All posts by Mukund Mohan

My discipline will beat your intellect

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

New IPO filing: $XMTR Xometry – Marketplace for excess Manufacturing Capacity

$XMTR Xometry, a marketplace for excess manufacturing capacity filed to go public. Founded in 2013 and based in Maryland, the service connects companies with manufacturers with excess production capacity around the world.

Sixty-Four Percent of Small Manufacturers Anticipate Growth as Business  Confidence Rebounds to Pre-COVID Levels | Business Wire

CEO and co-founder Randy Altschuler started $XMTR Xometry with co-founder Laurence Zuriff to help companies looking to build custom parts have the ability to do so in a digital way.

$XMTR Rather than working the phones or starting an email chain, they can go into the Xometery marketplace, define parameters for their project and find a qualified manufacturer who can handle the job at the best price.

$XMTR helps customers

Finds work tailored to individual shops

Pay only 30% up front

Eliminate the quoting process

Handle the sales and marketing

ExOne | Xometry Adds Binder Jetting Through ExOne Partnership

The company had built relationships with 5,000 manufacturers around the world and had 30,000 customers using the platform.

On-demand manufacturing firm Xometry acquires Munich's Shift - Washington  Business Journal

$XMTR will look at raise about $100M – $200M to repay loan debt, which amounted to $15.8M and for expansion.

Xometry cofounder and CEO Randy Altschuler

$XMTR closed 2020 with $141M in revenue — a 76% jump from $80.2M in 2019 revenue and 268% from 2018’s $38.4M. It had $31M in annual losses.

On-demand manufacturing service Xometry raises $50 million in equity  funding - 3D Printing Industry

Xometry $XMTR has raised over $200M in funding since and most recently raised $75M in Sep 2020 at $600M in valuation.

$XMTR has 386 employees. It acquired competitor MakeTime in July 2018.

The market for on-demand manufacturing is about $7B and will grow to $9B by 2025. Valuation is not know yet, but will be closer to the IPO day.

Analysis

The pros are high margin marketplace business, with scalable market opportunity. It fills a big need in this JIT (Just in Time) manufacturing and inventory economy. The cons are the huge losses and lower take rate 15%.

I am going to wait on this again and put it on my watchlist because it is well priced and will likely POP.

Post script: The stock priced at $44 and went up 91% on IPO day.

New IPO Filing Sentinel One $S Endpoint Cybersecurity Vendor

$S Endpoint cybersecurity vendor SentinelOne filed for an IPO, likely to raise about $500M at about $8B-$10B valuation. The final numbers will be known in a few weeks.

SentinelOne Endpoint Protection Platform Features | G2

$S SentinelOne XDR platform antivirus technology provides autonomous real-time protection across all operating systems, including Windows, Linux, macOS, and cloud-native and containerized workloads. The endpoint protection is powered by distributed AI which resides both on devices as well as in the cloud for always-on, machine-speed protection.

$S SentinelOne was founded by Tomer Weingarten in 2013, and has its HQ in Mountain View, California. The company has raised over $700M and most recently raised $276M from Tiger Global at over $4B valuation.

$S SentinelOne has experienced massive growth in recent years, with sales jumping to $93.1M in 2020, +100.2% from $46.5M in 2019. Losses were $117.6M, or $3.31 per share, 53.6 percent worse than a loss of $76.6M, or $2.34 per share the year earlier.

International sales accounted for 30of% SentinelOne’s revenue.

$S SentinelOne sells its software via channel partners. Its two largest channel partners are France-based distributor Exclusive Networks and N.J.-based direct market reseller (DMR) SHI International. SentinelOne generated 19% of its revenue from Exclusive Networks and 13% of its revenue from SHI.

SentinelOne Singularity: AI-Powered XDR platform transforms enterprise  security - Help Net Security

$S SentinelOne’s main competitor is $CRWD CrowdStrike, which is much larger, but it also competes with $PANW Palo Alto Networks and $ZS ZScaler.

$S SentinelOne had over 4,700 customers in more than 80 countries, up 74.1% from more than 2,700 customers a year earlier. No single customer accounts for more than 3% of SentinelOne’s revenue.

Metrics and Analysis

While the final valuation and numbers are not known, assuming it is growing at 100% and will be $200M+ in 2021, I think the implied valuation or 40X – 50X NTM revenues is rich, but this is in a very hot space (Cybersecurity) and the market is willing to pay for high growth companies.

I still like $CRWD Crowdstrike a lot, $ZS ZScaler and $OKTA Okta in the Cybersecurity space, so I will likely not initiate a position for 3-6 months.

New IPO Tomorrow $DLO dLocal LatAm Online Payments provider

dLocal Announces Filing of Registration Statement for Proposed Initial  Public Offering | Business Wire

$DLO, DLocal, an Uruguay-based payments startup, has seen its valuation more than quadruple to $5 billion after raising $150 million in an investment round.

DLocal, processes cross-border payments with APIs for emerging markets.

IPO of DLocal Limited: an Uruguayan Online Payment Service is Floating | R  Blog - RoboForex
D Local $DLO

$DLO DLocal provides platforms in 29 countries that allow companies such as Amazon.com Inc. and Booking.com to charge clients in different currencies by accepting local credit cards, bank transfers and other forms of payment. It also helps companies send money to their agents and contractors, such as Uber Technologies Inc.’s drivers.

Dlocal customers

$DLO primary offerings include:

  • dLocal API
  • Fraud management tools
  • Compliance
  • Merchant dashboard
  • Marketplace service
Uruguay's DLocal Valued at $5 Billion as Alkeon, Tiger Invest - Bloomberg

$DLO will sell 29.4M shares (plus an additional 4.4M green shoe) at $18 per share raising about $600M.  The market could value $DLO at $5.7B. This implies a valuation of 32X to 39X 2021 revenues.

dLocal raises millions in round; Nubank buys Easynvest; and more | iupana

$DLO has a customer base of more than 330 merchants covering over 2B internet users. dLocal offers over 600 local payment methods.

dLocal on Twitter: "#Money2020EU Our handsome-looking team is dying to talk  to you about emerging markets #payments. Booth G11 #crossborder #fintech…  https://t.co/0ZXvOPVAvh"

$DLO dLocal offers its partners one direct API, one technology platform and one contract under its one dLocal model.

$DLO dLocal posted revenue of $104M in fiscal 2020, up 129% YoY. The company reported revenue of $40.3M in the most recent quarter, up 124% YoY. Net income for 2020 was $28M

$DLO had total payment volume of $2.1 billion in 2020 and saw total payment volume grow at a compounded annual growth rate of 97% from 2016 to 2020.

dLocal Collaborates with Microsoft to Reach New Customers in Emerging  Markets | Value Added Services News in Nigeria

$DLO dLocal has partnering with $SHOP Shopify to enable small businesses to offer local payment methods in more than 19 currencies in emerging markets.

The Only Payments Technology Platform That Unlocks The Full Potential Of  Today's Growth Markets: dLocal
CEO and founder Sebastian

Metrics

DBNER: Net revenue retention rate for the year of 2020 was 171%.

Rule of 40: DLO’s most recent RF40 was 170%, which is awesome.

Global market for B2B cross border payments was an estimated $27 trillion in 2020 and is expected to reach $35 trillion by 2022. The addressable market for $DLO is $152B in the near term (2025).

Competitors include AstroPay and Stripe.

Analysis

I like the company a lot and will initiate a small starter position tomorrow assuming it does not go over $25 per share. If it prices over $25, I will wait for a pull back.

New IPO filing $AHS Aihuishou – Chinese used electronics marketplace

Chinese used electronics trading platform Aihuishou is aiming to raise $500 million to $1 billion in a U.S. initial public offering by early June.

Love recycling store
Aihuishou

$AHS Aihuishou was founded in 2011 and has $JD (Jd.com) as an investor. The company is seeking a $4B – $5B valuation.

LOGO

$AHS Aihuishou is the leading marketplace for second-hand electronic products, covering the mainstream second-hand digital markets in China, India, and Brazil.

LOGO

In 2019, JD announced a strategic merger between its second-hand trading platform Paipai and Aihuishou and invested another $20M in cash to Aihuishou.

$AHS Aihuishou had a total of seven rounds of financing, totaling more than $1.2B. 

The used electronics market is over $15B in China alone.

$AHS Aihuishou recycles second-hand mobile phones, computers, laptops, cameras and other electronics products from individuals and corporations and resells them on its website and apps, as well as offline stores in 140 cities.

$AHS Aihuishou means “Love Recycling” in Chinese.

LOGO

Total GMV transacted on the platform was $4.2B for the twelve months ended March 31, 2021, representing a year-over-year growth from the twelve months ended March 31, 2020 of 66.1%.

$ASH revenues

$AHS total revenue for 2020 was $741M +25% YoY, while losses were lower by 100% at $71M, from 2019.

Risks

This is very competitive market, with many local players who service and sell used electronics. The integration with JD’s used electronics marketplace is still underway. Over 80% of products traded in the marketplace are cell phones.

Analysis

$AHS growth rates look reasonable as does the valuation. The company will do about $1B in 2021 revenues and is valued at $4B – $5B with 16% gross margins. If value this relative to $EBAY, which is growing at 29% YoY (Blended last 12 months) and $43B Market cap with $11.2B in 2020 revenues,

$AHS has the big advantage of growth in China, which $EBAY does not.

I am not going to participate in the IPO and wont likely track this stock until it shows me growth in similar lines to $ETSY, $SHOP and $SE

New SPAC Acorns $OAKS – #Fintech company with investments, banking and Savings

$OAKS Acorns, a consumer banking, savings and investment company has agreed to go public via a SPAC $PACX for $2.2B. The company did $71M in 2020 revenue and is growing at over 70% YoY.

Acorns Review 2021 : A Safe Investing App For Beginners
Acorns

$OAKS / $PACX will have $465M cash for the company post the merger.

Image

$OAKS Acorns doesn’t allow its 4+M users to buy or sell individual stocks. Instead, it helps them build balanced portfolios for the long term via its signature service, which deposits users’ spare change into index funds. 

Acorns - Invest, Earn, Grow, Spend, Later | Acorns

$OAKS Launched in late 2014, Acorns helps users invest in stocks and bonds and operates on a subscription-based model. It has 4M subscribers.

How To Recommend A Stock Is Acorns App Good – AUSILI PER DISABILI E ANZIANI

$OAKS / $PACX Acorns. The Irvine, California-based company counts $PYPL PayPal, BlackRock $BX and Comcast Corp among its investors.

Get $1,000 for free by downloading Acorns savings app | Cult of Mac

$OAKS Acorns said that they aim to pass along 10% of their respective positions in the new company to eligible customers through a share-ownership program.

Get $1,000 for free by downloading Acorns savings app | Cult of Mac

$OAKS grew to over $71M in revenue +70% YoY and is expected to continue to grow at that rate in 2021. At 17X 2021 revenues for 70% growth, this seems like a good value, especially since this is more like a SaaS business, but I think shares wont head higher until 2H 2021.

Image

Comparable valuations are higher, but Acorns $OAKS will suffer from SPAC rejection for the near future. Most investors are staying away from SPACS at the present moment, so I expect shares will head to between $7 – $9 post merger.

Image

New IPO Filing Sprinklr $CXM, Marketing SaaS Customer Experience Software

$CXM Sprinklr sells a software as a service (SaaS) customer experience management platform. The company’s product (also called Sprinklr) combines five different products: marketing, advertising, research, care and engagement.

Sprinklr + Trustpilot
Sprinklr

$CXM Sprinklr was founded in 2009 by Ragy Thomas in New York, and has grown 19% YoY in 2020 to $386M in revenue. It was last valued at $2.7B in Sep 2020 when it raised $200M.

$CXM Sprinklr has raised approximately $585M since it was founded.

$CXM sells its platform on a subscription basis annually to over 1000 customers including TikTok, Facebook, Prada, Cisco, Microsoft and Nike.

Sprinklr Pricing, Alternatives & More 2021 - Capterra

Over the last decade, Sprinklr $CXM has acquired 12 companies including UserRules, Scup, Little Bird, Branderati & new brand Analytics.

Technology

LOGO
$CXM platform

$CMX Sprinklr platform is architected to ingest unstructured and structured data from more than 30 channels in real time, including audio, video and images.

LOGO

$CXM Sprinklr has 4 modules.

Modern Research – listen to and learn from the market, customers, and competitors to act inreal-time.
Modern Care – serve customers on the channels they choose, increasing satisfaction, driving loyalty and reducing costs.
Modern Marketing & Advertising – personalize ads with content that is relevant, authentic, timely and effective.
Modern Sales & Engagement – engage with and sell to customers on the channels they use most.

LOGO

Market

The total addressable market for Unified-CXM (Customer Experience Management) platform is approximately $51B as of 2021, growing at 7% YoY.

LOGO
Ragy Thomas, Founder & CEO Sprinklr

Customers

1,179 customers, including more than 50% of the Fortune 100. 69 customers with subscription revenue equal to or greater than $1M for the trailing 12-month period, which represented approximately 47% of subscription revenue. 

Competitors

$ADBE Adobe, $CRM Salesforce, $XM Qualtrics, $MDLA Medallia, $HUBS Hubspot, $SVMK Survey Monkey, $SPT Sprout Social are all competitors, since they are both in the social media software space and the customer experience management space.

Financials

$CXM Revenue of $324.3M (2020) and $386.9M (2021) +19%, YoY and revenue of $93.0M and $111.0M in the three months ended April 30, 2020 and 2021, respectively +19% YoY.

$CXM Net loss was $39.1M (2020) , $41.2M (2021) and $11.2M and $14.7 M during three months ended April 30, 2020 and 2021.

$CXM Operating loss was $34.9M (2020) $28.8M (2021) and $7.9M and $10.7M during three months ended April 30, 2020 and 2021.

Valuation

$CXM revenue puts it in the top quartile of SaaS companies and growth in the bottom quartile. Sprinklr has not provided any of the SaaS metrics of customer retention or DBNER in its filing. Assuming a $4B valuation (likely) and $386M in last year’s revenue the valuation of 10.36 looks interesting but growth of 19% is not very appealing.

Valuation for Sprinklr compared to peers

Risks

The biggest risk with Sprinklr will be the lack of visibility into key operational metrics (which I think will be shared quarterly) and the competitive market for Customer experience management. Qualtrics $XM is the category leader and it is much bigger than Sprinklr, which means an acquisition is likely.

Analysis

$CXM is an easy pass for me until they show faster growth. Given that $XM Qualtrics is the segment leader, I will prefer to watch this from the sidelines.