology it uses. Working directly with farmers and other producers, GrubMarket has built apps that allow it and its partners to manage the logistics of the business in an efficient way. The idea will be to bring more AI to the platform over time: for example, to be able to run better modelling to figure out how much fruit and veg might sell during a given season, and how to price items.

GrubMarket also is dabbling in areas that you might not normally associate with a grocery-on-demand delivery company: it built an educational app called Farmbox, which — when you play it — can be used to collect points to spend on GrubMarket; and it’s also exploring how blockchain technology can be used in a “next-generation open platform for direct farm-to-table.”

Xu says that as the company continues to grow, it will shift more into direct-to-consumer deliveries to complement its wholesale business.

This latest round is a mixture of equity and debt and is being led by GGV with other previous investors Fusion Fund (formerly New Gen Capital) and Great Oaks Venture Capital participating, along with new investors Max Ventures, Castor Ventures, Bascom Ventures, Millennium Technology Value Partner, Trinity Capital Investment, Investwide Capital and others. The company is not publicly disclosing its valuation; it has raised around $64 million to date.

Many eyes are on Amazon these days, and what moves it might make next in groceries after acquiring Whole Foods, ramping up its own Pantry offerings, courting restaurants for delivery and making its own meal kits. This is not a question that keeps up Xu at night, however.

“Food is the largest and biggest opportunity in e-commerce,” he said, estimating that today the total value for the global food and agricultural industry is around $9 trillion (versus $8 trillion in 2017), with only about one percent of buying done online. “That’s a big enough opportunity to have a few giant companies, and not just Amazon.”

It’s also an opportunity that could sustain some slightly smaller companies, too: One of my favorite e-commerce businesses in England is a service that I’ve been using for years, an organic grocery delivery called Abel & Cole that brings us a box of organic fruit and vegetables (and whatever else I order on top of that) each week. Like GrubMarket, it’s working directly with smaller producers who might have otherwise found it hard-going to find a way of selling their produce directly to buyers (and buyers would have found it hard-going to ever buy directly from these producers). Unlike GrubMarket, it takes a more modest approach that doesn’t involve eventually becoming a leviathan itself. May they all be around for years to come.


Source: TechCrunch – Startups

13 Jun

Southeast Asia’s Grab lands $1B from Toyota at a $10B valuation

Grab, the ride-hailing firm that acquired Uber’s Southeast Asia business earlier this year, is raising a new round of funding and it just announced that it will be led by Toyota, which is committing $1 billion in capital. The deal values Grab at over $10 billion, a source close to the company told TechCrunch.

In return for its capital, Toyota will also get a board seat and the opportunity to place an executive within Grab’s team. Grab said it plans to work with its new investor “to create a more efficient transport network that will ease traffic congestion in Southeast Asia’s megacities” and help its drivers increase their income. In particular, that will involve close collaboration with the Toyota Mobility Service Platform (MSPF), which is working on areas such as user-based insurance, new types of financial packages and predictive car maintenance.

“Going forward, together with Grab, we will develop services that are more attractive, safe and secure for our customers in Southeast Asia,” said Toyota executive vice president Shigeki Tomoyama in a statement.

Toyota put money into Grab via its Next Technology Fund last year, but this time around the capital comes directly from the parent company. Hyundai is another automotive firm that has backed Grab.

The new round follows a $2.5 billion investment that was jointly led by SoftBank and China’s Didi, two long-time investors put an initial $2 billion up for the round last year. That round quietly closed at the start of 2018, Grab has confirmed but so far it hasn’t said who put up the additional money.

The company’s valuation had been $6 billion but, unsurprisingly since the Uber deal, it has jumped by a further $4 billion based on Toyota’s investment.

Grab now claims over 100 million downloads of its app across eight countries in Asia, including Singapore, Indonesia, Vietnam, Thailand and more. The firm said its annual revenue run rate has now surpassed $1 billion, although it declined to provide profit or loss numbers.

While it did remove Uber from the region by acquiring its business — although the deal didn’t go as smoothly as had planned — that exit prompted new entrants to jump into the region with Indonesia’s Go-Jek, in particular, looking like the key foe. Go-Jek, which is valued at some $4.5 billion, recently announced plans to expand to four new markets having itself raised a significant $1.5 billion round.

Aside from competition, Singapore-based Grab has kept its busy in recent years expanding its services from point-to-point taxis and private car hailing to include mobile payments, food delivery and dock-less bicycles. Earlier this month it officially unveiled Grab Ventures, a unit focused on helping building out an ecosystem through investment and mentoring.

Grab Ventures is not a VC arm, but it does plan to make 8-10 investments over the next two years while it will also open an accelerator program for “growth-stage” startups — although that doesn’t include equity investments for cash. The division will also focus on incubating new business ideas, which include its recently launched Grab Cycles product which aggregates on-demand bikes from a range of companies.


Source: TechCrunch – Funding and Exits