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Boldstart Ventures gets bigger thanks to Kustomer and other early bets on technical founders

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Boldstart Ventures, a New York-based firm that started with a $1.5 million proof-of-concept fund in 2011, has just closed on $155 million in capital commitments for its fifth flagship fund and $75 million for its second opportunity fund, a vehicle meant to support breakout startups in its portfolio.

Given Boldstart’s focus — and its track record to date — it’s only surprising that the young firm didn’t raise more in the current market. From the outset, Boldstart has focused on technical founders in the U.S., Canada, and Europe who are already building, or are capable of building, SaaS products. Indeed, firm cofounder Ed Sim says the firm prides itself on “talking to founders before they even start their businesses.”

He points to some of the most valuable companies in the firm’s portfolio as outfits that Boldstart funded when they “just had slide decks and no product.” Among these is Snyk, a company that helps developers use open source code and stay secure and was valued at $2.6 billion when it raised its last round of funding in September. Another is Kustomer, a startup that specializes in customer-service platforms and chatbots and that Facebook acquired in November for a reported $1 billion. Boldstart was also there at the start of the data intelligence platform BigID, which closed its newest round in December at a $1 billion valuation.

We talked with Sim about making those early bets — and whether capturing founders so early on in their trajectory has grown harder as more and more VCs have begun pushing into the same types of deals.

TC: You’ve been investing in enterprise software for more than 20 years, so many founders know you are are. How much of your deal flow is inbound versus Boldstart seeing an underserved opportunity and tapping someone on the shoulder to start a company?

ES: It’s a combination of the two. Frankly, when we started in 2010, no one knew who Boldstart was, and no one really knew who we were five years ago. Over the last couple years, because our founders have been doing so well, people have kind of learned about us a little bit more [but] by no means are we really out there.

I think [part of our success ties to] around 75% of our investment opportunities coming from our existing founders — they are sharing their friends with us. They are introducing us to the VP of engineering who is leaving their company and has this bug where they want to start a company. Being able to track these people before they start their business is probably one of the most important things that we can do, no matter how we meet them.

TC: So much of a startup’s success centers on its ability to tell a story. Is it a challenge for technical founders to do this, in your experience? Is part of your job helping them find a cofounder who can sell that vision?

ES: You’re right that the ability to tell a story is so important in order to recruit that first hire, recruit your cofounder, get us investors excited, but I don’t think that’s been a problem [with technical founders]. It’s amazing, the amount of content that’s out there and the learnings from a lot of these VPs of engineering or heads of product [that founders absorb].

[Also] we really want to help them become CEOs of the world’s best enterprise companies, and that means having the patience and the understanding and providing the coaching and mentorship [they need], and even surrounding them from the very beginning with advisors or angel investors who have been there and done that. These are people from the Datadogs of the world, or the figures who might want to write a small check . .  and help the founders and share their knowledge. To bring in that village together from the very beginning and help a technical founder learn how to be a CEO is a fun and challenging endeavor that we like to take on.

TC: A lot of VCs have like flooded into enterprise investing in a more aggressive way. Are you having to write bigger checks, are you able to get the ownership percentage you used to get, and is it harder to maintain your pro rata?

ES: We are getting the target ownership that we’re looking for. We are able to earn our pro rata or super pro rata in a lot of situations. And finally, I would say that it’s been nice, in a way, that a lot of these larger firms are entering the enterprise space because there’s now plenty of funding from smart people for the founders who we back at the very beginning. . .

If you look at the portfolio, I’d say that 75% or more of our companies end up graduating to [up] rounds, and that’s been allowing us to work with new founders who are allowing us to write the checks that we want, because they know that we will spend the time and deliver value to them.

TC:  As these startups close funding rounds, sometimes just a few months after the last, has it become harder to retain employees? Are they hopping around more or less in this market?

ES: Access to capital is not as hard as it used to be, but access to talent is. People will say, ‘Well, you can hire people remotely.’ Well, yes, you can. But that means that now your competition is global.

With all the capital flowing, the biggest challenge for any company in hiring and accessing talent is building that engine and that culture, which are absolutely mission critical in order to build a world-class business. Those are the things that separate companies that scale quickly and companies that don’t. It’s not just the product; you need great people, and you need to think about this from day one. It’s also why it’s so important for us to help founders think about what’s next, what’s six months ahead or 12 months ahead, and help them figure how to build that engine from the start.

Pictured above: the Boldstart team meeting on Zoom.

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

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UK challenger bank Starling raises $376M, now valued at $1.9B

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Challenger banks continue to see huge infusions of cash from investors bullish on the opportunity for smaller and faster-moving tech-based banking startups to woo customers from their larger rivals. In the latest development, UK-based Starling announced that is has closed £272 million ($376 million at current rates), at a pre-money valuation of £1.1 billion.

This means that the round, a Series D, values the company at £1.372 billion ($1.9 billion) post-money.

Starling — which competes against incumbent banks, as well as other challengers like Monzo and Revolut — said it will be using the money to continue its growth. The bank is already profitable. In updated financials posted today, Starling said it generated revenue of £12 million ($16.6 million) in January of this year, up 400% compared to a year ago, with an annualized revenue run rate of £145 million. It posted operating profits for a fourth consecutive month, and net income currently exceeds £1.5 million per month.

Starling, founded in 2017, has now pased 2 million accounts, with 300,000 business accounts among them. It’s not clear how many of those accounts are active: the figures are for opened accounts, Starling said. Gross lending has passed £2 billion, with deposits at £5.4 billion.

Starling said it plans to use the funding both to expand its lending operations in the UK, to expand into other parts of Europe, and make some strategic acquisitions.

“Digital banking has reached a tipping point,” said Anne Boden, founder and CEO of Starling Bank, in a statement. “Customers now expect a fairer, smarter and more human alternative to the banks of the past and that is what we are giving them at Starling as we continue to grow and add new products and services. Our new investors will bring a wealth of experience as we enter the next stage of growth, while the continued support of our existing backers represents a huge vote of confidence.”

The round is being led by Fidelity Management & Research Company, with Qatar Investment Authority (QIA); RPMI Railpen (Railpen), the investment manager for the £31 billion Railways Pension Scheme; and global investment firm Millennium Management also participating, and it comes on the heels of us reporting in November that it was raising at least £200 million.

The funding comes at a critical time in consumer banking. The trend in the UK — the market where Starling is active — for the last several year has been a gradual shift to online and mobile banking, with those trends rapidly accelerating in the last year of lock-downs and enforced social distancing to slow down the spread of Covid-19.

Challenger (neo) banks have been some of the biggest winners of evolving consumer habits. Using rails provided as white-label services by way of APIs from banking infrastructure providers (another startup category in itself with companies like Rapyd, Plaid, Mambu, CurrencyCloud and others all involved) they will offer the same basic services such as checking and deposit, but they will typically do so with considerably  more flexibility, and additional savings and financial tips, and savings services to customers — all carried out over digital platforms.

Big, incumbent banks have scrambled to keep up with innovation, but newer generations of users are less beholden to their brands and incumbency, not least a result of the banking crisis last decade that revealed many of them to be cosiderably less competent and solid than many might have assumed.

That bigger market picture has also meant a surge of many neobanks, and so Starling competes with more than just the incumbents. Others include Monese, Revolut, Tide, Atom and Monzo — the latter a particularly acute competitor, founded by the ex-CTO of Starling.

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Deliveroo posted narrowed loss of $309M, with gross transactions surging to $5.7B in 2020, EITF shows

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The clock has officially started ticking on Deliveroo’s plans to go public in April. After announcing last week that it planned to list on the London Stock Exchange, today the on-demand food delivery company backed by Amazon and others published selected updated financials for the previous fiscal year, along with its Expected Intention to Float (EITF) — a more formal document that marks the two-week period until the company publishes its prospectus and, at the start of April, embarks on its subsequent IPO.

The bottom line is that Deliveroo is still unprofitable. It posted a 2020 underlying loss of £223.7 million ($309 million), but that figure was down by nearly £100 million from 2019, when it chalked up a loss of £317 million ($438 million). It did not disclose revenues (sometimes called turnover) in today’s statement.

The company said that it now serves some 6 million customers, with its three-sided marketplace also including more than 115,000 restaurants, takeaways and grocery stores, and 100,000 riders in 800 locations among 12 markets.

At the same time, Deliveroo showed some clear momentum in a year where many restaurants had to close their doors and shift operations to take-away models because of Covid-19.

It notes that it has been profitable on an “Adjusted EBITDA basis” over two quarters, with underlying gross profit up by 89.5% to £358 million ($495 million) compared to £189 million in 2019.

Its gross transaction volume (total amount spent by consumers ordering food) grew by 64% to £4.1 billion ($5.67 billion) with the run-rate in Q4 surging to £5 billion. This figure is unsurprising when you consider that Q4 represented the holiday period, and additionally the UK market (Deliveroo’s primary market and its home) went through not one but two different periods of being locked down in that quarter (the second of these is still in place).

It also notes that gross profit margin as a percentage of GTV has grown from 5.8% in 2018 to 8.8% in 2020, with some markets getting to 12%.

“The company remains focused on investing in driving growth in a nascent online food market,” it noted in the EITF, although I’m not sure nascent is exactly the word I’d use. Its drivers are easily the most visible of the many delivery services that exist in London. Deliveroo estimates that the restaurant and grocery sectors represent an addressable market of £1.2 trillion ($1.66 trillion) across the 12 regions where it offers services. In that figure, it says that just 3% of sales are estimated to be online, “equivalent to less than 1 out of the 21 weekly meal occasions being online.”

The company was valued at over $7 billion in it last fundraising, a $180 million round from Durable, Fidelity and others, as recently as January of this year.

It’s a huge leap that is the stuff that tech myths are made of (with untold hours of blood, sweat and tears, and a lot of luck too). I met Will Shu, the CEO and founder, when he was just really getting started at Deliveroo, and he seemed somewhat bewildered by how fast the startup was growing and where it was leading him. It’s interesting that he himself hasn’t forgotten those early days, either, which surely help keep the company focused at a time when there are a lot of opportunities, and therefore a lot of potential for focus unravelling.

“I never set out to be a founder or a CEO. I was never into start-ups, I didn’t read TechCrunch. I’m not one of those Silicon Valley types with a million ideas,” he noted in his letter published in the EITF. “I had one idea. One idea born out of personal frustration. An idea that I was fanatically obsessed with: I wanted to get great food delivered from amazing London restaurants.”

The prospectus will tell us how much the company intends to raise in its IPO so we’ll know those numbers soon. In the meantime, Deliveroo said that it plans to “invest in its long-term proposition by developing its core marketplace, enhancing its superior consumer experience, providing restaurant and grocery partners with unique tools to help them grow their businesses, and providing riders with the flexible work they value alongside security.”

It’s also going to continue building out “dark kitchens” (which it brands Editions); Signature, a white-label service for restaurants to offer delivery via their own online channels; Plus, a Prime-style loyalty subscription service; and on-demand grocery — which is also shaping up to be a huge market in Europe and the rest of the world.

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Porsche raises stake in electric car and components maker Rimac Automobili

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Rimac Automobili, the Croatian company known for its electric hypercars and battery and powertrain development, has gained yet another investment from Porsche AG.

Porsche said Monday it has invested 70 million euros ($83.3 miilion) into Rimac, a move that increases its stake from 15% to 24%.

This is the third time Porsche has invested into Rimac. The German automaker made its first investment into Rimac in 2018. Porsche increased its equity stake into Rimac in September 2019. A few months earlier, Hyundai Motor Company and Kia Motors jointly invested €80 million ($90 million at the time) into Rimac.

Rimac was founded by Mate Rimac in 2009 and is perhaps best known for its electric hypercars, such as the two-seater C Two that it debuted in 2018 at the Geneva International Motor Show. The vehicle produces an eye-popping 1,914 horsepower, has a top speed of 256 miles per hour and can accelerate from 0 to 60 mph in 1.85 seconds. Rimac plans to unveil C Two in its final form in 2021.

However, Rimac does more than produce hypercars. The company, which employs 1,000 people, also focuses on battery technology within the high-voltage segment, engineers and manufactures electric powertrains and develops digital interfaces between humans and machines.

Porsche is most interested in Rimac’s development of components, according to comments made by Lutz Meschke, the deputy chairman of Porsche AG’s executive board. Meschke noted that Rimac is “excellently positioned in prototype solutions and small series” and “is well on its way to becoming a Tier 1 supplier for Porsche and other manufacturers in the high-tech segment.”

Porsche has already placed its first orders with Rimac for the development of highly innovative series components, according to Meschke.

Despite its continued investments, Porsche said it doesn’t have a controlling stake in Rimac.

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