All posts by Mukund Mohan

My discipline will beat your intellect

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).

New IPO filing – Remitly #Fintech Global money transfer company, previously valued at $15.B in Jul 2020

Remitly, a Seattle startup that helps immigrants in developed countries send money home to family and friends in developing nations has filed confidentially for an IPO. Pricing and terms will be known by early July.

Remitly CEO Matt Oppenheimer

Remitly competes with Western Union, Transfer Wise, Money Gram, Xoom and others in the $550B remittances market.

Remitly competitor TransferWise has also seen its valuation rise, with investors recently pegging its worth at $5 billion during a secondary share sale in July 2020.

Matt Oppenheimer, started Remitly in 2011 after running internet and mobile banking at Barclays in Kenya with Shivaas Gulati and Josh Hug, as cofounders.

Remitly eliminates forms, codes, agents, and other fees typically associated with the international money transfer process. 

Send money to M. Lhuillier with Remitly

Remitly started with the Philippines market, but today lets over 4M consumers ship money to 50 countries, worldwide.

Remitly Review 2021: Low-Cost Platform to Transfer Money Abroad

It owns no retail outlets. Customers can only initiate a transfer digitally, although on the receiving end in developing countries, Remitly partners with cash-pickup locations.

On average, money transfer agents charge a 13% fee on remittance transactions.  For those sending money home, the appeal of faster and less expensive money transfers is obvious.

HOW REMITLY WORKS WITH GCASH? |Tesha EK - YouTube

Remitly makes money by charging transaction fees and marking up foreign exchange rates. Fees vary widely by country, but on average, Remitly charges about 1.5% for a transfer.

Western Union, which owns many brick-and-mortar locations and brought in $852 million in profit last year, charges roughly 5%.

Remitly expands coverage for mobile remittance program to 40 countries,  nears 1K employee mark - GeekWire

Remitly has grown revenue nearly 100% annually over the past five years, reaching an estimated $80M in 2018 and over $250M by 2020.

Remitly customer growth increased by 200% in 2020, compared to a year ago, with 3 million customers served in aggregate spread evenly across the 17 send-from markets and the 57 send-to countries.

Remitly | Impact 20 | Fortune

Remitly has over 1000 employees has raised over $400M in funding so far, with over $80M in debt alone. It last raised money from Visa in March 2021, and previously $85M at $1.5B in valuation on July 2020. It is seeking $4 – $5B valuation.

Remitly will use the IPO funds to invest in PassBook, a banking and debit card product aimed at multinational workers, who frequently face hurdles when trying to set up bank accounts.

Jeff Bezos-backed Remitly announces free money transfers to the Philippines  - GeekWire

Remitly has acquired 2 startups – Symphoni, an AI Product in the #Fintech space and Wire, a mobile messaging app.

Valuation

At $4B valuation and about $220M in revenue, (estimated), 18X last twelve months valuation is rich in the #fintech space but in line with $AFRM at 24X P/S. Given the rapid growth in customers this may be justified, but until we know the final valuation sought and the revenue growth this seems rich.

Analysis

With over 500 IPOs in the last 6 months, the pickings are great. Remitly will do very well during IPO time if the market conditions are good.

I do think however, that I am going to wait to see their final numbers and decide if they will be in the top 1% of IPOs that I will invest in.

What we still need to review:

  1. Revenue, customer growth in 2020 and expected projections
  2. Gross Margins (estimated at 30 – 40%)
  3. Average $ per transaction and average take rate
  4. Repeat customer usage of platform – do customers like using it or are they very price conscious and use the platform with lowest fees each time?

$VIH VPC Impact SPAC merger with Bakkt – a fintech provider – analysis

$VIH is a SPAC that is looking to merger with fintech provider Bakkt. The company will get $574M in cash at a valuation of $2.6B post merger.

Bakkt is majority owned by $ICE (Intercontinental Exchange), which is adding $50M to the PIPE.

Bakkt manages digital assets – digital currency, loyalty points, gift cards, in game assets and crypto currency for consumers.

Bakkt is a platform for institutional investors as well to buy, sell, and store digital assets on a global network.

Bakkt also offers warehouse storage for the safekeeping of Bitcoin.

In 2019, the company announced that it was working with Starbucks to enable customers to reload their Starbucks Card—enabling people to buy coffee with Bitcoin.

Bakkt was founded in 2018, and started in crypto currency trading, allowing consumers to manage their digital assets.

ICE operates exchanges, clearinghouses, and listing venues & provides
services to support the trading, lending, investment and risk management.

VIH

Other stockholders include $MSFT $SBUX $ICE $PAYU and Boston Consulting Group.

Analysis

$VIH Bakkt This is a very cursory analysis, but I am not at all excited about this yet or I am missing something for the short to medium term.

$VIH They claim to have consumer accounts, but still dont have a large presence.

$VIH They claim to focus on 300% growth in 2022, but obliviously we will know more only after 2-3 Q of execution. The valuation is not cheap, the comparable companies are doing well $SQ and $COIN, so this is an easy pass for me, for now.

New IPO $ZETA Zeta Global, Ad Tech Saas, but growing slowly

$ZETA Zeta Global is a Software as a Service (Saas) company seeking to raise $250M on a $2.1B valuation, with $368M in 2020 rev,$53M net loss, growing at 25% YoY. 5.43X Price to Sales, but low EBITDA and growth are a concern.

Zeta Global Announces Successful Completion of Debt Refinancing | Zeta  Global

Founded in 2007 by David Steinberg (CEO) the company has raised over $600M in funding so far. It is seeking to sell 15.6M shares (+3.4M additional) at $10 – $12 / share.

Marketing tech company Zeta Global raises $140M at a $1.3B valuation |  TechCrunch
ZT

$ZETA has build a database marketing platform with 220M “opt-in” individuals in the US, which its 1000+ customers use to target offers, and engage for promotions and marketing.

The market $ZETA is going after is marketing automation software, which is $6.9B according to IDC, but $ZETA claims it can service a $36B market.

LOGO

One of the co founders of $ZETA is John Sculley, ex CEO of $AAPL, who is the Vice Chairman of ZETA.

$ZETA has over 1200 employees and has a direct sales force. It competes with Acxiom (went private for $2B in 2018).

$ZETA financials dont look too bad, but they are not compelling either, with 25% revenue growth net losses growing. Overall margins are in the 60% range and inconsistent.

While there are no direct comparable companies public, $ZETA is often mentioned in conjunction with marketing automation companies such as $HUBS Hubspot, Acoustic, $CRM Salesforce Pardot, $ADBE Marketo.

Analysis

$ZETA My only draw was that John Sculley was the vice chairman. This is a slow growth company, with a long history and inconsistent execution, so an easy pass for me.

New IPO: $MQ Marqeta begins trading on Jun 10th – Fintech company in credit card space

$MQ Marqeta will begin trading next week on Jun 10th. They are looking to sell 44.5M shares (+ 6.8M additional likely) at over $24 per share (significantly oversubscribed, so final price is going to be likely $30).

Marqeta | Modern Card Issuing and Payment Solutions

$MQ market cap will be $12B – $15B for 561 M outstanding shares. $DASH Doordash, Square $SQ – 70% of revenues for $MQ, and Klarna are customers.

$MQ IPO pricing range implies ~15X to 17.5X on 22E revenue and ~33X to 36X 22E Gross Profit. $AFRM and $AFTPY are comparable, but $MQ gross margins are lower.

Marqeta S-1 teardown

$MQ Marqeta is a #Fintech company that provides platform and APIs to allow companies to issue virtual or physical cards, process card transactions, and thus, efficiently manage payment programs.

Marqeta Prices IPO Shares At $20 To $24 | PYMNTS.com

$MQ Marqeta allows companies to offer Visa or Mastercard payment products to customers without having to deal directly with a traditional bank.

Marqeta Careers Pique Interest for Berkeley-Haas MBAs interested in  Payments Innovation | by Bosun Adebaki | Haas FinTech Club | Medium

On the back end, $MQ Marqeta itself handles the work with banks; its bank partners include Sutton Bank of Ohio, which accounts for nearly all of Marqeta’s business, and MetaBank of South Dakota.

Managing Customers in the Dashboard | Marqeta Docs

$MQ Marqeta’s top customers include $SQ Square, $UBER Uber, $DASH Doordash, Instacart, $AFRM Affirm, Klarna, $COIN Coinbase, and Marcus by $GS Goldman Sachs.

Pando: Marqeta now powers Facebook Card loyalty and payments tech,  announces $14M Series B round

$MQ will raise $1.2 – $1.5B at the IPO, at $12B – $15B. $MQ has raised over $500M from multiple investors since its founding in 2010 by CEO Jason Gardner.

Marqeta IPO: will the payments firm serve up a strong debut?

$SQ and $UBER own warrants to buy $MQ stock.

FinDEVr Preview: Marqeta - Finovate

$MQ Marqeta makes money by charging a fee on payment transactions, based on the interchange fee system that payment processors like $V Visa and $MA Mastercard use. The vast majority of their revenue comes from interchange fees, with some additional revenue from processing fees.

Payments 101 with Square and Marqeta - Visa Developer Community

$MQ total net revenue was ~$143M and ~$290M during 2019 and 2020, implying +103% YoY growth. Net revenue growth has accelerated to 123% during 1Q21.

It Took Three Tries, But This Entrepreneur Transformed His Struggling  Startup Into A $2 Billion Unicorn

$MQ gross margins are in the 40% – 45% and 20% EBITDA margins long term.

Marqeta Files for IPO as the Pandemic Stirs a Boost in Revenue

Pros

Growing customer base, strong revenue traction and tremendous growth.

Marqeta Jobs and Company Culture

Customer and processing concentration: $SQ is 70% of their revenue, and issuing bank Sutton Bank is 97% of processing volume.

$MQ faces competition from Stripe and $ADYEY Adyen and many other less sophisticated businesses.

It Took Three Tries, But This Entrepreneur Transformed His Struggling  Startup Into A $2 Billion Unicorn

Analysis

I like $MQ transaction fee model, its moat on the API and usage, but think the IPO will have a ton of hype which will raise its short term price. In #Fintech I still like $SQ Square $AFRM Affirm and $SOFI SoFi more and $PYPL Paypal, $COIN Coinbase, $FSRV Katapult as well.

FinTech Is Hard! What It Takes to Make It – With Jason | MEDICI