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GoCardless raises another $95M as it bets on open banking alongside its recurring payments network

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GoCardless, the London fintech that aims to become the one-stop shop globally for businesses that want to let customers pay via recurring bank payments, has raised $95 million in Series F funding.

According to The Telegraph newspaper, this gives the company much coveted unicorn status. However, I understand the round values GoCardless at just over $970 million, meaning that the 2011-founded fintech is perhaps best described as a soonicorn (presuming these things are important to you).

The latest fundraise was led by Bain Capital Ventures, and follows 46% year-on-year growth for GoCardless as it benefits from an increase in e-commerce and online payments generally during the pandemic. It brings the total raised by the company to-date to $240 million.

GoCardless says it will use the funding to accelerate its open banking strategy, which will see it combine open banking-enabled bank-to-bank payments with the global bank debit payments network it has already built out. “For the first time, merchants will be able to access the best of both worlds for recurring payments: Instant open banking payments will provide visibility and speed, while bank debit maximises cash flow and minimises churn by pulling funds automatically from payers – all at a lower cost than cards,” pitches the fintech.

In addition — and noteworthy — GoCardless says it will also expand its offering into the “adjacent e-commerce market” to launch a simple and secure way of making open banking-enabled bank-to-bank payments as a lower-cost alternative to cards.

The company has always pitched direct debits as a much better recurring payments method, especially for subscription commerce and regular B2B payments. That’s because, amongst other things, debit and credit cards expire, breaking any subsequent recurring payments. By adding bank-to-bank payments to its stack, GoCardless is continuing to push up against the card network duopoly of Visa and Mastercard.

“We think the magic is in the combination of open banking payments and our existing direct debit platform,” co-founder and CEO Hiroki Takeuchi tells me, when asked why GoCardless is entering the soon to be commoditized space of open banking payments.

“They are really complimentary as open banking is faster and more secure but direct debit is more flexible and more reliable. The combination will create something entirely new and unique that will not only make our product better for our existing customers but also enable us to go after new markets”.

He says that GoCardless already has the required FCA permissions to do open banking payments, and new products are actively under development. Debut products will be launching in the first half of 2021.

“We have been following open banking very closely but we felt it wasn’t reliable enough or slick enough for payments until quite recently,” adds Takeuchi. “This has been changing and we think now is the perfect time to focus on open banking payments”.

One interesting aspect of open banking is that the U.K. regulator is currently consulting with the industry on plans to make recurring payments possible via open banking, meaning that they could be used instead of direct debits. Arguably, GoCardless’ biggest moat is the global recurring payments network it has built, and so I put it to Takeuchi that open banking is both an opportunity and a threat to GoCardless.

“We don’t worry about this – we are agnostic to the rails we build on,” he says, pushing back. “What we care about is getting money from one bank account to another as efficiently as possible. In fact, we processed the first (and I think maybe the only) variable recurring payment via open banking last year as part of a test we worked on with the open banking team.

“If open banking offers rails that replicate direct debit then we will adopt those. The reality is that the payment itself is only a small part of the overall value we provide for our merchants — there are a lot of other basics such as reconciliation, refunds, international settlement, FX etc. that are really important — so we are confident that there is still a lot for us to do”.

Lyron Foster is a Hawaii based African American Musician, Author, Actor, Blogger, Filmmaker, Philanthropist and Multinational Serial Tech Entrepreneur.

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Extra Crunch roundup: antitrust jitters, SPAC odyssey, white-hot IPOs, more

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Some time ago, I gave up on the idea of finding a thread that connects each story in the weekly Extra Crunch roundup; there are no unified theories of technology news.

The stories that left the deepest impression were related to two news pegs that dominated the week — Visa and Plaid calling off their $5.3 billion acquisition agreement, and sizzling-hot IPOs for Affirm and Poshmark.

Watching Plaid and Visa sing “Let’s Call The Whole Thing Off” in harmony after the U.S. Department of Justice filed a lawsuit to block their deal wasn’t shocking. But I was surprised to find myself editing an interview Alex Wilhelm conducted with with Plaid CEO Zach Perret the next day in which the executive said growing the company on its own is “once again” the correct strategy.


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In an analysis for Extra Crunch, Managing Editor Danny Crichton suggested that federal regulators’ new interest in antitrust enforcement will affect valuations going forward. For example, Procter & Gamble and women’s beauty D2C brand Billie also called off their planned merger last week after the Federal Trade Commission raised objections in December.

Given the FTC’s moves last year to prevent Billie and Harry’s from being acquired, “it seems clear that U.S. antitrust authorities want broad competition for consumers in household goods,” Danny concluded, and I suspect that applies to Plaid as well.

In December, C3.ai, Doordash and Airbnb burst into the public markets to much acclaim. This week, used clothing marketplace Poshmark saw a 140% pop in its first day of trading and consumer-financing company Affirm “priced its IPO above its raised range at $49 per share,” reported Alex.

In a post titled A theory about the current IPO market, he identified eight key ingredients for brewing a debut with a big first-day pop, which includes “exist in a climate of near-zero interest rates” and “keep companies private longer.” Truly, words to live by!

Come back next week for more coverage of the public markets in The Exchange, an interview with Bustle CEO Bryan Goldberg where he shares his plans for taking the company public, a comprehensive post that will unpack the regulatory hurdles facing D2C consumer brands, and much more.

If you live in the U.S., enjoy your MLK Day holiday weekend, and wherever you are: thanks very much for reading Extra Crunch.

Walter Thompson
Senior Editor, TechCrunch
@yourprotagonist

 

Rapid growth in 2020 reveals OKR software market’s untapped potential

After spending much of the week covering 2021’s frothy IPO market, Alex Wilhelm devoted this morning’s column to studying the OKR-focused software sector.

Measuring objectives and key results are core to every enterprise, perhaps more so these days since knowledge workers began working remotely in greater numbers last year.

A sign of the times: this week, enterprise orchestration SaaS platform Gtmhub announced that it raised a $30 million Series B.

To get a sense of how large the TAM is for OKR, Alex reached out to several companies and asked them to share new and historical growth metrics:

  • Gthmhub
  • Perdoo
  • WorkBoard
  • Ally.io
  • Koan
  • WeekDone

“Some OKR-focused startups didn’t get back to us, and some leaders wanted to share the best stuff off the record, which we grant at times for candor amongst startup executives,” he wrote.

5 consumer hardware VCs share their 2021 investment strategies

For our latest investor survey, Matt Burns interviewed five VCs who actively fund consumer electronics startups:

  • Hans Tung, managing partner, GGV Capital
  • Dayna Grayson, co-founder and general partner, Construct Capital
  • Cyril Ebersweiler, general partner, SOSV
  • Bilal Zuberi, partner, Lux Capital
  • Rob Coneybeer, managing director, Shasta Ventures

“Consumer hardware has always been a tough market to crack, but the COVID-19 crisis made it even harder,” says Matt, noting that the pandemic fueled wide interest in fitness startups like Mirror, Peloton and Tonal.

Bonus: many VCs listed the founders, investors and companies that are taking the lead in consumer hardware innovation.

A theory about the current IPO market

Digital generated image of abstract multi colored curve chart on white background.

Digital generated image of abstract multi colored curve chart on white background.

If you’re looking for insight into “why everything feels so damn silly this year” in the public markets, a post Alex wrote Thursday afternoon might offer some perspective.

As someone who pays close attention to late-stage venture markets, he’s identified eight factors that are pushing debuts for unicorns like Affirm and Poshmark into the stratosphere.

TL;DR? “Lots of demand, little supply, boom goes the price.”

Poshmark prices IPO above range as public markets continue to YOLO startups

Clothing resale marketplace Poshmark closed up more than 140% on its first trading day yesterday.

In Thursday’s edition of The Exchange, Alex noted that Poshmark boosted its valuation by selling 6.6 million shares at its IPO price, scooping up $277.2 million in the process.

Poshmark’s surge in trading is good news for its employees and stockholders, but it reflects poorly on “the venture-focused money people who we suppose know what they are talking about when it comes to equity in private companies,” he says.

Will startup valuations change given rising antitrust concerns?

GettyImages 926051128

financial stock market graph on technology abstract background represent risk of investment

This week, Visa announced it would drop its planned acquisition of Plaid after the U.S. Department of Justice filed suit to block it last fall.

Last week, Procter & Gamble called off its purchase of Billie, a women’s beauty products startup — in December, the U.S. Federal Trade Commission sued to block that deal, too.

Once upon a time, the U.S. government took an arm’s-length approach to enforcing antitrust laws, but the tide has turned, says Managing Editor Danny Crichton.

Going forward, “antitrust won’t kill acquisitions in general, but it could prevent the buyers with the highest reserve prices from entering the fray.”

Dear Sophie: What’s the new minimum salary required for H-1B visa applicants?

Image Credits: Sophie Alcorn

Dear Sophie:

I’m a grad student currently working on F-1 STEM OPT. The company I work for has indicated it will sponsor me for an H-1B visa this year.

I hear the random H-1B lottery will be replaced with a new system that selects H-1B candidates based on their salaries.

How will this new process work?

— Positive in Palo Alto

Venture capitalists react to Visa-Plaid deal meltdown

A homemade chocolate cookie with a bite and crumbs on a white background

OLYMPUS DIGITAL CAMERA

After news broke that Visa’s $5.3 billion purchase of API startup Plaid fell apart, Alex Wilhelm and Ron Miller interviewed several investors to get their reactions:

  • Anshu Sharma, co-founder and CEO, SkyflowAPI
  • Amy Cheetham, principal, Costanoa Ventures
  • Sheel Mohnot, co-founder, Better Tomorrow Ventures
  • Lucas Timberlake, partner, Fintech Ventures
  • Nico Berardi, founder and general partner, ANIMO Ventures
  • Allen Miller, VC, Oak HC/FT
  • Sri Muppidi, VC, Sierra Ventures
  • Christian Lassonde, VC, Impression Ventures

Plaid CEO touts new ‘clarity’ after failed Visa acquisition

Zach Perret, chief executive officer and co-founder of Plaid Technologies Inc., speaks during the Silicon Slopes Tech Summit in Salt Lake City, Utah, U.S., on Friday, Jan. 31, 2020. The summit brings together the leading minds in the tech industry for two-days of keynote speakers, breakout sessions, and networking opportunities. Photographer: George Frey/Bloomberg via Getty Images

Zach Perret, chief executive officer and co-founder of Plaid Technologies Inc., speaks during the Silicon Slopes Tech Summit in Salt Lake City, Utah, U.S., on Friday, Jan. 31, 2020. The summit brings together the leading minds in the tech industry for two-days of keynote speakers, breakout sessions, and networking opportunities. Photographer: George Frey/Bloomberg via Getty Images

Alex Wilhelm interviewed Plaid CEO Zach Perret after the Visa acquisition was called off to learn more about his mindset and the company’s short-term plans.

Perret, who noted that the last few years have been a “roller coaster,” said the Visa deal was the right decision at the time, but going it alone is “once again” Plaid’s best way forward.

2021: A SPAC odyssey

In Tuesday’s edition of The Exchange, Alex Wilhelm took a closer look at blank-check offerings for digital asset marketplace Bakkt and personal finance platform SoFi.

To create a detailed analysis of the investor presentations for both offerings, he tried to answer two questions:

  1. Are special purpose acquisition companies a path to public markets for “potentially-promising companies that lacked obvious, near-term growth stories?”
  2. Given the number of unicorns and the limited number of companies that can IPO at any given time, “maybe SPACS would help close the liquidity gap?”

Flexible VC: A new model for startups targeting profitability

12 ‘flexible VCs’ who operate where equity meets revenue share

Spotlit Multi Colored Coil Toy in the Dark.

Spotlit Multi Colored Coil Toy in the Dark.

Growth-stage startups in search of funding have a new option: “flexible VC” investors.

An amalgam of revenue-based investment and traditional VC, investors who fall into this category let entrepreneurs “access immediate risk capital while preserving exit, growth trajectory and ownership optionality.”

In a comprehensive explainer, fund managers David Teten and Jamie Finney present different investment structures so founders can get a clear sense of how flexible VC compares to other venture capital models. In a follow-up post, they share a list of a dozen active investors who offer funding via these non-traditional routes.

These 5 VCs have high hopes for cannabis in 2021

Marijuana leaf on a yellow background.

Image Credits: Anton Petrus (opens in a new window) / Getty Images

For some consumers, “cannabis has always been essential,” writes Matt Burns, but once local governments allowed dispensaries to remain open during the pandemic, it signaled a shift in the regulatory environment, and investors took notice.

Matt asked five VCs about where they think the industry is heading in 2021 and what advice they’re offering their portfolio companies:

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GitLab oversaw a $195 million secondary sale that values the company at $6 billion

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GitLab has confirmed with TechCrunch that it oversaw a $195 million secondary sale that values the company at $6 billion. CNBC broke the story earlier today.

The company’s impressive valuation comes after its most recent 2019 Series E in which it raised $268 million on a 2.75 billion valuation, an increase of $3.25 billion in under 18 months. Company co-founder and CEO Sid Sijbrandij believes the increase is due to his company’s progress adding functionality to the platform.

“We believe the increase in valuation over the past year reflects the progress of our complete DevOps platform towards realizing a greater share of the growing, multi-billion dollar software development market,” he told TechCrunch.

While the startup has raised over $434 million, this round involved buying employee stock options, a move that allows the company’s workers to cash in some of their equity prior to going public. CNBC reported that the firms buying the stock included Alta Park, HMI Capital, OMERS Growth Equity, TCV and Verition.

The next logical step would appear to be IPO, something the company has never shied away from. In fact, it actually at one point included the proposed date of November 18, 2020 as a target IPO date on the company wiki. While they didn’t quite make that goal, Sijbrandij still sees the company going public at some point. He’s just not being so specific as in the past, suggesting that the company has plenty of runway left from the last funding round and can go public when the timing is right.

“We continue to believe that being a public company is an integral part of realizing our mission. As a public company, GitLab would benefit from enhanced brand awareness, access to capital, shareholder liquidity, autonomy and transparency,” he said.

He added, “That said, we want to maximize the outcome by selecting an opportune time. Our most recent capital raise was in 2019 and contributed to an already healthy balance sheet. A strong balance sheet and business model enables us to select a period that works best for realizing our long-term goals.”

GitLab has not only published IPO goals on its Wiki, but its entire company philosophy, goals and OKRs for everyone to see. Sijbrandij told TechCrunch’s Alex Wilhelm at a TechCrunch Disrupt panel in September that he believes that transparency helps attract and keep employees. It doesn’t hurt that the company was and remains a fully remote organization, even pre-COVID.

“We started [this level of] transparency to connect with the wider community around GitLab, but it turned out to be super beneficial for attracting great talent as well,” Sijbrandij told Wilhelm in September.

The company, which launched in 2014, offers a DevOps platform to help move applications through the programming lifecycle.

Update: The original headline of this story has been changed from ‘GitLab raises $195M in secondary funding on $6 billion valuation.’

 

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Facebook blocks new events around DC and state capitols

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As a precaution against coordinated violence as the U.S. approaches President-elect Joe Biden’s inauguration, Facebook announced a few new measures it’s putting in place.

In a blog post and tweets from Facebook Policy Communications Director Andy Stone, the company explained that it would block any events slated to happen near the White House, the U.S. Capitol or any state capitol building through Wednesday.

The company says it will also do “secondary” sweeps through any inauguration-related events to look for violations of its policies. At this point, that includes any content connected to the “Stop the Steal” movement perpetuating the rampant lie that Biden’s victory is illegitimate. Those groups continued to thrive on Facebook until measures the company took at the beginning of this week.

Facebook will apparently also be putting new restrictions in place for U.S. users who repeatedly break the company’s rules, including barring those accounts from livestreaming videos, events and group pages.

Those precautions fall short of what some of Facebook’s critics have called for, but they’re still notable measures for a company that only began taking dangerous conspiracies and armed groups seriously in the last year.

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