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Why are VCs launching SPACs? Amish Jani of FirstMark shares his firm’s rationale

It’s happening slowly but surely. With every passing week, more venture firms are beginning to announce SPACs. The veritable blitz of SPACs formed by investor Chamath Palihapitiya notwithstanding, we’ve now seen a SPAC (or plans for a SPAC) revealed by Ribbit Capital, Lux Capital, the travel-focused venture firm Thayer Ventures, Tusk Ventures’s founder Bradley Tusk, the SoftBank Vision Fund, and FirstMark Capital, among others. Indeed, while many firms say they’re still in the information-gathering phase of what could become a sweeping new trend, others are diving in headfirst.

To better understand what’s happening out there, we talked on Friday with Amish Jani, the cofounder of FirstMark Capital in New York and the president of a new $360 million tech-focused blank-check company organized by Jani and his partner, Rick Heitzmann. We wanted to know why a venture firm that has historically focused on early-stage, privately held companies would be interested in public market investing, how Jani and Heitzmann will manage the regulatory requirements, and whether the firm may encounter conflicts of interest, among other things.

If you’re curious about starting a SPAC or investing in one or just want to understand how they relate to venture firms, we hope it’s useful reading. Our chat has been edited for length and clarity.

TC: Why SPACs right now? Is it fair to say it’s a shortcut to a hot public market, in a time when no one quite knows when the markets could shift?

AJ: There are a couple of different threads that are coming together. I think the first one is the the possibility that [SPACs] works and really well. [Our portfolio company] DraftKings [reverse-merged into a SPAC] and did a [private investment in public equity deal]; it was a fairly complicated transaction and they used this to go public and the stock has done incredibly well.

In parallel, [privately held companies] over the last five or six years could raise large sums of capital, and that was pushing out the the timeline [to going public] fairly substantially. [Now there are] tens of billions of dollars in value sitting in the private markets and [at the same time] an opportunity to go public and build trust with public shareholders and leverage the early tailwinds of growth.

TC: DraftKings was valued at $3 billion when it came out and it’s now valued at $17 billion, so it has performed really, really well. What makes an ideal target for a SPAC versus a traditional IPO? Does having a consumer-facing business help get public market investors excited? That seems the case.

AJ: It comes down to the nature and the growth characteristics and the sustainability of the business. The early businesses that are going out, as you point out, tend to be consumer based, but I think there’s as good an opportunity for enterprise software companies to use the SPAC to go public.

SPAC [targets] are very similar to what you would want in a traditional IPO: companies with large markets, extremely strong management teams, operating profiles that are attractive, and long term margin profiles that are sustainable, and to be able to articulate [all of that] and have the governance and infrastructure to operate in a public context. You need to be able to do that across any of these products that you use to get public.

TC: DraftKings CEO Jason Robins is an advisor on your SPAC. Why jump into sponsoring one of these yourselves?

AJ: When he was initially approached, we were, like most folks, pretty skeptical. But as the conversations evolved, and we began to understand the amount of customization and flexibility [a SPAC can offer], it felt very familiar. [Also] the whole point of backing entrepreneurs is they do things differently. They’re disruptive, they like to try different formats, and really innovate, and when we saw through the SPAC and the [actual merger] this complex transaction where you’re going through an M&A and raising capital alongside that and it’s all happening between an entrepreneur and a trusted partner, and they’ve coming to terms before even having to talk about all of these things very publicly, that felt like a really interesting avenue to create innovation.

For us, we’re lead partners and directors in the companies that we’re involved with; we start at the early stages at the seed [round] and Series A and work with these entrepreneurs for over a decade, and if we can step in with this product and innovate on behalf of our entrepreneurs and entrepreneurs in tech more broadly, we think there’s a really great opportunity to push forward the process for how companies get public.

TC: You raised $360 million for your SPAC. Who are its investors? Are the same institutional investors who invest in your venture fund? Are these hedge funds that are looking to deploy money and also potentially get their money out faster?

AJ: I think a bit of a misconception is this idea that most investors in the public markets want to be hot money or fast money. You know, there are a lot of investors that are interested in being part of a company’s journey and who’ve been frustrated because they’ve been frozen out of being able to access these companies as they’ve stayed private longe. So our investors are some are our [limited partners], but the vast majority are long-only funds, alternative investment managers, and people who are really excited about technology asa long term disrupter and want to be aligned with this next generation of iconic companies.

TC: How big a transaction are you looking to make with what you’ve raised?

AJ: The targets that we’re looking for are going to look very similar to the kind of dilution that a great company would take going public —  think of that 15%, plus or minus, around that envelope. As you do the math on that, you’re looking at a company that’s somewhere around $3 billion in value.  We’re going to have conversations with a lot of different folks who we know well, but that’s that’s generally what we’re looking for.

TC: Can you talk about your “promote,” meaning how the economics are going to work for your team?

AJ: Ours [terms] are very standard to the typical SPAC. We have 20% of the original founders shares. And that’s a very traditional structure as you think about venture funds and private equity firms and hedge funds: 20% is is very typical.

TC: It sounds like your SPAC might be one in a series.

AJ: Well, one step at a time. The job is to do this really well and focus on this task. And then we’ll see based on the reaction that we’re getting as we talk to targets and how the world evolves whether we do a second or third one.

TC: How involved would you be with the management of the merged company and if the answer is very, does that limit the number of companies that might want to reverse-merge into your SPAC?

AJ: The management teams of the companies that we will target will continue to run their businesses. When we talk about active involvement, it’s very much consistent with how we operate as a venture firm, [meaning] we’re a strong partner to the entrepreneur, we are a sounding board, we help them accelerate their businesses, we give them access to resources, and we leverage the FirstMark platform. When you go through the [merger], you look at what the existing board looks like, you look at our board and what we bring to bear there, and then you decide what makes the most sense going forward. And I think that’s going to be the approach that we take.

TC: Chamath Palihapitiya tweeted yesterday about a day when there could be so many VCs with SPACs that two board members from the same portfolio company might approach it to take it public. Does that sound like a plausible scenario and if so, what would you do?

AJ: That’s a really provocative and interesting idea and you could take that further and say, maybe they’ll form a syndicate of SPACs. The way I think about it is that competition is a good thing. It’s a great thing for entrepreneurship, it’s a good thing overall.

The market is actually really broad. I think there’s something like 700-plus private unicorns that are out there. And while there are a lot of headlines around the SPAC, if you think about technology-focused people with deep tech backgrounds, that pool gets very, very limited, very quickly. So we’re pretty excited about the ability to go have these conversations.

You can listen in on more of this conversation, including around liquidation issues and whether FirstMark will target its own portfolio companies or a broader group or targets, here.

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Amid a boom in SPACs, few women investors

If you’ve been following the SPAC boom, you may have noticed something about these blank-check vehicles that are springing up left and right in order to take public privately held companies. They are being organized mostly by men.

It’s not surprising, given the relative dearth of women in senior financial positions in banking and the venture industry. But it also begs the question of whether women, already hustling to overcome a wealth gap, could be left behind if the trend gains momentum.

Consider that studies have shown women investors are are twice as likely to invest in startups with at least one female founder, and more than three times as likely to invest in startups with female CEOs. It’s not a huge leap to imagine that women-led SPACs might also be more inclined to identify women-led companies with which to merge and take public.

SPAC sponsors can reap handsome rewards, too. In return for lining up investors, then persuading a target company to accept the terms it offers them, sponsors typically receive 25% of the SPACs founder shares, which can mean a lot of money in a short amount of time, given that SPACs typically aim to merge with a company in two years or less. In fact, even if the SPAC performs terribly — say the company with which it merges is later accused of fraud — those sponsors get paid.

Eventbrite cofounder Kevin Hartz, who is overseeing a $200 million SPAC, explained it to us in August this way: “On a $200 million SPAC, there’s a $50 million ‘promote’ that is earned.” But “if that company doesn’t perform and, say, drops in half over a year or 18-month period, then the shares are still worth $25 million. (Hartz himself called this guaranteed payout “egregious,” though he and his partner in the SPAC, Troy Steckenrider, didn’t structure their SPAC differently, saying that as a first-time SPAC sponsor, they wanted to keep things straightforward.)

Women aren’t entirely unaccounted for in the current SPAC craze. Thanks to a state law passed in California in 2018, nearly all SPACs based in California have a female director, as reported earlier by Axios.

In the last two weeks, at least three SPACs to register with the SEC have been launched exclusively or in part by sponsors who are women. Hope Taiz, a New York-based investor who began her investment banking career at Drexel Burnham Lambert, registered plans this week with the SEC to raise a $300 million blank-check company called Aequi Acquisition.

Northern Star Acquisition, a consumer-focused SPAC co-led by magazine vet Joanna Coles, meanwhile filed for a $300 million IPO last week, and Climate Change Crisis Real Impact I Acquisition, a SPAC focused on climate technology, raised $200 million in an IPO . The blank check company is co-led by Mary Powell, the former CEO of Green Mountain Power.

One SPAC sponsor — Betsy Cohen, a founder and former CEO of the financial services company Bancorp — has really taken to SPACs, establishing four fintech-related shell firms so far, the most recent of which raised $750 million last month. (As an interesting aside, the SPAC programs of both Goldman Sachs and Jefferies are led by women.)

Given these developments, some might wonder — reasonably — if it isn’t a little early to worry about women missing out on this apparent gold rush. Still, women-led SPACs represent a tiny percentage of the 133 SPACs that have raised more than $50 billion in proceeds this year at last count.

More, the only traditional tech investors to jump into the pool to date are exclusively men, including Chamath Palihapitiya of Social Capital (who has dozens of SPACs in mind); Hartz and Steckenrider; entrepreneur-investors Reid Hoffman and Mark Pincus, Ribbit Capital’s Mickey Malka; former Uber executive Emil Michael; and the founders of FirstMark Capital.

It isn’t that their female counterparts aren’t paying attention, seemingly. A number of top women VCs with whom we’ve talked say they’re following the action and weighing how to participate. One such prominent investor told us she’s been researching under what circumstances it makes sense for VC firms to engage in a SPAC’s origination.

Others may be looking to gain exposure first to SPACs through their portfolio companies. Dana Grayson of Construct Capital, for example, led an early investment in the 3D printing company Desktop Metal — which is going public through a SPAC-led deal —  while a partner the firm NEA. At TechCrunch’s recent Disrupt event, Grayson, speaking about Desktop Metal, called SPACs a “great new viable alternative for companies.”

Either way, observes Kristi Marvin, a former investment banker who now runs the data site SPACInsider, it’s not time to panic, she suggests.

For one thing, as with “most banking things, SPACs skew heavily male,” so it’s to be expected that many more men are sponsoring SPACs. The SPAC market is also on the verge of overheating, based on what she is seeing. “You have 10 deals trying to price in the same day, and investors are tapped out.”

And SPACs require a learning curve that some underestimate. “It’s why you see hedge funds and PE firms more involved in SPACs; they have infrastructure to do them versus three guys who are facing a ton of work just to do the administrative side of things,” notes Marvin.

As with other financial products, Marvin expects to see more women embrace SPACs over time, especially if they prove to be as durable as many early adherents suggest. That said, she adds, “If in a year or two, it’s still only male VCs who’ve dipped their toe into SPACs, it may be a problem.”

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DCM is poised to make roughly $1 billion off its $26 million bet on Bill.com

David Chao, the cofounder of the cross-border venture firm DCM, speaks English, Japanese, and Mandarin. But he also knows how to talk to founders.

It’s worth a lot. Consider that DCM could see more than $1 billion from the $26.4 million it invested across 14 years in the cloud-based business-to-business payments company Bill.com, starting with its A round. Indeed, by the time Bill.com went public last December, when its shares priced at $22 apiece, DCM’s stake — which was 16% sailing into the IPO — was worth a not-so-small fortune.

Since then, Wall Street’s lust for both digital payments and subscription-based revenue models has driven Bill.com’s shares to roughly $90 each. Little wonder that in recent weeks, DCM has sold roughly 70 percent of a stake that’s currently valued at roughly $900 million and was worth more than $1 billion a few weeks ago. (It still owns 30 percent of its position.)

We talked with Chao earlier today about Bill.com, on whose board he sits and whose founder, René Lacerte, is someone Chao backed previously. We also talked about another very lucrative stake DCM holds right now, about DCM’s newest fund, and about how Chao navigates between the U.S. and China as relations between the two countries worsen. Our conversation has been edited lightly for length and clarity.

TC: I’m seeing you owned about 33% of Bill.com after the first round. How did that initial check come to pass? Had you invested before in Lacerte?

DC: That’s right. René started [an online payroll] company called PayCycle and we’d backed him and it sold to Intuit [in 2009] and René made good money and we made money. And when he wanted to start this next thing, he said, ‘Look, I want to do something that’s a bigger outcome. I don’t want to sell the company along the way. I just want this time to do a big public company.’

TC: Why did he sell PayCycle if that was his ambition?

DC: It was largely because when you’re a first-time CEO and entrepreneur and a large company offers you the chance to make millions and millions of dollars, you’re a bit more tempted to sell the company. And it was a good price. For where the company was, it was a decent price.

Bill.com was a little bit different. We had good offers before going public. We even had an offer right before we went public.  But René said, ‘No, this time, I want to go all the way.’ And he fulfilled that promise he’d made to himself. It’s a 14-year success story.

TC: You’ve sold most of your stake in recent weeks; how does that outcome compare with other recent exits for DCM? 

DC: We actually have another recent one that’s phenomenal. We invested in a company called Kuaishou in China. It’s the largest competitor to Bytedance’s TikTok in China. We’ve invested $49.3 million altogether and now that stake is worth $3.8 billion. The company is still private held, but we actually cashed out around 15% of our holdings. and with just that sale alone we’ve already [seen 10 times] that $30 million.

TC: How do you think about selling off your holdings, particularly once a company has gone public?

DC: It’s really case by case. In general, once a company goes public, we probably spend somewhere between 18 months to three years [unwinding our position]. We had two big IPOs in Japan last year. One company [has] a $1.6 billion market cap; the other is a $2.6 billion company. There are some [cases] that are 12 months and there are some [where we own some shares] for four or five years.

TC: What types of businesses are these newly public companies in Japan?

DC: They’re both B2B. One is pretty much the Bill.com of Japan. The other makes contact management software

TC: Isn’t DCM also an investor in Blued, the LGBTQ dating app that went public in the U.S. in July?

DC: Yes, our stake wasn’t  very big, but we were probably the first major VC to jump in because it was controversial.

TC: I also saw that you closed a new $880 million early stage fund this summer.

DC: Yes, that’s right. It was largely driven by the fact that many of our funds have done well. We’re now on fund nine, but our fund seven is on paper today 9x, and even the fund that Bill.com is in, fund four, is now more than 3x. So is fund five. So we’re in a good spot.

TC: As a cross-border fund, what does the growing tension between the U.S and China mean for your team and how it operates?

DC: It’s not a huge impact. If we were currently investing in semiconductor companies, for example, I think it would be a pretty rough period, because [the U.S.] restricts all the money coming from any foreign sources. At least, you’d be under strong scrutiny. And if we invested in a semiconductor company in China, you might not be able to go public in the U.S.

But the kinds of deals that we do, which are largely B2B and B2C — more on the software and services side — they aren’t as impacted. I’d say 90% of our deals in China focus on the domestic market. And so it doesn’t really impact us as much.

I think some of the Western institutions putting money into the Chinese market — that might be decreasing, or at least they’re a little bit more on the sidelines, trying to figure out whether they should be continuing to invest in China. And maybe for Chinese companies, less companies will go public in the U.S., etcetera. But some of these companies can go public in Hong Kong.

TC: How you feel about the U.S. administration’s policies?  Do you understand them? Are you frustrated by them?

DC: I think it requires patience, because what [is announced and] goes on the news, versus what is really implemented and how it truly affects the industry, there’s a huge gap.

[Correction: This story originally reported that DCM had sold nearly $900 worth of shares and maintains another 30%; the firm’s entire position is currently worth $900 million, with 30% of those shares still held.]

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Everyone filed to go public Monday

Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast (now on Twitter!), where we unpack the numbers behind the headlines.

We’re back out of sequence, because literally every company you can name (well, almost) dropped an S-1 yesterday so we had to sit down and parse them out a bit. That so many filings dropped during the same two days when we had Y Combinator’s two-day Demo Day at the same time meant that we were all a bit punch drunk, but we rallied.

Natasha and Danny and Chris and myself all piled back onto the mics to dig through all the numbers. Here’s a rundown of the companies we went through:

  • Palantir, which filed its formal S-1 during our recording session. Danny covered most of the news last Friday, but the public doc is now live, so happy sleuthing.
  • Unity’s huge IPO that shows how big gaming is. Natasha connected it to the broader Apple-Epic dust-up, and we all reviled in its growth results.
  • Snowflake had Danny so excited he was conjuring scripted segues, and we were all impressed at its historical growth. Sure, it lost a lot of money last year, but, hey, Snowflake has dialed that back as well.
  • And then there was Asana, a company I’ve covered quite a lot over the years. Our general take is that the company’s growth has been good, if it is losing more money than we anticipated. Still, Asana could set a neat new precedent of raising debt ahead of a direct listing. This is one to watch.
  • And then we spent a little time on JFrog and Sumo Logic (more here), because we are nothing if not completionists.

Got all of that? It was a lot of facts to get through, but we did our best and we hope this helps. More tomorrow as we talk Y Combinator with a special guest host. Chat tomorrow!

Equity drops every Monday at 7:00 a.m. PT and Friday at 6:00 a.m. PT, so subscribe to us on Apple PodcastsOvercastSpotify and all the casts.

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Palantir targeting 3 class voting structure according to leaked S-1, giving founders 49.999999% control in perpetuity

We are continuing to make progress through Palantir’s leaked S-1 filing, which TechCrunch attained a copy of recently. We have covered the company’s financials this morning, and this afternoon we talked about the company’s customer concentration. Now I want to talk a bit about its ownership and stock valuation.

First, let’s talk about ownership. Having read through our leaked copy of the S-1 the past few hours, I can only summarize the situation as: wow, this is a really complicated ownership structure.

At the highest level, the founders of the company — Peter Thiel, Alex Karp, and Stephen Cohen — own 30.2% of the stock of the company as of the end of July of this year. Thiel controls much more than that though through his myriad investments made through Founders Fund, Mithril Capital, Clarium Capital, and quite literally dozens of other investment management funds listed in the filing.

In terms of overall corporate voting power today, Thiel has 28.4% at his disposal, Karp 8.9%, and Cohen 3.1% according to the company’s calculation.

This is where things get interesting. As is typical with most modern tech IPOs, the founders of the business are looking to create multiple voting classes of stock in order to protect their voting power even while their total ownership of the company diminishes. It is pretty common today to see a two-class structure where the plebian stock class for retail investors offers one vote, and a special class is offered to founders that has 10 votes. This allows a founder with 5% of the company through these special shares to control a majority of a company’s voting authority.

Palantir wants to push the envelope further though with a three-class structure that would prioritize Thiel, Karp, and Cohen above all others. In Palantir’s model, there would be a Class A share with 1 vote, a Class B share with 10 votes, and a special “Class F” share with variable votes.

Class F shares would share 49.999999% (six 9s in the decimal – I counted twice) of the voting power of Palantir at all times, regardless of the underlying ownership of shares. Important to note that that is not a “majority” and thus they will not have literally a controlling stake in the public company.

In fact, Palantir has spent much of the last few months building the case for why it needs this special tripartite system of corporate governance. It hired several new members to its board of directors including Alexandra Schiff, Spencer Rascoff, and Alexander Moore earlier this year in order to build a “Special Governance Committee” that would make these changes to the company’s Delaware charter. Given that the founders were practically the only directors of the company outside of Adam Ross, it was hard to give themselves control by their own vote.

Palantir’s leaked S-1 has dozens of pages of the timeline and discussions that resulted, and why the committee ended up deciding to go with what can only be described as Byzantine method of voting.

That resolution still has to be supported by shareholders and of course, Wall Street. Much in the way that Palantir is going to have a lockup on its employees in a novel variant of the direct listing model, it seems it wants to pioneer a new model of founder ownership as well.

Stock valuation

Now, let’s switch over to a little chart showing Palantir’s preferred stock prices since inception and the current carrying value of those shares:

Immediately, we can see here that Palantir starting in 2013 really came into its own. The company, which was founded in 2003, showed little sign of deep outside investor interest for much of its early history. Its preferred stock share price grew linearly and slowly from its Series C in 2008 to its Series H in 2013.

Then, something interesting happens. There is almost immediately a radically increasing growth in the value of the stock with new issues in the Series H through K showing quick growth in value.

Recent stock sales have been common shares, and not preferred.

According to the company’s leaked S-1 we attained, only three shareholders passed the 5% threshold required for SEC disclosure. Founders Fund is listed as owning 12.7% of the company’s Class B shares, Japanese insurance giant SOMPO Holdings is listed as owning 20.3% of the company’s Class A shares, and investment bank UBS is at 5.7% of Class A shares. The company said that it had 529 million Class A shares and 1.09 billion Class B shares outstanding as of the end of June this year.

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Leaked Palantir S-1 shows company has 125 customers after 17 years

We are still walking through Palantir’s leaked S-1, which as of the time of this writing, hasn’t yet been filed and published by the SEC. This morning, we discussed some of Palantir’s financials, including its revenues, margins, and net losses.

The company’s customer base — and it’s high-degree of concentration — is a recurring theme in the leaked S-1 filing that TechCrunch has been reading all day.

Palantir has precisely 125 customers as of the end of the first half of 2020. Palantir notes that customers from different parts of the same government department or company are considered separately (Palantir’s example is that the CDC and NIH are both part of the Department of Health and Human Services, but would be billed separately and are thus considered separate customers for the purpose of its calculation).

As of the end of 2019, the average revenue per customer for Palantir was $5.6 million. In comparison to many other SaaS stocks, that is a gargantuan number, but mostly driven by the fact that Palantir doesn’t have the soft onboarding strategies of products like Slack or Amazon Web Services, where small organizations can start using a product even though they aren’t massive moneymakers.

Palantir notes that over the past decade, average revenue per customer has increased 30%.

What’s perhaps more worrying though is the sheer revenue concentration of Palantir. The company’s top three customers — which aren’t disclosed — together represented 28% of the company’s revenue for 2019. Its top twenty customers represented 67% of total revenues, with each one of those customers averaging $24.8 million in revenue.

As we reported this morning, 53.5% of the company’s revenue is derived from government contracts, with the balance from commercial clients.

Palantir’s filing says that 40% of revenue is generated in the U.S., with 60% generated internationally. The company says that it has clients in 150 countries (of course, reconciling 150 countries with 125 customers is left as a math exercise for the reader).

Palantir sees great growth opportunities in both its government and commercial businesses. On the government side, the company said in its note to shareholders that:

The systemic failures of government institutions to provide for the public — fractured healthcare systems, erosions of data privacy, strained criminal justice systems, and outmoded ways of fighting wars — will continue to require both the public and private sectors to transform themselves. We believe that the underperformance and loss of legitimacy of many of these institutions will only increase the speed with which they are required to change.

Palantir argues that its total addressable market is $119 billion.

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Airbnb could file to go public this month

According to the Wall Street Journal, Airbnb could file confidentially to go public as early as this month. The same report states that Airbnb could follow that filing with an IPO before year’s end. Morgan Stanley and Goldman are helping the former startup with its IPO process, the Journal writes.

The news that Airbnb’s IPO could be back on caps a tumultuous year for the home-sharing unicorn, which promised in 2019 to go public in 2020. The company was widely tipped to be considering a direct listing before COVID-19 arrived, crashing the global travel market, and with it, Airbnb’s financial health.

Airbnb declined to comment on its IPO plans.

As travelers stayed home, the company was forced to sharply cut staff, and take on billions in capital at prices that compared to its late 2019-momentum looked rather expensive.

But since those blows, Airbnb has began to make noise about positive progress regarding its platform usage, and, implicitly, its financial performance.

In June Airbnb said that between “May 17 to June 6, 2020, there were more nights booked for travel to Airbnb listings in the US. than during the same time period in 2019” and that “globally, over the most recent weekend (June 5-7), we saw year-over-year growth in gross booking value” for “the first time since February.”

And in July, the company that said that its users had “booked more than 1 million nights’ worth of future stays at Airbnb listings” globally in a single day, the first time since March 3rd that that had happened.

Precisely how far Airbnb has financially clawed its way back is not clear. But the company’s cost basis in the wake of its layoffs could lower the revenue base it needs to recover to reach something akin to profitability, a traditional IPO benchmark though one that has lost luster in recent years.

And with local travel taking off — slowly-improving airline occupancy rates are, therefore, not indicative of Airbnb’s performance or health — the company could have retooled its business in the wake of COVID to something that can still put up attractive revenues at strong margins.

Needless to say I am hype to read the Airbnb S-1, so the sooner it drops the happier I’ll be. Getting an in-depth look at what happened to the unicorn during COVID-19 is going to be fascinating.

Airbnb joins DoorDash, Coinbase, Palantir, and others on our IPO shortlist. More as we have it.

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Secretive data startup Palantir has confidentially filed for an IPO

Secretive big data and analytics startup Palantir, co-founded by Peter Thiel, said late Monday it has confidentially filed paperwork with the U.S. Securities and Exchange Commission to go public.

Its statement said little more. “The public listing is expected to take place after the SEC completes its review process, subject to market and other conditions.”

Palantir did not say when it plans to go public nor did it provide other information such as how many shares it would potentially sell or the share price range for the IPO . Confidential IPO filings allow companies to bypass the traditional IPO filing mechanisms that give insights into their inner workings such as financial figures and potential risks. Instead, Palantir can explore the early stages of setting itself up for a public listing without the public scrutiny that comes with the process. The strategy has been used by companies such as Spotify, Slack and Uber. However, a confidential filing doesn’t always translate to an IPO.

A Palantir spokesperson, when reached, declined to comment further.

Palantir is one of the more secretive firms in Silicon Valley, a provider of big data and analytics technologies, including to the U.S. government and intelligence community. Much of that work has drawn controversies from privacy and civil liberties activists. For example, investigations show that the company’s data mining software was used to create profiles of immigrants and consequently aid deportation efforts by the ICE.

As the coronavirus pandemic spread throughout the world, Palantir pitched its technology to bring big data to tracking efforts.

Last week, Palantir filed its first Form D in four years indicating that it is raising $961 million. According to the filing, $550 million has already been raised and capital commitments for the remaining allotment have been secured.

With today’s news, the cash raise looks complementary to the company’s ambitions to go public. One report estimates that the company’s valuation hovers at $26 billion.

Palantir’s filing is another example of how the IPO market is heating up yet again, despite the freeze COVID-19 put on so many companies. Last week, insurance provider Lemonade debuted on the public market to warm waters. Accolade, a healthcare benefits company, similarly is sold more shares than expected.

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DoubleDown is going public: Why isn’t its IPO worth more?

Agora isn’t the only company headquartered outside the United States aiming to go public domestically this quarter. After catching up on Agora’s F-1 filing, the China-and-U.S.-based, API-powered tech company that went public last week, today we’re parsing DoubleDown Interactive’s IPO document.


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The mobile gaming company is targeting the NASDAQ and wants to trade under the ticker symbol “DDI.”

As with Agora, DoubleDown filed an F-1, instead of an S-1. That’s because it’s based in South Korea, but it’s slightly more complicated than that. DoubleDown was founded in Seattle, according to Crunchbase, before selling itself to DoubleU Games, which is based in South Korea. So, yes, the company is filing an F-1 and will remain majority-held by its South Korean parent company post-IPO, but this offering is more a local affair than it might at first seem.

Even more, with a $17 to $19 per-share IPO price range, the company could be worth up to nearly $1 billion when it debuts. Does that pricing make sense? We want to find out.

So let’s quickly explore the company this morning. We’ll see what this mobile, social gaming company looks like under the hood in an effort to understand why it is being sent to the public markets right now. Let’s go!

Fundamentals

Any gaming company has to have its fun-damentals in place so that it can have solid financial results, right? Right?

Anyway, DoubleDown is a nicely profitable company. In 2019 its revenue only grew a hair to $273.6 million from $266.9 million the year before (a mere 2.5% gain), but the company’s net income rose from $25.1 million to $36.3 million, and its adjusted EBITDA rose from $85.1 million to $101.7 million over the same period.

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