Just Raised- 04/05/2022
By Alan Soclof
3 BIG STORIES
1. A Fast Collapse
This past week, The Information released multiple pieces on Fast, the one-click checkout company, with some wild details.
The first piece reported that the company is looking to raise another $100M @ a $450M valuation vs. the $500M valuation at its last $102M raise (led by Stripe). They’re also telling new investors that they’re planning to cut hundreds of jobs.
The second piece, released two days later, shared that the company shockingly only earned $600K in revenue last year, but still hired over 400 employees and burned $10M a month. After struggling to raise capital, the company is now looking to be acquired.
Could we have seen this collapse coming?
Hindsight is always 20/20, but here are my favorite red flags provided by Fast CEO Domm Holland:
- He did donuts in a race car dressed in Fast gear as another PR stunt
- He skydived out of a plane as a PR stunt
- He bought a domain name in 2010 just to hold it hostage to one of the biggest Australian airlines, as detailed in this NPR article
Also, I can’t stop thinking about Stripe in this situation. What did one of the best companies in the world—the third-biggest unicorn cranking almost $10B in annual revenue—see in Fast that they felt leading a $102M round was a smart move?
In many ways the struggles and down round of Fast seem to have a lot less to do with the macro forces present in the market than the fact that this is not a very good company. This is a very different situation than an Instacart or Gopuff.
Prediction: Fast will be acquired over the next few months for ~$400M and will leave the spotlight as fast as they entered it.
2. A Square Prize
Prizeout, a payment ad tech platform, announced a $25M Series B that includes investment from Mark Cuban, Precept Capital, and Continental Investment Capital, among others.
The best way to explain what Prizeout does is through an example. Let’s say you bet on UNC over Duke in Saturday night’s game and made $100. Instead of withdrawing that money into a bank account, Prizeout will match you with a corporate partner like Amazon, Lowe’s, Nordstrom, or Domino’s and give you a $118 coupon to their site.
Yes, you receive a meaningful chunk of cash to buy products from a company you likely already shop at. (Hopefully not all of that money would go to Domino’s, however. That is a lot of mediocre pizza.)
Off the bat, I can’t get over how cool of an idea this is. Entrepreneurs are just built different.
One nugget that really stuck out to me regarding Prizeout was that they recently partnered with Square, enabling Prizeout to access millions of small businesses nationwide. This got the gears in my brain churning about the bigtime acquisition Square made of AfterPay, the buy-now-pay-later (BNPL) company, for $29B.
As exemplified by the price tag, consumers have fallen in love with BNPL. Imagine how much more they would love it if a significant discount system like Prizeout’s was embedded into the process. Sounds like a consumer’s dream come true.
I’m sure Square will be monitoring how Prizeout does on the platform, and if things go well Prizeout CEO David Metz might hear his phone ringing soon.
The only reason we don’t see this happen is if Jack Dorsey and Co. feel that the simplicity of the BNPL process is part of its appeal.
Prediction: I think Prizeout is awesome, and if they’re not acquired by Square (or I guess Block), I think we have a unicorn on our hands.
3. A Crypto River
Last week, Cross River Bank announced a $620M funding round at a $3B+ valuation led by PE firm Eldridge & a16z.
Cross River has quickly become known as the bank for everything FinTech and crypto, supporting ~80 companies like:
The growth the bank has seen is massive too. In 2015, Cross River originated $2.4B, and today that number has 10x to over $24B.
This is massive news for the crypto industry. CRB has been crucial to the success of many of crypto’s greatest. And now that CRB has a serious warchest, the best crypto companies will have no problem securing funds.
Interestingly, Cross River Bank has been profitable since 2010. Many in CRB’s shoes would likely be more conservative and move toward becoming a more classic bank, but that is obviously not in their DNA.
The biggest banks are playing catchup to CRB and their relationships and understanding of the marketplace are massive competitive advantages. If the good vibes keep rolling in crypto land, CRB is poised to continue being a rocketship.
At the same time, no bank is as exposed to the crypto landscape as CRB is if things turn in the wrong direction—something that could easily happen if crypto bulls get greedy.
Even Vitalik Buterin, creator of the Ethereum blockchain, has concerns. In an interview with Time magazine last month the historically quiet Buterin shared these two interesting quotes:
- “Crypto itself has a lot of dystopian potential if implemented wrong.”
- “If we don’t exercise our voice, the only things that get built are the things that are immediately profitable.”
CHART OF THE DAY
Curious Trends in Telehealth
- Telehealth absolutely exploded during the pandemic, going from .2% of medical claims in January to 13% in its peak in April 2020.
- Since the April 2020 peak, the usage of telehealth has decreased significantly, approaching under 4% until the rise of Omicron.
- Telehealth is here to stay, but my question is: As the world (hopefully) returns to normal, will telehealth be much smaller than people think? That could be devastating for VCs who invested billions of dollars into this space.
What They Do: Marketplace for gaming NFTs
Amount Raised: $35M seed round
Lead Investors: Paradigm, Multicoin Capital
The Rundown: Fractal is founded by Justin Kan, cofounder of Twitch, the #1 video game viewing service acquired by Amazon. Using a Twitch-like interface, the company looks to create a marketplace for the top Web3-focused video games.
Fractal is focused on quality over quantity, represented by the fact that only 5% of gaming applicants have been accepted onto the platform. There has already been significant engagement on the platform: there were 33K buyers for one game’s NFTs, and “Tiny Collection” (game) raised over $2M from their initial NFT offering.
What They Do: Nationwide laundry service
Amount Raised: $10M seed round
Lead Investors: Headline Ventures
The Rundown: SudShare is looking to revolutionize the laundry space. The company offers a $1-per-pound service to pick up, clean, and deliver your laundry back to you by the next day.
It’s hard for me to put into words how badly I want this company to succeed. This is my dream come true.
What They Do: Turning paternal leave into a competitive advantage
Amount Raised: $1.4M seed round
Lead Investors: N/A
The Rundown: Parentaly is a company looking to turn parental leave into a competitive advantage by helping companies adopt or increase family-friendly parental leave programs.
Parentaly has created supportive parental leave systems that help companies improve their business results. They ultimately want the parental leave process to uplift employees by removing unnecessary work and upleveling junior employees who provide coverage support. In turn, employees returning from leave will feel supported and help improve retention while also growing their careers.
Along with the raise, the company announced a partnership with The Hunt Club, a hiring company focused on digital health companies with over 6M candidates in its system.
What They Do: Artist-centered music therapy platform
Amount Raised: $800K pre-seed round
Lead Investors: Dr. Venus Nicolino, Rough Draft Ventures, Gaingels
The Rundown: SoundMind is a mental health app that looks to leverage the power of music to help people with anxiety, mood, and stress.
The company will use these funds to launch the second version of their app which will include personal stories and curated music from prominent music artists.
What They Do: Women’s health CBD product brand
Amount Raised: $750K pre-seed round
Lead Investors: More than 50% of investors were women
The Rundown: Lure Life is a female-founded and majority Black-owned venture that creates various CBD health products focused on women’s health and wellness. The company looks to use these funds to create additional products on top of their existing three.
Learn More: Press Release & Company Website
Q: Sequoia Capital announced the successor to Douglas Leone. What is his name?
Here are three of my favorite jobs from the startup/VC world today. Click here to post a job on the Just Raised Job Board and get it featured.
In this gig, the analyst will build and manage data models and use tools like Periscope and Tableau for visualization for one of Silicon Valley’s greatest success stories. As discussed in Newsletter #22, Instacart recently cut its valuation from $30B to $24B. This is actually a good thing for people looking to get a gig with the company as this means you will get your options at a lower valuation!
Cambium Carbon is an awesome company focused on creating local wood supply chains; they connect local craftsmen and companies with surplus wood that would otherwise go to landfills. Cambium is looking to put the $3M seed round they raised last month to use by hiring a Marketing Manager that will be responsible for content creation, performance analysis, PR and so much more.
Capchase is a FinTech company that provides financial solutions to startups. The company’s core product enables startups to receive funding for their venture in a non-dilutive manner. After raising an $80M Series B in early March, the company is building out their team of Financial Analysts. In this position, the analyst will be responsible for assessing the credit risk of the recurring revenue companies that Capchase works with. View More →
- I can’t get over this video of a crow helping a hedgehog crossing the street.
- Barron’s seems a lot more excited than I was on Starry’s (SPAC discussed in last newsletter) prospects! Interesting read breaking down the SPAC.
- I actually cannot get over the fact that Elon Musk bought 9% of Twitter. The ultimate flex.
- Can’t wait for the Cleveland Guardians’ opening day on Thursday! (And to get bored after the second pitch!) Thoughts on the team’s new official song? I almost really like it.
- Checked out All-In podcast #74. Not too much VC talk but a lot of good macro conversations. Definitely left the pod a whole lot smarter.
- Started going down a BBQ YouTube rabbit hole and this behind-the-scenes video of how Peter Luger makes steak?! I need a steak.