Welcome again to The TechCrunch Exchange, a weekly newsletter focused on startups and market trends. It’s largely derived from the daily column featured on Extra Crunch, but offered freely for your weekend review. Click here to receive it directly in your inbox each Saturday morning.

Are you prepared? Let’s examine funding activity, emerging companies, and recent initial public offering developments.

The beginning of this year has proven anything but tranquil.

Hopes for a calmer 2021, following the challenging circumstances of 2020, were quickly dashed as the New Year commenced with significant venture capital investments (Divvy! Gtmhub!), IPO announcements (Affirm! Poshmark! Roblox!), SPAC-related news (SoFi! BuzzFeed!), and unsettling events in the nation’s capital. We will address these topics momentarily, excluding the political matters as I prefer to avoid further discussion before the work week begins.

Today, we will begin by highlighting two instances of company growth: one from an organization approaching IPO readiness, and another from a newer startup establishing itself following a product release.

First, we’ll consider Cloudinary, a software company specializing in media management, which we previously covered in early 2020 when the self-funded company reported $60 million in annual recurring revenue, or ARR. I reconnected with this growing company this week to assess its experience navigating a pandemic while remaining independently funded.

Itai Lahan, co-founder and CEO of Cloudinary, informed TechCrunch that his company has now achieved $80 million ARR, representing 33% growth during a particularly active year. A noteworthy accomplishment, certainly. However, Lahan explained that Cloudinary had initially aimed for over $90 million in revenue for the year. What accounted for this difference?

As it turns out, Cloudinary deliberately moderated its growth trajectory.

Lahan detailed to TechCrunch how Cloudinary responded to the COVID-19 pandemic and its effects on segments of its customer base. He and the leadership team opted to reduce the speed of hiring and implement other measures. The primary objective was to guide the company through the pandemic while preserving its culture as it transitioned to remote work, he stated.

The Exchange is seeking startups with between $35 million and $60 million ARR that are experiencing rapid expansion and are willing to share key performance indicators. Please reach out if this describes your company. Further details about this initiative are available here.

The discrepancy between the company’s $80 million ARR and its initial target was a combination of the pandemic’s economic impact and deliberate decisions made by the company, Lahan explained.

It is rare for me to hear a CEO of a private technology firm articulate that they were intentionally making choices to curtail their company’s growth. I struggle to recall a similar instance. Lahan, however, had compelling reasons that extended beyond a lack of recent substantial funding. The company prioritized long-term or sustainable growth over immediate financial gains.

Lahan believes that by concentrating on its customers and employees rather than solely on short-term financial objectives, Cloudinary will achieve greater growth over the next five years than if it had pursued maximum speed. An example of this approach in 2020? The company currently employs approximately 285 individuals, compared to its original plan of around 320.

Remarkable, isn’t it? This is feasible because Lahan and his team are not obligated to answer to external investors with short- or medium-term liquidity expectations, and because Cloudinary provides its employees with opportunities for secondary liquidity, reducing internal pressure for an IPO.

That is not to say we wouldn’t welcome a Cloudinary public offering, as it would allow for a more thorough examination of its financial performance. With projections to exceed $100 million ARR this year, it is nearing the point where regular, detailed inquiries would be appropriate.

Now, let’s turn our attention to a smaller company: OnJuno! While Cloudinary is approaching public offering status, OnJuno is preparing to consider a Series A funding round. It is, therefore, at an earlier stage of development.

TechCrunch initially reported on OnJuno in December, following its launch, to understand the rationale for yet another neobank. According to co-founder Varun Deshpande, OnJuno is designed for high-net-worth individuals, whereas other neobanks typically focus on customers with fewer assets.

OnJuno attracts customers with competitive interest rates and a focus on the debit-oriented Asian American community, as described by Deshpande. How is the company performing? We followed up with OnJuno approximately three and a half weeks after its launch. Deshpande indicated that OnJuno anticipates reaching $10 million in assets under management (AUM) soon, with users contributing average deposits of $7,000 to $8,000. This is significantly higher than the average for some other neobanks, the startup claims.

The fintech startup projects reaching $100 million AUM within the next two to three quarters, noting that around 80% of its users are switching from traditional banks. We will monitor its progress toward $25 million AUM and the consistency of its average deposit amounts.

Finally, let’s discuss recent venture capital rounds, IPO news, and, regrettably, some SPAC developments.

Venture capital

Even though it’s only been the initial days, weeks, and months of 2021, a significant amount of activity has already taken place. As an illustration, we’ve observed the emergence of approximately six new companies valued at over a billion dollars – unicorns – with several others poised to join their ranks.

The rapid rate of unicorn formation is encouraging; however, given our proximity to the fourth quarter of 2020, it’s premature to definitively identify this as a lasting pattern. Nevertheless, with Divvy securing $165 million in funding at a $1.6 billion valuation, Hinge Health reaching a $3 billion valuation, and Salesloft achieving unicorn status, the venture capital landscape has been remarkably active.

Beyond these high-profile investments, Jumbotail, a company based in Bangalore, secured $14.2 million in funding this week to advance its efforts in “digitizing local retail stores within the world’s second-largest internet-using population.” This initiative appears both innovative and significant.

Furthermore, Voxie, a startup located in Atlanta, Georgia, raised $6.7 million in a Series A funding round. Voxie “provides solutions to enable businesses to automate and oversee” their text message marketing campaigns. This demonstrates the continued potential for new companies within the software industry. I previously would have predicted the text messaging startup sector was fully saturated three years ago, but that is clearly not the case!

Looking ahead, we will revisit analyses of startup concentrations. Following our examination of the growth rate of companies focused on corporate cards and related software, we are now turning our attention to software startups specializing in OKR (Objectives and Key Results) software. If you operate in this space, please submit your data to be included in our research.

IPOs

Considering the broader landscape of initial public offerings, here's a key update: Both Affirm and Poshmark are moving forward with conventional IPOs, achieving substantial increases over their most recent private valuations. This indicates that the IPO activity in 2021 is beginning similarly to the surge observed in late 2020. Anticipate significant gains in the near future for several well-known companies.

Additionally, Roblox has decided to forego a traditional IPO, securing a large amount of funding instead, and is now planning a direct listing. The reasoning behind this shift is a valid inquiry, and we have previously explored the factors involved.

In summary, the IPO market is projected to remain robust and potentially exhibit greater variety than initially anticipated throughout 2021, at least in its early stages.

SPACs (alas)

Even though interest in SPACs may have waned, and many feel fatigued by them, they are now initiating actions that are genuinely noteworthy. To be concise and mindful of your time and patience:

• BuzzFeed is potentially becoming a publicly traded company through a SPAC merger. Our assessment: This is a positive development, and we hope BuzzFeed News receives substantial financial resources to continue its important journalistic work.
• SoFi is considering going public via a SPAC, and their investor presentation is available for review, though it appears questionable. The rationale for not pursuing a traditional IPO is unclear. However, given Chamath Palihapitiya’s involvement, this deal is likely to generate significant media attention.
• Bustle Digital Group is reportedly exploring a potential public listing through a SPAC. Our assessment: Is this actually happening?

Odds/Ends

A significant number of venture capital firms have recently secured funding, a topic we discussed on the podcast. I’d like to highlight another one: Transformation Capital, which has successfully closed a $500 million fund specifically targeting the digital health sector.

A key benefit of funds with a defined focus, such as this one and USV’s recently launched climate fund, is their clear investment strategy. In Transformation Capital’s case, they are dedicated to investing in digital health companies that have already reached the commercial stage, as they state themselves.

This represents the second fund established by the firm, bringing their total assets under management to $800 million. That’s noteworthy.

Alex