Slack’s Direct Listing, Libra Reactions, and Softbank Investment Projections: Term Sheet
Slack is about to hit the public markets on Thursday via a direct listing, and all eyes are on the company.
The popular workplace messaging platform is expected to list on the New York Stock Exchange in the second major direct listing in the U.S. after Spotify. Slack was valued at $7.1 billion when it last raised a private round of funding in August 2018.
As a reminder, direct listings are a considerably cheaper method of going public in which only existing shares are sold, no cash is raised for the company, and bank underwriters that help market the deal are cut out. But to have a chance at successfully executing a direct listing, companies have to clear a higher bar.
I asked Andreessen Horowitz’s Scott Kupor recently about why some of these startups are rejecting the traditional IPO path. He explained that household-name tech companies like Spotify and Slack are the rare ones that can pull off a direct offering because many investors in the secondary markets are already familiar with their financials and valuation. He added:
My personal view is that I still don’t think we’ll see a tidal wave of companies doing this. I still think it will be limited to a very select few, but it will probably have an ancillary benefit of making underwriters recognize that this is a viable alternative for some companies and you’ve got to think about what your real value add is. And I think that’s a net positive quite frankly.
Some things to note: The company’s revenue in the most recent quarter grew by 67% year-over-year to $135 million, while its net loss grew to $32 million from $25 million. At around $17 billion, Slack would be valued similarly to Zoom and PagerDuty, two enterprise-cloud companies that went public in April 2019, according to private-capital data firm PitchBook. Zoom is now trading 173% above its offering price, while PagerDuty is 130% higher.
“This market is hungry for good stories, and investors are paying up for growth that has a reasonable path to profitability,” Duncan Rolph, a managing partner at Miracle Mile Advisors, told Fortune. “Slack is very popular and it’s growing pretty quickly, with a fairly targeted focus to replace email, which provides for a good story. Their execution so far suggests they may be able to close the gap in terms of losses.”
Also, there will be a Brainstorm Finance panel today on Slack and the future of IPOs. You can tune in here to watch live here starting at 2 p.m. EST.
LIBRA FEEDBACK: You guys have strong opinions on Facebook’s new cryptocurrency project, Libra. After the company introduced its new digital currency, I asked you to chime in with thoughts, concerns, and opinions.
Here’s what Term Sheet readers had to say about whether Libra has a shot at disrupting financial services as we know it today: (Note: Some answers have been shortened for clarity & length.)
“Disruptive? No. Libra will become part of the Facebook ecosystem, but it will not disrupt financial services on a large scale. In the U.S., Facebook is on the ropes, Europe has shown it will get strict with GDPR, and forget about China adopting this. On the issue of trust; Let me guess, Libra as a service will be "free.” Facebook's DNA contains the mining of people's data, it excels at this. Expect Libra to be full of personal-data-in-exchange-for-gimmick features such as the right to read through all your transactions just so it can remind you that you like to buy toothpaste at Target. Put me down for a vote of no confidence.” — Alfonso
“Am I missing something here? I don't see how this benefits end users in any way. Isn't this just Facebook doing in-app purchases where I'm forced to purchase tokens from Facebook? As an end user why would I want to convert my dollars — which can be used to buy things with all of the partners mentioned and every other merchant on the internet — into Facebook token which can only be used a handful of places? Seriously I would love someone from Facebook to explain what the actual benefit is supposed to be for users.” — Andrew J.
“Regarding Libra, it’s a bit counterintuitive for what a lot of ‘crypto’ enthusiasts and technologists stand for. Libra is inherently centralized – ‘the Foundation’ will be controlling the supply, have access to the nodes, and serve more-or-less as a Corporate who’s who of money-hungry financial services companies; the mere fact it is backed by fiat currency makes it more or less a token; and its use case is diluted by the fact that competing, well-proven services to transfer fiat online already exist (see: paysafecard). It makes me think of video game currencies and how they function – swap fiat for tokens and enter a marketplace to buy/exchange goods (either real or digital). I have a hard time seeing this gain major traction for anything other than enabling WhatsApp and FB to compete with the likes of Square Cash, etc.” — Johnny C.
"Facebook's Libra project is an ambitious effort that validates the concept of blockchain and its utility in moving currency. That said, the project raises questions as to whether a stablecoin not tied to one specific fiat currency will have utility given there is not a real-world equivalent to this type of currency now." — Chad Cascarilla, CEO of Paxos
“From a technology perspective, Libra doesn't appear to be doing anything that isn't being done by existing crypto/payment providers. What does seem different is how Facebook plans to address the issues of user adoption and merchant acceptance, which ultimately are the key barriers to entry for any new payment system. By establishing a vaunted group of high-profile technology companies and investors to act as founders and stewards of the platform, Facebook is banking on Libra's unique governance structure to help build the user-trust that has been so lacking in the wider crypto space. Still, payment systems don't become ubiquitous overnight. This is clearly a long-term play that is likely to have minimal near or even midterm impact on existing payment infrastructure.” – Paul Condra, lead emerging technology analyst at PitchBook
“Facebook's launch of a currency is insane. This is potentially a huge shift in society. Its impact on representative democracy is yet to be seen. For the last several hundred years, the largest currencies were controlled and printed by governments. Among other things, this gave them the ability to collect taxes. Yes, Bitcoin tried to untether currency from government, but Bitcoin had no power and was attempting to build a decentralized currency. For all the participation Libra is said to have, it will be controlled by private actors with their own agendas and conflicts of interest.
If Facebook were to become the largest controller of non-institutional international currency, then either a) the governments of the world will need to exert more administrative oversight over the company or b) the power of governments will be reduced. I cannot think of another company that has as much global influence, and therefore global power. What will this mean for taxes, inflation rates, etc?” — Andy R.
“Given the political attention tech companies have been receiving lately, it is interesting that Facebook's cryptocurrency hasn't been a hot topic for politicians yet. Libra is one of the best shots cryptocurrencies have ever had to generate widespread adoption. On the other hand, at a time that politicians are paying special attention to the power accumulated by a few massive tech companies, Libra could be the very thing that would put Facebook's influence beyond general political acceptance.” — Lucas B.
“It's a game changer for the crypto world. For crypto to truly prosper, it must have trust and confidence — the foundation of any currency. Their Foundation approach will have a deep well of trust and confidence. And, of course, the ability to engage in commerce is essential and it appears as if they will be addressed, slowly but surely. As this expands, it could be the first real test to the USD as the world's reserve and trade currency, a development that will not go over well. Directly or indirectly, I'd expect very heightened scrutiny of Facebook by the US Govt. And the banks will be the ones pushing for heightened supervision as this is a terrain they can't touch while under direct Fed regulation.” — Charles
FINTECH $$: Tally, a San Francisco-based financial technology startup, raised $50 million in funding. Tally aims to automate the financial services of consumers at low cost. Jason Brown, Tally’s CEO and cofounder, told Fortune he plans to use the cash infusion to hire software engineers to develop more products. He said the company had already done the difficult work—the “base layer stuff” involving data aggregation, ingestion, and error correction—and that it is now focused on quickly deploying add-on services, such as automatic student loan management and credit score improvement. Read more at Fortune.
QUOTE OF THE DAY: “Let me be clear that this is not a business plan. It’s a tall tale.” — Softbank’s Masayoshi Son after saying that the value of Sofbank’s investment portfolio could grow 33-fold to 200 trillion yen ($1.8 trillion) in 20 years.
• Meero, a Paris-based provider of on demand commercial photography services, raised $230 million in Series C funding. Eurazeo, Prime Ventures and Avenir Growth led the round, and were joined by investors including Global Founders Capital, Aglaé Ventures, Alven, White Star Capital and Idinvest.
• Wolt, a Helsinki-based food delivery service, raised $130 million in Series C funding. ICONIQ Capital led the round, and was joined by investors including 83North, EQT Ventures, Highland Europe and Lifeline Ventures.
• AnyVision, an Israel-based computer vision company specializing in AI-enabled face, body, and object recognition software, raised $74 million in Series A funding. Investors include M12, DFJ Growth, and OJ Technology Partners.
• Mattermost, a Palo Alto, Calif.-based provider of enterprise-grade messaging solutions, raised $50 million in Series B funding. Y Combinator Continuity Fund led the round, and was joined by investors including Battery Ventures, Redpoint and S28 Capital.
• Arrive Logistics, an Austin, Texas-based technology-powered freight brokerage, raised $25 million in Series B funding. Lead Edge Capital led the round.
• goTenna, a New York-based mobile mesh networking platform, raised $24 million in Series C funding (equity and debt). Founders Fund led the round, and was joined by investors including Comcast Ventures, Union Square Ventures, Collaborative Fund, Walden VC, MentorTech, Bloomberg Beta, and Silicon Valley Bank.
• Hazelcast, a Palo Alto, Calif.-based in-memory computing platform, raised $21.5 million in funding. C5 Capital led the round, and was joined by investors including Bain Capital Ventures, Earlybird Venture Capital and Capital One Growth Ventures.
• Duffel, a U.K.-based global travel booking systems for mobile and web travel companies, raised $21.5 million in Series A funding. Investors include Benchmark. Blossom Capital, and Index Ventures.
• Aunt Bertha, an Austin-based social service search and referrals software platform for people to find various social welfare programs, raised $16 million in Series C funding. Noro-Moseley Partners led the round, and was joined by investors including Digitalis Ventures, Techstars Ventures, Techstars Impact, and Capital Factory.
• Text IQ, a New York-based provider of AI solutions for identifying sensitive information, raised $12.6 million in Series A funding. Investors include FirstMark Capital and Sierra Ventures.
• Enboarder, an Australia-based cloud-based HR technology company that helps employers create engaging employee onboarding experiences, raised $8 million in Series A funding. Greycroft led the round, and was joined by investors including Next Coast Ventures and Stage 2 Capital.
• SafeAI, a Sunnyvale, Calif.-based developer of software as a service platform for the heavy equipment industry, raised $5 million in funding. Autotech Ventures led the round, and was joined by investors including Brick & Mortar Ventures, Embark Ventures, and Monta Vista Capital.
PRIVATE EQUITY DEALS
• Xirgo Technologies, LlLC, a portfolio company of HKW acquired UAB Baltic Car Equipment, a Lithuania-based manufacturer of telemetry equipment.
• Grocery Outlet Holding, an Emeryville, Calif..-based operator of discount grocery stores, plans to raise $318 million in an offering of shares priced between $18 to $19. The firm posted sales of $2.3 billion in sales for the 12 months ended December 31, 2018 and income of $15.9 million. Hellman & Friedman backs the firm. BofA Merrill Lynch, Morgan Stanley, Deutsche Bank, Jefferies, Barclays, Goldman Sachs, Guggenheim Securities, UBS Investment Bank, and Cowen are joint bookrunners. It plans to list on the Nasdaq as “GO.” Read more.
• Stoke Therapeutics, a Bedford, Mass.-based maker of therapies for severe genetic diseases, raised $142 million in an IPO of 7.9 million shares priced at $18. It has yet to post a revenue. J.P. Morgan, Cowen, and Credit Suisse are underwriters. It plans to list on the Nasdaq as “STOK.” Read more.
FIRMS + FUNDS
• Cathay Innovation, a global venture capital fund, raised EUR 320 million ($358 milion) for a new investment vehicle. The fund’s target is EUR 500 million ($560 million).
• Arboretum Ventures, an Ann Arbor, Mich.-based venture capital firm, raised $250 million for its fifth fund, Arboretum V.
• Adna Pekmezovic and Zann Ali joined 2048 Ventures as senior associates.