>

Lyft’s imminent IPO could value the company at $23B

Lyft’s imminent IPO could value the company at B

Ridehailing firm Lyft will make its Nasdaq debut as early as next week at a valuation of up to $23 billion, The Wall Street Journal reports. The business will reportedly price its shares at between $62 and $68 apiece, raising roughly $2 billion in the process.

With a $600 million financing, Lyft was valued at $15.1 billion in June.

Lyft filed paperwork for an initial public offering in December, mere hours before its competitor Uber did the same. The car-sharing behemoths have been in a race to the public markets, igniting a pricing war ahead of their respected IPOs in a big to impress investors.

Uber’s IPO may top $120 billion, though others have more modestly pegged its initial market cap at around $90 billion. Uber has not made its S-1 paperwork public but is expected to launch its IPO in April.

Lyft has not officially priced its shares. Its S-1 filing indicated a $100 million IPO fundraise, which is typically a placeholder amount for companies preparing for a float. Lyft’s IPO roadshow, or the final stage ahead of an IPO, begins Monday.

San Francisco-based Lyft has raised a total of $5.1 billion in venture capital funding from key stakeholders including the Japanese e-commerce giant Rakuten, which boasts a 13 percent pre-IPO stake, plus General Motors (7.76 percent), Fidelity (7.1 percent), Andreessen Horowitz (6.25 percent) and Alphabet (5.3 percent). Early investors, like seed-stage venture capital firm Floodgate, also stand to reap big returns.

Lyft will trade under the ticker symbol “LYFT.” JPMorgan Chase & Co., Credit Suisse Group AG and Jefferies Financial Group Inc. are leading the IPO.

Lyft recorded $2.2 billion in revenue in 2018 — more than double 2017’s revenue — on a net loss of $911 million.

Lyft declined to comment.

Lyft’s imminent IPO could value the company at B
Source: TechCrunch

Decade in review: Trends in seed- and early-stage funding

Decade in review: Trends in seed- and early-stage funding

We’ve decided to step back from the breaking news for a minute to conduct a review of seed and early-stage funding trends over the last decade for U.S.-based companies.

I’m fairly certain we can all agree that the environment for startups has changed dramatically in the past 10 years, specifically in two major ways:

  1. The development of seed funding as its own class and;
  2. The expansion of growth stage investing.

What we’ve also seen are recent concerns raised about the decline in seed stage funding by Mark Suster, a partner at UpFront Ventures, as there has not been commensurate growth in early stage funding (Series A and B), to meet this growth in seed-financed companies. This is often expressed as the Series A crunch.

So with venture funding at an all-time high, along with increased growth in supergiant rounds, now seems like an appropriate time to conduct this kind of review.

Setting the stage

First, let’s set the stage for our analysis and explain where our data comes from with a few quick facts:

  • Rounds below $1 million can be the most difficult to capture adequately as many angel and pre-seed deals are not reported.
  • Luckily, Crunchbase has an “active founder community” that adds early stage financings.
  • By “active founder community” we are referring to many founders who are active on Crunchbase adding their company, themselves as founders, and their fundings.
  • Around 47 percent of fundings below $5 million in the U.S. are added by contributors, as distinct from our analyst teams who process the news, track Twitter, and work directly with our venture partners.
  • For this study, we bucket U.S. funding rounds by size to indicate stage.
  • Given the high percentage of self-reported seed financing, data added after the end of a quarter needs to be factored in.
  • For this reason we use projected data for many of the Crunchbase quarterly reports in order to more accurately reflect recent funding trends. For the charts below we are using actual data, with some provisions for the data lag when discussing the trends.

Now, let’s take a look at the trends.

Rounds below $1 million are slumping

Since 2014 we have seen mostly double-digit declines in less than $1 million rounds each year – a strong pivot from 2008-2014 when we saw double-digit growth.

In 2018 seed funding counts and amounts below $1 million were down from 2015 at 41 and 35 percent respectively. Given that data at this stage can be added long after the round took place, we assess there could be a 20 percentage-point relative increase in 2018 compared to 2017.

If we factor this in, 2018 seed funding counts and amounts below $1 million are down from 2015 at 30 and 23 percent respectively. In other words, seed below $1 million are closer to 2012 and 2017 levels.

$1 million to $5 million rounds are flattening

Round from $1 million to $5 million also experienced growth from 2008 through 2015, more than threefold for counts and close to threefold for amounts. Upward growth stalled from 2015. However, we do not see a substantial downward trend in the last three years. Dollars invested are stable at $7.5 billion from 2015 through 2017. Counts and amounts are down in 2018 from the 2015 height by 12 percent for deal count and 6 percent for amounts.

At Crunchbase we are always cautious about reporting downward trends for the most recent year or quarter, as data does flow in after the close of the most recent time period. If the trend is over a greater time period, that is a stronger signal for change in the market. Based on data continuing to be added after the end of a year for the previous year, we assess around 10 percentage point increase relative to 2017. This would make 2018 roughly equivalent  to 2017 on rounds and slightly up on amounts.

Seed funds take bigger stakes

Why is seed flattening? Seed investors report putting more dollars into fewer deals. Or as they raise more substantial subsequent funds, they are putting more dollars into the same number of transactions. Seed funds need to get enough equity for a meaningful stake, should a startup survive to raise subsequent rounds. Seed funds are investing in fewer startups for more equity.

Larger venture funds taking a less active role in seed

UpFront Ventures’ Suster (referenced earlier) also talks about larger venture firms becoming less active in seed, as investing at the seed stage can limit their ability down the road to invest in competitive startups who emerge as growing contenders in a specific sector. The growth of more substantial funds in venture allows firms to see deals mature before investing, perhaps paying more to get the equity they want, and allowing startups not growing as quickly to fail or get acquired.

As Fred Wilson from Union Square Ventures notes, “In the first five years of this decade, we saw the seed portion of the market explode. In the last five years of this decade we saw the growth portion of the market explode. But over those last ten years, the middle part, the traditional venture capital market, has not changed much.”

The middle is growing

For the middle, Series A and B rounds (which used to be the first institutional money in), the market for $5 million to $10 million rounds has almost doubled, but it has taken from 2008 to 2018. In that same period, growth has been slower than round below $5 million. Growth has continued past 2015. Since 2015, rounds are down slightly for one year, and then continue to grow in 2017 and 2018. Counts are up from 2015 by 17 percent and dollars by 18 percent.

$10 to $25 million rounds are growing

Rounds of $10 million to $25 million have grown over 11 years by 73 percentage points for counts, and 78 percentage points for amounts. This is a slower pace than $5 million to $10 million rounds, but continuing to edge up year over year.

Seed is maturing

Seed is its own class that is here to stay. Indeed pre-seed, seed and seed extension all seem to have specific dynamics. Of the 600-plus active seed funds who have raised a fund below $100 million, close to half have raised more than one fund. In the last three years in the U.S. we have not seen a slowing of seed funds raised for $100 million and below.

Conclusion

When we take into account the data lag, dollars for below $5 million is projected to be $8.5 billion, close to the height in 2015 of $8.6 billion. Deal counts are down from the height by a fifth, which does mean less seed-funded startups in the U.S. Provided that capital allocation is greater than $5 million continues to grow, less seed funded startups will die before raising a Series A. More companies have a chance to succeed, which is good for seed funds, and ultimately for the whole ecosystem.

Decade in review: Trends in seed- and early-stage funding
Source: TechCrunch

No Man’s Sky has a big new update due out this summer

No Man’s Sky has a big new update due out this summer

No Man’s Sky has a big new update due out this summer

After a conspicuous stretch of silence ending with a mysterious teaser tweet on Thursday, No Man’s Sky creator Sean Murray revealed that another major free update is on the way. The new content, which is the first since last year’s Visions update, will hit the massive space exploration game this summer.

The bundle of new content, called No Man’s Sky “Beyond,” will tie together three different updates, though Murray is only giving up the details of one so far. The one we know about is something that Murray is calling “No Man’s Sky Online” which “includes a radical new social and multiplayer experience which empowers players everywhere in the universe to meet and play together” and weaves together three standalone updates into “a vision for something much more impactful.”

https://platform.twitter.com/widgets.js

The short preview video doesn’t reveal much, but it shows a ship we haven’t seen before in what looks like either a reimagined space station (that would be nice!) or some kind of brand new multiplayer hub area.

Murray emphasized that the multiplayer update wouldn’t add things from other major multiplayer games like microtransactions or subscriptions and that he has no intention of turning No Man’s Sky into an MMO. (Still, if a lot of people are playing online together in a massive world, isn’t it uh, kind of an MMO?) The blog post noted that the team would release more details on the other two big pieces of new content in the coming weeks.

“These changes are an answer to how we have seen people playing since the release of NEXT, and is something we’ve dreamed of for a long time,” Murray added.

After a very rough launch and its accompanying critical lambasting in 2016, No Man’s Sky’s team has consistently added huge free content updates to the game. That dedication to building out the world the development team initially promised has brought “millions” of new players into the fold and inspired a thriving online and in-game community.

That community will be happy to hear that according to his latest blog post, Murray doesn’t intend to walk away from the game any time soon.

No Man’s Sky has a big new update due out this summer
Source: TechCrunch

Apple addresses Spotify’s claims, but not its demands

Apple addresses Spotify’s claims, but not its demands

Two days after Spotify announced that it had filed a suit against Apple with the European Commission over anticompetitive practices, Apple today issued its own response of sorts.

In a lengthy statement on its site called “Addressing Spotify’s Claims”, Apple walks through and dismantles some of the key parts of Spotify’s accusations about how the App Store works, covering app store approval times, Spotify’s actual cut on subscription revenues, and Spotify’s rise as a result of its presence on iOS.

At the same time, Apple carefully sidesteps addressing any of Spotify’s demands: Spotify has filed a case with the European Commission to investigate the company over anticompetitive practices and specifically to consider the relationship between Apple and Spotify (and by association any app maker) in terms of whether it is really providing a level playing field, specifically in the context of building and expanding Apple Music, its own product that competes directly with Spotify on the platform that Apple owns.

In fact, Apple doesn’t mention the European Commission, nor the suit, even once in its 1,100+ word statement. Here is what it does cover:

App Store updates. Spotify has accused Apple of dragging its feet on updates to its apps and deliberately doing to so impacts its ability to distribute its service effectively. The company made 173 updates to its apps on iOS, and while Apple doesn’t speak to any transparency on just how long it takes to approve changes, it notes that Spotify has had more than 300 million downloads of its app, and “the only time we have requested adjustments is when Spotify has tried to sidestep the same rules that every other app follows.” 

It also says it’s worked with Spotify to bring it to more platforms and devices — although it did not address one of Spotify’s specific claims, that Apple’s HomePod is the only home speaker where Spotify is currently not available.

— App store pricing. The crux of Apple’s belief is that Spotify wants to use the benefits of being a revenue-generating app on the store, without paying any dues to be there, living rent-free, as it were.

Apple points out that 84 percent of apps on the App Store are actually free to use (many of them will be ad-supported) and in those cases, they really do not pay anything to Apple. But it believes that if you are going to use its platform to make money, Apple should get a cut. The question has always been just how much of a cut Apple should get.

The company’s development of payments has been a tricky one for Apple. In some regards that is a blessing. It centralises your billing details in one trusted place, which ultimately makes for a secure experience. In others it’s a curse: it imposes a particularly strict set of rules and commissions that everyone must follow and doesn’t give developers or customers any choice for how to take and make payments within apps.

Apple notes that in the case of Spotify, the company is misrepresenting App Store commissions on a number of counts. For one, right now, Apple takes a 30 percent cut on subscriptions in the first year, but after that it brings that down to 15 percent. Spotify failed to mention that commission change, focusing only on the 30 percent figure that makes Apple look especially greedy.

It also notes that a lot of Spotify’s customers are using the free version of the product, not paying for any subscriptions. And given that Spotify has tried to shift more of its billing to its site instead of within the app, claims of losing out money over Apple’s terms and a lack of choice for how to pay within it — you have to use Apple’s in-app payments to pay for subscriptions and other goods in apps — are not valid: “Even now, only a tiny fraction of their subscriptions fall under Apple’s revenue-sharing model. Spotify is asking for that number to be zero,” it notes.

What Apple fails to respond to is that Spotify identifies a number of other apps that appear to be given provisions to enable payments that do not run through Apple’s billing, and Apple has not been transparent over how it has chosen those.

Apple Music versus Spotify. The suit filed with the European Commission and antitrust accusations are not the only two things that Apple does not cover in its response. It also completely fails to give even one mention of its own music product, Apple Music, which competes directly with Spotify.

It does say that “We share Spotify’s love of music and their vision of sharing it with the world,” and instead goes directly after Spotify in the jugular: its own issues with how it controls those wanting to do business on its own platform. “Spotify’s aim is to make more money off others’ work. And it’s not just the App Store that they’re trying to squeeze — it’s also artists, musicians and songwriters,” it notes, pointing to a recent suit against music creators filed by Spotify after the US Copyright Royalty Board required Spotify to increase its royalty payments. “This isn’t just wrong, it represents a real, meaningful and damaging step backwards for the music industry,” Apple notes.

Trust in antitrust

Indeed, while the case is in progress and remains sealed, Spotify has summed up many of its key points in a site that it is promoting called Time to Play Fair. But to be very clear, some of us might be hard pressed to call Spotify exactly an underdog.

Apple is one of the biggest and most profitable companies in the world, and Spotify is still scrambling to prove out the long-term financial viability of music streaming as a business model. But Spotify is also the world’s biggest music streaming company, and in reality both have had their fair share of accusations related to how they leverage control over those using their platforms — app publishers for Apple; musicians and those in related fields for Spotify — for their better financial gain.

Spotify’s best approach, in my opinion, would be to keep this debate and make its case to the European Commission at as high a level as possible. There have been a number of examples already of how regulators in Europe have broken up companies or business models, enforcing different practices in the name of promoting better competition: telecoms, internet access, computer and mobile operating systems, advertising and television are among the areas where it’s already proven that it will champion first not the platform, but those who are trying to use it, especially in cases where the platform companies also happen to directly compete with their customers: where those who own the playing field are forced to provide terms to visiting athletes that ensure they get the same treatment as the home team.

This case would be the first time that app stores are considered on the same terms, a mark of just how ubiquitous they have become.

In that regard, by going through some of Spotify’s claims to provide its own rebuttals, Apple seems to be trying to paint a very specific picture to the public — one that we imagine will also play out as it presents its case to regulators: Spotify is not exactly a small company and it has most definitely benefitted, not failed, by virtue of being in the Apple App Store. That’s a key image that — if successful — will help Apple deflect from being viewed as a monopoly, and subsequently forced to change its practices.

Apple addresses Spotify’s claims, but not its demands
Source: TechCrunch