Weekly SaaSology ⚡️ 10.22.21
Growing neobanks 🏦, the rise of the no-code revolution 👨💻, and more!
Welcome back to Weekly SaaSology👋 Hope you enjoy this week’s top 10 highlights!
I’ve also realized that the VC jargon can be complicated and opaque to those unfamiliar with it, so I’ll also discuss a new investing concept or term every week!
This week onwards, we’ll dive deeper and talk about how the trends will affect the future of work and how the funded startups will continue to disrupt industries 🏭
Top Six Investments 🚀
N26, a Berlin-based neobank, raised $900 million at a $9 billion valuation in Series E funding led by Third Point and Coatue, with participation from Dragoneer and previous investors. Neobanks are digital banks that operate without any physical branches 🏦. N26 competes against Chime, NuBank, Revolut, and several other fintech platforms that continue to raise significant funding - you can read more about neobanks in the trends section below.
Deel, a San Francisco-based remote hiring platform, raised $425 million at a $5.5 billion valuation in Series D funding led by Coatue, with participation from Altimeter Capital, a16z, YC, and Spark Capital. Deel operates as an Employer of Record in more than 50 countries and automates payroll, benefits, compliance, and other HR functions for over 4,500 companies. In my last newsletter, I talked about distributed teams and remote hiring. As companies tap into other geographical markets for accessing a broader and cheaper talent pool, platforms like Deel will continue to emerge and raise capital to resolve the challenges of remote hiring and distributed workforce management.
Electric, a New York City-based IT infrastructure provider for small and mid-sized businesses (SMBs), raised $90 million in Series D funding led by GGV Capital, with participation from Bessemer, Greenspring Associates, 01 Advisors, Slack, and other existing investors. Instead of hiring a person or department to handle essential IT functions (90% of which is maintenance and compliance), over 700 SMBs use Electric’s platform to handle a myriad of IT-related tasks such as distribution, maintenance, and security. What Electric does for IT infrastructure is similar to what Justworks does for HR. Electric is projecting to end the year with ~$40 million in annual recurring revenue or ARR (more on this soon), growing more than 100% in the past twelve months!
Primer, a London-based automated payments platform, raised $50 million at a $425 million valuation in Series B funding led by ICONIQ, with participation from Accel, Balderton Capital, Seedcamp, Speedinvest, and RTP Global. It provides a drag-and-drop framework and offers over 45 integrations with various workflow tools to help online merchants build payment stacks.
Builder.io, a San Francisco-based “no-code” web development platform, raised $14 million in Series A funding led by Greylock, with participation from Imaginary Ventures and several angel investors. It provides an integrated drag-and-drop visual editor that allows marketers, product managers, and designers to build and manage online content flawlessly. More on “no-code” below.
AirGarage, a San Francisco-based full-stack parking operator, raised $12.5 million in Series A funding led by a16z, with participation from Floodgate, Founders Fund, and Abstract Ventures. AirGarage works with more than 200 parking real estate owners and automates their daily operations - everything from signage installation, payment collection, and even parking enforcement.
Top Two Trends ☁️
Rise of neobanks 💸
Neobanks (or challenger banks) are becoming the face of modern banking, especially for those that haven’t been well-served by traditional financial institutions. The majority of these digital banking platforms provide a very user-friendly interface and promise low fees and transparency. They leverage AI/ML (more on this soon!) and analytics to offer personalized services while minimizing operating costs. Access to mobile banking, especially in emerging economies, accelerates digital adoption and drives efficiency and automation.
Some of the hardships that neobanks face include gaining the trust of customers and operating efficiently at scale. To mitigate some of these risks, most neobanks offer sign-up and referral bonuses and freemium subscriptions. This lets customers experience the app before paying for it and leverage a “product-led growth” (PLG) strategy. In emerging markets like India, neobanks need to rely on partner banks to offer licensed services as the governing authorities don’t allow banks to operate 100% digitally just yet.
No-code Movement 👨💻
The no-code movement is built on the premise that tech should serve as an enabler and facilitate creation. Coding powers so much that we do in our day-to-day lives yet sadly acts as a bottleneck and barrier to entry. Programming makes it all possible - whether we’re checking our bank accounts, liking photos on social media, or browsing new outfits online. For the majority of us that lack coding skills, the idea of building a website or app seems way out of reach.
No-code platforms power non-developers and developers alike to create software and web apps using a graphical user interface instead of writing code. What was once a space that only programmers and coders could navigate is now open to everyone. The no-code movement has removed the obstacle of knowing programming languages, letting anyone bring their ideas to light. No-code is simply an abstract layer over code. Meaning, it takes the fundamentals of code and translates them into seamless drag and drop solutions — allowing creators and developers to build modern apps and websites visually.
Startup Spotlight ✨
How can we talk about the no-code revolution and not mention Webflow?
Founded in 2013, Webflow is a San Francisco-based no-code web development and hosting SaaS platform. It empowers web designers to build professional, responsive, and custom websites in a visual canvas with no code or developer help. Backed by Accel, Silversmith, and CapitalG (Alphabet’s independent growth fund), Webflow has 295 employees and over 2 million users. Here is a snapshot of the platform:
It competes in a crowded market with DIY website-building platforms like Squarespace and Wix (yes, you read that right! It’s Wix from those unskippable YouTube ads) that are also working towards replacing WordPress and GoDaddy, the 800-pound gorillas and clunky incumbents in the website building and hosting space.
VC Topic of the Week 📚
Let’s talk about Dilution. Generally speaking, as new funding rounds occur, existing investors (including founders and employees) will own proportionally less than they did previously - their ownership gets diluted. Dilution isn’t necessarily a bad thing. If the new stock is issued at a higher price, they may own a smaller stake of a larger business, which means the value of the investment is higher than it was previously.
VC Valuation 101: Pre-Money Valuation + Investment $ = Post-Money Valuation
Let’s assume you own 20% of a startup valued at $5 million. Your stake is currently worth $1 million. If you raise a new round of VC funding of $5 million at a $15 million pre-money valuation, it equates to a $20 million post-money valuation.
This means you get diluted by 25% (new VC’s ownership), which is $5 million (investment) divided by $20 million (post-money). You now own 15%, calculated by multiplying previous ownership (20%) times one minus dilution (25%). However, your 15% is now worth $3 million (15% of $20 million), a gain of $2 million.
Came across an investing term or concept that you can’t wrap your head around? Reply to this email with it, and I’ll be sure to explain it in a future edition.
Tweet of the Week 🐦
University endowments comprise money and other financial assets donated to academic institutions. These funds support teaching, research, and public service initiatives of universities. Charitable donations are the primary source of funds for endowments. “Brand-name” college endowments are witnessing blockbuster gains, largely due to the “endowment model” pioneered and championed by Yale University. It advocates for significant allocations to high-performing illiquid assets, such as venture capital and private equity, and much less emphasis on the public markets.
Feel free to reach out to me by replying to this email or @dhruvcashpoor on Twitter if you have any questions, comments, or suggestions on the newsletter 🙂
Have a great weekend, and I’ll see you next Friday 🥂
This newsletter is intended for informational purposes only. Sources: CNBC, TechCrunch, StrictlyVC, LinkedIn, Twitter, Barrons, Emergence Capital, Medium, Forbes, Nexit Ventures, Mobile Transaction, Fast Company, Webflow, Investopedia.