JUUL, Startup Growth, And Who Is Investing For The Long-Term

Morning Markets: Welcome to a Friday grab bag of startup news and musings.

Ever make dinner with what’s left in the fridge at the end of a busy week? Mostly this column gets through all the topics and news that fit its purview in any given five-day period. Other times, like this week, I wind up with a few interesting leftover tidbits that I still need to share.

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So we’ll cram them into one post. Today we’re talking startup ARR growth (again), JUUL’s job posting growth, public SaaS mayhem, and some notes on two funds, one sovereign wealth and one venture-focused.

Startup ARR Growth

In the final week of August, I collated a number of startup (ie non-public, venture-backed, growth-oriented) revenue growth rates. In particular, we published a few annual recurring revenue (ARR) growth figures. That was jolly good, but I wanted to not merely collect and publish numbers we’d known. I wanted newer, fresher figures.

So I asked for them. And, to my pleasant surprise, a few companies wrote in. Points to Userlytics and Signal Vine for being sporting. Afterward, however, another company wrote in and wound up sitting in inbox purgatory. I couldn’t do an entire post about one data point. That would be silly.

But I could toss it in with the rest of the half-cut veggies if I compiled other odds and ends into a varied frittata. So, here’s our late entrant:

  • ID Finance: The fine folks at ID Finance reported via email that their revenue expanded from just over 20 million Euro in the first half of 2018 to 36.7 million Euro in the first half of 2019. That’s growth of just over 91 percent, year-over-year.

ID Finance is a Barcelona-based fintech company that has raised $56 million to-date, including a $6 million Series A from 2015 and a $50 million round of debt in February of 2017.

JUUL’s Job Growth

As a former smoker, I switched to JUUL like a bundle of my friends. Then the company got into all sorts of legal trouble.

I somewhat thought that the company’s recent regulatory rough patch would have slowed it down. From at least one key perspective, that’s not the case. Thinknum, a company that compiles public data into growth signals, reported in a few charts sent to Crunchbase News that the number of JUUL job postings is near a record high, while the company’s total number of employees (headcount) appears to be at an an all-time high as well.

This actually makes sense. The company is still raising capital (read here and here), and has a very lucrative market. I know that because I spend about as much on JUUL Pods as I do on my smartphone contract.

SaaS Goes Up, SaaS Goes Down

Holy heck what a (mostly not great) week for SaaS companies. Smartsheet got whacked. Slack went up, and then very sharply down. Box went up, but only because it might be forced to sell itself. You get the picture.

We cover SaaS stocks on Crunchbase News as a huge swath of startups depend on the subscription model to sell their digital goods and services. What happens to the public SaaS companies drives sentiment for startups. So, we watch the top of the market so that we can predict the weather for private companies.

After writing about the matter this week, let’s zoom out. Two facts are useful. First, SaaS stocks have been, in aggregate, roughly flat since March. That means that revenue multiples are slowly falling; as companies in the sector grow, their index should rise. It’s not.

Second: SaaS stocks are still up sharply from their start-of-year lows. So, while public equities in modern software companies are no longer free-climbing, they seem to have leveled off somewhere healthy — after all, slipping from a 11x enterprise value/revenue multiple to a 10x multiple is hardly a death sentence.

Temasek + Cathay Innovation

Finally, quick notes on two funds I’ve met with recently but never got the chance to cover.

First, Temasek, a holding company cum sovereign wealth fund (should that be the other way around?) that I’ve spoken to on two occasions now. Initially, so that I could pester the group with questions, and the second time to chat about its recent investment results. In the latter case, I spoke with Mukul Chawla, a managing director at the firm and its West Coast head.

My impressions concerning the Singaporean giant (it has hundreds of billions of dollars in wealth under its umbrella) are that it’s far more patient than most investors that I speak with. And that its international perspective (it became more active in greater Asia in 2002, and globally in 2011), seems to suit it well, a concept we’ll discuss again shortly.

Turning to the numbers, Tamasek’s 2019 produced returns of 1.5 percent, a slim result compared to its ten-year average of 9 percent. Temasek noted an “increasingly challenging environment” in its last fiscal year, noting that it “moderated its investment pace” over the same period.

I discussed climate change with Chawla, something that the firm specifically highlighted as “the most urgent challenge confronting humanity today” in its investment letter. Temasek also discussed ecommerce (“changing consumption patterns”) and longer lifespans. My impression from Chawla is that the firm is able and willing to think sufficiently far into the future to perhaps drive returns even in more difficult global conditions (see: this morning’s jobs reports).

Temasek is not the only firm thinking globally. I also recently met Denis Barrier, the co-founder, and CEO of Cathay Innovation in San Francisco. A few quick things. You might not be super aware of Cathay (no relation to the airline), but it has put capital into mega-hit Pinduoduo, and, more recently, Chime, a startup we covered yet again this week.

What’s interesting about Cathay isn’t that it’s made some hot deals (there are so many unicorns today that if a fund doesn’t have capital in at least one, that is more notable than the opposite), but that it is linked to a private equity group (Cathay Capital Private Equity), and a platform of corporates.

In essence, Cathay built a venture fund on the back of its extant financial network, which is actually pretty neat. It’s like networking, but instead of happening at the Four Seasons bar in San Francisco, it’s having a direct line to Cardif in Europe.

And that’s that. Morning Markets is back on Monday. A quick question: Should we email these out when we publish them, or are they better left as Web-only articles? with thoughts if you have them. 

Illustration: Dom Guzman.

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