The TechCrunch Exchange - Why are so many unicorns raising mega-rounds?

Saturday, September 26, 2020 • By Alex Wilhelm

Welcome back to The TechCrunch Exchange, a weekly startups-and-markets newsletter. It's broadly based on the daily column that appears on Extra Crunch, but free, and made for your weekend reading.

The Exchange column is off most of next week as I am off until Friday. After that, regular service will resume. Make sure to show Danny and Natasha and Chris love on the podcast while I'm out.

Ready? Let's talk money, startups and spicy IPO rumors.

Why are so many unicorns raising mega-rounds?

We should see two direct listings next week when I am offline. Palantir and Asana are expected to start trading on Tuesday and Wednesday, respectively. It's going to be a big moment for the companies, and for direct listings as a method of going public.

Both Asana and Palantir raised capital ahead of their debuts (more here, and here), giving them the leeway to go public without selling more stock. Why does this matter? If the two companies debut well, and there's some leeway in terms of what that means, we could perhaps see more companies favor a direct listing over the traditional IPO path or a SPAC-led flotation.

As we'll discuss in the next section, there's ample late-stage money available to make direct listing dreams into reality. Maybe. I don't want to argue that direct listings will stay rare, as I would have thought that SPACs would also stay niche. But 2020 has had a way of twisting everything around and making the seemingly impossible rather likely.

On a personal level, the Asana public debut is something I've been looking forward to for years, and am pretty gutted to miss it after I interviewed one of its co-founders at my very first TechCrunch Disrupt on staff. But time off matters, so I'm going to try to stay as offline as I can. Feel free to tweet me what happens, if you'd like to toture me a little bit.

Before we get into a wave of news and notes on what's new, recaps of the Disrupt SaaS panel and the $100 million ARR panel are now online, if you're into that sort of thing.

Why are so many unicorns raising mega-rounds? image

Image Credits: Nigel Sussman

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Market notes

Today we're taking a late-stage focus:

We've seen two mega fintech rounds in the last week or so, one from Chime and one from Robinhood. The Robinhood round is more an extension on a previously announced $200 million infusion — a Series G — to $660 million in total. Chime's $485 million investment, meanwhile appears to be the full amount in one go.
My read of the situation is that the huge revenue gains that the two unicorns have seen are attracting big checks ahead of expected liquidity. Which, given the recent spate of hugely successful IPOs, is not too hard to imagine.
Robinhood's Q2 growth was epic, and the new capital coming in could hint that Q3 is also going well. Chime flat-out announced 3x revenue growth in 2020 and unadjusted EBITDA positivity. That's impressive as hell for a company that was tipped to do $200 to $300 million in revenue last year.
Speaking of fintech companies raising fat rounds, Greenlight's $215 million Series C is worth your time, in case you missed it.
Also out this week: News that European delivery giant Deliveroo is reported to be starting IPO talks. Why? A COVID-related delivery bump, per Bloomberg. This is one to keep an eye on.
On the subject of well-funded startups eventually going public, thanks to Lemonade’s epic IPO earlier this year, it appears that Root is looking to debut as well. Its reported, possible $6 billion IPO valuation seems within reason, given what we know about Lemonade's own multiples.
The late-stage news doesn't stop: Just sticking to the insurance market, Next Insurance raised $250 million this week.
A few weeks ago, nearly as a joke I wrote about the reasons to be bullish on Palantir's direct listing. New revenue guidance helps make the case even more strongly. Palantir's historical results are uneven, but its expected revenue growth in the rest of 2020 looks set to accelerate. Not bad.

That's a lot of big rounds, and anticipated liquidity seen or reported in the aftermath of all-time highs for tech stocks. What happens if tech stocks drop another 10, or 15%?

Various and sundry

Connected fitness is hot and we're calling it the Peloton Effect.
The Corsair IPO was cool this week, and worth your time to look into. I only got to touch on it, but it's the most interesting IPO that the tech press somewhat ghosted in a long time. My bad.
I got on the phone with Kim Jabal, the CFO of Unity, last week after this newsletter got wrapped. Its IPO went well. Pricing at $52, far above its early price ranges, the company is worth around $83 billion as I write to you.
Jabal reported that Zoom roadshows are not bad at all, really, and have some benefits. The CFO also praised her firm's "very data-driven process" of getting to an IPO price. Sure, shares have appreciated after its debut, but nothing like what we saw when Snowflake debuted. That's good, given that the Snowflake IPO was a bit messy on the early trading side of things.
Unity's IPO was notable for allowing existing shareholders to sell up to 15% of their holdings, executives excepted. That move doesn't appear to have caused any undue damage to the company and could have helped boost its float, making for a more reasonable first-day experience.
I caught up with the new CFO from Zuora this week, Todd McElhatton, to chat about his company's recent performance and the future. More notes to come later, but the gist is that Zuora has run through a good portion of the COVID-related churn that it will have to, meaning that it hopes to get back to growth soon.
The gap between the company's bullishness on subscription economy and its own somewhat muted growth post-IPO have always been an interest of mine. It will be interesting to see what impact McElhatton has on the company's growth rate.
Point Nine capital has a new fund worth €99,999,999, which is hilarious.
SPACs are about half of IPO volume this year, which seems 100% totally normal and not indicative of a pretty broken moment in the markets.
And the GoodRX IPO priced at $33 a share, closing its first day up 53%.
Oh, and I have a recap coming of my chat with Accel's Andrew Braccia and Sonali De Rycker when I get back, I just ran out of time. My bad!