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Shopify will be a major winner in Affirm’s IPO

November 19, 2020, 3:06 PM UTC

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The mega IPOs are shooting out of the gates again.

Following DoorDash’s filing, buzzy fintech Affirm also filed to go public on the Nasdaq under the ticker symbol AFRM in a deal reportedly valuing the firm at as much as $10 billion.

One big takeaway from the filing: Canadian e-commerce titan Shopify could stand to gain handsomely from the IPO. Shopify is listed as a party that owns over 5% of the business founded by PayPal co-founder Max Levichin.

In fact, Shopify could be set to become the company’s third-largest investor, leapfrogging venture firms including Khosla Ventures, Founders Fund, and Lightspeed Venture Partners, each of which hold a hefty stake in Affirm and have invested in the company far longer, according to the S-1. Also, Shopify will pay very, very little for its shares.

I wondered a month ago how pandemic winners like Zoom or Shopify could use their lofty stock valuations to snap up or invest in other companies. But in this case, Shopify didn’t use its stock price or balance sheets—no, the company leveraged its massive network of merchants to ink out a deal with Affirm. 

As part of a July agreement, Shopify will offer Affirm as a payment option on its platform, and also receive warrants to buy about 20.3 million in shares for a nominal penny a share. (Or as tech Twitter likes to call such agreements, free shares!) Shopify has already exercised a quarter of those warrants, while the rest is set to convert upon the IPO. 

The TL;DR? In aggregate, Shopify’s 20.3 million in shares will be half-Class A and half-Class B—which also gives it that rare thing called voting power

The fintech is paying a lot for access to Shopify’s merchants. It also indicates a turning point for Affirm that the company has yet to achieve: The company isn’t trying to simply be an installment plan lender. It wants to replace debit and credit cards for the next generation, not only lending funds to pay for that $2,000 couch or stationary bike, but also facilitating the banal payments. So far, its progress has largely been in the former.

“We have successfully demonstrated how our solutions can enable and accelerate commerce for larger, more considered purchases,” the S-1 read. “A key principle of our next phase of growth is expanding into higher frequency purchases which we believe will position us to increase engagement with consumers and merchants.” 

And Affirm believes those higher-frequency purchases can come from Shopify.

“We expect that our commercial agreement with Shopify… will increase the mix of our shorter duration, low average order volume products.”

Lucinda Shen
Twitter: @shenlucinda
Email: lucinda.shen@fortune.com

VENTURE DEALS

- SellerX, a Berlin-based acquirer of Amazon businesses, raised $118 million (€100 million) in seed funding. Cherry Ventures, Felix Capital, and TriplePoint Capital led the round and were joined by Village Global. Read more.

- Addepar, a Mountain View, Calif.-based platform for wealth management, raised $117 million in Series E funding. WestCap Group led the round and was joined by investors including 8VC and Sway Ventures.

- Medable, a Palo Alto, Calif.-based company for digital clinical trials, raised $91 million in Series C funding. Sapphire Ventures led the round and was joined by investors including GSR Ventures, PPD, and Streamlined Ventures

- Spring Health, a New York-based provider of behavioral health benefits, raised $76 million in Series B funding. Tiger Global led the round and was joined by investors including GingerBread Capital and Operator Partners.

- ZenBusiness, an Austin-based provider of a micro business management platform, raised $55 million in Series B funding. Cathay Innovation led the round.

- CAIS, a New York-based alternative investment platform, will raise $50 million in Series B funding from Eldridge.

- Abnormal Security, a San Francisco-based email security company, raised $50 million in Series B funding. Menlo Ventures led the round and was joined by investors including Greylock.

- Aclima, a San Francisco-based air pollution and greenhouse gas measurement startup, raised $40 million in Series B funding. Investors included Clearvision Ventures. 

- Duolingo, a Pittsburgh-based language-learning platform, raised $35 million in funding at a $2.4 billion valuation from Durable Capital Partners and General Atlantic.

- CloudBolt Software, a North Bethesda, Md.-based cloud management company, raised $35 million in Series B debt and equity. The equity was led by Insight Partners.

- Chipper Cash, an African cross-border fintech startup, raised $30 million in Series B funding. Ribbit Capital led the round and was joined by investors including Bezos Expeditions, 500 Fintech, Deciens Capital, and One Way Ventures Read more.

- Cogito, a Boston-based sales call analytics company, raised $25 million in funding. Goldman Sachs Growth Equity led the round and was joined by investors including Salesforce Ventures.

- Apprentice.io, a Jersey City-based  software company for life science manufacturing, raised $24 million in Series B funding. Insight Partners led the round and was joined by investors including Pacific Western Bank, Pritzker Group Venture Capital, GFR Fund, and The Venture Reality Fund.

- Realync Corp., Carmel, Ind.-based multifamily virtual leasing site, raised $22 million. Susquehanna Growth Equity invested.

- Abacus.ai, a San Francisco-based AI platform, raised $22 million in Series B funding. Coatue led the round and was joined by investors including Decibel Ventures and Index Partners.

- Sofia, a Mexican healthtech startup, raised $19 million in Series A funding. Index Ventures led the round.

- Welcome, a virtual events platform, raised $12 million in Series A funding. Kleiner Perkins led the round and was joined by investors including YC, Kapor Capital and WIN.

- TRANSFR VR, a New York-based maker of virtual reality-based  on-the-job training, raised $12 million in Series A funding. Firework Ventures led the round.

- ClosedLoop.ai, an Austin-based healthcare data science platform, raised $11 million in Series A funding. Greycroft and .406 Ventures led the round and were joined by investors including Silicon Valley Bank and Meridian Street Capital. 

- Cardless, a San Francisco-based consumer credit card financial technology firm, has raised over $10 million from investors including Greycroft, Accomplice, Clocktower Ventures, and Pear.

- Farmstead, a San Francisco-based online groce, raised $7.9 million in Series A funding. Aidenlair Capital led the round and was joined by investors including Y Combinator, Gelt VC, Duro, Maple VC, Heron Rock, 19 York, and Red Dog Capital.

- build.security, a Tel Aviv-based authorization policy management company, raised $6 million in seed funding. YL Ventures led the round and was joined by investors including George Kurtz (CEO and Co-founder of CrowdStrike). 

- Grouparoo, a Menlo Park, Calif.-based way to sync data warehouses to third-party tools, raised $3 million in seed funding. Eniac Ventures and Fuel Capital led the round and was joined by investors including Hack VC, Liquid2, and SCM Advisors.

- Sugarbreak, a New York-based maker of pills  to reduce sugar consumption, raised nearly $3 million in funding. Investors included SKAGEN Conscience Capital, Bronze, BBG Ventures, and Sorven Capital.

- Datafold,  a San Francisco-based firm seeking to automate testing and monitoring of data analytics, raised $2.1 million in seed funding. New Enterprise Associates led the round.

PRIVATE EQUITY

- Ahold Delhaize (AS:AD) and Centerbridge Partners will acquire FreshDirect, the New York-based e-commerce grocer. J.P. Morgan backed the firm. Financial terms weren't disclosed. 

- Creative Foam Corp., backed by Industrial Opportunity Partners, acquired the assets of Aetna Felt Corp., an Allentown, Pa.-based converter, fabricator, and distributor of felt used in podiatry and foot-care products. Financial terms weren't disclosed.

- Climate Pros, a portfolio company of Saw Mill Capital Partners, acquired The Hattenbach Company, a Cleveland-based provider of commercial refrigeration and HVAC services. Financial terms weren't disclosed.

- Clearlake Capital Group agreed to acquire  nThrive’s Technology Division, a healthcare revenue cycle management  platform from nThrive Holdings. Financial terms weren't disclosed.

- GTCR recapped Jet Support Services, a private jet servicing firm. Financial terms weren't disclosed.

- Ascent, backed by Horizon Capital, acquired Mango Solutions, a U.K.-based data sciences consulting firm. Financial terms weren't disclosed.

- Service Champions, a portfolio company of CenterOak Partners, acquired Adeedo!, JW Plumbing Heating & Air, and A-Avis Home Services, three home services brands serving the Los Angeles and Riverside, California markets. Financial terms weren't disclosed.

- Prairie Capital recapitalized Applied Data Corporation, a Tampa-based provider of fresh item management technology for grocery and convenience stores.

- Payroc, backed by Parthenon Capital, acquired Bluestone Payments, a Peachtree City, Ga.-based provider of payments to merchants. Financial terms weren't disclosed.

EXITS

- Bain Capital is weighing a potential sale or initial public offering of Diversey, a Fort Mill, S.C.-based cleaning company, that could value the company at $6 billion including debt, per Bloomberg. Read more.

- Croda agreed to acquire Eurazeo Capital’s stake in Iberchem, a Spain-based maker of sunblocks, for about 820 million euros ($973 million).

- Rinse acquired Dryv, a Chicago-based on-demand dry cleaning and laundry provider backed by Breakpoint Ventures.

OTHER

- Intact Financial Corp. and Tryg will acquire RSA Insurance Group (LON: RSA), the U.K.-based insurer, for 7.2 billion pounds ($9.6 billion). Read more.

SPAC

- Arrival, a maker of electric vans and buses, agreed to combine with CIIG Merger Corp., a SPAC. Backed by investors including BlackRock, the company will be valued at $5.4 billion.

F+FS

- Searchlight Capital Partners closed Searchlight Capital III with of $3.4 billion in committed capital.

- Round Hill Music Royalty Partners closed its third private fund, Round Hill Music Royalty Fund III, with $291 million.

- Pike Street Capital closed Pike Street Capital Partners with $237 million.

PEOPLE

- LDV Capital, promoted Abigail Hunter-Syed to partner.