A Record, A Round, And An IPO

Morning Markets: One venture round, one impending IPO, and where the Nasdaq is pointing both the private and public markets.

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Last week on Equity I tried to highlight a sentiment shift in the technology world. Bullishness felt ascendant once again.

Sure, venture activity was down compared to some 2018 highs in the first quarter, but the Nasdaq was popping, big rounds were landing, and the IPO market looked hot.

Things have continued in that vein. Yesterday, for example, both the Nasdaq and the S&P 500 “finished in record territory, notching all-time highs for the first time since fall and late summer,” as MarketWatch put it. Given that the public markets help shape opinion in the private markets (optimism and pessimism bleed from the stock market into how private investors value companies), it’s an important moment for the firms that we cover here.

An IPO

The market warmth we just described is driving companies through the IPO gauntlet.

Yesterday we dug into the DouYu IPO filing (Remember the Huya debut? DouYu marks another esports-focused offering.), only to discover that we’d missed a different China-based technology offering targeting the U.S. markets. Say hello to Yunji, an ecommerce company with a membership component.

According to its latest F-1 filing, this is how it works:

If that isn’t clear, the company’s model depends on using lots of IRL and digital tech to link suppliers and consumers. That’s how Amazon works, with its website, services, and distribution network powering an ecommerce stack.

Yunji tallied $1.892 billion in revenue last year (cost of 2018 revenue: $1.557 billion), leading to a slim operating loss of $14.5 million. The firm grew 92 percent from 2017 to 2018, for reference, while cutting its operating loss slightly. That’s a path to profitability.

And Yunji has done all that while not raising billions of dollars. Indeed, Crunchbase has just $154.9 million in recorded capital for the company. Some rounds that we know about don’t have listed round values, but even given that its capital thirst seems lesser than what we’ve seen from some companies.

So we’ve discussed our record and our IPO. Let’s peek at an interesting round.

A Round

A company called Eightfold.ai announced a $28 million round this morning. Eightfold is a company I know a bit. I met a few of its team in San Francisco last year.

That a company with an “.ai” suffix raised a $28 million Series C is not surprising. In fact, that’s nearly the platonic ideal of a 2019 venture capital round. What makes Eightfold interesting isn’t its funding amount (though it added IVP to its backer list, which isn’t bad at all), but rather what it’s trying to accomplish.

Eightfold wants to help big companies with what it describes as their “number one challenge,” namely “hiring and retaining top talent.” If you ask CEOs of tech companies what’s bothering them, the talent crunch is a pretty common response, so Eightfold is tackling a reasonable problem.

The economy is hot (see above), and markets are rewarding tech companies looking to reach the next level (see above), exacerbating the talent crisis. But even if there was a correction of moderate size, talent would still be tough in and around tech hubs. That puts the startup in a somewhat fun spot; unless tech is decimated in a correction, I’d hazard that Eigthfold is slightly recession-proof.

That aside, Eightfold is working in a space where there is demand, and it, putatively at least, has a solution. The combination should help it grow quickly. Sadly, the firm declined to share growth metrics with Crunchbase News.

Hot Times

Taking all that together, the public markets are setting new records, tech companies of all shapes and sizes and profitability are targeting the U.S. markets, and startups looking to solve hot-market talent problems are finding new backers and fresh capital.

It’s still hot times in tech. No matter how bad things looked in December.

Illustration: Li-Anne Dias.