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March 23, 2019
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Fundings & Exits

HoneyBook, a client management platform for creative businesses, raises $28M Series C led by Citi Ventures

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HoneyBook co-founders Oz and Naama Alon

HoneyBook, a customer-relationship management platform aimed at small businesses in creative fields, announced today it has raised a $28 million Series C led by Citi Ventures. All of its existing investors, including Norwest Venture Partners, Aleph, Vintage Investment Partners and Hillsven Capital, also returned for the round. Citi is a strategic partner for HoneyBook and this will enable it to offer new financial products to freelancers, its co-founder and CEO Oz Alon told TechCrunch.

This brings HoneyBook’s total raised so far to $72 million. It is using the funds to grow its teams in San Francisco and Tel Aviv and build new features for its user base, including small companies, people who work by themselves (“solopreneurs”) and freelancers. Like other CRMs, HoneyBook helps them develop relationships with potential new clients, manage projects, send invoices and accept payments, but with tools scaled for their business’ needs.

Alon told TechCrunch in an email that one segment HoneyBook is focused on is millennials (he cites a survey that found 49 percent of people under 40 plan to start their own business). HoneyBook currently claims tens of thousands of customers and has passed $1 billion in business booked using its software, along with 75,000 members in Rising Tide, the company’s online community for creative entrepreneurs.

Other management software platforms competing for the attention of entrepreneurs and freelancers include Tave, Dubsado and 17hats. One of the main ways HoneyBook differentiates is by enabling its users to accept online payments without integrating with a third-party service. Thanks to this, its users “transact more than 80 percent of their business online, significantly more than any other payments platform serving this audience, Alon said. It’s partnership with Citi will also allow the company to develop more unique services for its target customers, he added.

In a prepared statement, Citi Ventures’ Israel director and venture investing lead Omit Shinar said “We are in the midst of a period of extensive changes in societal structures and economic models. The fintech ecosystem is producing more and more breakthrough innovations that serve the needs of modern consumers, and we believe, as a pioneer in its space, HoneyBook can become a market leader in the U.S.”

News Source = techcrunch.com

Zeus raises $24M to make you a living-as-a-service landlord

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Cookie-cutter corporate housing turns people into worker drones. When an employee needs to move to a new city for a few months, they’re either stuck in bland, giant apartment complexes or Airbnbs meant for shorter stays. But Zeus lets any homeowner get paid to host white-collar transient labor. Through its managed ownership model, Zeus takes on all the furnishing, upkeep, and risk of filling the home while its landlords sit back earning cash.

Zeus has quietly risen to a $45 million revenue run rate from renting out 900 homes in 23 cities. That’s up 5X in a year thanks to Zeus’ 150 employees. With a 90 percent occupancy rate, it’s proven employers and their talent want more unique, trustworthy, well-equipped multi-month residences that actually make them feel at home.

Now while Airbnb is distracted with its upcoming IPO, Zeus has raised $24 million to steal the corporate housing market. That includes a previous $2.5 million seed round from Bowery, the new $11.5 million Series A led by Initialized Capital whose partner Garry Tan has joined Zeus’ board, and $10 million in debt to pay fixed costs like furniture. The plan is to roll up more homes, build better landlord portal software, and hammer out partnerships or in-house divisions for cleaning and furnishing.

“In the first decade out of school people used to have two jobs. Now it’s four jobs and it’s trending to five” says Zeus co-founder and CEO Kulveer Taggar. “We think in 10 years, these people won’t be buying furniture.” He imagines they’ll pay a premium for hand-holding in housing, which judging by the explosion in popularity of zero-friction on-demand services, seems like an accurate assessment of our lazy future. Meanwhile, Zeus aims to be “the quantum leap improvement in the experience of trying to rent out your home” where you just punch in your address plus some details and you’re cashing checks 10 days later.

Buying Mom A House Was Step 1

“When I sold my first startup, I bought a home for my mom in Vancouver” Taggar recalls. It was payback for when she let him remortgage her old house while he was in college to buy a condo in Mumbai he’d rent out to earn money. “Despite not having much growing up, my mom was a travel agent and we got to travel a lot” which Taggar says inspired his goal to live nomadically in homes around the world. Zeus could let other live that dream.

Zeus co-founder and CEO Kulveer Taggar

After Oxford and working as an analyst at Deutsche Bank, Taggar built student marketplace Boso before moving to the United States. There, he co-founded auction tool Auctomatic with his cousin Harjeet Taggar and future Stripe co-founder Patrick Collison, went through Y Combinator, and sold it to Live Current Media for $5 million just 10 months later. That gave him the runway to gift a home to his mom and start tinkering on new ideas.

With Y Combinator’s backing again, Taggar started NFC-triggered task launcher Tagstand, which pivoted into app settings configurer Agent, which pivoted into automatic location sharing app Status. But when his co-founder Joe Wong had to move an hour south from San Francisco to Palo Alto, Taggar was dumbfounded by how distracting the process was. Listing and securing a new tenant was difficult, as was finding a medium-term rental without having to deal with exhorbitant prices or sketchy Cragislist. Having seen his former co-founder go on to great success with Stripe’s dead-simple payments integration, Taggar wanted to combine that vision with OpenDoor’s easy home sales to making renting or renting out a place instantaneous. That spawned Zeus.

Stripe Meets OpenDoor To Beat Airbnb

To become a Zeus landlord, you just type in your address, how many bedrooms and bathrooms, and some aesthetic specs, and you get a monthly price quote for what you’ll be paid. Zeus comes in and does a 250-point quality assessment, collects floor plans, furnishes the property, and handles cleaning and maintenance. It works with partners like Helix mattresses, Parachute sheets, and Simple Human trash cans to get bulk rates. “We raised debt because we had these fixed investments into furniture. It’s not as dilutive as selling pure equity” Taggar explains.

Zeus quickly finds a tenant thanks to listings in Airbnb and relationships with employers like Darktrace and ZS Associates with lots of employees moving around. After passing background checks, tenants get digital lock codes and access to 24/7 support in case something doesn’t look right. The goal is to get someone sleeping there in just 10 days. “Traditional corporate housing is $10,000 a month in SF in the summer or at extended stay hotels. Airbnb isn’t well suited [for multi-month stays]. ” Taggar claims. “We’re about half the price of traditional corporate housing for a better product and a better experience.”

Zeus signs minimum two-year leases with landlords and tries to extend them to five years when possible. It gets one free month of rent as is standard for property managers, but doesn’t charge an additional rate. For example, Zeus might lease your home for $4,000 per month but gets the first month free, and rent it out for $5,000 so it earns $60,000 but pays you $44,000. That’s a tidy margin if Zeus can get homes filled fast and hold down its upkeep costs.

“Zeus has been instrumental for my company to start the process of re-location to the Bay Area and to host our visiting employees from abroad now that we are settled” writes Zeus client Meitre’s Luis Caviglia. “I particularly like the ‘hard truths’ featured in every property, and the support we have received when issues arose during our stays.”

At Home, Anywhere

There’s no shortage of competitors chasing this $18 billion market in the US alone. There are the old-school corporations and chains like Oakwood and Barbary Coast that typically rent out apartments from vast, generic complexes at steep rates. Stays over 30 days made up 15 percent of Airbnb’s business last year, but the platform wasn’t designed for peace-of-mind around long-term stays. There are pure marketplaces like UrbanDoor that don’t always take care of everything for the landlord or provide consistent tenant experiences. And then there are direct competitors like $130 million-funded Sonder, $66 million-funded Domio, recently GV-backed 2nd Address, and European entants like MagicStay, AtHomeHotel, and Homelike.

Zeus’ property unit growth

There’s plenty of pie, though. With 330,000 housing units in SF alone, Zeus has plenty of room to grow. The rise of remote work means companies whose employee typically didn’t relocate may now need to bring in distant workers for a multi-month sprint. A recession could make companies more expense-cautious, leading them to rethink putting up staffers in hotels for months on end. Regulatory red tape and taxes could scare landlords away from short-term rentals and towards coprorate housing. And the need to expand into new businesses could tempt the big vacation rental platforms like Airbnb to make acquisitions in the space — or try to crush Zeus.

Winners will be determined in part by who has the widest and cheapest selection of properties, but also by which makes people most comfortable in a new city. That’s why Taggar is taking a cue from WeWork by trying to arrange more community events for its tenants. Often in need of friends, Zeus could become a favorite by helping people feel part of a neighborhood rather than a faceless inmate in a massive apartment block or hotel. That gives Zeus network effect if it can develop density in top markets.

Taggar says the biggest challenge is that “I feels like I’m running five startups at once. Pricing, supply chain, customer service, B2B. We’ve decided to make everything custom — our own property manager software, our own internal CRM. We think these advantages compound, but I could be wrong and they could be wasted effort.”

The benefits of Zeus‘ success would go beyond the founder’s bank account. “I’ve had friends in New York get great opportuntiies in San Francisco but not take them because of the friction of moving” Taggar says. Routing talent where it belongs could get more things built. And easy housing might make people more apt to live abroad temporarily. Taggar concludes, “I think it’s a great way to build empathy.”

News Source = techcrunch.com

Wattpad gains strategic investment from Times Bridge to further expand in India

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Wattpad is further expanding into Asia with a new partnership and undisclosed strategic investment from Times Bridge, the global investment arm of the Times Group in India. The deal aims to help the storytelling community establish a larger presence in the country where it already counts over 2.6 million monthly users who have shared more than 4 million stories to date, it says.

Similar to its recent partnership with entertainment partner Huayi Brothers Korea, the deal with Times Bridge is also focused on turning more Wattpad stories into books, TV shows, movies, and other digital projects in the region.

This is an area where Wattpad has found some success. In the U.S., one of the stories on its platform became the Netflix teen hit “The Kissing Booth,” and other stories have become projects at Hulu, AwesomenessTV, eOne, Sony, SYFY, iflix, Universal Cable Productions (NBCU), and elsewhere. The company also just launched its own books division to better capitalize on bringing its online stories to print.

India has been a more recent focus for Wattpad, following its  $51 million raise from Tencent. Soon after, the company appointed its first Head of Asia for Wattpad Studios, Dexter Ong. And it also recently hired its first GM of India, Devashish Sharma, who has been working with local partners to turn its stories into movies, TV, digital and print in the region.

“Millions of Indian readers and writers have already found a home Wattpad,” said Sharma, in a statement. “Times Bridge and The Times Group have an unmatched media and entertainment portfolio, and connections with some of India’s most-respected authors and cultural figures. We’re excited to work together to create new opportunities for Indian storytellers,” he added.

Today, Wattpad’s app supports a number of local languages including Hindi, Malayalam, Tamil, Urdu, Bengali, Gujarati, Punjabi, Assamese, Marathi, and Oriya.

To find the stories that become popular, Wattpad relies on a combination of human curation and technology – the latter with its Story DNA machine learning system that helps to identify the standouts by deconstructing things like sentence structure, word use, grammar and other factors that contribute to popularity.

“We’re thrilled to work with Times Bridge expand our footprint in the region and create more opportunities for India’s rich literary community to tell their stories, reaching new audiences in India and around the world,” said Wattpad co-founder and CEO Allen Lau, in a statement.

Wattpad didn’t disclose Times Group’s investment. The firm has previously partnered with other tech companies in India, and has investments in Uber, Airbnb, Coursera, Houzz, MUBI, Smule, and others.

News Source = techcrunch.com

The meaning of Nginx and F5

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F5 Networks took a dive yesterday after the company announced it was acquiring open-source web server NGINX. While media coverage of the deal was largely positive, the public markets appeared much more skeptical, as F5 stock finished the day down nearly 8%.

As most analyses noted, the logic behind the deal is clear. F5’s existing markets have continued to dry up, with just low single digit expansion expected year-over-year. On top of NGINX being one of the most widely used web servers in the world, NGINX gives NetOps-focused F5 an entrée into the DevOps market. As a result, F5 now has to fork over some cash to modernize its offering and find new avenues for growth. Plus, the acquisition provides F5 with exposure to the growing movement towards open source software.

Unfortunately for F5, the company’s stock is heavily owned by institutional holders and the tradeoffs and costs of the transaction hit areas where institutional investors are particularly sensitive.

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First, investors love nothing more than when companies return cash to shareholders, primarily through buybacks or dividends. Unsurprisingly, investors were less than pleased when F5 announced it would be cutting its more than $1 billion share repurchase plan and would instead be using its cash to fund the NGINX deal.

Some investors and analysts were even more turned off by a purchase price they viewed as a bit pricey (with some estimating a mid-to-high 20s transaction multiple on 2018 sales), which meant F5 will have to extract larger financial benefits from the deal to reach attractive levels of return.

Though F5 expects the combined entity to gain market share and identify more than enough synergies to fuel returns in the long run, in the near term, the company announced that the deal would compress operating margins and earnings-per-share, while only modestly improving revenue growth. Diluting earnings-per-share in particular likely had a direct impact on the valuations spat out by investor models, since many at least in part use a multiple of year-ahead earnings to derive price targets.

And while many investor concerns seem largely technical or financial, several analysts expressed broader fears over the level of synergies and revenue growth F5 and NGINX will actually be able to generate. The synergy concerns from the investment community are actually fairly aligned with those expressed by some of the developer community.

Historically, open-source purists have typically viewed the involvement of for-profit entities as a fatal blow to open source platforms, based on the general assumption that financial and shareholder incentives will lead to proprietary licensing or other challenges. As a result, in addition to the normal integration risk seen in any M&A event, analysts expressed concerns over potential impacts to the combined entity’s ability to attract or retain dedicated open source customers or employees.

Fears that F5’s involvement in NGINX will deter investors seem a bit overblown, but the immediate harsh reaction of F5’s stock investors does nothing to quell fears that financial pressure may impact the existing NGINX model.

The divergent responses to F5’s deal seems indicative of a larger trend we’ve focused on, where long-standing tech powerhouses have seen growth stall after focusing on profitable business lines while ignoring emerging alternative models that have become the primary source of growth. Now, incumbents are having to cough over hefty sums just to play catch up and face a tough balancing act of angering investors and investing in their future.

~ Written by Arman Tabatabai

Ingrid Burrington’s Networks of New York

Photo by Smith Collection/Gado/Getty Images

In book news, I finished Networks of New York, which is a slim book on the infrastructure that powers New York City’s internet and surveillance infrastructure. Burrington has made a name for herself covering the politics and challenges of the networking layers of the internet, and this is both a reference and a sort of travel field guide to this technology that looms around us every day but we often overlook.

That all said, it is really slim, with a few details of mergers and acquisitions of telecom companies strewn in between pages of figures depicting manhole covers. As an exemplar of short books, I think it is an experimental contribution, but I can’t recommend the book if you really want to understand how internet plumbing works. A better book (albeit less about the internet) is Kate Ascher’s The Works: Anatomy of a City.

~ Written by Danny Crichton

Thanks

To every member of Extra Crunch: thank you. You allow us to get off the ad-laden media churn conveyor belt and spend quality time on amazing ideas, people, and companies. If I can ever be of assistance, hit reply, or send an email to danny@techcrunch.com.

This newsletter is written with the assistance of Arman Tabatabai from New York

You’re reading the Extra Crunch Daily. Like this newsletter? Subscribe for free to follow all of our discussions and debates.

News Source = techcrunch.com

CXA, a health-focused digital insurance startup, raises $25M

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CXA Group, a Singapore-based startup that helps make insurance more accessible and affordable, has raised $25 million for expansion in Asia and later into Europe and North America.

The startup takes a unique route to insurance. Rather than going to consumers directly, it taps corporations to offer their employees health flexible options. That’s to say that instead of rigid plans that force employees to use a certain gym or particular healthcare, a collection over 1,000 programs and options can be tailored to let employees pick what’s relevant or appealing to them. The ultimate goal is to bring value to employees to keep them healthier and lower the overall premiums for their employers.

“Our purpose is to empower personalized choices for better living for employees,” CXA founder and CEO Rosaline Koo told TechCrunch in an interview. “We use data and tech to recommend better choices.”

The company is primarily focused on China, Hong Kong and Southeast Asia where it claims to works with 600 enterprises including Fortune 500 firms. The company has over 200 staff, and it has acquired two traditional insurance brokerages in China to help grow its footprint, gain requisite licenses and its logistics in areas such as health checkups.

We last wrote about CXA in 2017 when it raised a $25 million Series B, and this new Series C round takes it to $58 million from investors to date. Existing backers include B Capital, the BCG-backed fund from Facebook co-founder Eduardo Saverin, EDBI — the investment arm of the Singapore Economic Development Board — and early Go-Jek backer Openspace Ventures, and they are joined by a glut of big-name backers in this round.

Those new investors include a lot of corporates. There’s HSBC, Singtel Innov8 (of Singaporean telco Singtel), Telkom Indonesia MDI Ventures (of Indonesia telco Telkom), Sumitomo Corporation Equity Asia (Japanese trading firm) Muang Thai Fuchsia Ventures (Thailand-based insurance firm), Humanica (Thailand-based HR firm) and PE firm Heritas Venture Fund.

“There are additional insurance companies and strategic partners that we aren’t listing,” said Koo.

Rosaline Koo is founder and CEO of CXA Group

That’s a very deliberate selection of large corporates which is part of a new strategy to widen CXA audience.

The company had initially gone after massive firms — it claims to reach a collective 400,000 employees — but now the goal is to reach SMEs and non-Fortune 500 enterprises. To do that, it is using the reach and connections of larger service companies to reach their customers.

“We believe that banks and telcos can cross-sell insurance and banking services,” said Koo, who grew up in LA and counts benefits broker Mercer on her resume. “With demographic and work life event data, plus health data, we’re able to target the right banking and insurance services.

“We can help move them away from spamming,” she added. “Because we will have the right data to really target the right offering to the right person at the right time. No firm wants an agent sitting in their canteen bothering their staff, now it’s all digital and we’re moving insurance and banking into a new paradigm.”

The ultimate goal is to combat a health problem that Koo believes is only getting worse in the Asia Pacific region.

“Chronic disease comes here 10 years before anywhere else,” she said, citing an Emory research paper which concluded that chronic diseases in Asia are “rising at a rate that exceeds global increases.”

“There’s such a crying need for solutions, but companies can’t force the brokers to lower costs as employees are getting sick… double-digit increases are normal, but we think this approach can help drop them. We want to start changing the cost of healthcare in Asia, where it is an epidemic, using data and personalization at scale in a way to help the community,” Koo added.

Talking to Koo makes it very clear that she is focused on growing CXA’s reach in Asia this year, but further down the line, there are ambitions to expand to other parts of the world. Europe and North America, she said, may come in 2020.

News Source = techcrunch.com

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