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Google, Nokia, Qualcomm are investors in $230M Series A2 for Finnish phone maker, HMD Global

Published August 11, 2020

Mobile device maker HMD Global has announced a $230M Series A2 — its first tranche of external funding since a $100M round back in 2018 when it tipped over into a unicorn valuation. Since late 2016 the startup has exclusively licensed Nokia’s brand for mobile devices, going on to ship some 240M devices to date.

Its latest cash injection is notable both for its size (HMD claims it as the third largest funding round in Europe this year); and the profile of the strategic investors ploughing in capital — namely: Google, Nokia and Qualcomm.

Though whether a tech giant (Google) whose OS dominates the world’s smartphone market (Android) becoming a strategic investor in Europe’s last significant mobile OEM (HMD) catches the attention of regional competition enforcers remains to be seen. Er, vertical integration anyone? (To wit: It’s a little over two years since Google was slapped with a $5BN penalty by EU regulators for antitrust violations related to how it operates Android — and the Commission has said it continues to monitor the market ‘remedies’.)

In a further quirk, when we spoke to HMD Global CEO, Florian Seiche, ahead of today’s announcement, he didn’t expect the names of the investors to be disclosed — but a press spokesperson had already shared them with us so he duly confirmed the trio are investors in the round. (But wouldn’t be drawn on how much equity Google is grabbing.)

HMD’s smartphones run on Google’s Android platform, which gives the tech giant a firm business reason for supporting the mobile maker in growing the availability of Google-packed hardware in key growth markets around the world.

And while HMD likens its consistent (and consistently updated) flavor of Android to the premium ‘pure’ Android experience you get from Google’s own-brand Pixel smartphones, the difference is the Finnish company offers devices across the range of price points, and targets hardware at mobile users in developing markets.

The upshot is relatively little overlap with Google’s Pixel hardware, and still plenty of business upside for Google should HMD grow the pipeline of Google services users (as it makes money by targeting ads).

Connoisseurs of mobile history may see more than a little irony in Google investing into Nokia branded smartphones (via HMD), given Android’s role in fatally disrupting Nokia’s lucrative smartphone business — knocking the Finnish giant off its perch as the world’s number one mobile maker and ushering in an era of Android-fuelled Asian mobile giants. But wait long enough in tech and what goes around oftentimes comes back around.

“We’re extremely excited,” said Seiche, when we mention Google’s pivotal role in Nokia’s historical downfall in smartphones. “How we are going to write that next chapter on smartphones is a critical strategic pillar for the company and our opportunity to team up so closely with Google around this has been a very, very great partnership from the beginning. And then this investment definitely confirms that — also for the future.”

“It’s a critical time for the industry therefore having a clear strategy — having a clear differentiation and a different point of view to offer, we believe, is a fantastic asset that we have developed for ourselves. And now is a great moment for us to double down on this,” he added.

We also asked Seiche whether HMD has any interest in taking advantage of the European Commission’s Android antitrust enforcement decision — i.e. to fork Android and remove the usual Google services, perhaps swapping them out for some European alternatives, which is at least a possibility for OEMs selling in the region — but Seiche told us: “We have looked at it but we strongly believe that consumers or enterprise customers actually love [Google] services and therefore they choose those services for themselves.” (Millions of dollars of direct investment from Google also, presumably, helps make the Google services business case stack up.)

Nokia, meanwhile, has always had a close relationship with HMD — which was established by former Nokia execs for the sole purpose of licensing its iconic mobile brand. (The backstory there is a clause in the sale terms of Nokia’s mobile device division to Microsoft expired in 2016, paving the way for Nokia’s brand to be returned to the smartphone market without the prior Windows Mobile baggage.)

Its investment into HMD now looks like a vote of confidence in how the company has been executing in the fiercely competitive mobile space to date (HMD doesn’t break out a lot of detail about device sales but Seiche told us it sold in excess of 70M mobiles last year; that’s a combined figure for smartphones and feature phones) — as well as an upbeat assessment of the scope of the growth opportunity ahead of it.

On the latter front US-led geopolitical tensions between the West and China do look poised to generate a tail-wind for HMD’s business.

Mobile chipmaker Qualcomm, for example, is facing a loss of business, as US government restrictions threaten its ability to continue selling chips to Huawei; a major Chinese device maker that’s become a key target for US president Trump. Its interest in supporting HMD’s growth, therefore, looks like a way for Qualcomm to hedge against US government disruption aimed at Chinese firms in its mobile device maker portfolio.

While with Trump’s recent threats against the TikTok app it seems safe to assume that no tech company with a Chinese owner is safe.

As a European company, HMD is able to position itself as a safe haven — and Seiche’s sales pitch talks up a focus on security detail and overall quality of experience as key differentiating factors vs the Android hoards.

“We have been very clear and very consistent right from the beginning to pick these core principles that are close to our heart and very closely linked with the Nokia brand itself — and definitely security, quality and trust are key elements,” he told TechCrunch. “This is resonating with our carrier and retail customers around the world and it is definitely also a core fundamental differentiator that those partners that are taking a longer term view clearly see that same opportunity that we see for us going forward.”

HMD does use manufacturing facilities in China, as well as in a number of other locations around the world — including Brazil, India, Indonesia and Vietnam.

But asked whether it sees any supply chain risks related to continued use of Chinese manufacturers to build ‘secure’ mobile hardware, Seiche responded by claiming: “The most important [factor] is we do control the software experience fully.” He pointed specifically to HMD’s acquisition of Valona Labs earlier this year. The Finnish security startup carries out all its software audits. “They basically control our software to make sure we can live up to that trusted standard,” Seiche added. 

Landing a major tranche of new funding now — and with geopolitical tension between the West and the Far East shining a spotlight on its value as alternative, European mobile maker — HMD is eyeing expansion in growth markets such as Africa, Brail and India. (Currently, HMD said it’s active in 91 markets across eight regions, with its devices ranged in 250,000 retail outlets around the world.)

It’s also looking to bring 5G to devices at a greater range of price-points, beyond the current flagship Nokia 8.3. Seiche also said it wants to do more on the mobile services side. HMD’s first 5G device, the flagship Nokia 8.3, is due to land in the US and Europe in a matter of weeks. And Seiche suggested a timeframe of the middle of next year for launching a 5G device at a mid tier price point.

“The 5G journey again has started, in terms of market adoption, in China. But now Europe, US are the key next opportunity — not just in the premium tier but also in the mid segment. And to get to that as fast as possible is one of our goals,” he said, noting joint-working with Qualcomm on that.

“We also see great opportunity with Nokia in that 5G transition — because they are also working on a lot of private LTE deployments which is also an interesting area since… we are also very strongly present in that large enterprise segment,” he added.

On mobile services, Seiche highlighted the launch of HMD Connect: A data SIM aimed at travellers — suggesting it could expand into additional connectivity offers in future, forging more partnerships with carriers. 

“We have already launched several services that are close to the hardware business — like insurance for your smartphones — but we are also now looking at connectivity as a great area for us,” he said. “The first pilot of that has been our global roaming but we believe there is a play in the future for consumers or enterprise customers to get their connectivity directly with their device. And we’re partnering also with operators to make that happen.”

“You can see us more as a complement [to carriers],” he added, arguing that business “dynamics” for carriers have also changed substantially — and customer acquisition hasn’t been a linear game for some time.

“In a similar way when we talk about Google Pixel vs us — we have a different footprint. And again if you look at carriers where they get their subscribers from today is already today a mix between their own direct channels and their partner channels. And actually why wouldn’t a smartphone player be a natural good partner of choice also for them? So I think you’ll see that as a trend, potentially, evolving in the next couple of years.”

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Parsable scores $60M Series D as pandemic forces faster digitization of industrial sector

Published August 11, 2020

It seems the pandemic has forced the business world to digitize faster, and the industrial sector is no different. Parsable, a San Francisco startup that is helping digitize industrial front-line workers, announced a $60 million Series D today.

Activate Capital and Glade Brook Capital Partners co-led the round. They got help from new investors Alumni Ventures Group, Cisco Investments, Downing Ventures, Evolv Ventures and Princeville Capital, along with existing investors Lightspeed Venture Partners, Future Fund, B37 Ventures, Honeywell and Saudi Aramco. Today’s money brings the total raised to more than $133 million, according to the company.

As I wrote at the time of the company’s $40 million Series C in 2018, “Parsable has developed a Connected Worker platform to help bring high tech solutions to deskless industrial workers who have been working mostly with paper-based processes.”

CEO Lawrence Whittle says that while the pandemic has shut some factories, and reduced overall worker headcount, it has still led to increased usage on the platform of companies whose products are considered essential services. What’s more, Parsable’s ability to deal with information on an individual mobile device or laptop means that in many cases, workers can stay separated and not share computers on the factory floor, making the process safer.

“Fortunately, the majority of our focus is in what’s often deemed as essential industries — so consumer packaged goods (CPG), food, beverage, agriculture and related industries such as paper and packaging. Those markets, interestingly enough, predominantly because of consumer demand continue to operate pretty successfully from a demand perspective during this COVID period,” Whittle told TechCrunch.

While the company would not give specific growth numbers, they shared that registered users grew 11x and the number of deployed sites tripled year over year. What’s more, they have users in more than 100 countries encompassing 14 languages.

With the money, the company wants to expand internationally into Asia, EMEA and Latin America. The startup has 120 employees, but plans to hire for essential needs over the next several months, preferring to be conservative and seeing where the pandemic takes the economy in the coming months.

Whittle points out that the diversity of its user base, and the desire to expand into other regions demands that they have a more diverse employee base, even while it’s a clear ethical consideration, as well.

“When you’re serving customers in over 100 countries, and you provide a product in in 14 languages, [having] diversity and inclusion is to some extent a given. What we’re doing as a company […] is taking every opportunity to further lean into that and that’s one of the leading lights of our of our business,” Whittle said.

Parsable launched in 2013. It took a few years to build the product. Today, customers include Georgia-Pacific, Henkel and Shell.

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Tencent wants to merge China’s esports archrivals Douyu and Huya

Published August 11, 2020

The war between two of China’s largest esports companies may soon come to a truce at the will of their investor, Tencent.

Tencent, the world’s biggest games publisher, announced late Monday a proposal to consolidate Douyu and Huya, the competing live-streaming sites focused on video games. Rather than paying in cash, the deal will see the pair enter a stock-for-stock merger.

The proposal is non-binding, but Tencent has paved the way for it to go through. In a separate deal, the entertainment giant agreed to pay Joyy, part-owner of Huya and the company behind TikTok’s serious rival Likee, $810 million in exchange for 30 million shares. Tencent will also buy 1 million shares from Huya CEO Dong Rongjie. Upon the transaction, Tencent will hold 51% of Huya’s shares and 70.4% of its voting rights.

Tencent is also the largest shareholder of Douyu, with a 38% stake and voting power.

What this means is the esports platforms that have long fought neck and neck for audiences and live-streaming hosts may soon need to work together. That’s good news for investors who have been hemorrhaging cash.

NYSE-listed Huya has a current market cap of $5.27 billion and Nasdaq-traded Douyu is worth $4.44 billion, giving the duo a combined value of around $10 billion. The pair will together control more than 300 million monthly esports users. By March, Douyu had 158 monthly active users and Huya claimed 151.3 MAUs, though there can be overlaps.

The question is who will be in charge of the consolidated behemoth. Could Mr. Dong be relinquishing control of Huya as he gives up a considerable amount of shares? Joyy already signaled its retreat in the first quarter when it stopped folding Huya’s operating results into its own report.

Ammo for Tencent

Industry observers believe the merger can significantly expand Tencent’s reach in the gaming supply chain. The company is the publisher behind blockbusters like the mobile versions of PUBG and Call of Duty, and the addition of a live-streaming empire will allow it to capture not just gamers but also the wider esports spectatorship.

It’s worth noting that Tencent has its own in-house Penguin Esports that’s a counterpart to Douyu and Huya. It’s not hard to imagine the three players integrating resources and generating synergies under Tencent’s oversight.

New challengers have sprung up in the field. While Douyu and Huya focused on esports from the outset, more general-purpose video services like Bilibili and Kuaishou have been luring legions of esports users in recent years. But lo and behold, Tencent is also an investor in Bilibili and Kuaishou.

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Y Combinator President Geoff Ralston shares actionable advice for startup founders

Published August 10, 2020

Running a startup accelerator comes with a number of occupational hazards, but “skepticism is the easiest thing to fall into when you’ve seen too many companies,” said Y Combinator President Geoff Ralston, “and it’s the thing you have to avoid the most.”

Ralston joined me last week for an hour-long Extra Crunch Live interview where we talked about several topics, including how YC has adapted its program during the pandemic, why he has “never stopped coding” and what he sees changing in tech.

“We try to not be too smart, because great founders often see things beyond what you’re seeing,” he said. “If you try to be too smart, you’ll miss the Airbnbs of the world. You’ll say ‘Airbeds in peoples houses? That’s stupid! I’m not going to invest in that,’ and you could’ve bought 10% of Airbnb for like nothing back then… 10% of that company… you can do your own math.”

Extra Crunch Live is our new virtual event series where we sit down with some of the top founders, investors and builders in tech to glean every bit of insight they care to share. We’ve recently been joined by folks like Hunter Walk, Kirsten Green and Mark Cuban.

To watch the entire interview with Geoff Ralston, sign up for ExtraCrunch — but once you’ve got that covered, you can find it (and a bunch of key excerpts from the chat!) below.

Advice for getting into YC

I prefer it when an Extra Crunch Live conversation starts out with actionable advice, so we kicked things off with any suggestions Ralston had for folks looking to apply to YC. And he had plenty! Such as:

  • Mind the deadline, but all hope is not lost if you miss it: “If you miss the deadline, it’s not the end of the world,” says Ralston. “Don’t tell anyone on the admissions team that I said this, but it’s a little bit of a soft deadline. We would never turn down the next epic company because you missed the deadline… although your odds go down of getting in if you don’t make it in by [the deadline]. Why shouldn’t your odds be as high as possible?”
  • Don’t change things up for YC’s sake: “Do whatever you can do to make your company as successful, as real as possible… but don’t try to like, pretty up your company for YC,” he says. “That’s never smart [to do] for an investor. Don’t make bad short-term decisions because you think there’s a deadline that you should do wrong things for. Instead, build your company for the long term, and do the best you can possibly do to find product market fit, to build the right product, to build the right technology, to build the right software or whatever it is you’re building.”

Later in the video (around the 40:55 mark), a question from the audience leads Ralston back to the topic, and he has a few more pieces of advice:

  • Stick to the instructions: “The instructions are fairly clear. It says: do a one-minute video, have all the founders there, and talk to us. That’s a good idea! Don’t give us some marketing video, we’re not interested in that. That’s not how we’re making our decision.”
  • Hone your pitch: “Think about expressing yourself concisely, with great clarity. It does not help to write a book in the application. Be kind to us! We’re reading, you know, hundreds of applications. Get your idea across as clearly as you can. That’s actually a really good signal to us, if you can describe what you’re doing with a minimum of words. That helps us a ton.”
  • Tell your story: “Do not skimp on talking about yourselves!” Ralston notes. “We are super interested in you, who you are, and why you’re doing what you’re doing.”

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DoubleVerify says ad fraudsters are using public domain content to create fake TV apps

Published August 10, 2020

The team at DoubleVerify, a company that helps advertisers eliminate fraud and ensure brand safety, said that it’s recently identified a new tactic used by ad fraudsters seeking to make money on internet-connected TVs.

Senior Vice President of Product Management Roy Rosenfeld said that it’s harder for those fraudsters to create a legitimate-looking TV app — at least compared to the web and mobile, where “you can just put up a site [or app] to generate content.” For a connected TV app, you need lots of video, which can be costly and time-consuming to produce.

“What these guys have started to do is take old content that’s in the public domain and package that in fancy-looking CTV apps that they submit to the platform,” Rosenfeld said. “But at the end of the day, no one is really watching the old westerns or anything like that. This is just a vehicle to get into the app stores.”

As noted in a new report from the company (which will soon be available online), DoubleVerify said it has identified more than 1,300 fraudulent CTV apps in the past 18 months, with more than half of that coming in 2020.

The report outlined a process by which fraudsters create an app from this content (often old TV and movies from the ’50s and ’60s that has fallen into the public domain); submit the app for approval from Roku, Amazon Fire or Apple TV; then, with the additional legitimacy of an app store ID, generate fake traffic and impressions.

Rosenfeld compared this to a previous boom in flashlight apps for smartphones: “Are there legit flashlight apps? Absolutely. But most of them were not.” In the same way, he argued, “This is not a testament about public domain content overall, it’s not to say that there aren’t legit channels and apps out there that people are consuming and enjoying” — it’s just that many of the public domain apps being submitted are used for ad fraud.

To avoid paying for fake impressions, DoubleVerify recommends that advertisers advocate for transparency standards, buy from platforms that support third-party verification and, of course, buy through ad platforms certified by DoubleVerify.

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Trump administration announces major midband spectrum auction for 5G

Published August 10, 2020

5G is increasingly coming into focus as a set of technologies that has the potential to dramatically expand the quality, bandwidth and range of wireless connectivity. One of the major blocks to actually rolling out these technologies though is simply spectrum: there just isn’t enough of it available for private use. 5G needs spectrum at very low frequencies to penetrate buildings and increase range, and it also needs high frequencies to support the huge bandwidth that future applications will require.

The crux though is in the midband — frequencies that can support a mix of range, latency and bandwidth that could become a mainstay of 5G technologies, particularly as a bridge for legacy infrastructure and devices.

Today, the midband of U.S. spectrum is heavily utilized by government services like the military, which uses the spectrum for everything from conflict operations to satellite connectivity. That has prevented commercial operators from accessing that spectrum and moving forward with wider 5G deployments.

That’s why it is notable today that the White House announced that the 3450 Mhz to 3550 Mhz spectrum will officially be handed off to the FCC for an auction that will allow private operators to access midband spectrum. Given the legal process involved, that auction is expected to take place in December 2021, with private operation of services likely beginning in 2022. Usage of the band is expected to follow the spectrum sharing rules of AWS-3, according to a senior Trump administration official.

According to the White House, a committee of 180 experts was assembled from all the armed services and the Defense Secretary’s office to look at where a segment of the DoD’s spectrum could be freed up and moved to private usage to back 5G.

Such efforts are in line with the MOBILE NOW Act of 2017, which Congress passed in order to spur government agencies to speed up the process of allocating spectrum for 5G uses. That act encouraged NTIA, an agency which advises on telecom issues for the U.S. government, to identify the 3450 Mhz to 3550 Mhz band as a major area of study back in 2018, and earlier this year in January the agency found “viable options” for converting the band to private use.

It’s the latest positive step in the long transition of wireless to 5G services, which demands changes in technology (such as the wireless chips in cell phones), spectrum allocation, policy development and infrastructure buildout in order to come to fruition.

Ted S. Rappaport, a professor of electrical engineering and the founding director of NYU WIRELESS, an academic research center focused on advanced wireless technologies, said that “It’s great news for America … and a terrific move for U.S. consumers and for the U.S. wireless industry.”

He noted that the particular frequency was valuable, given existing knowledge and research in the industry. “It’s not that far from existing 4G spectrum where engineers and technicians already have good understanding of the propagation. And it’s also at a spectrum where the electronics are very low cost and very easy to make.”

There has been growing pressure on U.S. government leaders in recent years over the plodding 5G transition, which has fallen behind peer countries like China and South Korea. Korea in particular has been a world leader, with more than two million 5G subscribers already in the country thanks to an aggressive industrial policy by Seoul to invest in the country’s telecommunications infrastructure and take a lead in this new wireless transition.

The U.S. has been faster at moving ahead in millimeter (high frequency) spectrum for 5G that will have the greatest bandwidth, but it has lagged in midband spectrum allocation. While the announcements today is notable, there will also be concerns whether 100 Mhz of spectrum is sufficient to support the widest variety of 5G devices, and thus, this allocation may well be just the first in a series.

Nonetheless, additional midband spectrum for 5G will help move the transition forward, and will also help device and chip manufacturers begin to focus their efforts on the specific bands they need to support in their products. While it may be a couple of more years until 5G devices are widely available (and useful) in the United States, spectrum has been a key gating factor to reaching the next-generation of wireless, and a gate that is finally opening up.

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iOS 14 redirects web links from News+ publishers directly to the Apple News app

Published August 10, 2020

Apple’s still-in-beta operating systems will automatically redirect News+ subscribers to the Apple News app when they click on links from a News+ publisher.

In other words, if you click or tap on a link to a paywalled story published by a News+ partner — including stories from our own Extra Crunch membership program — iOS 14, iPadOS 14 and macOS Big Sur will take you straight to the article page in the News+ app, even when the link ostensibly points to the publisher’s own website.

Tony Haile (who founded the ad-free subscription news service Scroll) tweeted about the change this morning, and I’ve been able to replicate it myself.

The experience should be familiar to (for example) New York Times app readers who, when they click on a web link, are taken straight to the article page in the NY Times app. (In TechCrunch’s case, I noticed that Apple even prompts users to open the News app when they click on stories that aren’t paywalled.)

Woah, I wonder how many publishers in Apple News+ realize that the new iOS14 and MacOS Big Sur are by default intercepting traffic to their sites and sending it to the Apple News app instead. pic.twitter.com/k4PQG9mE7M

— Tony Haile (@arctictony) August 10, 2020

This addresses one of the more frustrating elements of being a News+ subscriber: Although your $9.99 monthly subscription gets you access to paywalled stories from publishers like The New Yorker and The Wall Street Journal, you only get access via the News app — not the publishers’ websites. So I’ve often seen something I want to read on Google or Twitter, but instead of clicking the link, I have to open the News app and track down the story.

So this seems like it should significantly improve the reader experience, even if it might be a little disconcerting at first. And it only applies to News+ subscribers, who are opted-in but will have the option to turn off the “Open Web Links in News” feature in their News settings.

But as Haile noted, publishers may be less excited about the change: “Any strategic rationale that Apple News+ represents a separate channel/audience is now gone. This directly cannibalizes a publishers’ core subscription audience.”

Although Apple has not released News+ subscriber numbers, there have been several reports — including a November 2019 story from CNBC — suggesting that the service has struggled to attract new subscribers after signing on 200,000 users in the first 48 hours after launch. And Digiday reported that publishers have been underwhelmed with revenue.

Update: An Apple spokesperson just provided the following statement:

Apple is committed to creating the best experience for Apple News+ subscribers. This change offers subscribers seamless access to the content that is part of their News+ subscription right in the News app or publisher app, as well as providing publishers with increased engagement and revenue opportunities on Apple News. News+ subscribers can set their link preference in their News settings.

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Seed funding tips and tricks from Uncork Capital founder Jeff Clavier

Published August 10, 2020

Angel funding, seed investing and generally focusing on earlier stage investing is a huge business in the world of startups these days — it helps investors get in early to the most promising companies, and (because of the smaller size of the checks) allows for even the less prolific to spread their bets.

There was a time when it was immensely difficult for a founder to get a first check, not least because there were fewer people writing them. However, Jeff Clavier was an exception to that rule.

As the founder of Uncork Capital (formerly known as SoftTech VC), he has been in the business of angel and seed investing for 16 years, popularizing the opportunity and highlighting the need for more support at this stage — well before it was cool. You could say he was early to early stage.

Clavier said that at the end of 2019, it was estimated that there were more than 1,000 firms focusing on seed investing in the market, but by the end of this year, there will be about 2,000. “Don’t ask me whether it makes any sense because when I started 16 years ago, I didn’t think would be a big deal,” he said. “But certainly that creates a bit of a conundrum for founders to try and understand.”

As of now, Clavier has made nearly 230 investments and counting.

TechCrunch Early Stage, our virtual conference highlighting that stage of startup life, was the perfect venue to hear from him on all things seed investing and building startups today. Below are some highlights, a link to the video and a pitch deck he put together for the chat. Questions were edited for space and clarity.

Not all VCs are created equal (so know who you are pitching)

First thing to understand is that not all VCs are created equal. There are a bunch of different firms, tons of them out there, and you as a founder need to understand what are the specifics of your pitch opportunity, how to match with the right firm, and to figure out what stage of “early” you happen to be.

Startups can be super early, or mid-stage, which is typically what we refer to as pre-seed. Then there’s the seed stage, where you have developed a product, with a demo. And there is post-seed, where you have product but are not quite ready to raise a Series A. So who are the firms that can actually be the right fit for me at those different stages? The qualification part of the targeting is really important. Especially in a COVID environment when you can’t spend the same kind of time with each other.

It’s useful for founders to try and understand investors better, maybe asking a couple of questions like, “When is the last time you made a brand new investment at seed stage?” And “How has your investment process changed as a result of COVID?”

For investors, you want to understand how you’re going to evolve your process to cope with the fact that you don’t spend time with those founders face-to-face. Some firms are still struggling with that.

At Uncork, we’re now past the point of portfolio triage that we had in the first few weeks of of the pandemic. What was surprising to me was the speed and velocity at which some deals actually.

Find an investment lead

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Unpacking Duck Creek Technologies’ IPO and hoped-for $2.7B valuation

Published August 10, 2020

Tech stocks retain their highs as the second quarter’s earnings season begins to fade into the rearview mirror, and there are still a number of companies looking to go public while the times are good. It looks like a smart move, as public investors are hungry for growth-oriented shares — which is just what tech and venture-backed companies have in spades.

The companies currently looking to go public are diverse. China-based real-estate giant KE Holdings — a hybrid listings company and digital transaction portal for housing — is looking to raise as much as $2.3 billion in a U.S. listing. Xpeng, another China-based company that builds electric vehicles, is looking to list in the U.S as well. Xpeng has the distinction of being gross-margin negative in every key time period detailed in its S-1 filing.

The Exchange explores startups, markets and money. You can read it every morning on Extra Crunch, or get The Exchange newsletter every Saturday.

And then there’s Duck Creek Technologies, a domestic tech company looking to go public on the back of growing SaaS revenues. This morning let’s quickly spin through Duck Creek’s history, peek at its financial results, calculate its expected valuation and see how its pricing fits compared to current norms.

Duck Creek is a Boston-based software company that serves the property and casualty (P&C) insurance market. Its customers include names like AIG, Geico and Progressive, along with smaller players that aren’t as well known to the American mass market.

The KE IPO will be a big affair because the company is huge and profitable with $3.86 billion in H1 2020 revenue leading to $227.5 million in net income. The Xpeng IPO will be interesting because Tesla’s strong share price has given float to a great many EV boats. But Duck Creek is a company slowly letting go of perpetual license software sales and scaling its SaaS incomes while still generating nearly half its revenues from services. It’s a company we can understand, in other words.

So let’s get under the skin of the Boston-based company that also claims low-code functionality. This will be fun.

Duck Creek by the numbers

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Mux raises $37M Series C as its API-based video streaming service scales

Published August 10, 2020

This morning, Mux, a startup that provides API-based video streaming tooling and analytics, announced that it has closed a $37 million Series C round of capital.

Andreessen Horowitz led the round, which included participation from Accel and Cobalt. Prior to this funding round, Mux most recently raised a roughly $20 million round in mid-2019. In total, the company had raised a hair under $32 million before its Series C, according to PitchBook data.

The Mux round lands amidst a number of trends that we’re tracking here at TechCrunch, namely API-based startups, which are hot as a group at the moment, and startups that are serving an accelerating digital transformation.

Let’s explore a bit of Mux’s history, and then dig into how the startup’s current pace of revenue growth explains its fresh infusion of capital.

From exits to analytics to APIs

TechCrunch spoke with Mux’s founder Jon Dahl about the round, curious about how the company came to be. Dahl was a co-founder of Zencoder back in the early 2010s, which sold to Brightcove. When Zencoder launched, TechCrunch said that it wanted “to be the Amazon Web Services of video encoding.” It wound up selling for $30 million, a figure that stood a bit taller in 2012, when the transaction was announced.

Dahl stuck around Brightcove for a few years while angel investing. Then in late 2015 he founded Mux. The new startup first built an analytics tool called Mux Data. Dahl said the analytics product was needed because more conventional tooling like Google Analytics don’t work well with online video.

Mux Data is a SaaS product. But what made Mux even more interesting is its on-demand infra play, namely Mux Video.

Mux Video is delivered via an API, supporting both live and on-demand video for other companies. The startup likes to argue that it’s doing for video what Stripe has done for payments, namely take a bundle of complexity and headache, wrestle it into shape, then offer it via a developer-friendly hook.

Delivering video, we’ve seen via the bootstrapped growth of Cloudinary and recent Daily.co round, is growing work in 2020.

That fact shows up in Mux’s numbers, which are somewhat bonkers. The company’s aggregate revenue numbers are growing at a pace that Dahl described as 4x, while Mux Video’s revenues are growing at a pace of 8x, he said. Dahl shared a few other metrics — startups: if you want folks to care about your funding round, follow this example — including that Mux Video’s LTV/CAC ratio is somewhere around 5x-6x, and that its net retention is around 160%.

The collected performance data that Mux shared explain why a16z wanted to put its capital into the company.

But to better understand that all the same, I caught up with Kristina Shen, a general partner at the venture firm. Shen stressed that Mux was heading in the right direction before the pandemic, but that COVID has accelerated the importance of video in how humans interact with one another — an accelerating secular shift for Mux to surf, in other words.

COVID has bolstered Mux, with a release regarding its new investment, noting that its “social media customers [have seen] an increase of 118% in video streaming since mid-February while fitness and health streaming surged by 162%, e-learning grew by 230% and religious streams jumped nearly 3 orders of magnitude.”

Shen said during our call that Mux is one of the fastest-growing enterprise SaaS companies that her firm has seen.

Finally, when asked about Mux’s gross margins, Shen said the company would eventually look similarly to other companies in the infra space, like Twilio and Stripe. This matches what Dahl told this publication, though the founder included a fun wrinkle. Remember Mux Data, the analytics product? Its margins more closely resembles SaaS economics, while Mux Video is more similar to other API, infra plays. So Mux has a bit of SaaS and a bit of infra in it, which should give it a super interesting blended gross margin profile.

Fun. The next time we talk to the firm we’ll be curious to see how far into the double-digit millions it can stretch its run rate.

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