Tuesday, July 16, 2019

“Fintech Startup Finix Raises $18 Million, Aims To Become The Twilio Of Payments - Forbes” plus 2 more

“Fintech Startup Finix Raises $18 Million, Aims To Become The Twilio Of Payments - Forbes” plus 2 more


Fintech Startup Finix Raises $18 Million, Aims To Become The Twilio Of Payments - Forbes

Posted: 16 Jul 2019 03:00 AM PDT

In the U.S., electronic payments is a highly regulated business whose esoteric ins and outs can make your eyes glaze over. But for those who master its complexities, it can be extremely lucrative. 

Finix, a three-year-old, 30-person startup based in San Francisco, raised $17.5 million in Series A funding from Bain Capital Ventures, Visa and Insight Partners, among other investors. It aims to help companies manage and monetize payments by becoming their own payment processors. In the same way Twilio's white-label software lets Uber users seamlessly call their driver through the app, and just as Marqeta lets DoorDash control how debit card transactions are processed, Finix lets companies own and control their payment processing. 

Before founding Finix in 2016, Richie Serna, 31, did a stint in consulting at Booz & Company in New York. When he was considering moving to San Francisco to join a payments startup, he talked to a few friends who worked in venture capital. "Don't quit your job," they said. "You can't code, and your parents aren't rich." He tried it anyway, teaching himself to program. He left the first startup, Balanced, after two years to launch his own venture, teaming up with Sean Donovan, 36, who had worked at payments processor Vantiv (now Worldpay) for 14 years, ever since he was 18. The pair took a couple years to build the product and got their first customer in 2018.

Today, merchants have many options for payments processors, ranging from going directly to traditional payments behemoths like Worldpay and Fiserv to using a service like Square, PayPal and Stripe. Traditional processors take a small cut of each transaction on top of the rich "interchange" revenue that Visa and Mastercard collect when they charge merchants 1.5% to 2.5% for each card swipe. Matt Harris, a partner at Bain Capital Ventures who led the Finix investment, estimates that traditional processors let you recover from 0.10% to 0.25% of transaction volume, while Stripe lets you keep 0.25%. 

Alternatively, if you're a merchant that starts clearing big money, you can bring processing in house and keep a larger chunk of the transaction fees. Building your own "payments stack" can cost millions of dollars and take years of development, Serna claims. "Airbnb has 170 people on payments team, 110 of which are payments engineers," the Finix CEO says. (Airbnb declined to comment.) 

Finix targets customers that process at least $50 million in annual transactions, a point when it might start to make economic sense to move away from Stripe, Square or PayPal. The fintech giants charge merchants from 2.75% to 2.9% of each transaction, plus other fees. Finix makes money through a monthly licensing fee and other surcharges, like an onboarding fee.

Lightspeed, a Canadian company that sells point-of-sale software for accepting credit cards, is a Finix client. It previously earned 0.25% per transaction when it used multiple payment processors. After bringing the processing in-house with Finix's white label service, "we are targeting to net approximately 0.65%," the company said in a recent regulatory filing. That means it's earning 0.40% more on every transaction it processes, or $4 million for every $1 billion it clears. (Lightspeed processes $13 billion a year, but not all of that is through Finix.)

Bain's Matt Harris thinks Finix is riding a wave of change in the payments space, where more software companies are starting to control payments. For example, Mindbody is thriving by helping gyms and spas accept payments, and it has its own payments stack. Lyft and Airbnb do too. "Around 8% of all payments are initiated by software companies. We think that 8% will grow to 80%," Harris says. Finix wants to woo those software firms as customers. So far, it has two dozen of them, with multiple customers processing billions of dollars a year in transactions.

The challenges loom large. Stripe, Square and PayPal have strong products, brands and market power. For years there has been talk of Visa and Mastercard's interchange fees dropping due to regulation, which would threaten Finix's value proposition, although Harris thinks new legislation is unlikely. Perhaps the biggest hurdle is that Finix's model is new and unfamiliar, and it will take a lot of customer education. Historically, changes in the U.S. payments industry have happened slowly, so Finix will need to move mountains to break that pattern.

The Next Billion Dollar Startups: Where Are They Now? (Exit Edition) - Forbes

Posted: 16 Jul 2019 02:55 AM PDT

Since Forbes and TrueBridge began our partnership to produce the annual Next Billion Dollar Startups list, we have traditionally done a retrospective to see how quickly the companies on our lists have grown. As shown in the graphic below, nearly half of companies on the 2015-2018 Next Billion Dollar Startups Lists have IPO'd, been acquired, or been valued at $1 billion or greater.

With 2019 already gearing up to be a year of major liquidity events, it's a good time to pause and recognize the exits from our Next Billion Dollar Startups lists to date. As Forbes highlights in its own blog post, most companies we've profiled are continuing to grow as private companies. This is in line with the trend of startups staying private for longer, which we examined in 2015. But after this year, we may see the list of Next Billion Dollar Startup exits grow a little longer.

Here are the companies that have already exited the Next Billion Dollar List and "where" they've gone: to the public markets, to another company via an acquisition, or to a private equity buyer.

 

The Next BIllion Dollar Startups LIst is produced by Forbes in partnership with TrueBridge Capital Partners. *Full IPO and acquisition details for each company below.

TrueBridge Capital Partners

 

TO THE PUBLIC MARKETS (IPO)

Blue Apron

IPO'd in June 2017

Meal-kit delivery company Blue Apron has struggled to perform in the public markets since its highly anticipated debut two years ago. However, the company has continued making changes in an effort to right the ship, including hiring a new CEO, Linda Kozlowski, who is the former Chief Operating Officer at Etsy. As Blue Apron faces challenges of increasing competition and a declining customer base, the company's investors will be eager to see Kozlowski steer the company in a new direction.

Datastax

Filed to go public (as of March 2019)

Founded in 2010, Datastax is seen as one of the few viable startup competitors to the tech behemoth Oracle. Datastax serves as the central support system of the open-source Apache Cassandra database and provides data management for clients like McDonald's, Delta Airlines, and eBay. The company has benefitted from a broader shift towards cloud-hosted software, which is a cheaper alternative for companies than hosting data on internal servers.

Guardant Health

IPO'd in October 2018

Biotechnology company Guardant Health saw its share price soar in the first day of trading, and its stock has continued to perform well since then. Guardant Health offers a "liquid biopsy" for cancer patients, which helps them avoid the pain and risk of invasive tumor biopsies. Since its IPO, the company has partnered with AstraZeneca to develop blood-based early cancer assays, which will help identify cancer patients likely to respond well to treatment with AstraZeneca's oncology therapies. And while liquid biopsies are already nearly a standard of care for people with late-stage cancers, the company is continuing on its mission to use liquid biopsies to find cancer recurrences and even detect cancer early.

Livongo

Filed to go public (as of March 2019)

Livongo was founded in 2014 by a veteran CEO and entrepreneur, Glen Tullman, with a deeply personal mission: helping diabetics manage their disease. Tullman, whose son was diagnosed with type 1 diabetes and whose mother also suffered from the disease, started Livongo to create better outcomes for patients and reduce costs for self-insured employers through the application of technology. Its IPO will be one of the first for the latest generation of digital health technology companies. That class of companies also includes medical records data startup Catalyst Health, revenue and payment cycle management company Change Healthcare, and intake software company Phreesia.

Poshmark

Reportedly planning an IPO in Fall 2019 (as of April 2019)

Poshmark is one of the largest social marketplaces for fashion, allowing users to buy and sell their personal items simply by taking a photo of their product and uploading it to the app. Since the 2008 recession, online marketplaces like Poshmark have surged in popularity, and the recent successful IPO of The RealReal, a luxury online consignment shop, has marked a potential watershed moment for the industry. One highlight for potential public investors in Poshmark will be its lack of overhead in the form of merchandise, although the company will continue to face competition from a crowded market.

Postmates

Filed to go public (as of February 2019)

Despite its presence in the crowded space of on-demand delivery startups, Postmates has continued to stand out from the pack. The company has rapidly expanded its geographic presence – as of February 2019, it was operating in 3,500 cities across all 50 states – and it's expanded its business beyond food and restaurant service, including in areas like alcohol delivery. But following Uber's lackluster IPO in May, potential investors may be concerned about the similarities between Postmates' delivery platform and Uber Eats'. All eyes will be on Postmates this year to see how the company performs on the public market and how that will impact other on-demand delivery companies.

Redfin

IPO'd in January 2018

After 13 years as a private company, Seattle-based brokerage Redfin successfully debuted on the NASDAQ at a market cap of $1.73 billion. Redfin, whose CEO bills the company as the Amazon of Real Estate, aims to introduce technology to the convoluted and inefficient process of home-buying and serve as a one-stop-shop for all things real estate. Redfin's share price has continued to perform above its opening price, and the company has seen strong traction with its recently launched services, including RedfinNow, its direct home buying and selling operation.

Tenable Network Security

IPO'd in July 2018

Last year's IPO by Tenable Network Security, which provides subscription-based cyber risk management tools, was sizable for the cybersecurity industry, especially for a company that was bootstrapped by its three founders for 10 years before accepting any venture capital money. Tenable's niche focus is on Cyber Exposure, or helping customers understand the complex mix of platforms within their organization and their associated vulnerabilities. Tenable recently unveiled new machine learning technology to automatically correlate an asset's vulnerability and threat data with how critical that asset is to a platform.

TO ANOTHER COMPANY (ACQUISITIONS)

Hotel Tonight

Reached definitive agreement to be acquired by Airbnb for an undisclosed amount (March 2019)

Hotel Tonight joined the Next Billion Dollar Startups list in 2016, five years after its founding as a last-minute hotel booking app/website. Its story has complemented Airbnb's own, as both companies have sought to be recognized for more than just the offerings that first put them in the public spotlight. Hotel Tonight looked to transform its reputation as an app solely for "last-minute" use, and Airbnb has focused on showcasing its offerings beyond vacation homes or shared apartments. The tie-up comes as Airbnb is reportedly eyeing an IPO in the near future.

Jive Communications

Acquired by LogMeIn for $357 million (April 2018)

Jive Communications arrived on the Next Billion Dollar Startups list as one of several companies looking to replace incumbent corporate phone systems through applications that integrate voice, video, and other communications. The company attracted LogMeIn as a way to diversify and expand LogMeIn's suite of collaboration products, which include conferencing services like GoToMeeting and join.me and authentication services like LastPass.

Looker

Reached definitive agreement to be acquired by Google for $2.6 billion (June 2019)

Google Cloud's agreement to acquire Looker, a business-intelligence software provider, marks one of the company's and the industry's largest acquisitions. It's also an indicator of Google's efforts to bolster its cloud business amid fierce competition from Amazon and Microsoft. Looker enables its customers to gather and examine trends in corporate data stored in third-party databases, which complements Google's hybrid cloud strategy and extends Google's capabilities in business analytics.

Orchard Platform

Acquired by Kabbage for an undisclosed amount (May 2018)

Small business lender Kabbage acquired Orchard Platform with the goal of enhancing its data capabilities and accelerating the development of products and services for its strategic partners and customers. Orchard emerged on the Next Billion Dollar Startups list with the backing of prominent investors from both Wall Street and Silicon Valley, including former heads of Citigroup and Morgan Stanley and Max Levchin. As TrueBridge highlighted in 2016, Orchard Platform is at a unique position in the crowded marketplace lending space, as it's a trusted conduit between institutional investors and loan originators.

PillPack

Reached definitive agreement to be acquired by Amazon for $1.0 billion (June 2018)

PillPack's acquisition by Amazon came as a surprise to the market, as it indicated Amazon's strong intent to enter the retail pharmaceutical industry. Founded in 2013, PillPack enables patients to receive their medications by mail, by the day and time they should be taken. Since the acquisition was announced and closed last year, PillPack's CEO TJ Parker has started leading Amazon's pharmacy efforts, and Amazon has begun marketing PillPack's at-home prescription drug delivery to Amazon Prime members.

SimpliVity

Acquired by Hewlett Packard Enterprise for $650 million (February 2017)

Data management platform SimpliVity is one of many companies focused on hyperconverged infrastructure, which combines data computation, storage, and networking into a single system (such as SimpliVity's flagship product, the OmniCube). SimpliVity arrived on the List as one of the fastest-growing IT infrastructure companies to date and was pegged as a potential blockbuster IPO. Its acquisition by HPE, however, will allow the combined company to expand its existing infrastructure, automation, and cloud services and bring OmniCube to more customers.

Skyhigh Networks

Acquired by McAfee for $400 million (via its financial sponsors) (January 2018)

Cloud security company Skyhigh Networks found success as an independent company managing cloud security duties for clients like Cisco, Hewlett-Packard, and DirecTV, when it joined our inaugural Next Billion Dollar Startups list in 2015. Its acquisition by McAfee marked the company's first since its spin-out from Intel in 2017. The transaction was an indicator of increasing consolidation in the security industry and helped expand McAfee's legacy endpoint security business into the cloud.

Viptela

Acquired by Cisco Systems for $610 million (July 2017)

Cisco's acquisition of Viptela expands the company's SD-WAN portfolio, which refers to technology that connects enterprise networks over large distances via connections like broadband internet, 4G, and LTE. Most importantly, however, Viptela fits squarely within Cisco's traditional networking business but provides a more modern, cloud-based solution. Viptela was one of several cloud-based acquisitions made by Cisco at the time, as the company has continued to expand its cloud capabilities. Those include Cisco's acquisition of AppDynamics for a whopping $3.7 billion and its acquisition of Jasper Technologies for $1.4 billion.

TO A PRIVATE EQUITY BUYER (LBO)

GoFundMe

Acquired by Accel and TCV (June 2015)

After years of bootstrapping the company, GoFundMe's co-founders Brad Damphousse and Andrew Ballester agreed to raise venture capital funding in 2015, earning a valuation of about $500 million. The platform today remains the poster child of crowdsourced funding. But not long after raising its first VC funds, Damphousse and Ballester agreed to sell their controlling stakes to existing investors Accel and TCV, at a valuation of around $600 million. Now, the company is using its funds to grow the team, enhance its product features and functionalities, and bring the platform to more geographies.

Khoros (f.k.a. Lithium Technologies)

Acquired by Vista Equity Partners (January 2018)

Lithium Technologies, the provider of software for social media and online community management, is part of the very first Next Billion Dollar Startups class, but it has evolved significantly since then. In January 2018, the company was acquired by Vista Equity Partners, and in September, it was merged with Spredfast, a provider of digital customer engagement solutions. Today, the combined company (known as Khoros) is aiming to create the most comprehensive platform for brands to manage their online communities.

ServiceMax

Acquired by Silver Lake Management (February 2019)

ServiceMax is one of the few companies on the Next Billion Dollar Startups List to have exited twice. In November 2016, ServiceMax – a company that provides software for field service management – was acquired by one of its customers, General Electric, for $915 million to help automate its services business. Now, the company is aiming to pursue a new chapter under Silver Lake's ownership and create a new category of software in Service Execution Management.

Could Norway build a unicorn? - Forbes

Posted: 16 Jul 2019 06:24 AM PDT

As Norway's startup ecosystem becomes more established, ambitions are rising

Traditionally famous for its oil and gas supplies, unrivaled fishing industry, and having one of the highest standards of living in the world, Norway has hit the headlines for an entirely different reason in the last couple of years: as the latest startup hotspot to watch.

Norway's emergence onto the startup scene hasn't come out of nowhere. The Norwegian government has deliberately focused on building up the tech industry through investment and promotion, in a bid to move the economy away from its reliance on a handful of traditional industries. In doing so, entrepreneurship has caught on in a big way, with young people for the first time considering a career in startups, rather than big industry.  

 The figures show the strategy is working and momentum is building fast. Startup investment grew 76.3% in the first half of 2018, and 30 new scaleups were added to the count as of September last year. Now, as the ecosystem becomes more established, ambitions are rapidly rising too, with founders and investors starting to think about what comes next. And the question on everybody's lips is: Could Norway build its own unicorn?

Solid foundations

Norway certainly has a lot in its favor. A stable business environment, highly educated workforce and aforementioned high living standards mean it has the infrastructure to support fledgling businesses and attract the talent it needs to found and run them.

It is also a society with tech at its core, having established a leading edge in healthcare and govtech. Norway famously leads the world for take-up of electric vehicles, and the government has just announced a national strategy for artificial intelligence. This readiness to be an early-adopter makes it the ideal test-bed for innovative, potentially world-leading technology. And with extensive natural resources, it isn't short of money to invest in new ventures.

These factors have combined to support the growth of several success stories, which could indeed become the unicorns of the future. One of the earliest stars was Kahoot, the game-based learning platform, currently worth €300m. And numerous new challengers are hot on its heels, including SpaceMaker - the design and construction simulation software - valued at between $100 and $150m, and Xeneta - the ocean freight market intelligence platform - which has so far raised €28.7m.

Yet, while Norway has shown it has the creativity and talent to build successful businesses, it is still lagging behind more established hubs when it comes to the number of scaleups that call the country home. Ranked 8th in Europe, it is closing in on Finland and Denmark, but still has a long way to go to reach comparable economies, such as Sweden and Spain. Meanwhile, the UK had 29 times more scaleups last year.

Breaking into the big leagues

Many believe that building a billion-dollar business is the milestone Norway needs to instill the confidence and knowledge to become a truly global player. Success breeds success, as they say, and having one big growth story would help propel everything forward. An ecosystem learns a lot from nurturing such a huge company, gaining knowledge and skills that it can feed into future projects. So, does it need to do to make that jump?

  1. More funding

While significant wealth has been created in Norway over the last 30 years, there is still no structured or specialized approach to venture investing and only a limited number of investors offer a value-added model and global outlook. This issue is exacerbated by the fact that family offices, pension funds and corporates are also reluctant to back venture, leaving a significant funding gap.

In many cases, this shortage of intelligent funding drives Norwegian founded companies to move abroad to seek investment. A recent Scaleup Norway report found that Norwegian companies that have set up an international base were able to raise twice as much capital as those that stayed put. The result is that valuable skills and knowledge are lost from the ecosystem at the same time.

But building up the funding pipeline required by scale-ups is a gradual process, according to Teodor Bjerrang, Founding Partner at Oslo based VC, SNÖ. "We are starting to see family offices and institutional investors test the water in the VC space, although it is early days and not yet enough to support growth companies," he commented. "But it will happen and it's only a matter of time before more funding starts to come through. As more mature Norwegian companies secure international capital and expand abroad, we'll gradually see more family offices and in institutional investors catch on to the opportunity."  

  1. Next-level government support

While it has encouraged investment and got the ball rolling, there is more that the Norwegian government could be doing to ease the road for scaleups and potential unicorns.

For example, the tax system is still not as friendly as it could be for entrepreneurs, putting potential founders off or encouraging them to move elsewhere. One example is the 50% tax on equity shares given to employees, making this reward option less attractive for talent in Norway than it would be elsewhere. Added to this is the issue of work permits, which aren't always easy to obtain in Norway, again making it harder to secure the specialist skills that are needed when you're growing quickly.

The government could also do more to buy products and services from startups, rather than building its own technology in house. Norway's public sector is known for its innovation and forward-thinking tech, but there aren't enough opportunities for private businesses to win these contracts. This is a missed opportunity to build private sector knowledge and resources in areas such as govtech and healthtech that could then be exported all around the world.

  1. Focus on its strengths

Finally, Norway doesn't have one dominant startup or scaleup sector, rather the top three verticals are enterprise software (12%), cleantech (11%) and fintech (9%). And what I would like to see more of is businesses piggybacking on existing strong, traditional industries to develop technology within those areas, whether that's fishing, energy, or the long-distance transport required to reach the extreme north of the country. These are the areas where Norwegian businesses can offer something unique, and potentially create something truly groundbreaking. 

Norway's startup ecosystem has come on leaps and bounds in a very short time, and that ingenuity and hard work should be applauded. But now is the time for Norwegian entrepreneurs, investors and the government to start thinking bigger and taking some risks. Building a unicorn isn't the 'be all and end all' of course – but it's a nice target to aim for.

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