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Their Businesses Went Virtual. Then Apple Wanted a Cut.

ClassPass built its business on helping people book exercise classes at local gyms. So when the pandemic forced gyms across the United States to close, the company shifted to virtual classes.

Then ClassPass received a concerning message from Apple. Because the classes it sold on its iPhone app were now virtual, Apple said it was entitled to 30 percent of the sales, up from no fee previously, according to a person close to ClassPass who spoke on the condition of anonymity for fear of upsetting Apple. The iPhone maker said it was merely enforcing a decade-old rule.

Airbnb experienced similar demands from Apple after it began an “online experiences” business that offered virtual cooking classes, meditation sessions and drag-queen shows, augmenting the in-person experiences it started selling in 2016, according to two people familiar with the issues.

Airbnb discussed Apple’s demands with House lawmakers’ offices that are investigating how Apple controls its App Store, according to three people who spoke on the condition of anonymity to discuss private conversations. Those lawmakers are now considering Apple’s efforts to collect a commission from Airbnb and ClassPass as part of their yearlong antitrust inquiry into the biggest tech companies, according to a person with knowledge of their investigation.

Those lawmakers are set to grill Tim Cook, Apple’s chief executive, and the chief executives of Amazon, Facebook and Google in a high-profile hearing on Wednesday.

Apple’s disputes with the smaller companies point to the control the world’s largest tech companies have had over the shift to online life brought on by the pandemic. While much of the rest of the economy is struggling, the pandemic has further entrenched their businesses.

With millions more employees working from home, Amazon and Google are selling more online cloud space, with revenue for Amazon Web Services and Google Cloud soaring in the first quarter of the year, which included the start of the pandemic. Facebook and YouTube, which is part of Google, some of the internet’s largest gathering places, had traffic surge as people couldn’t socialize in person.

Apple has also brought in more revenue from its online-services business, mostly on the back of its App Store, and its Macs, iPads and iPhones have become even more important tools.

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Credit…ClassPass

With gyms shut down, ClassPass dropped its typical commission on virtual classes, passing along 100 percent of sales to gyms, the person close to the company said. That meant Apple would have taken its cut from hundreds of struggling independent fitness centers, yoga studios and boxing gyms.

Apple said that with Airbnb and ClassPass, it was not trying to generate revenue — though that is a side effect — but instead was trying to enforce a rule that has been in place since it first published its app guidelines in 2010.

Apple said waiving the commission in these cases would not be fair to the many other app developers that have paid the fee for similar businesses for years. Because of the pandemic, Apple said that it gave ClassPass until the end of the year to comply and that it was continuing to negotiate with Airbnb.

“To ensure every developer can create and grow a successful business, Apple maintains a clear, consistent set of guidelines that apply equally to everyone,” the company said in a statement.

ClassPass was told it must comply with the rule this month, according to the person close to the company. Instead, it stopped offering virtual classes in its iPhone app, since those classes were subject to Apple’s commission, according to Apple. As a result, fewer potential customers now see the classes advertised by its gym partners.

In 2016, Airbnb started a business offering in-person “experiences” to travelers, such as guided tours, bar crawls and cooking classes with locals in their vacation destinations. In early April, as the pandemic gutted travel plans and the company’s bottom line, Airbnb began selling virtual versions of similar experiences, though it quickly expanded that business to more prominent offerings, like cooking classes with famous chefs and training sessions with Olympic athletes.

Later that month, Apple reached out to say that when the online experiences were sold in Airbnb’s iPhone app, the company would have to pay Apple’s fees, said a person familiar with their exchanges.

Apple said it believed that Airbnb had long intended to offer virtual experiences — not that the business was created simply because of the pandemic — and that it would continue to do so once the world has resumed to normal. Apple also pointed out that Airbnb had never paid Apple any money despite the fact that it built its multibillion-dollar business with the help of its iPhone app.

Airbnb is still negotiating with Apple. In June, Brian Chesky, Airbnb’s chief executive, said that the online experiences offering was the company’s “fastest growing product ever” and had earned $1 million in revenue. Apple said that if the two companies could not come to terms, it could remove Airbnb’s app from the App Store.

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Credit…James Estrin/The New York Times

Many companies and app developers complain that Apple forces them to pay its commission to be included in the App Store, which is crucial to reaching the roughly 900 million people with iPhones. Apple said the App Store had 500 million visitors from 175 countries each week.

For months, economists and lawyers at the Justice Department have held meetings with companies and app developers about the App Store as part of its antitrust investigation into Apple. The music service Spotify and another large company that declined to be named also said they have had recent conversations with attorneys general from several states about the issue.

Unlike Spotify, Airbnb and ClassPass do not offer services that directly compete with one of Apple’s digital products.

Many companies complain that they are also subject to what they call Apple’s capricious enforcement of its rules, which can lead to their apps’ removal from the App Store, killing some of their business. If Apple removes an app from the App Store, the developer couldn’t gain new app users and couldn’t update the apps already on people’s phones, eventually rendering them broken.

Apple said a small fraction of iPhone apps were subject to its commission, which is in line with the fees other platforms charge, according to a study released by Apple last Wednesday. Airbnb, for instance, charges a 20 percent commission on experiences.

“If you’re not in the App Store today, you’re not online. Your business cannot function. So they’re the gatekeepers of something that every single company wants,” said Andy Yen, the chief executive of ProtonMail, an encrypted email service based in Switzerland that effectively competes with Apple’s own email service. “If you want to pass through their gates, they’re going to charge you 30 percent of your revenue.”

Mr. Yen said his company had been battling with Apple since 2017 over its commission, with Apple sometimes restricting the ProtonMail app on iPhones. To account for Apple’s fee, ProtonMail began charging 30 percent more for subscriptions bought on its iPhone app versus those bought on its website, which aren’t subject to Apple’s fee. “The only way that we could support this fee was actually by passing on the cost to the customer,” he said.

But when ProtonMail told iPhone users about the lower price on its website, Apple restricted its app. Then, when the company instead tried to make clear that 30 percent of the subscription price went to Apple, Apple restricted its app again. “You only hide something like this if it’s wrong,” Mr. Yen said.

Asked about ProtonMail’s experience, Apple said its rules require certain apps to use its payment system and ban them from directing people to buy their products or services elsewhere.

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Without desks and a demo day, are accelerators worth it?

As a result of the pandemic, accelerators have moved operations fully remote to abide by social distancing. The shift has forced well-known programs like 500 Startups, Y Combinator and Techstars to go fully online, while encouraging existing venture capital firms to launch new digital-only fellowships like Cleo Capital and NextView Ventures.

Before the pandemic, accelerators could advertise their value by lending desk space once used by Airbnb, Twilio and Brex’s co-founders, plus a glitzy demo day. Now, stripped of their in-person element, the actual value of an accelerator program — and the network they provide — is being tested in new ways.

So a question remains for participating founders: Are they getting the benefits of what they thought they signed up for?

In the Zoom where it happened

The last thing Michael Vega-Sanz wanted to do was was join another Zoom get-together for entrepreneurs. But the car-sharing company he co-founded with twin brother Matthew was in the middle of a pivot, so they joined NextView Ventures’ inaugural remote accelerator program.

“I envisioned an accelerator with awkward happy hours, mass Zoom calls,” Vega-Sanz said. Fast-forward one month into the program, he says it “has been quite the opposite.”

Before joining NextView’s accelerator, Vega-Sanz did an in-person incubator at Babson College in Boston, but there’s “a lot less fluff” in being virtual, he told TechCrunch.

“[With in-person] the reality was you’d go to lunch, and by the time you drove over there and had all your side talk, small talk, chit-chat and actually got into the nitty-gritty of the event, there was a lot of time loss,” he said. “You could have been working for your company during that time.”

If possible, Vega-Sanz still recommends that first-time founders attend a physical accelerator instead of a virtual one for the energy it brings, even with the downside of useless events.

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SaaS startup Swoop raises $3.2M to modernize mom-and-pop transportation companies

Chauffeured group transportation — the vehicles used for corporate outings, special events and even weddings — is a fragmented industry, with hundreds of small operators that rely on analog systems to book customers. Now in this era of COVID-19, these operators are being squeezed as travel and tourism have dwindled and companies have opted to have employees work from home.

One Los Angeles-based transportation booking startup called Swoop aims to bring these small, local operators into the digital age with a new software-as-a-service platform that it says is helping them adapt in this COVID-19 era. The startup, loaded with an injection of capital, is ramping up its SaaS product in hopes of tapping into a marketplace where customers spend $40 billion annually.

Swoop has raised $3.2 million in a seed funding round led by Signia Venture Partners, South Park Commons and several angel investors, including former Uber CPO Manik Gupta; Kevin Weil, co-creator of Libra at Facebook; Kim Fennel, a former Uber executive; and Elizabeth Weil, former partner at Andreessen Horowitz and 137 Ventures.

“I’m fascinated about how operators are still running most of their business with pen and paper,” Swoop CEO and co-founder Amir Ghorbani said in a statement. Ghorbani has witnessed firsthand the constraints of these small operators. During high school and college, Ghorbani helped with his parents’ limousine business. The experience prompted him to seek a solution. 

“I saw a huge opportunity to help these small mom and pop shops, in an under-digitized industry, where no operator has more than 1% market share,” Ghorbani added.

Ghorbani began by building a group transportation booking platform used by companies like Airbnb, Google and Nike. Through those bookings the companies saw an opportunity to build business management software for vehicle operators.

Swoop’s SaaS platform lets companies book and dispatch rides, track vehicles and communicate with customers. It also acts as a central hub for payments and other bookkeeping. The tool is designed to smooth out the booking process as well as increase vehicle utilization, which is currently at 4.9%, according to the company. Swoop also passes on to the operators using its SaaS tool leads from companies that use the booking platform.

For now, the focus is on local transportation companies, not public transit, which is a sector that Uber is chasing.

COVID-19, which has suspended most group outings, has upended these local transportation operators. Swoop says it has adjusted its platform to help these operators survive. The company told TechCrunch that it is helping operators repurpose their vehicles to ship goods rather than people. For instance, large vans once used for corporate outings can now be marketed to food wholesalers or companies that need local package delivery. The platform is also being used to connect operators with companies like Amazon that provide transportation to shuttle essential factory workers.

Swoop said COVID-19 might end up accelerating its business ramp as operators are being forced to evaluate their businesses and seek new ways to generate revenue and reduce costs.

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Airbnb Was Like a Family, Until the Layoffs Started

SAN FRANCISCO — On May 5, after almost two months of working alone in his San Francisco apartment, Brian Chesky, Airbnb’s chief executive, cried into his video camera.

It was a Tuesday, not that it mattered because the days had blurred together, and Mr. Chesky was addressing thousands of his employees. Looking into his webcam, he read from a script that he had written to tell them that the coronavirus had crushed the travel industry, including their home rental start-up. Divisions would have to be cut and workers laid off.

“I have a deep feeling of love for all of you,” Mr. Chesky said, his voice cracking. “What we are about is belonging, and at the center of belonging is love.” Within a few hours, 1,900 employees — a quarter of Airbnb’s work force — were told they were out.

The moves thrust Airbnb into the center of a growing debate in Silicon Valley: What happens when a company that has positioned itself as family to its employees reveals that it is just a regular business with the same capitalist concerns — namely, survival — as any other?

Start-ups that sell everything from mattresses to data-warehousing software have long used “making the world a better place”-style mission statements to energize and motivate their workers. But as the economic fallout from the coronavirus persists, many of those gauzy mantras have given way to harsh realities like budget cuts, layoffs and bottom lines.

That now puts companies with a “commitment” culture at the highest risk of losing what made them successful, said Ethan Mollick, an entrepreneurship professor at the University of Pennsylvania’s Wharton School.

“Part of the compensation is being part of this family,” Mr. Mollick said. “Now the family goes away, and the deal is sort of changed. It just becomes a job.”

In many ways, Airbnb was the ideal example of a commitment culture company. Founded by Mr. Chesky, Nathan Blecharczyk and Joe Gebbia in 2008, the start-up grew quickly as an online platform that helped homeowners rent out rooms to travelers. Along the way to a $31 billion valuation, it built a reputation as the polar opposite of its sharing economy peers such as Uber, which prized ruthless competition, and WeWork, which collapsed under a partying culture and its founder’s self-dealing.

Instead, Airbnb stood for earnest idealism. Mr. Chesky, 38, a stocky designer from upstate New York, spoke frequently of trustworthiness, authenticity and a desire to build a business that valued principles and people over the short-termism of Wall Street. Mr. Gebbia delivered a TED Talk on designing for trust. And Airbnb’s former chief ethics officer, Rob Chesnut, wrote a book called “Intentional Integrity.”

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Credit…Jim Wilson/The New York Times

Inside the San Francisco company’s airy, plant-filled offices, the posivibes were also plentiful. Employees surprised one another by raising their arms to form celebratory human tunnels, held dog “pawties” in conference rooms designed to look like actual Airbnb listings and were serenaded on their birthdays by the company’s a cappella group, Airbnbeats. New employees, who were screened for empathy in job interviews, were welcomed “home” and told: “You belong here.”

So in March, when the coronavirus hurtled in, the rupturing of the “Airfam” was painful. Airbnb, which had been on track to go public this year, suddenly faced an avalanche of travel cancellations. Revenue evaporated. Weeks later, Mr. Chesky announced the layoffs and scaled back the company’s ambitions.

“Everything that kind of could go wrong did go wrong,” he said in an interview. “It felt like everything stopped working at the same time.”

From the outside, Airbnb’s commitment culture appeared intact. Mr. Chesky’s layoffs script, which was published on the company blog, got more than one million views and was praised as compassionate, empathetic and a “lesson in leadership.” At a question-and-answer session about the job cuts later, Mr. Chesky and his co-founders offered a standing ovation to the employees they had let go. Clapping and heart emojis from audience members filled the screen.

But more than a dozen current and former Airbnb employees, most of whom declined to be identified because they had signed nondisparagement agreements with the company, said in interviews that they had experienced a sudden disillusionment when the carefully crafted corporate idealism cracked.

Kaspian Clark, 38, who worked in customer support in Portland, Ore., for around two years, said he had fully bought into Airbnb’s mission and felt denial and grief when he was let go.

“There are a lot of people who feel very betrayed by this,” he said. “I deeply hope that Airbnb is able to remain the thing that I believed in.”

A company spokesman said it “has been a difficult time for everyone.” He added, “The more than 5,000 people who work at Airbnb are incredibly motivated and enthusiastic because they believe in our mission.”

In a podcast interview in May with Eric Ries, a fellow entrepreneur, Mr. Chesky acknowledged a disconnect.

“How does a company whose mission is centered around belonging have to tell thousands of people they can’t be at the company anymore?” he said. “It was a very, very difficult thing to face.”

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Credit…Jason Henry for The New York Times

Airbnb was built not on a genius technological innovation or a meticulous business school PowerPoint, but on the idea that people might trust one another enough to stay in strangers’ houses. Basically, the goodness of humanity.

Its network of home rentals quickly spread across the United States and into almost every country. Airbnb raised more than $3 billion in venture capital and expanded into activities, luxury vacations, experiments with flights and even a print magazine.

As the company grew, Mr. Chesky began talking of a world where digital nomads healed divisions with in-person connections.

“I think in the future, people won’t travel — they’ll just be mobile,” he predicted in 2013. “People are going to be living a month here, a few weeks there, four months somewhere else.” Airbnb was not just renting vacation homes, the idea went, it was building a “United Nations around the kitchen table.”

His philosophy crystallized in 2018 when he presented a plan for something called “stakeholder” capitalism. In contrast to Wall Street’s focus on quarterly financial reports and daily stock moves, Mr. Chesky aspired to a capitalism that had an “infinite time horizon” and was good for society.

That philosophy imbued many areas of work for Airbnb employees. Part of their performance reviews, for instance, were based on how well they embodied the start-up’s core values, three former employees said. “Embrace the adventure” was sometimes used to justify difficult situations, they said, and “champion the mission” was code for putting a positive spin on things. (A company spokesman disputed the characterization.)

Airbnb’s rental listings grew from 2,500 in 2009 to seven million this year. The company landed funding from top venture firms including Andreessen Horowitz, Founders Fund and Sequoia Capital. Its valuation, which topped $2 billion in 2012, skyrocketed to $31 billion by 2017. An initial public offering this year was set to make its executives, investors and employees rich.

Enter the virus. As travel ground to a halt in March, Airbnb cut its 2020 revenue projection to less than half of the $4.8 billion it hauled in last year. Its I.P.O. filing, which Mr. Chesky had been tweaking with ideas for stakeholder capitalism and planned to submit by late March, went into a drawer.

Instead, Mr. Chesky said, he drew up a list of principles for operating in the virus. They included being decisive and emerging “on the right side of history.”

He compared the situation to a fire. “You’re in a house, it’s burning, you have to put out the fire while getting the furniture out of the house and also rebuilding the house,” he said.

Mr. Chesky asked Airbnb’s board of directors to call in to virtual meetings every Sunday and set up a daily “war room” meeting with his executive team. He said he had remained glued to his computer most days till around midnight, occasionally baking chocolate chip cookies or going on walks during calls.

There were stumbles. When guests wanted out of nonrefundable bookings because the pandemic had forced them to change their plans, Airbnb changed its policy to allow refunds. But the move outraged the company’s rental operators, who relied on the income. Mr. Chesky eventually apologized for how Airbnb had communicated the decision.

“Was everything done perfectly? No,” said Alfred Lin, an Airbnb board member and investor at Sequoia Capital. “It was about speed and being directionally right.”

Airbnb soon cut $800 million in marketing costs, dropped bonuses and halved executive pay for six months. It also ended contracts with roughly 490 full-time freelancers. With cancellations pouring in and call centers closed because of the virus, Airbnb directed employees across the company, including its recruiters, who had frozen hiring, to assist customers. The backlog took weeks to get through.

In April, the company raised $1 billion in emergency funding, followed by another $1 billion in debt.

Then came the May 5 layoffs. To blunt the shock, Airbnb’s severance packages included three months of salary and a year of health benefits, which was more generous than many other start-ups doing layoffs.

Mr. Chesky has since described a “second founding,” in which Airbnb will be more focused on its core home rental business. It will look different, he said, with fewer customers booking international travel, less flocking to crowded cities, more local trips and more long-term stays.

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Credit…Jessica Chou for The New York Times

Two days after the layoffs, the questions came thick and fast in the employee Q. and A. inside Awedience, Airbnb’s virtual meeting software, according to five people who attended.

Some workers asked why there weren’t furloughs or broader pay cuts instead of layoffs. Others asked why certain groups had been chosen for cuts and why the company couldn’t trim more perks, like its budget for renting office plants.

Mr. Chesky said the situation was too uncertain for furloughs and pay cuts, calling those temporary measures. Layoffs were mapped to the future business strategy, he added. A spokesman said the company spent only a small amount on landscaping and related services.

One area hit by layoffs was Airbnb’s safety team, which handles situations like shootings and assaults at its rentals. When a fatal shooting at a party in Orinda, Calif., made national headlines last fall, the company banned unauthorized parties at rentals and announced plans to confirm that all of its listings were what they advertised.

In the employee Q. and A., Mr. Chesky reiterated past statements that safety was a priority for the company. Workers piped up with written heckles — the equivalent of shouting in a crowded theater — with messages like “Safety was never a priority!” It was an unusual public show of dissent.

Within a week of the layoffs, new safety cases had piled up, two people with knowledge of the situation said. Airbnb asked some laid-off employees to return temporarily to work through the cases, they said. Workers on the regulatory response and payments teams were asked to come back temporarily as well, they said.

An Airbnb spokesman said that the groups focused on user safety were the same size as before the layoffs and that the company assessed its support staffing levels daily. “Brian has always made clear that safety is our priority,” he said.

During that time, Leonardo Baca, an information technology professional who was laid off, joined colleagues to attend a virtual magic performance presented by Airbnb Experience — part of the company’s activities booking service, which had moved online because of the virus. It was meant to be a team-building exercise but instead became a goodbye party.

Some laid-off colleagues were devastated, Mr. Baca said, while those who remained expressed dismay over why they had been spared. “We don’t know why people were cut,” he said. “You lose a piece of the team.”

Later, on a Slack channel for former employees, some lamented that Airbnb was gutting its culture, according to messages viewed by The New York Times. In June, an Airbnb contractor who had recently been let go wrote an editorial for Wired that quoted peers calling the company “hypocritical” for its “remarkably callous” treatment of contract labor during the pandemic.

An Airbnb spokesman said its contractors “were more than contractors, they were our teammates and friends.” He said the company had provided them two weeks of pay and other benefits.

Other issues bubbled up. In a chat room for female Airbnb employees after the layoffs, one laid-off worker described three instances of sexual harassment while at the company, saying that human resources was unhelpful and that co-workers brushed it off, according to an image of the conversation viewed by The Times. The latter, the person wrote, “hurt the most.”

The company said it does not tolerate harassment and discrimination and investigates all claims.

Last month, some employees in Airbnb’s China division sent a letter to management outlining what they said was inappropriate behavior by Yanxin Shi, engineering director for its China business, according to one of the employees responsible for the letter, which The Times viewed. They alleged that Mr. Shi had ranked female colleagues by attractiveness and had said he didn’t believe in the company’s “core values” but could perform them well enough to pass the job interview and teach others to do the same.

Airbnb said it had concluded that the letter’s “most serious allegations” were not supported and had taken “appropriate action,” but it did not specify what that was. Mr. Shi did not respond to a request for comment. Skift earlier reported on the letter.

Mr. Chesky said he remained optimistic. The company has been promoting signs of recovery, like a growing number of bookings within driving distance and adoption of its “virtual experiences.” In a virtual meeting on Wednesday afternoon, Mr. Chesky told Airbnb workers that the company would resume work on its plans to go public.

He also reflected on the last four months, which he said had been “traumatizing in some ways.” The crisis showed him that Airbnb had strayed from its roots as a place for people to connect, and he planned to rectify that.

“Something we can never lose,” Mr. Chesky said, “is being true to ourselves, being different, being special.”

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IPOs that could happen soon, cannot happen soon enough

Earlier today we took a look at two companies that have filed to go public, nCino and GoHealth. The pair join Lemonade in a march toward the public markets.

But those three firms are hardly alone. We know that DoorDash filed privately earlier this year (it also raised a pile of cash lately, so its IPO may not be in a hurry), and Postmates filed privately last year.

Even more, there are a number of companies whose IPOs we anticipate in short order. So, what follows is our incredibly scientific survey of impending IPOs, starting with those closest to the gate. This list is focused on companies that were at one point venture-backed startups, even if they have become behemoths in the intervening years.

We’ll start with companies that have filed and are moving toward debuts in the next few weeks:

  • nCino: This SaaS company is growing nicely, and has pretty good overall economics. We covered its financial history here. Its debut will be a win for North Carolina.
  • GoHealth: A Chicago success story that was swallowed by private equity last year, GoHealth is now an incredibly complicated company and offering that features lots of long-term indebtedness. But, its exit should provide reasonable returns to its current owner’s backers, who held onto the firm for less than a year before trying to flip it.
  • Lemonade: Lemonade’s IPO is an important moment for a number of modern insurance companies like Root, MetroMile, Kin and others. Not that they all sell the same type of insurance, mind, they don’t. Lemonade does rental and home insurance, while Root and MetroMile are focused on autos, for example. But if Lemonade manages a strong offering, it could provide tailwind to its fellow neo-insurance providers all the same.
  • Agora: We’re catching up on the Agora debut. The China-based company’s IPO filing details a company that provides other companies and developers the ability to “embed real-time video and voice functionalities into their applications without the need to develop the technology or build the underlying infrastructure themselves” via APIs. This sounds a bit like what Daily.co is building, if you recall that round. Agora is a company that has good operating income and net income before “accretion on convertible redeemable preferred shares to redemption value.” With that in hand, the company’s earnings are sharply negative. Read that how you want. Agora wants to raise between $280 million and $315 million.

And, next, companies that have filed privately but are still hanging back:

And here are companies that are making the sort of noise that one might make before finally going public:

All of the above is a jam, and I am stoked to dig through the S-1 trenches with you.

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NYSE seeks SEC approval for more direct listings

The New York Stock Exchange filed an amendment today with the Securities and Exchange Commission to allow for more direct listings.

Direct listings offer a more streamlined method for companies to go public and raise capital than traditional IPOs — which entail a lengthy roadshow process and involvement of underwriters to determine valuations and share-prices.

Traditionally, direct listings to raise capital have been available to companies only for follow on raises, after they’d completed the conventional initial public offering process.

The NYSE allowed tech companies Slack and Spotify to list directly in 2018 and 2019 and Silicon Valley insiders, such as VC Bill Gurley, have encouraged companies to pursue the method.

AirBNB — which this month revived talks of going public in 2020 — has said it would consider a direct listing rather than a traditional IPO.

The NYSE filed a proposal with the SEC in December to allow for more direct listings, but that was declined without public comment.

The amendment offered today provides more details on how the direct listing process — with a capital raise — would work, according to the NYSE’s Vice Chairman, John Tuttle.

“What we did, versus the early versions of the filing, is to [offer] a very granular, mechanical breakdown of how we would execute this type of transaction,” he told TechCrunch on a call.

Most of that surrounds how new shares are numbered, valued and priced in a direct listing. Traditional IPOs rely on underwriters —  that also charge hefty fees — to determine opening share-price, and that can swing widely once the stock actually goes to market.

The NYSE touts direct listings as a less costly way to go public and one that could lead to a less volatile price discovery process.

On when the NYSE’s proposed direct listing proposal could be approved or (denied), “The timeline is up to the SEC. Their first deadline for any action is this Saturday,” said Tuttle.

Updates to the listing process are just some of the changes that could come to New York Stock Exchange. The 228 year old, Wall Street based organization continued trading virtually through the COVID-19 outbreak, using digital platforms.

The pandemic could lead to the NYSE becoming less of a work from office entity and more a remote, work from home company in the future, Tuttle told TechCrunch in April.

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The Tech I.P.O. Comes Roaring Back in the Pandemic

SAN FRANCISCO — As the coronavirus spread in March, Vroom, a start-up that sells used vehicles online, shelved its plans to go public and rushed to shore up its operations.

But with many dealerships closed under shelter-in-place orders, people started buying more cars online, benefiting Vroom with record sales in March and April, the company said.

“We saw the whole world stabilizing,” said Paul Hennessy, the chief executive. “At the end of April, we said, ‘OK, maybe we should actually go on the offensive here.’”

Vroom, which is based in New York, capped that offensive by going public last week. Its share price more than doubled on the first day of trading as the company raised $495 million from its offering.

Vroom is part of a group of start-ups that have moved quickly to go public as the initial shock of the coronavirus has worn off. The stock market, which plummeted when the outbreak swept the United States, has rallied strongly in recent weeks. Since its nadir in late March, the S&P 500 index has climbed 40 percent.

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As the market has bounced back, SelectQuote, an online insurance provider; ZoomInfo, a sales software data provider; Warner Music Group, a record label; and Vroom have gone public. And more initial public offerings are on the way.

Lemonade, an insurance start-up valued at $2.1 billion, announced last week that it had confidentially filed to go public. DoubleDown Interactive, a mobile gaming company, also filed to go public this month.

Some of the biggest Silicon Valley start-ups are taking steps toward an I.P.O., too. Airbnb, the home rental start-up valued at $31 billion, said it hadn’t ruled out going public this year. Palantir, a digital surveillance company valued at $20 billion, is preparing to file for an I.P.O. in the coming weeks, said a person briefed on the start-up’s plans, who declined to be named because the talks were private.

Palantir declined to comment; Bloomberg reported earlier on its I.P.O. plans.

“The window is open,” said Previn Waas, a partner focused on I.P.O.s at the professional services firm Deloitte. “Everyone has figured out that a virtual I.P.O. is possible. There’s an appetite for companies to go public.”

Jeff Thomas, head of West Coast listings and capital markets at the Nasdaq stock exchange, said, “Everybody who was in process is gearing back up.”

Morgan Stanley had spent the last few months helping companies affected by the coronavirus find financing in every form — except public offerings, said Colin Stewart, Morgan Stanley’s head of technology equity capital markets. The market was too volatile, and companies had to assess how the virus had changed their financial forecasts, he said.

But now with the stock market more stable, the situation has changed. “It’s clear there is a lot of pent-up investor demand to look at I.P.O.s,” Mr. Stewart said.

Wall Street is embracing them even though many of the companies are losing money. Vroom lost $143 million last year on $1.2 billion in revenue, according to its disclosures. The food delivery start-up DoorDash, which filed in February to go public and has seen increased use in the pandemic, has also burned through hundreds of millions in cash and is unprofitable.

Last year, high-profile money losers such as Uber and Lyft also went public — and promptly skidded in the stock market. Their disappointing performances and the failed I.P.O. of WeWork set off a wave of prudence across the start-up world.

But excitement for new listings — especially for fast-growing tech companies — has sidelined the question of profitability. Investors have become more tolerant of money-losing companies because the virus has accelerated the adoption of technology like e-commerce, virtual learning, streaming, telehealth and delivery, said Gavin Baker, chief investment officer at Atreides Management, which invests in private and public companies.

“Covid pulled the world into 2030,” Mr. Baker said.

Not all of the companies that were on track to go public this year may make it, given how the economy is reeling from the pandemic. In early March, EquityZen, an investment service that tracks I.P.O.s, published a list of nine potential candidates for the year. Four — including the home rental company Vacasa, the 3-D printing company Desktop Metal and Velodyne Lidar, which makes technology for driverless cars — have since laid off staff because of the coronavirus.

“If we wrote the list today, it would have a very different set of components,” said Phil Haslett, a co-founder of EquityZen.

Airbnb, which had said it would go public this year, was hit especially hard by the travel shutdown. It raised new funding in April and cut a quarter of its staff. Asked about going public this year, Brian Chesky, its chief executive, said in a recent interview: “You can deal with some volatility, but there is a threshold. We’re kind of feeling out where that threshold is.”

The window for I.P.O.s right now may be small. A second wave of virus-related shutdowns could send the stock market into another tailspin. Companies also need to navigate disclosing their second-quarter financials, as well as holidays like Labor Day and Yom Kippur. Plus there is the November presidential election, which may create volatility in the market.

As a result, more companies than usual are aiming to go public in August, a month they traditionally avoided because people were often on vacation, Mr. Thomas of Nasdaq said. The exchange is telling companies to be ready to go public any time, he said, and to have alternative financing ready in case they can’t.

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Credit…via ZoomInfo

For chief executives trying to take their companies public now, the timing is a nail-biter. Henry Schuck, founder and chief executive of ZoomInfo, had been planning to get his company out to the stock market in late March. But when the virus hit, he started checking the VIX, an index that measures stock market volatility, every day. The index had rarely topped 20 over the past decade, but in March, it topped 80.

“The market was just not in a place to have an I.P.O. come out,” he said.

In May, after the market had stabilized, Mr. Schuck decided to go for it. But there were other challenges. While executives typically go on a “roadshow” to pitch their company’s shares to investors, he was stuck at home.

So he crammed back-to-back virtual meetings with investors into a week. Even though he was at home, he said, he made sure to dress up and even wear shoes. On the morning of ZoomInfo’s I.P.O. on June 4, Mr. Schuck hit a ceremonial virtual button to open trading, alongside his wife and 4-year-old daughter. ZoomInfo’s shares rose more than 60 percent on the first day of trading.

Mr. Hennessy of Vroom also held a virtual roadshow, taking meetings with investors via teleconference from his home in Suffern, N.Y. He said he appreciated the efficiency of the roadshow, which would normally have lasted two weeks across multiple cities.

On the day of the I.P.O. on June 9, Mr. Hennessy and his executive team could not travel to Nasdaq, where Vroom was listing, to press the opening buzzer since the exchange was not open to visitors. Nasdaq provided Vroom’s employees with an app to upload photos of themselves, which the exchange displayed on its tower in New York’s Times Square.

Vroom’s office, nearby at 37th Street and Broadway, remained closed, but a few employees in masks went to see their faces displayed on the tower, Mr. Hennessy said. He said he had preferred it to an in-person ceremony, since people in the whole company got to participate by sending in photos and sharing screenshots of themselves on the tower.

“Those Nasdaq moments are over in a few minutes with some confetti,” he said. “This lasted a couple of hours.”

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General Atlantic to invest $870M in India’s Reliance Jio Platforms

Mukesh Ambani’s Jio Platforms has agreed to sell its 1.34% stake to General Atlantic, the latest in a series of deals the top Indian telecom operator has secured in recent weeks.

On Sunday, New York-headquartered private equity firm General Atlantic said it would invest $870 million in the Indian telecom operator, a subsidiary of India’s most valued firm (Reliance Industries), joining fellow American investors Facebook, Silver Lake, and Vista Equity Partners that have also made sizeable bets on the three-and-a-half-year old Indian firm.

General Atlantic’s investment values Jio Platforms at $65 billion — the same valuation implied by the Silver Lake and Vista deals and a 12.5% premium over Facebook’s deal, the Indian firm said.

Sunday’s announcement further illustrates the growing appeal of Jio Platforms, which has raised $8.85 billion in the past one month by selling about 14.7% of its stake, to foreign investors that are looking for a slice of the fast-growing world’s second largest internet market.

General Atlantic, a high profile investor in consumer tech space that has invested in dozens of firms such as Airbnb, Alibaba, Ant Financial, Box, ByteDance, Facebook, Slack, Snapchat, and Uber, has been a key investor in India for more than a decade though it has avoided bets in consumer tech space in the country.

It has cut checks to several Indian startups including NoBroker, a Bangalore-based startup that helps those looking to rent or buy an apartment connect directly with property owners, edtech giants Unacademy and Byju’s, payments processor BillDesk, and National Stock Exchange of India. The PE firm, which has invested about $3 billion in India, said last week that it was looking to invest an additional $1.5 billion in Indian firms by next year — this time focusing on the players operating in consumer tech category.

Reliance Industries chairman Ambani, who has poured more than $30 billion to build Jio Platforms, said the telecom network would “leverage General Atlantic’s proven global expertise and strategic insights across 40 years of technology investing.”

“General Atlantic shares our vision of a digital society for India and strongly believes in the transformative power of digitization in enriching the lives of 1.3 billion Indians,” he added.

Prepaid SIM cards of Reliance Jio at a retail store. (Photo: INDRANIL MUKHERJEE/AFP via Getty Images)

Launched in the second half of 2016, Reliance Jio upended India’s telecommunications industry with cut-rate data plans and free voice calls. Jio Platforms, a subsidiary of Reliance Industries, operates the telecom venture, called Jio Infocomm, that has amassed 388 million subscribers since its launch to become the nation’s top telecom operator.

Reliance Jio Platforms also owns a suite of services including music streaming service JioSaavn (which it says it will take public), smartphones, broadband business, on-demand live television service and payments service.

“In just three and a half years, Jio has had a transformational impact in democratizing data and digital services, propelling India to be positioned as a leading global digital economy,” said Sandeep Naik, MD and Head of India & Southeast Asia at General Atlantic, in a statement.

The new capital would help Ambani, India’s richest man, further solidify his last year’s commitment to investors when he said he aimed to cut Reliance’s net debt of about $21 billion to zero by early 2021. Its core business — oil refining and petrochemicals — has been hard hit amid the coronavirus outbreak. Its net profit in the quarter that ended on March 31 fell by 37%.

In the company’s earnings call last month, Ambani said several firms had expressed interest in buying stakes in Jio Platforms in the wake of the deal with Facebook . Bloomberg reported last week that Saudi Wealth Fund was also in talks with Ambani for a stake in Jio Platforms.

Facebook said that other than offering capital to Jio Platforms for a 9.99% stake in the firm, it would work with the Indian giant on a number of areas starting with e-commerce. Days later, JioMart, an e-commerce venture run by India’s most valued firm, began testing an “ordering system” on WhatsApp, the most popular smartphone app in India with over 400 million active users in the country.

29-year-old Akash Ambani, the oldest son of Mukesh, said in a statement, “Jio is committed to make a digitally inclusive India that will provide immense opportunities to every Indian citizen especially to our highly talented youth.”

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The Results Are In for the Sharing Economy. They Are Ugly.

OAKLAND, Calif. — The coronavirus pandemic has gutted the so-called sharing economy. Its most valuable companies, which started the year by promising that they would soon become profitable, now say consumer demand has all but vanished.

It is not likely to return anytime soon.

In earnings reports this week, Uber and Lyft disclosed the depth of the financial damage. The companies said their ride-hailing businesses all but collapsed in March, the last month of the first quarter, as shelter-in-place orders spread through Europe and the United States.

The red ink extends beyond ride hailing. The home-sharing company Airbnb, which investors valued at $31 billion, had planned to go public this year. Instead, the company has slashed costs and raised emergency funding, and on Tuesday it laid off 1,900 employees, about 25 percent of its staff. It also reduced its revenue forecast for this year to half of what it brought in last year.

“While we know Airbnb’s business will fully recover, the changes it will undergo are not temporary or short-lived,” Brian Chesky, Airbnb’s chief executive, wrote in a memo to employees.

The companies, founded on the notion that they should become as big as possible as quickly as possible and worry about making a profit somewhere down the line, now face an uncertain future. And their timelines for turning a profit appear — for now — to have been tossed aside.

Even when people return to the office and start traveling, the pandemic could change how they behave for years to come. Thirty percent of gig-economy revenue could disappear over the next one to two years, with a portion of it unlikely to return, said Daniel Ives, managing director of equity research at Wedbush Securities.

“Based on our analysis of the gig economy and the overall pie of consumers, unfortunately, there’s a slice that — until there’s a vaccine — will not get in a ride-sharing vehicle or use an Airbnb,” Mr. Ives said.

On Tuesday, there was another threat to Uber and Lyft: California’s attorney general sued the companies, claiming that they misclassified their drivers as independent contractors. If the lawsuit is successful, the companies could have to pay hundreds of millions of dollars in civil penalties and back wages for drivers.

Airbnb faces a different challenge. How will hosts — most of them offering rentals as a side business — deal with virus safety? In an effort to bolster confidence in its listings, the company announced a set of new cleaning standards for its rentals in April. Guests can also opt for a 72- or 24-hour vacancy period before they enter.

There is not much to look forward to in the current quarter for the companies, according to financial analysts. Mr. Ives said he expected Uber’s revenue to contract 69 percent and Lyft’s 66 percent during the period, which covers April through June.

Lyft said rides on its service fell nearly 80 percent in late March and remained down 75 percent in mid-April. In May, passengers began to return cautiously to Lyft, but rides were still down 70 percent, Lyft executives said on a Wednesday earnings call with financial analysts.

If passengers continued to stay away from the service at similar rates, Lyft predicted it would lose nearly $360 million on an adjusted basis, which excludes stock-based compensation and other expenses, during the current quarter. Its adjusted loss in the first quarter was $97.4 million.

“These are the hard truths we’re facing,” Logan Green, Lyft’s chief executive, said on Wednesday. In late April, Lyft laid off 17 percent of its employees. Executives took a 30 percent pay cut and employee pay was trimmed 10 percent.

On Thursday, Uber said revenue in the first quarter grew 14 percent from the same quarter last year, but the company’s losses ballooned 190 percent to $2.9 billion. That deficit was largely driven by a $2.1 billion loss caused by its investments in international ride-hailing businesses, like Grab and Didi, that are also experiencing low demand because of the virus.

“I won’t sugarcoat it. Covid-19 has had a dramatic impact on rides,” Dara Khosrowshahi, Uber’s chief executive, said on Thursday in a call with investors. Use of Uber’s ride service was down 80 percent in April, he said. But Uber saw a bright spot in its food delivery, which grew 89 percent since the previous year, excluding India.

Although Uber has not yet given a new date by which it expects to become profitable, Mr. Khosrowshahi said the pandemic “will impact our timeline by quarters, not years.” Before the outbreak, Uber said it would be profitable, excluding some costs, by the end of this year.

Uber laid off 14 percent of its employees on Wednesday as it cut 3,700 people from its recruiting and customer service organizations.

Mr. Khosrowshahi will not take a salary for the rest of the year. He said in an email to remaining employees, seen by The New York Times, that the company continued to look for ways to cut costs and may eliminate more jobs over the next two weeks.

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Credit…Tomohiro Ohsumi/Getty Images

While Uber Eats, the food delivery service, has experienced increased demand and restaurant sign-ups in some markets, the company also shut down Uber Eats in several international markets where it had been burning cash and laid off 50 employees from that division.

Its bike and scooter business is another weak point, and Uber invested $85 million in a competing service, Lime, that would allow it to offload its bikes and scooters while still offering Lime’s fleet in its app.

About 500 employees who work on Uber’s bike and scooter offerings could lose their jobs.

“Lime has indicated that they plan to offer interview opportunities to a few members of our team, while others will receive severance packages,” Dennis Cinelli, the head of Uber’s micromobility team, said in an email to employees that was seen by The Times.

Financial analysts expect the companies to begin to recover as consumers return to work. They are still sitting on a lot of money. Uber has $9 billion, and Lyft has more than $2 billion. Before the virus, Airbnb had $3 billion in cash on its balance sheet; since then, it has raised $1 billion in funding and secured a $1 billion term loan.

Despite the downturn in business, Lyft’s stock was up more than 20 percent on Thursday as it exceeded investors’ expectations for revenue in the first quarter and reassured them with its layoffs last month that it would cut costs. Uber’s stock was up more than 8 percent in after-hours trading on Thursday.

But investors still question the companies’ claims that they will become profitable as they tap the $1.2 trillion that Americans spend each year on transportation costs like car ownership and maintenance.

Although Uber and Lyft said they provided a preferable transportation option over public transit, some analysts worried that consumers would choose to drive themselves rather than share a car with a ride-hail driver and risk spreading the virus.

“All investors are trying to figure out industries that the pandemic will permanently transform for the better or permanently transform for the worse,” said Tom White, a senior research analyst with the financial firm D.A. Davidson.

Kate Conger reported from Oakland, and Erin Griffith from San Francisco.

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Airbnb is buying trust during the COVID-19 travel slowdown

Hello and welcome back to our regular morning look at private companies, public markets and the gray space in between.
Airbnb’s recent moves in the wake of a global travel slowdown are interesting and worth understanding in chronological order. What it details is a company spending heavily today to keep up its future health. Demand will return to the world travel market in time — how much, no one knows — and Airbnb wants to be a well-liked participant in the return to form.
Building off our last look at the company, we should understand how Airbnb intends to not only …

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