Weekly SaaSology ⚡ 11.28.21
The Metaverse 🤯, Buy Now Pay Later Plans 🧾, and Crowdfunding 💰
In the spirit of Thanksgiving, I’d like to thank you for being an avid reader of Weekly SaaSology ❤️ Now let’s unpack the most exciting deals and trends of this week 💸
Top Five Investments 🚀
Niantic, a San Francisco-based augmented reality (AR) platform, raised $300 million at a $9 billion valuation in Series D funding from Coatue. Niantic aims to use the funding to build what it calls a “real-world Metaverse.” As a Google spin-out, Niantic is famous for developing games like Pokémon GO. Niantic calls the Metaverse, at least the one that renders us bound to Virtual Reality headsets like Oculus, a “dystopian nightmare” 🤯. More on this below.
Verbit, a Palo Alto-based AI-powered transcription platform, raised $250 million at a $2 billion valuation in Series E funding led by Third Point Ventures. Verbit leverages machine learning and natural language processing 💬 to achieve more accurate and faster results. It serves 2,000+ customers like Disney and Amazon and competes against other transcription platforms like Descript and Otter. Verbit recorded $100+ million in ARR, growing 6x annually with 163% net revenue retention and cash efficiency.
TruePay, a São Paulo-based “buy now, pay later” platform, raised $32 million in a Series A funding led by Addition. More on “Buy Now Pay Later” 💵 startups and plans below, but as far as TruePay is concerned, it was founded less than a year ago and already serves over thousands of merchants in Latin America.
Zenity, a Tel Aviv-based low/no-code oversight platform, raised $5 million in seed funding led by Vertex Ventures and UpWest. Coming out of stealth last week, Zenity is built on the premise that the growing adoption of low/no-code tools 👨💻 gives rise to the need for higher governance and security. Zenity helps build a catalog of low/no-code apps being used across the organization.
Dent Reality, a London-based augmented reality (AR) platform, raised $3.4 million in seed funding led by Pi Labs. Dent Reality provides hyper-localized mapping and positioning to venues like grocery stores 🛒 so shoppers can chart a part to the desired object using their smartphones 📱.
Top Two Trends ☁️
Buy Now Pay Later (BNPL) Startups 💵
You may have come across the “Buy Now Pay Later” option at checkout (online or offline) during your Black Friday or Cyber Monday shopping spree. Whether Affirm, Klarna, or Afterpay, all BNPL plans operate using the same mechanism, allowing people to buy instantly and make payments in installments over time.
Most BNPL startups charge merchants 2% to 8% of the purchase amount, while some charge a flat $0.30 for every transaction 🧾. These startups also ensure that merchants sign an agreement preventing them from passing the surcharge onto the shoppers. However, some BNPL plans charge consumers an interest rate of 10% to 30% of the “loan” amount. Additionally, most of these plans generally perform a soft credit check and charge consumers late fees if they miss payments. In 2019, late fees represented ~17% of Affirm’s revenue.
While this might make you wonder why merchants would want to pay for BNPL plans, having easy access to these plans benefits merchants to some extent as it influences consumer behavior- giving consumers an inflated sense of purchase power 💸 and enabling them to make “impulsive” buying decisions.
What is the Metaverse 🌎?
Everyone seems to be talking about the Metaverse, from Mark Zuckerberg rebranding Facebook as Meta to your Walmart cashier purchasing a plot of “digital” land. In essence, the Metaverse represents a digital universe created through a combination of VR, AR, and other technological elements. Builders and supporters of the Metaverse describe it as a virtual world where people can work, play, socialize, and experience anything from a virtual concert to a multiplayer game 🎮. The Metaverse also contributes to the development of the digital economy where people can create, buy, and sell digital goods.
On the flip side, there are a lot of people that despise the use of clunky VR headsets or AR glasses because of motion sickness or physical pain of wearing them for too long. While people often think of these devices when we talk about interacting with the Metaverse, they aren’t necessarily the only means of accessing the digital world. As discussed in the deals section, AR/VR startups such as Niantic and Dent Reality, are disrupting the ways in which people interact with the Metaverse, predominantly through the use of smartphones 📱.
Startup Spotlight ✨
Founded in 2013, Contentful is a San Francisco-based “headless” content management (CMS) 💻 platform with ~777 employees and ~$350 million in funding. Contentful helps digital teams assemble and customize content and deliver omnichannel experiences with deep integration using APIs 🔗. It is used by digital marketers and developers at thousands of companies like IKEA, Peloton, and EA.
Headless CMS represents the back-end platform where the content repository “body” is separated/decoupled from the presentation layer “head.” Content that is housed in a headless CMS is delivered via APIs for seamless multichannel display.
More organizations are switching from “monolithic” web CMS platforms like WordPress that lock content in silos (as depicted below) to modern, agile content platforms like Contentful that store and deliver structured content across devices 📱 using open APIs. Contentful competes against other headless CMS and structured content platforms like Contentstack, Sanity, Prismic, GraphCMS, and Storyblok.
VC Topic of the Week 📚
Equity crowdfunding offers startups the ability to raise capital from a large number of individuals that can pitch in as little as $10 to collectively pool capital in exchange for equity. It allows startups to tap into vast networks of people easily accessible through social media and websites like Kickstarter, Indiegogo, and GoFundMe. These websites generate revenue by charging a percentage of the funds raised 💰 as fees.
The SEC regulates equity-based crowdfunding ventures in the US - they also increased the crowfunding amount cap from $1 million to $5 million in late 2020.
Crowdfunding offers several benefits - founders can set their own terms and have more control as their startups get off the ground. These perks stretch beyond strategic alignment as individual investors can also serve as customers and support product development, marketing, and other user-facing functions. However, some startups prefer to have the guidance of seasoned VC investors from the beginning 👨🏫.
Now that we’re wrapping up with early-stage funding rounds - pre-seed and seed, you can see below what’s left to cover in the broader funding landscape. Next, we’ll dive into the “institutional” form of early-stage funding - venture capital as we know it 🤑!
Tweet of the Week 🐦
Feel free to reach out to me by replying to this email or @dhruvcashpoor on Twitter! From now on, we’ll discuss five instead of seven deals and only mention the lead investor(s) instead of listing all participating investors to be more concise.
This newsletter is intended for informational purposes only. Sources: TechCrunch, VentureBeat, Twitter, Giphy, Tenor, Forbes, Investopedia, Wired, USA Today, MintyMint