How investors are valuing the pandemic – TechCrunch

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Ready? Let’s talk about money, startups and hot IPO rumors.

Start with a little housekeeping: Equity now does more. And TechCrunch has its justice and early stage events ahead of it. I interview Zoom’s CRO for the latter. And The Exchange itself has some overdue stuff to offer next week, including $ 50M and $ 100M in ARR updates (Druva etc), a look at usage-based pricing versus traditional SaaS models (with CEOs from Fastly, Appian, BigCommerce etc.).), and more. Woo!

This week, both DoorDash and Airbnb reported profits as publicly traded companies for the first time, marking their real finals in the ranks of the well-worn unicorns. We’re keeping an eye on the earnings cycle, but today we have some insight for the startup world.

A few basics will help us get started. DoorDash exceeded growth expectations in the fourth quarter, generating revenue of $ 970 million versus an expected $ 938 million. The gap between the two is likely due in part to how new DoorDash stock is and the pandemic making it difficult to forecast. Despite the oversized growth, DoorDash stocks initially fell sharply following the report, although they largely rebounded on Friday.

Why the initial immersion? I think the company’s net loss was greater than investors hoped for – although a large GAAP deficit is standard for the first quarter after debut. Those concerns may have been mitigated by the company’s earnings call, which included a notice from the company’s CFO that it “will see an acceleration in January compared to our order growth in December and fourth quarter”. That is encouraging. On the flip side, the company’s CFO said, “Starting in the second quarter, there will be a reversal of pre-COVID behavior within the customer base.”

Bring away: Large companies expect a return to pre-COVID behavior, just not quite yet. Companies that have benefited from COVID-19 are being scrutinized. And they expect the tailwind to subside as the year progresses.

And then there’s Airbnb, which is up around 16% today. Why? It exceeded sales expectations and lost a lot of money at the same time. Airbnb’s net loss in the fourth quarter of 2020 was more than 10 times DoorDash. Why did Airbnb get a dent while DoorDash was dented? The high revenue ($ 859 million instead of the expected $ 748 million) and the potential for future growth; Investors expect that Airbnb’s current over-fulfillment of expectations will lead to even more growth in the future.

Bring away: Provided you have a good story to tell about future growth, investors remain willing to accept heavy losses. So the growth trade is alive even as companies that may already have received a boost are facing heightened scrutiny.

For startups, the valuation pressures or the surge may be due to the side of the pandemic they are on;; Are you at the end of your tailwind (SaaS with remote work, maybe?) Or on the rise (restaurant technology, maybe?). Something to chew on before you raise.

Market notes

It’s been a blistering week for funding rounds. Crunchbase News, my former journalistic home, has a great report on how many massive rounds we’ve seen so far this year. But even a step or two back, funding was very busy.

A couple of rounds that I couldn’t get to this week that caught my eye were a $ 90 million round for Terminus (ABM-focused GTM juicer I assume), Anchorage’s $ 80 million series C (crypto storage for big bucks) and Foxtrot Market’s $ 42 million Series B (fast delivery of yuppie and zoomer paraphernalia).

Now when I sit here and finally write a tidbit about each one, I remember the sheer breadth of the technology market. Termius is helping other companies sell, Anchorage wants to protect your ETH, while Foxtrot wants to help you replenish your breakfast rosé broth before you endure a dry morning. What a mix. And everyone has to generate acceptable growth for the company, as they not only raised more capital, but also raised fairly large rounds for their supposed maturity (measured by the listed series phase, although the nickname may be more canard than guide).

I am jokingly calling this little section of the Newsletter Market Notes a joke, how can you possibly jot down the entire market that is important to us? These companies and their recent capital injections underscore the point.

Miscellaneous and miscellaneous

Finally, two notes from winning calls. The first from Root, a Head Scratcher, and the second from Results from Booking Holdings.

I had a chat with Root Insurance CEO Alex Timm this week shortly after the numbers dropped. As such, I didn’t have much context in terms of investor reaction to the results. I read that Root was super capitalized and has pretty big plans to expand. Timm was optimistic about the improvement in his company’s profitability (based on the claims ratio and loss-adjusted costs for the Insurtech fans out there) and growth during the pandemic.

But today, its shares are down 16%. If you analyze the analyst call, there’s a movement in Root’s economic profile (in terms of the variance in ceding in the quarters to come) that makes it difficult to see full year growth from my seat. But it seems that Roots business is still moulting to a degree that is almost refreshing; The company could have gone public with part of its current development in 2022. Instead, it raised tens of dollars over the past year and is now public.

Despite the sustained and impressive valuation history of Neemon Insurnace player Lemonade, MetroMile stock is also stretching a bit, while Roots stock has lost more than half of its value since going public. If the current re-rating of some new insurance companies continues, private investment in the space may be slow to materialize. (Fewer things like that?) It’s a possible trend that we’ll be keeping an eye on this year.

Next up, Booking Holdings, the company that owns Priceline and other travel properties. Given that Booking may have clues about the future of business travel – which are important to us to have clues about what might be relevant to remote work and office culture – things that differ from start-up hub- Locations all the way through to software sales – The Exchange has secured a call seat and elected the company on.

Glenn Fogel, CEO of Booking Holdings, didn’t comment on how his company is trading at all-time highs despite sharp year-over-year sales declines. He noted that the pandemic has raised expectations for conversations which could limit short-term business travel in the future to meetings that could now be conducted over video calls. He was optimistic about future conference travel (good news for TechCrunch, I suppose) and future travel in general.

So we don’t know anything yet about the ray perspective. Booking Holdings doesn’t say much, maybe because it just doesn’t know when things are going to change. Because of me. Perhaps after another three months of introducing the vaccine, it will give us a better window of what a partial return to an old normal might look like.

Finally, you can read Apex Holdings’ SPAC presentation here and Markforged’s here. Also, I’ve written about the buy-now pay-later section here, covered Digital Ocean’s IPO with Ron Miller here, and scrawled about Toast’s review and Olo debut here.

Hugs and have a nice weekend!


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