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How investors assess the pandemic – TechCrunch

Welcome back to The TechCrunch Exchange, a weekly startup and market newsletter. It’s largely based on the daily column that appears on Extra Crunch, but free, and made for your weekend reading. Want it in your inbox every Saturday morning? Register here.

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

Let’s start with a little housecleaning: Equity is now doing more things. And TechCrunch has its Justice and Early-Stage events coming up. I’m interviewing Zoom’s CRO for the latter. And the Exchange itself has some long-awaited things to come next week, including $ 50 million and $ 100 million (Druva, etc.) ARR updates, a price snapshot based on the consumption versus traditional SaaS models (with CEOs of Fastly, Appian, BigCommerce, etc.), and more. Court!

This week, DoorDash and Airbnb first reported earnings as public companies, marking their true graduation from the ranks of unicorns left. We’re quietly keeping our usual eye on the earnings cycle, but today we have some learnings for the startup world.

A few basics will help us get started. DoorDash exceeded growth expectations in the fourth quarter, posting revenue of $ 970 million versus $ 938 million forecast. The gap between the two probably stems in part from the novelty of DoorDash’s stock and the pandemic which makes it difficult to predict. Despite the disproportionate growth, DoorDash shares initially fell sharply after the report, although they largely recovered on Friday.

Why the initial plunge? I think the company’s net loss was larger than investors hoped – although a large GAAP deficit is the norm for the first quarters after the debut. That concern could have been alleviated by the company’s earnings call, which included a note from the company’s chief financial officer that “an acceleration in January compared to our order growth in December and the fourth quarter.” It’s encouraging. On the flip side, the company’s chief financial officer said, “As of the second quarter, we’re going to see a return to pre-COVID behavior among customers.

Carry: Large companies anticipate a return to pre-COVID behavior, but not quite yet. Companies that have benefited from COVID-19 are coming under close scrutiny. And they expect the tailwinds to fade as the year progresses.

And then there’s Airbnb, which is up about 16% today. Why? He exceeded income expectations while losing a lot of money. Airbnb’s fourth quarter 2020 net loss was more than 10 times that of DoorDash. So why did Airbnb have a bump when DoorDash was ringing? Its high turnover ($ 859 million, instead of the projected $ 748 million) and its potential for future growth; investors expect the current exceeding of Airbnb expectations to lead After growth on the road.

Carry: As long as you have a good story to tell about future growth, investors are always willing to accept big losses; growth trade is therefore alive, even as companies that may have already received a boost come under increased scrutiny.

For startups, valuation pressure or elevator could come from which side of the pandemic they are on; are they on the tailwind (SaaS focused on remote work, perhaps?), or on the rise (foodservice technology, perhaps?). Something to chew on before relaunching.

Market Notes

It was a blistering week for the fundraising rounds. Crunchbase News, my old journalistic house, has a great article on how many massive tours we are seeing so far this year. But even a rung or two down the fundraising activity was very busy.

A few rounds that I couldn’t get this week that caught my eye included a $ 90million spin for Terminus (ABM-focused GTM juicer, I guess), the $ 80million Series C d ‘Anchorage (crypto-storage for a lot of money) and Foxtrot Market’s $ 42 million. Series B (fast delivery of yuppie and zoom essentials).

Sitting here now, finally writing a tidbit on each, I remember the breadth of the tech market. Termius is helping other businesses sell, Anchorage wants to keep your ETH safe, while Foxtrot wants to help you replenish your stock of breakfast rosé before you have to endure a dry morning. What mix. And each must generate acceptable growth for the risk, as they have not just raised more capital, but have raised large enough turns for their purported maturity (measured by their listed series stage, although the nickname may be more. duck as guide.)

I jokingly call this little section of the Market Notes newsletter a joke, how can you rate the whole market that is close to our hearts? These companies and their recent capital injections underscore this point.

Miscellaneous and miscellaneous

Finally, two earnings call notes. The first from Root, who is a head scraper, and the second from Booking Holdings’ results.

I chatted with Alex Timm, CEO of Root Insurance this week, moments after the numbers fell. As such, I didn’t have much context in how investors reacted to its results. My reading was that Root was super capitalized and had big plans to expand. Timm was optimistic about improving his company’s economics (based on loss ratio and loss-adjusted expenses, for insurtech fans) and growth during the pandemic.

But today, its shares are down 16%. Analyzing the analyst’s call, there is a shift in Root’s economic profile (with respect to the variance of premium surrender over the next few quarters) that makes it difficult to take full advantage of its year-over-year growth. full from where I am. But this appears that Root’s business is still changing to an almost refreshing degree; the company could have gone public in 2022 with some of its current development behind it, but instead it raised $ 1 billion last year and is now public.

Holding its neck a bit, despite Lemonade’s pursuit and continued impressive valuation, MetroMile’s stock is also softening, while Root’s has lost more than half of its value since its IPO date. If the current revision of the pricing of some neo-insurance players continues, we could see some private investments in the space slow down. (Less things like this?) It’s a possible trend that we’ll have our eyes on this year.

Then, Booking Holdings, the company that owns Priceline and other travel properties. Since Booking might have notes on the future of business travel – which we care about clues about what might come from remote working and office culture, things that impact everything from Software sales startup center locations – The Exchange snagged a niche and dialed the company up.

Booking Holdings CEO Glenn Fogel has not commented on how his company is trading at record highs despite the sharp drop in year-over-year revenue. He noted that the pandemic has rocked expectations for conversations, which could limit short-term business travel in the future for meetings that could now take place over video calls. He was optimistic about future conference travel (good news for TechCrunch, I guess), and future travel more generally.

So as to the prospect of the jets, we don’t know anything yet. Booking Holdings isn’t saying much, perhaps because it just doesn’t know when things are going to change. Fair enough. Maybe after three more months of vaccine rollout we’ll have a better window into what a partial return to old normal might look like.

And to top it off, you can read Apex Holdings’ SPAC presentation here, and Markforged’s here. I’ve also written on Buy-Now-Pay-Later space here, on Digital Ocean’s IPO with Ron Miller here, and scribbled on Toast’s review and Olo’s debut here.

Hugs and have a good weekend!


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