[bThe week’s biggest IPO news had nothing to do with Monday’s S-1 deluge[/b
https://techcrunch.com/wp-content/uploads/2020/06/NSussman_Techcrunch_Exchange-multicolor.jpg?w=533 Welcome back to[iThe TechCrunch Exchange[/i, a weekly startups-and-markets newsletter. It’s broadly based on https://techcrunch.com/tag/the-exchange/the daily column that appears on Extra Crunch, but free, and made for your weekend reading. (https://techcrunch.com/newslettersYou can sign up for the newsletter here!)
Ready? Let’s talk money, startups and spicy IPO rumors.
[bThe week’s biggest IPO news had nothing to do with Monday’s S-1 deluge[/b
During https://techcrunch.com/2020/08/25/unity-jfrog-asana-snowflake-and-sumo-logic-file-for-ipos-in-rapid-fire-fashion/Monday’s IPO waveI was surprised to see Asana join the mix.
After news had https://www.bloomberg.com/news/articles/2020-06-05/asana-billionaire-founder-is-said-to-do-debt-deal-before-listingbroken in Junethat the company had raised hundreds of millions in convertible debt, I hadn’t guessed that the productivity unicorn wouldn’t https://techcrunch.com/2020/08/24/as-losses-expand-asana-is-confident-it-has-the-ticket-for-a-successful-public-listing/give us an S-1in the very next quarter. I was contentedly wrong. But the reason why Asana’s IPO is notable isn’t really much to do with the company itself, though do take the time to https://www.sec.gov/Archives/edgar/data/1477720/000119312520228462/d855753ds1.htmdig into its resultsand https://techcrunch.com/2020/02/03/asana-files-to-go-public-says-it-will-do-so-via-a-trendy-direct-listing/history.
What matters about Asana’s debut is that it appears set to test out a model that, until very recently, could have become the new, preferred way of going public amongst tech companies.
Here’s what I mean: Instead of filing to go public, and raising money in a traditional IPO, or simply listing directly, Asana executed two, large, convertible debt offerings pre-debut, thus allowing it to direct list with lots of cash without having raised endless [iequity[/icapital while private.
The method looked like a super-cool way to get around https://techcrunch.com/2020/08/08/ipo-mistakes-fintech-results-and-the-zenefits-mafia/the IPO pricing issuethat we’ve seen, and also provide a ramp to direct listing for companies that didn’t get showered with billions while private. (That Asana co-founder Dustin Moskovitz’s trust led the debt deal is simply icing on this particular Pop-Tart).
This brief column was going to be all about how we may see unicorns follow the Asana route in time, provided that its debt-powered direct listing goes well. But then https://www.wsj.com/articles/nyses-plan-for-new-ipo-alternative-wins-green-light-from-sec-11598479804the NYSE got permission from the SECto allow companies to raise capital when they direct-list.
In short, some companies that direct-list in the future will be able to sell a bloc of shares at a market-set value that would have previously set their “open” price. So instead of flogging the stock and setting a price and selling shares to rich folks and [ithen[/ifinding out what public investors would really pay, all that IPO faff is gone and bold companies can simply offer shares at whatever price the market will bear.
All that is great and cool, but as companies will be able to direct-list [iand[/iraise capital, the NYSE’s nice news means that Asana is blazing a neat trail, but perhaps not one that will be as popular as we had expected.
The NASDAQ is https://www.forbes.com/sites/elanagross/2020/08/26/sec-approves-nyse-direct-listing-proposal/#7d0d684c6bc5working to get in on the action. As https://twitter.com/dannycrichtonDannysaid yesterday https://techcrunch.com/2020/08/27/a-faster-easier-cheaper-way-of-going-public/on the show, this new NYSE method is going to crush traditional IPOs, provided that we’re understanding it during this, its nascent period.
Look, this week was bananas, and my brain is scrambled toast. You, like myself, are probably a bit confused about how it is only finally Saturday and not the middle of next week. But worry not, I have a quick roundup of the big stuff from our world. And, notes from calls with the COO of Okta and the CEO of Splunk, from after their respective earnings report:
[*China-based fintech giant Ant is super profitable and super big and super powerful and is going to have a https://www.wsj.com/articles/jack-mas-ant-group-posts-3-5-billion-profit-in-six-months-ahead-of-ipo-11597939394?mod=djemalertNEWSmega-IPO that matters, even if it isn’t happening Stateside. (This has https://techcrunch.com/2020/07/20/alibaba-ant-ipo/long been expected.)
[*As I write to you, the TikTok saga is not yet over, but between the lawsuits and smokescreens and other crap, it appears https://techcrunch.com/2020/08/27/tiktok-deal/that Microsoft and perhaps Walmart are the leading bidding duo. What a year.
[*SPACs for real companies are happening, and https://techcrunch.com/2020/08/26/desktop-metal-going-public-in-spac-led-deal-that-could-value-3d-printer-company-at-2-5b/Boston unicorn Desktop Metal is pushing ahead with one. This is an event to watch, and if it goes well we could see a bunch more in rapid-fire fashion.
[*Speaking of which, https://techcrunch.com/2020/08/25/unity-jfrog-asana-snowflake-and-sumo-logic-file-for-ipos-in-rapid-fire-fashion/here’s a run-down of all the companies that filed to go public on Monday. You are welcome, as that post was annoying to compile. (I jest, it was fun as hell.)
[*Also this week, Y Combinator had a two-day Demo Day confab that we wrote a lot about. Sure, these are early-stage companies, but their ranks will generate some material winners. So https://techcrunch.com/2020/08/26/equity-shot-our-favorite-startups-from-yc-demo-day/catch up here, with that link containing our chat about the startups and directions to all our coverage.
[*And for fun, here are some https://techcrunch.com/2020/08/24/a-quick-peek-at-snowflakes-ipo-filing/slightly deeper looks at Snowflakeand https://techcrunch.com/2020/08/24/unpacking-the-sumo-logic-s-1-filing/Sumo Logic’s respective IPO filings, and a contrarian take on https://techcrunch.com/2020/08/26/the-bullish-case-for-palantirs-direct-listing/why Palantir has problems, but also some merit.
Over to our chats, starting with https://twitter.com/fkerrestOkta COO and co-founder Frederic Kerrest:
[*https://www.okta.com/Oktahad a https://www.marketwatch.com/story/okta-stock-wobbles-after-earnings-beat-11598559253good quarter. But instead of noodling on just the numbers, we wanted to chat with its team about https://techcrunch.com/2020/06/05/the-accelerating-digital-transformation-redux/the accelerating digital transformationand what they are seeing in the market.
[*On the SMB side, Kerrest reported little to no change. This is a bit more bullish than we anticipated, given that it seemed likely that SMB customers would have taken the largest hit from COVID.
[*Kerrest also told us some interesting stuff about how the wave of COVID-related spend has changed: “We actually have seen the COVID ‘go home and remote work very quickly’ [thing, we’ve actually seen that rush subside a little bit, because you know now we’re five months into [the pandemic, so they had to figure it out.”
[*[iThis is a fascinating comment for the startup world[/i.
[*Okta is big and public and is going to grow fine for a while. Whatever.[iFor smaller companies aka startups that were seeing COVID-related tailwinds, I wonder how common seeing “that rush subside a little bit” is. [/iIf it is [ivery[/icommon, [imany[/istartups that had taken off like a rocket could be seeing their growth come back to Earth.
[*And if they raised a bunch of money off the back of that growth at a killer valuation, they may have just ordered shoes that they’ll struggle to grow into.
And then there was new https://www.mclaren.com/racing/McLaren F-1sponsor https://www.splunk.com/Splunk, data folks who are in the midst of a transition to SaaS that is seeing the firm double-down on building ARR and letting go of legacy incomes:
[*I spoke with https://twitter.com/douglasmerrittCEO Doug Merritt, kicking off with a question about his use of the word “tectonic” regarding the shift to data-driven decisions from https://investors.splunk.com/news-releases/news-release-details/splunk-inc-announces-fiscal-second-quarter-2021-financialSplunk’s earnings report. (“As organizations continue to adapt to tectonic societal shifts brought on by COVID-19, one thing is constant: the power of data to radically transform business.”)
[*I wanted to know how far down the American corporate stack that idea went; are mid-size businesses getting more data-savvy? What about SMBs? Merritt was pretty bullish: “We’re getting to tectonic,” he said during our call, adding that before “it really was the Facebooks, the Googles, the Apples, the DoorDashes, [and the LinkedIns that were using [Splunk.” But now, he said, even small restaurant chains are using data to better track their performance.
[*Relating this back to the startup world, I’ve been curious if lots of stuff that you and I think is cool, https://techcrunch.com/2020/08/27/covid-19-is-driving-demand-for-low-code-apps/like low-code business app development, will actually find as wide a footing in the market as some expect. Why? Because most small and medium-sized businesses are not tech companies [iat all[/i. But if Merritt is right, then the CEO of Appian might be right as well about how many business apps the average company is going to have in a few years’ time.
And finally for Market Notes, my work BFF and IRL friend https://twitter.com/ron_millerRon Miller https://techcrunch.com/2020/08/27/box-benefits-from-digital-transformation-as-it-raises-its-growth-forecast/wrote about Box’s earnings this week, and how the changing world is bolstering the company. It’s worth a read. (Most public https://techcrunch.com/2020/08/28/saas-stocks-survive-earnings-keeping-the-market-warm-for-software-startups-exits/software companies are doing well, mind.)
[bVarious and Sundry[/b
We’re already over length, so I’ll have to keep our bits-and-bobs section brief. Thus, only the brightest of baubles for you, my friend:
[*Y Combinator startups are focusing on revenue in this more uncertain world. Per https://www.theinformation.com/articles/y-combinator-ceo-faces-the-crisis-and-his-criticsThe Information, the startup org has encouraged startups in its world to “focus on generating revenue” and how to juice enough cash from their operations to endure sans checks from private investors.
[*Given the pace of private investments into certain startup niches today, it’s almost odd advice. But what is true for late-stage SaaS companies (very hot!) might not hold true for smaller YC companies that are focused on consumers.
[*https://twitter.com/nmasc_Natashawrote about a https://techcrunch.com/2020/08/25/ycs-most-anticipated-startup-raised-16m-from-a16z-before-demo-day/particularly hot startup from this YC batch, so I reached out to a hot company from a prior batch, https://tandem.chat/namely Tandem. But they didn’t want to talk on the record, so no news there. Alas.
[*The https://techcrunch.com/2020/08/27/la-gets-a-big-saas-exit-as-fastly-nabs-the-culver-city-based-signal-sciences-for-775m/Fastly deal is super cool and you should read more about it. As https://www.prnewswire.com/news-releases/reliaquest-raises-over-300-million-in-growth-financing-led-by-kkr-301117656.htmlwas this $300 million investment.
And with that, we are out of room. Hugs, fist bumps and good vibes,