Welcome back to The TechCrunch Exchange, a weekly newsletter for startups and markets. It's based largely on the daily column that appears on Extra Crunch, but it's free and designed for your weekend reading. Do you want it in your inbox every Saturday? Subscribe here.
Ready? Let's talk about money, startups and hot IPO rumors.
So much has happened this week. If you just catch up, the equity crew has spent a lot of time this week analyzing a number of early-stage venture capital rounds. If this is your jam go here. Today for the newsletter The Exchange deals with later news, although smaller startups will still show up.
We'll start by taking notes on a company that was new to me when I met it earlier this week: Nextiva. The company, with sales exceeding $ 200 million, is a quiet giant and, in particular, hasn't drawn on venture capital financing on its way to scale.
Given the frequency of discussions in the trade press about funding news, it was a refreshing pause to speak to Nextiva about how it managed to scale without relying on burning growth and outside capital.
In an interview with the CEO and co-founder Tomas Gorny, I was allowed to dig a little under the skin of the company's history. It goes something like this: After moving to California in 1996 at the age of 20, Gorny finally started a web hosting company in 2001 after working for tech companies during the dot-com boom. The web hosting company sold to another company called Endurance International in 2007, which was sold as a combined company for around $ 1 billion in 2011 and later went public before being privatized for $ 3 billion last month from the Endurance mentioned Year 2010 for part of the historic record.
Gorny founded Nextiva in 2008 and focused on what it now calls "UcaaS" or Unified Communications as a service. The startup grew to around $ 40 million in annual recurring income (ARR). At that point, it ran into issues with a third-party system that would integrate hardware and support and service software, which caused its thinking to change. The company set out to build a platform.
Nextiva expanded horizontally, adding CRM software, analytics, and other capabilities to its broader suite as it scaled. And it grew efficiently; Based on the founding team's money, Gorny told TechCrunch that even if he had used someone else's money, he would have built the company the same way.
Switching platforms was expensive. Nextiva reckoned $ 100 million would be spent on the project, and told TechCrunch that if it had just focused on its original offerings, it could potentially grow faster in the short term.
The platform work that Nextiva spent so much time and money on is now in the market. After scaling from ARR 100 million in 2016 to $ 200 million this year, the company now sees itself as closed. That raised my problems a bit as literally every business wants to be a platform. And almost none of them are.
However, Gorny influenced me somewhat with his reflections on the subject. Nextiva built a number of products, he explained, but wasn't a platform at the time. Correct. However, he argued that the company became one when it built a system that created a common pool of customer data for all of its apps and services, which allowed Nextiva to build on its basic level faster. According to the definition of a platform that precedes the abuse of the word by technology, this seems fair.
What's next for Nextiva? With an annual growth of more than 30%, it could go public. Since it is self-funding, by definition it cannot cause horror cash burn and meet the benchmarks required for an IPO. While Gorny pointed out that privatization could accelerate and slow his company growth if it wanted to focus more on product work, I got the impression that Nextiva wanted to get better known. And an IPO would help.
2021 is slated to be an upcoming floor for a rush of unicorn IPOs. Perhaps some of these debuts are dark horses too.
We have three topics for our discussion of the broader startup market this week that warrant discussion: AI fundraising, fintech, and liquidity in the private market.
On the AI front, it has been a busy sector lately, especially in the later stages. Ohio-based AI company Olive raised $ 225.5 million, or roughly half of the $ 456 million raised so far. Olive is a unicorn, and PitchBook puts its new valuation on a post-money basis at $ 1.50 billion.
It's nice to see victory for the Midwest. But Olive was hardly alone. Scale AI also raised a huge amount of money, this time $ 155 million at a valuation of $ 3.5 billion. Last year it raised $ 100 million on a valuation north of $ 1 billion. Elsewhere in the AI startups space, Versatile raised $ 20 million and Ultimate.ai raised $ 20 million. Employed!
Ride along. Stripe ditched a multitude of banking-as-a-service tools and shifted the highly regarded payments company from its original niche to a much broader – and potentially lucrative – domain.
So, doom for smaller startups working in the same problem area? Not when they have something to say. Chris Dean, the CEO of Treasury Prime, a startup I wrote about that offers banking services through an API, wrote to The Exchange saying that "the most important signal (from the Stripe messages) is to banks" is that they "need an open banking API to stay relevant."
And Dean assumes that every fintech has several providers for different things, and that for every large fintech that is served by banking-via-an-API services, there will be room for many providers. Treasury Prime has customers who use Marqeta, Galileo and Stripe ”for their banking needs.
Let's see; But the Stripe news is big news anyway. And the new updates explain the wait to go public I think. Better go public when these new pieces drive growth. So much for our notes last week that were critical of the IPO delay.
Finally, Carta X. I am excited about this news. Carta, which supports start-ups in managing their cap table and employees in processing their investments, is building a kind of exchange that is supposed to bring more liquidity and thus more price signals and thus more transparency to the private markets. It's coming early next year. More here.
Miscellaneous and miscellaneous
We're running out of space so just three last things to finish this week:
And finally, The Exchange Howard Lerman, CEO of Yext, spoke about his latest earnings report, which exceeded near-term expectations for third-quarter results, but investors wanted more of the fourth-quarter projections.
When I was talking to Lerman, who was at TechCrunch the other day for an Extra Crunch Live, I got the state of the country. On the one hand, Yext's endeavor to offer search services works, new logo countries and helps to reduce costs in the sales process. On the flip side, the world is re-entering a deadlock, meaning the company is experiencing upsell weakness in certain regions that is affecting short-term net retention results, which is a major growth driver for software companies.
Well, Yext is a single publicly traded SaaS company so I don't want to over-index its results, but the company's honest view of the uncertainties it faces regarding short-term growth can't be limited to its business concerns. How we ask startups about their fourth quarter growth in a few weeks.
For what it's worth, Yext appears in the midst of smart product expansion while portions of the market it sells are struggling with macro hangover. This is the situation that startups say is best private. Perhaps Yext will become a working argument for how to navigate public in the same circumstances.
Hugs and thanks for the weekend break.