New IPO Riskified $RSKD $3.3B Market Cap, $200M Rev, growing at 45% YoY

$RSKD Riskified, a software and services company focusing on payments industry, helping eCommerce vendors reduce fraud from online transactions, went public last week at $21 valuing the company at $3.3B.

Riskified founders Eido Gal and Assaf Feldman  / Photo: Tal Orani

$RSKD Riskified was founded in 2012 by Eido Gal (CEO and Assaf Feldman (CTO). It has raised over $70 M from General Atlantic, Fidelity Management and others

$RSKD core product is Chargeback Guarantee which automatically approves or blocks online transactions. Riskified’s business model is to collect a percentage-based fee on gross merchandize value (GMV).

Air Europa Selects Riskified PSD2 Optimization to Maximize Revenue and  Improve Customer Experience

$RSKD In the second quarter of 2021, Riskified expects revenue of $54.8-$55.7 million, up 46% from the corresponding quarter of 2020. Gross Margins are in the 53% – 54% range.

$RSKD Gross profit in the second quarter is expected to be $30.1-$33.7 million, up from $20.1 million in the corresponding quarter of 2020, while the operating loss is predicted to be between $900,000 and $5.5 million, narrowing from $7.7 million in the second quarter of 2020. 

$RSKD Net loss in the second quarter of 2021 is expected to be $19.4-$24.8 million compared with $7.3 million in the corresponding quarter of 2020.

$RSKD While no public competitors exist, there are 10-15 startups including Forter, ClearSafe, Kount and Sift Science.

Riskified (@Riskified) | Twitter

The market for fraud prevention is expected to grow from $20B in 2020 to $38B by 2025.

Fraud Detection and Prevention Market Size, Share and Global Market  Forecast to 2025 | COVID-19 Impact Analysis | MarketsandMarkets

There are 5 products that Fraud detection and prevention vendors offer:

Automated Workflows

Automates the sending of order details, payment fraud checks, blocking of suspicious devices, fulfillment, cancellation of fraudulent orders, and more so merchants can review even a high volume of orders quickly.

Machine Learning

Uses real-time insights that are fed into the machine learning models. Machine learning does faster and more complex calculations across a much wider range of online fraud signals when compared with manual review.

Insights Dashboard

Insight dashboards report synthesize relevant fraud prevention data, display algorithmic conclusions where given, and highlight suspicious activities via a single, easy to use interface. This means there is no need to switch between multiple views to see all relevant information, in turn making it much easier to organize and effectively execute a fraud prevention process.

Device Fingerprinting

Device fingerprinting is the technique of recording information about the device a shopper uses when placing an order. A wide variety of data points are analyzed, including things like the computer’s operating system, the browser the shopper used during check out, and even the language options installed. The information collected is then used in a risk assessment to identify fraudsters. For example, a shopper claiming to be from a country whose national language is not installed on their computer can indicate the shopper is using a VPN to hide their true location.

Chargeback Guarantee

Chargeback guarantees are a contractual obligation on the part of a fraud prevention solution to cover the cost of any chargebacks incurred by a merchant using their platform. When merchants use a fraud prevention solution that offers one, they never have to pay the cost of a chargeback themselves.

Riskified (@Riskified) | Twitter

Growth and valuation

$RSKD expects to do $210M – $220M in FCY21 revenues, growing at 51% YoY. At the current price of $26, it is valued at $3.45 Billion giving it roughly 16X P/S for 2021. Given the growth, and comparables at 17-19X SaaS valuations, at 60% margins, $RSKD is fairly valued.

riskifiedbynumbers_001a.jpg

$RSKD Risks include the ability for payment vendors ( $PYPL $SQ and $AFRM among others) to include these “features” or fraud detection with their core product. Second, the slower growth expected post Covid for eCommerce GMV.

$RSKD I think the valuation and numbers are good for an initial starter position under $25 with a risk of falling to $21 (IPO price)

Top email newsletters I would recommend on Finanace and stock markets

Since many folks ask me about recommendations for email newsletters I read and follow, I thought I’d put together a list. I subscribe to over 300 and get daily updates from 50, of which I skim about 40 and read 20 daily in detail.

Here in no particular order.

Top SubStacks which I like (in no particular order)

  1. Protocol Source Code

Why: A good view into tech in the early stage

Link: https://www.protocol.com/

  1. Exec Sum

Why: Summary of M&A, early IPOs and private investments

Link: https://execsum.co/

  1. Accelerated By Justin Moore

Why: Early technology startup view and summary

Link: https://readaccelerated.com/

  1. Alphacharts

Why: Charts and Brian’s view into trending 

Link: https://alphacharts.substack.com/

  1. Allegory of Finance

Why: High level thinking and investing mindset

Link: https://sahilbloom.substack.com/

  1. NZS Capital

Why: Great summary of the best links in technology and finance

Link: https://www.nzscapital.com/

  1. CB Insights

Why: Funding news on Unicorns

Link: https://www.cbinsights.com/newsletter

  1. The Compound Newsletter

Why: Data rich view into stocks that are moving

Link: https://compoundadvisors.com/newsletter

  1. Clouded Judgement

Why: A view into comps for cloud / SaaS companies from Jamin Ball

Link: https://cloudedjudgement.substack.com/

  1. Digital Native – Rex Woodburry

Why: Emerging creator economy VC with a view on upcoming trends

Link: https://digitalnative.substack.com/

  1. Farman Street

Why: Self help

Link: https://fs.blog/

  1. Fintech Brain Food

Why: The best fintech roundup from Europe and beyond

Link: https://sytaylor.substack.com/

  1. First Round Review

Why: Great content from founders on how to get started with startups

Link: https://review.firstround.com/

  1. Hedge Fund Insight by Yvonnne

Why: She picks a new hedge fund each week and talks about their holdings and why

Link: https://foryoureyesonly.substack.com/

  1. Hacker News Letter

Why: Keep on top of new things that developers are interested in

Link: https://hackernewsletter.us1.list-manage.com/subscribe

  1. Investopedia the daily

Why: Quick summary of daily highlights

Link: https://link.investopedia.com/join/53o/00-house-daily

  1. Jonah’s Growth Stocks

Why: He’s a good guy and finds some good winners early

Link: https://jonahlupton.substack.com/

  1. KnowHow Capital

Why: Macro insights into market movers

Link: https://knowhowcapital.substack.com/

  1. Macro Markets Daily

Why: Visually attractive macro data in 2 minutes

Link: https://www.macromarketsdaily.com/

  1. The Irrelevant Investor

Why: Michael Batnick has some good insights on stock movements

Link: https://theirrelevantinvestor.com/

  1. NFX – Network effects

Why: To understand marketplace companies such as $UBER $FVRR

Link: https://www.nfx.com/

  1. Net Interest Marc Rub einstein

Why: Fintech insights

Link: https://www.netinterest.co/

  1. Rob’s Educated Guess

Why: Rob is super smart and an experienced Hedge fund investor

Link: https://robs.substack.com/

  1. SPAC Track

Why: Daily Summary of SPACS

Link: https://spactrack.substack.com/

  1. Software Stack Investing

Why: In depth analysis and breakdown of software companies

Link: https://softwarestackinvesting.com/

  1. The Exponential View

Why: Out there thinking very forward looking

Link: https://www.exponentialview.co/

  1. The Hard Fork by Marvin Liao

Why: Silicon Valley insider news

Link: https://hardfork.substack.com/

  1. The Long Game by Mehdi Yacoubi

Why: Links to some long reads on the future

Link: https://thelonggame.xyz/

  1. What’s hot in enterprise and VC?

Why: Enterprise SaaS company investing but early stage

Link: https://whatshot.substack.com/

  1. Week in Ethereum

Why: Roundup of all #ETH News

Link: https://weekinethereum.substack.com/

New IPO $DIDI Didi Global, $UBER of China, ridesharing leader

$DIDI is going public on June 30th, selling 288M shares at $13 – $14 per share, raising $4.5B at $63B to $68B. $SFTBY (Softbank) $UBER (Uber) and $TCHEY (Tencent) are among the biggest shareholders. $AAPL (Apple) is also an investor.

$DIDI my big fear is revenue recognition is inconsistent, which makes valuations and metrics seem better than they are. That’s the biggest risk.

Didi IPO: How to Trade on Didi's IPO | CMC Markets

$DIDI was founded in 2012 by Will Wei Cheng, merged with Kuaidi in 2015 and acquired $UBER China in 2016. It operates in China, Brazil, Mexico and 11 other countries.

Didi files to raise US$4 billion in New York IPO, helping China's dominant  ride-hailing app catch up with Uber in value | South China Morning Post

Didi Chuxing $DIDI is the leader in the Chinese shared mobility sector, which is over $300B and growing as a market.

$DIDI revenues were down 8% in 2020 thanks to Covid, but were growing over 20% before. China mobility still accounts for over 90% of revenue.

$DIDI gross margins are in the 10% – 12% range and albeit small, have scale on their side.

At 24X last 12 months gross profit, the valuation for $DIDI is rich, but if growth can go back to over 20% YoY from 2022, this current price of shares might be a good value.

New IPO Turkish eCommerce Marketplace Hepsiburada D-market $HEPS (compared to $CPNG $OZON $JMIA )

D-Market, $HEPS Hepsiburada, the #3 eCommerce marketplace in Turkey, is going public on Jun 30th, seeking to raise $680M at $3.9B Market cap. The company did $2.4B in GMV and $751M in revenue growing at over 100% YoY.

Hepsiburada

$HEPS is selling 41.67M shares at $13. In terms of valuation, they are the lowest of the entire regional eCommerce companies and much better than $OZON or $CPNG from a valuation and growth standpoint.

Valuation and Growth

$HEPS makes 43% gross margins and like most eCommerce companies is branching into logistics, payments and local delivery. They aim to be a super app in Turkey.

Turkey is not a very large market with $60B in eCommerce and $250B Retail, but it has 24% penetration of eCommerce and growing. Compared to Turkey, $CPNG operates in South Korea with a $543B Retail market.

Hepsiburada is actually #3 in the market (although they claim to be #2 by some metrics). Trendyol.com and sahibinden.com are the largest 2 players.

I think the stock will do well given the valuation metrics. It is valued lower than comparable players, is growing quickly and has a little attention from retail and wall street.

I am yet to make up my mind on if I I will take a position at the IPO.

Risks: Small TAM (Turkey alone), Regional and political issues (similar to $OZON) and a number 3 player in a small market.

New IPO Legal Zoom $LZ – legal services for SMB and Consumers June 30th

LegalZoom, Inc. $LZ, an online platform for legal and compliance solutions for small- and medium-sized businesses, start trading as a public company on Wednesday, June 30.

LegalZoom review: Services, costs, pros & cons | finder.com

$LZ IPO pricing range of $24 to $27 per share implies a market cap ranging from ~$5.0B to $5.7B

$LZ is planning to sell up to 19.12M shares raising $500 – $600M. It has 211M shares outstanding.

LegalZoom Review | Reviewed & Ranked | Who is the Best?

The market for business legal services among SMB is about $40B according to $LZ.

LegalZoom Zooms Into $500 Million Secondary Investment | LawSites

Along with formation, $LZ LegalZoom offerings include ongoing compliance and tax advice and filings, trademark filings, and estate plans.

$LZ helped form 378,000 businesses in 2020 and helped create 250,000 estate plan documents in 2020.

Why Legal Zoom Is Great & 7-Step Guide The Legality

$LZ LegalZoom was started in 2001, by Robert Shapiro (former attorney
of O.J. Simpson).

LegalZoom raises massive $500M investment at a $2B valuation
Legal Zoom

$LZ saw revenue accelerate to 27% in Q1 2021 due to new company formations.

Metrics

$LZ has 71% to 73% Gross Margin (vs. 67% in 2020) and 30%-plus Adj. EBITDA margin.

$LZ is planning to repay all of its outstanding debt of ~$523mn from IPO proceeds.

Legalzoom.com TV Commercial 'Law On Your Side' - iSpot.tv

$LZ IPO pricing range implies approx. 7.25x to 8.25x on 22E Revs, 30.0x to 34.0x 22E Adjusted EBITDA.

$LZ Risks include an inherently high churn rate among SMBs and a relatively high level of customer acquisition-related marketing spend on a recurring basis.

LegalZoom Incorporation Service Review: 2021 Analysis
Zoom metrics

$LZ 2021 revenues are estimated in $565M range and 2022 revenues at $675M. growing at 18% YoY.

IPO Krispy Kreme $DNUT – revisiting the public markets

Krispy Kreme is going public again as $DNUT looking to raise $600M at $3.9B Market Cap. With 1.1B in revenue for 202, growing at 12% YoY and EBITDA at $137M, the EV/EBITDA is 29X, which is rich.

Order Krispy Kreme (1900 1st Ave) Delivery Online | Seattle | Menu & Prices  | Uber Eats
Krispy Kreme

$DNUT sells doughnuts, cookies (Insomnia acquisition) and coffee via its own stores and 3rd party stores. It was public before it was acquired by JAB partners a Private Equity Firm in 2016.

Your Covid vaccine earned you a Krispy Kreme — with a side of fat shaming  you should ignore

$DNUT is planning to sell $30M shares at $24/ share to raise $600M to pay down debt and grow the franchise.

Krispy Kreme introduces doughnut versions of dessert classics

The revenue growth for the next few years is expected in the 9 – 11% range YoY with EBITDA growth in 12 – 15% and EPS growing at 20%.

Krispy Kreme - Wikipedia

$DNUT has its own stores & franchises in US and Canada which are 70% of revenues. 67% of revenue comes from the “original glazed donut”.

Krispy Kreme Is Giving Healthcare Workers Free Donuts Every Monday

$DNUT operates 9,000 stores and is expecting to grow to 15,000 in the next 5 years.

KRISPY KREME, Seattle - 12505 Aurora Ave N - Restaurant Reviews, Photos &  Phone Number - Tripadvisor

2022 revenue for $DNUT is expected in $1.3 – $1.4B range and EBITDA in $170M – $175M range.

New IPO Torrid Holdings $CURV – Speciality retailer of Plus size women’s clothing

$CURV Torrid Holdings is the largest specialty retailer of women’s plus-sized apparel. It is looking to raise $156M at $21 per share on Thu, Jul 1. Market Cap will be $2.3B, at a 2.0 Multiple on EV/EBITDA, compared to peers at 0.7

$CURV has 608 stores and has a poor eCommerce business. Its valuation relative to GPS (Gap) and other specialty retailers seems high.

Form S-1

Torrid $CURV did $974M in revenue for 2020 growing negatively because of store closures, and is expected to grow at 8% YoY.

Plus-size fashion retailer Torrid files for IPO - Bizwomen

Same store sales metrics are going to look great compared to last year, but H&M and other fast casual apparel retailers are catching up to plus size business from Torrid.

Torrid Careers & Jobs - Zippia

Gros margins are decent at 42%, but I am not too keen on the stock overall. I am going to pass on the IPO.

New IPO $EVCM EverCommerce SaaS for SMB (Services Businesses)

EverCommerc $EVCM is a SaaS provider of software to over 500K services SMB. They are selling 19M shares at $16 – $18 per share, raising $340M (with 2nd option) at $3.5B Market Cap.

$EVCM IPO has Silver Lake partners and Hedosophia (Chamat P’s investments) are each investing $75M.

A New Dynasty in Home Improvement | Pro Remodeler

$EVCM provides software to 240K home services businesses, 72K healthcare practices and 46K gyms and fitness SMB.

Founded in 2016 and located in Denver, Colorado by Eric Remer who is the CEO.

Eric Remer
Founder Eric Remer

SMB businesses require solutions that enable them to perform three key functions: (1) acquire new customers and generate new business opportunities; (2) manage and scale business operations; and (3) improve and expand on customer relationships.

$EVCM platform

$EVCM provides these functions with a platform specifically catered to help with route-based dispatching, medical practice management, and gym member management. They provide Billing and Payments, Marketing – website, SEO and SEM and customer management apps.

The market for SMB software they claim is $1.3T globally and $520B in the US. For specific SMB software within the verticals that is serviceable the market is closer to $30B, of which they have <1%.

Glassdoor reviews are marginal, not great

$EVCM did $337.5M for the year ended December 31, 2020, growing at 39.4%. Losses reduced by 30% to $60M vs 2019.

For 3 months ending March 2021 revenue was $104.9M + 36.2% YoY, while net loss reduced to $16M (lower by 25%).

On April 2021, $EVCM agreed to acquire Timely LTD, or Timely. Timely is a New Zealand booking and business management software company for $95 million.

They have also agreed to raise debt financing to the tune of $540M.

Analysis

$EVCM I dont see enough disclosure and data on retention, churn, cost of acquisition of customers or the growth trajectory of the business for me to get any confidence that the revenues are predictable. This seems more like a Series G with some option to provide shares to the public since the “market is hot”.

$EVCM has largely grown by acquisition and I am not sure what the integration process or organic growth capabilities look like.

$EVCM On the plus side, I think Silver Lake and Hedosophia investing will give many people comfort, but I dont know their terms. I also think the SMB business is high churn (many die each year) so the revenue quality will be unpredictable.

$EVCM Overall 35% growth and valuation of 10X – 12X for a $340M is decent, but lack of enough information gives me pause. I am not too excited about this yet.

New IPO Offering SaaS Banking Mortgage provider Blend Labs $BLND

$BLND Blend Labs, a SaaS company providing loan management to banks and financial institutions filed to go public. It last raised $300M at $3.3B valuation in Jan 2021.

Press Room - Blend
Blend $BLND

$BLND provides a “white label” loan processing software application to banks. It helps them offer mobile & web ready, simple to use and easy to deploy loan products quickly – from mortgages and auto loans to home equity and personal loans.

Nima Ghamsari founded $BLND in 2012, while based in San Francisco. He was an early engineer at $PLTR Palantir and graduated from Stanford in 2008.

Nima Ghamsari

$BLND Most banks will either choose to build loan management and automation products themselves or can use a platform (with multiple loan offerings) such as Blend.

The reason banks choose platforms such as Blend is because of the constant changes on both the regulation as well as the technology side. Blend is less expensive for small and mid-sized banks than their own internal development teams.

Illustration of the consumer banking suite offering

This is similar to retail companies buying $SHOP Shopify or $BIGC Big Commerce over building their own eCommerce site.

$BLND can effectively implement “top-tier” verification services, algorithms, and data sets into their “out-of-the-box” products.

Blend lets financial institutions design user journeys built on an extensive component library. This means that lenders can begin with a fleshed-out product template and then swap out workflow components as needed. Each organization has control over design elements, while data services and data services remain fully integrated.

Another key aspect of their technology is the out of the box integration with 3rd party systems. They have over 1300 integrations, making it easy for institutions to quickly deploy loan products for customers.

$BLND has over 291 customers, with 31 of the top 100 financial institutions and 24 of the top 100 non-bank mortgage lenders as customers. 18 customers spent more than $1M annually which is 53% of revenue and top 5 customers accounted for 20% of revenue.

$BLND charges customers a subscription fee based on amount of loan processed.

The market for $BLND is about $33B – software spend by financial institutions on loan products.

LOGO

Metrics

DBNER is very high at 162% and their revenue growth rate is tremendous at 98%. $BLND currently processes about $5B in loan volume daily. Gross margins are 68%.

Financials

$BLND grew revenues 90% from 2019 to 2020 – from $50.7M to $98M. Net loss for 2020 was $74M, so they are also losing a lot of money.

$BLDN acquired Title365 to provide title commitments and streamline home mortgages process in March 2021. Title $212M in revenue, which is separate from the core $BLND revenues. $BLND has taken a loan of $225M to acquire Title365.

$BLND competes with Roostify, Cloudvirga, Figure, Turnkey lender. Some customers may use Plaid for portions of what Blend Labs does.

$BLND valuation is still unknown, but likely at $5 – $6B given they raised at $3.3B in Jan 2021. At $5B in valuation they will be 52X EV / LTM – which is high, but in line with other high growth SaaS and cloud companies such as $SNOW and $CRWD, but without the scale.

Risks

  1. Concentrated voting power with founder (typical of many software companies going public these days).
  2. Some customer concentration of revenue – 5 customers make up 20% of revenues
  3. Distraction from core business given the recent acquisition of Title365.
  4. $BLND Blend CEO has been given a “potential” $10B package in stock that will vest if the stock price stays over $13, $21, $67 and $130. These vest over 15 years.

Analysis

$BLDN makes my 1% of SaaS companies list, with 162% retention, nearly 100% growth, and while revenue of $90M is not large, post the acquisition of Title365 they will be over $300M in revenue growing at 60-70%. I will likely take a position if the valuation is reasonable at $5B – $6B.

Very speculative IPO $ATAI psychedelics startup ATAI Life Sciences $2.3B Market Cap

German Psychedelics startup $ATAI backed by Peter Thiel, Atai life sciences, an early stage mental health drug development companies is going public at $2.3B market cap, raising $215M.

$ATAI I thought I’d take a Q&A approach to this company since there are no revenues, no earnings or metrics to speak of immediate term.

What are psychedelics?

The term “psychedelic” is derived from the Ancient Greek words psychē (ψυχή, “soul”) and dēloun (δηλοῦν, “to make visible, to reveal”), translating to “mind-manifesting”.

Psychedelics (also known as hallucinogens) are a class of psychoactive substances that produce changes in perception, mood and cognitive processes.

Psychedelics affect all the senses, altering a person’s thinking, sense of time and emotions. They can also cause a person to hallucinate—seeing or hearing things that do not exist or are distorted.

There are many different kinds of psychedelics. Some occur naturally, in trees, vines, seeds, fungi and leaves. Others are made in laboratories.

Drug wheel segment - Psychedelics segment@2x.png

What are the effects of psychedelics?

Physiologically, entheogens can temporarily increase blood pressure, heart rate, body temperature, and hormones such as cortisol and oxytocin.

The following may be experienced using them:

  • feelings of euphoria
  • sense of relaxation and wellbeing
  • seeing and hearing things that aren’t there
  • confusion and trouble concentrating
  • dizziness
  • blurred vision
  • clumsiness
  • fast or irregular heart beat
  • breathing quickly
  • vomiting
  • sweating and chills
  • numbness.

What are the type of psychedelics?

Acid or LSD

Lysergic acid diethylamide, or LSD, is a chemically synthesized hallucinogen, developed from ergot, a kind of mold that grows on the rye grain.

Dimethyltryptamine or DMT

DMT is a naturally occurring plant-based psychedelic found in the bark and nuts of certain trees.

Ololiuqui or Morning Glory Seeds

Ololiuqui is a naturally occurring psychedelic which is found in the seeds of the morning glory flower.

Psilocybin or Magic Mushrooms

Magic mushrooms contain a naturally occurring type of hallucinogen, called psilocybin, which is found in certain fungi.

Mescaline or Peyote

Mescaline is a naturally occurring psychedelic substance found in certain species of cactus, the most well-known being the peyote cactus.

What are the therapeutic benefits of psychedelics?

A 2016 review of the medical literature on psychedelics concluded that entheogenics are considered physiologically safe, with no evidence that they lead to dependence or addiction. There is a significant body of research that indicates psychedelics can help treat disorders that don’t always respond well to conventional medicine. 

Are psychedelics legal?

At present, psilocybin, LSD, psychedelic mushrooms, and other psychedelic substances are classified as Schedule I controlled substances under US federal law.

Legalizing psychedelics would remove all legal prohibitions against their use and make them available to the general adult population for purchase and use at will, similar to cannabis in adult-use states. 

What does $ATAI do in psychedelics?

$ATAI has a pipeline containing 10 development programs and 6 enabling technologies. One of its companies has initiated a Phase 2a trial in the US, and ATAI expects to initiate a Phase 2 trial for another program in 2021 and three additional Phase 2 trials for other programs in 2022.

How much is $ATAI going to raise? What is the Market Cap?

$ATAI is raising $215M at $2.3B market cap. The market cap is based on selling 14.3M shares at $15 during IPO.

Which are other psychedelics companies?

Compass pathways $CMPS, Mind Medicine $MNMD and Aikido $AIKI are important companies.

$BMBIF, $TRYPF, $LFYSF $CYBN $CLXPF $NUMI $MMED and $MEDH are other tickers to watch.

How will we track the progress of $ATAI?

$ATAI One of its companies, Recognify Life Sciences, has initiated a Phase 2a trial in the US. ATAI expects to initiate a Phase 2 trial for another program in 2021 and an additional three Phase 2 trials for other programs in 2022. Below are the other companies.

LOGO

What is $ATAI corporate structure?

$ATAI has ownership in the 10 companies, but each is allowed to pursue their own path (funding, growth, research), since they target different therapies.

LOGO

Analysis

I think this might solely be a trade for me given the likelihood of sharp movement in price action. Since I am not a biotech expert, I will not likely take a large, long position. The fact that Peter Thiel is involved gives this (as with $PLTR and $VLDR some credibility).

The personal blog of Mukund Mohan