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Low-code focused OutSystems raises $150M at a $9.5B valuation

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This morning OutSystems, a low-code app development service, announced that it has closed $150 million in new capital. The round was led by Abdiel Capital and Tiger Global. Notably this is not the largest funding event that the Portugal and U.S.-based software company has raised. TechCrunch covered a $360 million round that OutSystems raised in 2018.

OutSystems was founded in 2001, making it older than most companies that we cover on TechCrunch, and yet it remains privately held. And like many startups, it appears to have caught a tailwind from the accelerating digital transformation of companies both large and small.

By selling $150 million worth of its own shares at a $9.5 billion valuation, OutSystems parted ways with around 1.6% of itself in the deal. Investors would not be willing to buy such a tiny slice of a company for such a price if they didn’t have confidence in its future performance.

The new funds put OutSystems on an IPO path, we reckon; the company declined to discuss public market plans with TechCrunch. It could go out sooner rather than later. This round smells a bit like pre-IPO capital, and OutSystems touted its model to TechCrunch as “efficient” in a conversation about its new funding, implying moderate cash-consumption at worst.

TechCrunch had asked the company to break down its stated plan to invest its new capital in both go-to-market (GTM) capabilities and product (R&D) work. OutSystems CEO Paulo Rosado told TechCrunch in an email that even before this announcement OutSystems was “steadily increasing both our R&D and GTM capacity,” meaning that it was “investing for growth.” The company remains “focused on building scale in an efficient way,” the CEO added.

OutSystems works on low-code app development, in contrast to the startups and more mature private concerns that are focused on the no-code project; no-code tools do not involve code, while low-code services bring together some coding along with visual programming interfaces.

In an interview with Rosado in late 2020, he explained to TechCrunch the differences between no-code and low-code as both complexity (the ability to tackle heavy-duty internal corporate workflows) and extensibility (the ability to adapt).

In OutSystems’ view low-code is simply better suited to creating material corporate apps. Here’s how the CEO explained it:

The problem is not low-code is worse than no-code. If no-code is very narrow, which most no-code tools are, when you get [a] change request that goes beyond what you can do visually, that’s it. The only answer that you have for the customer is “no, we cannot do it.”

With low-code, you can do it. But you have to do it with code. You go, you [add] code, and the code then gets blended into the no-code portion.So low-code means it’s a no-code capability, with the possibility of jumping into code.

No-code fans would argue that as their tools’ ability to avoid code improves, the code-required portion of development that Rosado details will decline. Regardless, the OutSystem’s method approach to the market appears to be working, if its recent capital raise is any indication.

Back to the round, to better understand of OutSystems’ market position in both competitive and completeness terms, TechCrunch asked the CEO about its relative strength in customer pricing calls. He responded by saying that the OutSystem’s “pricing model is based on platform utilization” over traditional SaaS pricing. We could quibble with the company here – it does have seat limits on lower-priced tiers – but the focus on consumption over traditional SaaS reminded us more of on-demand software over what Salesforce pioneered. Given the changes we’ve seen in the SaaS market lately, it’s a distinction worth keeping in mind.

Finally, how competitive is the low-code market that OutSystems’ is now taking on with fresh funding? According to its CEO, their chief competitor is not some other startup, but, instead “non-consumption.” A bit like how Netflix is competing with sleep, instead of HBO.

TechCrunch has covered the no-code and low-code for quite some time. We put words together concerning OutSystem’s 2016-vintage, $55 million round for example. But lately it seems that the demand for corporate apps – be they no-code or low-code – does appear to have accelerated. In the last four or six quarters, startups in the less-code market have consistently reported high-demand to TechCrunch.

Let’s see if the moment is enough to carry OutSystems all the way to the public markets.

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Tim Hortons marks two years in China with Tencent investment

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Tim Hortons, the Canadian coffee and doughnut giant, has raised a new round of funding for its Chinese venture. The investment is led by Sequoia China with participation from Tencent, its digital partner in China, and Eastern Bell Capital. The round comes two years after Tim Hortons made its foray into China’s booming coffee industry.

Tim Hortons didn’t disclose the amount of its latest fundraise but noted in a social media post that the proceeds will be used for opening more stores, building its digital infrastructure, brand presence, and more.

Tencent, the Chinese social media and entertainment behemoth, first backed the 57-year-old Canadian coffee chain last May. At the time the tie-up was seen as Tencent’s move to counter archrival Alibaba’s alliance with Starbucks to deliver coffee and help the American coffee titan go digital in China.

Tim Horton’s collaboration with the WeChat parent is in a similar vein. It has so far accumulated three million members through its WeChat mini program, a type of lightweight app that runs within the instant messenger. To appeal to young Chinese consumers, Tim Hortons opened an esports-themed cafe with Tencent, China’s biggest gaming company.

Two years into operating in China, Tim Hortons says it has reached storefront-level profitability with a footprint of 150 locations across 10 major cities. It plans to add more than 200 locations in 2021 and reach 1,500 stores nationwide in the next few years.

The dramatic rise and fall of coffee delivery startup Luckin brought the prospects of China’s coffee market to the forefront. Despite the investment frenzy around Luckin and other coffee businesses, coffee drinking still has a relatively low penetration in China compared to countries like the United States and Germany. On the other hand, coffee consumption is growing at a much faster rate of 15% in China, well above the global average of 2%, and is projected to reach 1 trillion yuan ($150 million) in 2025, according to a 2020 report by Dongxing Securities.

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Bessemer Venture Partners closes on $3.3 billion across two funds

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Another major VC firm has closed two major rounds, underscoring the long-term confidence investors continue to have for backing privately-held companies in the tech sector.

Early-stage VC firm Bessemer Venture Partners announced Thursday the close of two new funds totaling $3.3 billion that it will be using both to back early-stage startups as well as growth rounds for more mature companies.

The Redwood City-based firm closed BVP XI with $2.475 billion and BVP Century II with $825 million in total commitments.

With BVP XI, it plans to focus on early-stage companies spanning across enterprise, consumer, healthcare, and frontier technologies. 

Its Century II fund is aimed at backing growth-stage companies that Bessemer believes “will define the next century,” and will include both follow-on rounds for existing portfolio companies or investments in new ones.

BVP XI marks Bessemer’s largest fund in its 110-year history. In October 2018, the firm brought in $1.85 billion for its tenth flagship VC fund. This latest fund is its fifth consecutive billion-dollar fund, based on PitchBook data. 

Despite being founded more than 100 years ago, Bessemer didn’t actually enter the venture business until 1965. It’s known for its investments in LinkedIn, Blue Apron and many others, with a current portfolio that includes PagerDuty, Shippo, Electric and DocuSign. Exits include Twitch and Shopify, among many others.

With more money than ever before available for backing startups, the challenge now for VCs is to see how and if they can find (and invest in) whatever will define the next generation of tech. 

“As venture capitalists, we pay too much attention to pattern recognition and matching when in reality, the biggest opportunities exist where those patterns break,” the firm wrote in a blog post today. “Our job is to make perceptive bets on the future, especially those that others will dismiss and ridicule. We are fundamental optimists and strong believers in the power of innovation; our life’s work is putting our reputation, time, and money to help entrepreneurs realize a different future. They’re the ones pioneering something entirely new and obscure – a technology, a business model, a category.

In addition to announcing the new funds, Bessemer also revealed today that it’s brought on five new partners including Jeff Blackburn, who joins after a 22-year career at Amazon, alongside the promotion of existing investors Mary D’Onofrio, Mike Droesch, Tess Hatch, and Andrew Hedin.

Most recently at Amazon, Blackburn served as senior vice president of worldwide business development where he oversaw dozens of Amazon’s minority investments and more than 100 acquisitions across all business lines – including retail, Kindle, Echo, Alexa, FireTV, advertising, music, streaming audio & video, and Amazon Web Services.  

“Having been part of Amazon for more than two decades, I’m excited to begin a new chapter helping customer-focused founders build breakthrough companies,” said Blackburn in a written statement.  “I’ve known the Bessemer team for many years and have long admired their strategic vision and success backing early-stage ventures.” 

With the latest changes, Bessemer now has 21 partners and over 45 investors, advisors, and platform “team members” located in Silicon Valley, San Francisco, Seattle, New York, Boston, London, Tel Aviv, Bangalore, and Beijing. 

“At Bessemer, there’s no corner office or consensus; every partner has the choice, independently, to pen a check. This kind of accountability and autonomy means a founder is teaming up with a partner and board director who thoroughly understands your business and can respond quickly and decisively,” the firm’s blog post read.

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Daily Crunch: Twitter announces ‘Super Follow’ subscriptions

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Twitter reveals its move into paid subscriptions, Australia passes its media bargaining law and Coinbase files its S-1. This is your Daily Crunch for February 25, 2021.

The big story: Twitter announces ‘Super Follow’ subscriptions

Twitter announced its first paid product at an investor event today, showing off screenshots of a feature that will allow users to subscribe to their favorite creators in exchange for things like exclusive content, subscriber-only newsletters and a supporter badge.

The company also announced a feature called Communities, which could compete with Facebook Groups and enable Super Follow networks to interact, plus a Safety Mode for auto-blocking and muting abusive accounts. On top of all that, Twitter said it plans to double revenue by 2023.

Not announced: launch dates for any of these features.

The tech giants

After Facebook’s news flex, Australia passes bargaining code for platforms and publishers — This requires platform giants like Facebook and Google to negotiate to remunerate local news publishers for their content.

New Facebook ad campaign extols the benefits of personalized ads — The sentiments are similar to a campaign that Facebook launched last year in opposition to Apple’s upcoming App Tracking Transparency feature.

Startups, funding and venture capital

Sergey Brin’s airship aims to use world’s biggest mobile hydrogen fuel cell — The Google co-founder’s secretive airship company LTA Research and Exploration is planning to power a huge disaster relief airship with an equally record-breaking hydrogen fuel cell.

Coinbase files to go public in a key listing for the cryptocurrency category — Coinbase’s financials show a company that grew rapidly from 2019 to 2020 while also crossing the threshold into unadjusted profitability.

Boosted by the pandemic, meeting transcription service Otter.ai raises $50M — With convenient timing, Otter.ai added Zoom integration back in April 2020.

Advice and analysis from Extra Crunch

DigitalOcean’s IPO filing shows a two-class cloud market — The company intends to list on the New York Stock Exchange under the ticker symbol “DOCN.”

Pilot CEO Waseem Daher tears down his company’s $60M Series C pitch deck — For founders aiming to entice investors, the pitch deck remains the best way to communicate their startup’s progress and potential.

Five takeaways from Coinbase’s S-1 — We dig into Coinbase’s user numbers, its asset mix, its growing subscription incomes, its competitive landscape and who owns what in the company.

(Extra Crunch is our membership program, which helps founders and startup teams get ahead. You can sign up here.)

Everything else

Paramount+ will cost $4.99 per month with ads — The new streaming service launches on March 4.

Register for TC Sessions: Justice for a conversation on diversity, equity and inclusion in the startup world — This is just one week away!

The Daily Crunch is TechCrunch’s roundup of our biggest and most important stories. If you’d like to get this delivered to your inbox every day at around 3pm Pacific, you can subscribe here.

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