Extra Crunch Roundup: BNPL, Toast S-1/A, SaaS Pricing

Are Founders Overlooking Potential Risks with Chinese Venture Capital?

A question arises regarding whether startup founders, heavily focused on securing funding, may be exhibiting a lack of foresight when collaborating with venture funds originating from China.

Denis Kalinin, Asia business development manager at Runa Capital, conducted a study utilizing data sourced from iTjuzi, a comprehensive database of Chinese venture capitalists.

Shifting Investment Strategies

Kalinin’s research indicates that numerous Chinese venture funds have reduced their international investment activities. However, this trend is primarily attributed to the comparatively swift economic recovery of China following the COVID-19 pandemic.

The analysis explores several key aspects, including the increasing convergence of Chinese investments in Europe with those in Asia and the United States. Furthermore, it highlights that corporate venture capital (CVC) firms constitute half of China’s leading cross-border investors.

Currently, investors demonstrate a strong preference for sectors such as fintech, deep tech, and digital health.

“While Chinese investors possess the capacity to offer substantial benefits to overseas startups, a thorough evaluation of their specialized knowledge and its potential applicability is crucial.”

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Discussion on H-1B Visas and Remote Work

Today, at 2 p.m. PT/5 p.m. ET, a discussion will be held on Twitter Spaces featuring Managing Editor Danny Crichton and immigration law attorney Sophie Alcorn. The topic will center on the potential diminishing importance of H-1B visas for international founders in the context of expanding remote work opportunities.

This raises a significant point: With the increasing prevalence of remote teams, the decentralization of technology hubs, and investor willingness to fund ventures based on virtual interactions, how vital is it for startups to establish a physical presence within the United States?

This promises to be a compelling discussion. Follow @TechCrunch on Twitter to receive a reminder.

Thank you for reading Extra Crunch this week!

Walter Thompson
Senior Editor, TechCrunch
@yourprotagonist

Toast Anticipates $18 Billion Valuation with Forthcoming IPO

On Monday, Toast announced an initial public offering price range between $30 and $33 per share. Alex Wilhelm has analyzed the updated S-1/A filing to gain a clearer perspective on valuing vertically focused SaaS companies.

These companies combine software-as-a-service with payment processing functionalities.

The central question is whether the restaurant software company’s targeted $18 billion valuation is justified.

Analysis of Toast’s Business Model

Wilhelm’s investigation centers on understanding the intricacies of valuing businesses that integrate both SaaS and payment solutions.

The S-1/A filing provides crucial data for assessing Toast’s financial health and growth potential.

• The analysis considers key metrics like revenue growth and customer acquisition cost.
• It also examines the competitive landscape within the restaurant technology sector.
• Understanding the interplay between software revenue and payment processing fees is paramount.

Vertical SaaS companies like Toast cater to specific industries, offering tailored solutions.

This specialization can lead to higher customer retention and increased revenue per user.

However, it also presents challenges in terms of scalability and market expansion.

Implications for the SaaS and Payments Landscape

Toast’s IPO is being closely watched by investors and industry observers alike.

A successful offering could pave the way for other vertical SaaS companies seeking public funding.

The valuation achieved by Toast will serve as a benchmark for similar businesses.

It will also provide insights into investor appetite for companies operating at the intersection of software and payments.

Further Considerations

The current market conditions and investor sentiment will play a significant role in determining the final IPO price.

Factors such as interest rates and economic growth could influence demand for Toast’s shares.

A thorough understanding of these external factors is essential for accurately assessing the company’s prospects.

Establishing Pricing Strategies for Emerging SaaS Offerings

Determining the optimal pricing structure is a critical challenge for all founders initiating an enterprise software venture.

This is a significant decision with lasting implications. While per-user licensing offers administrative simplicity, it’s important to consider whether a concurrent user model would better suit customer needs.

Yousuf Khan, a partner at Ridge Ventures and former CIO, emphasizes that initial pricing conversations should prioritize understanding the buyer’s viewpoint and the demonstrable value the product delivers.

He acknowledges the inherent difficulty in objectively assessing one’s own creation, particularly when seeking financial compensation for it.

Key Considerations for Early-Stage SaaS Pricing

Successfully navigating the initial pricing phase requires careful thought and a customer-centric approach. Focusing on perceived value is paramount.

Founders should avoid becoming overly fixated on cost-plus pricing. Instead, they should concentrate on quantifying the benefits their software provides to the end-user.

• Value-Based Pricing: Align costs with the tangible improvements delivered.
• Customer Segmentation: Different customer groups may perceive value differently.
• Competitive Analysis: Understand how your pricing compares to alternatives.

Understanding these elements will help establish a sustainable and attractive pricing model.

The Importance of Buyer Perspective

Prioritizing the buyer’s perspective is crucial during the pricing process. What problems does your software solve for them?

How much time or money does it save? Quantifying these benefits allows you to justify your pricing and demonstrate a clear return on investment.

Remember, customers are less concerned with your development costs and more focused on the value they receive. Focus on outcomes, not inputs.

Navigating Self-Evaluation Challenges

Objectively evaluating your own product can be surprisingly difficult. It’s natural to overestimate its value.

Seeking feedback from potential customers and industry experts can provide valuable insights. This external perspective can help refine your pricing strategy and ensure it aligns with market expectations.

Will India's BNPL 2.0 Revolutionize B2B Commerce?

A significant digital shift is underway among India’s small and medium-sized enterprises (SMEs). This transformation is fostering novel e-commerce possibilities.

The adoption of smartphones is diminishing the reliance on traditional paperwork, and a recently launched, government-supported real-time payment infrastructure is fundamentally altering the methods of financial transactions.

The Rise of BNPL in B2B

Rather than adopting established credit models, Buy Now, Pay Later (BNPL) solutions are emerging as the key to unlocking the potential of digital B2B commerce, according to Anubhav Jain.

Jain is the co-founder and CEO of Rupifi, a company focused on providing financial solutions for businesses.

He posits that BNPL represents the logical progression in addressing the challenges inherent in digitizing B2B transactions.

• BNPL offers a streamlined approach to credit.
• It bypasses the complexities of traditional financing.
• It caters specifically to the needs of SMEs.

This new wave of BNPL, often referred to as BNPL 2.0, is designed to address the unique requirements of business-to-business transactions.

It differs from consumer-focused BNPL by offering features like larger credit limits and extended repayment terms.

The potential for disruption is substantial, as BNPL 2.0 aims to simplify and accelerate the flow of capital within the B2B ecosystem.

Analyzing Freshworks’ Initial Public Offering Price

Freshworks, a company specializing in the creation and provision of diverse business software solutions, has established an IPO price target between $28 and $32 per share.

This valuation potentially elevates the company’s worth to approximately $10 billion, as reported by Alex Wilhelm.

IPO Pricing Assessment

The initial pricing of the Freshworks IPO appears to be sensible, according to analysis.

However, a potential increase within the price range remains possible if investors demonstrate confidence in the company’s future expansion.

Currently, significant upward price movement isn't anticipated.

Assessing the Potential Valuation of Your BNPL Startup

Recent substantial acquisitions, notably the purchase of Japanese firm Paidy by PayPal and Australian BNPL provider Afterpay by Square, have demonstrably validated the inherent worth of ventures focused on the buy now, pay later market.

These transactions have offered concrete evidence that the value created by BNPL startups extends beyond merely their immediate financial performance, as detailed by Alex Wilhelm in The Exchange.

Analyzing BNPL Valuation Metrics

Wilhelm’s analysis centers on a straightforward valuation approach. He examines the companies Afterpay, Paidy, and Klarna to determine a key metric.

This metric focuses on establishing the price investors are willing to pay for each dollar of Gross Merchandise Volume (GMV) generated by these BNPL businesses.

• The core question is: What price would be justified for $1 of BNPL GMV?
• This provides a comparative benchmark for assessing the potential value of other companies in the sector.

Understanding this ratio is crucial for startups seeking funding or considering exit strategies within the rapidly evolving BNPL landscape.

Automated Techniques for Identifying and Recording Key Moments in Video Games

The popularity of video game livestreaming is experiencing substantial growth currently.

Twitch, for instance, consistently maintains an average of nearly 3 million simultaneous viewers. This figure notably surpasses the 1.1 million average concurrent viewers recorded by CNN during the coverage of the 2020 U.S. presidential election.

While top-tier streamers often employ dedicated video editors and social media personnel to enhance their online presence, emerging automated solutions are now empowering casual streamers to showcase their most compelling gameplay highlights.

The Rise of Automated Highlight Tools

Previously, creating polished highlight reels required significant manual effort. Now, automated systems are changing this landscape.

These tools analyze gameplay in real-time, identifying exciting or noteworthy events. This allows streamers to quickly produce engaging content without extensive post-production work.

Three Primary Methodologies

Several approaches are being utilized to achieve automated highlight detection. These can be broadly categorized into three main methodologies.

• Rule-Based Systems: These systems rely on pre-defined rules to identify highlights.
• Machine Learning Approaches: These leverage algorithms trained on large datasets of gameplay footage.
• Hybrid Methods: Combining rule-based and machine learning techniques for improved accuracy.

Detailed Examination of Each Methodology

Each of these methodologies possesses unique strengths and weaknesses. The optimal choice depends on the specific game and the desired level of accuracy.

Rule-based systems are straightforward to implement but can struggle with nuanced gameplay scenarios. Machine learning offers greater flexibility but requires substantial training data. Hybrid methods aim to balance these trade-offs.

Benefits for Streamers

Automated highlight detection offers numerous advantages for video game streamers. It saves time and resources, allowing them to focus on gameplay.

Furthermore, it enhances content quality and increases viewer engagement. By consistently sharing exciting moments, streamers can attract and retain a larger audience.

Initiating Privacy Discussions with Business Associates

According to Marc Ellenbogen, General Counsel at Foursquare, the average cost of a data breach for a company is $3.8 million. This substantial figure creates a significant “financial motivation for conducting The Privacy Talk.”

What does this entail?

He explains that this involves a discussion that extends beyond standard, publicly available privacy policies. It necessitates a thorough examination of a customer, vendor, supplier, or partner’s ethical framework.

The importance of this conversation should not be underestimated, regardless of your organization’s size or perceived risk.

The Core of the Privacy Talk

The Privacy Talk isn’t simply about legal compliance; it’s about understanding the values that underpin data handling practices. It’s a proactive step towards building trust and mitigating potential risks.

This discussion should cover areas such as data security protocols, incident response plans, and the overall commitment to protecting sensitive information.

• Data Security Measures: What steps are taken to prevent unauthorized access?
• Incident Response: How are breaches handled and reported?
• Ethical Considerations: What principles guide data collection and usage?

Failing to have these conversations can leave your organization vulnerable to significant financial and reputational damage.

Proactive engagement in these discussions demonstrates a commitment to responsible data stewardship and fosters stronger, more secure partnerships.

Advanced Rider Assistance Systems: Origins in Micromobility Regulations

To address concerns from municipalities and demonstrate the safety and benefits of micromobility solutions, scooter companies are now integrating technologies mirroring those found in automotive advanced driver assistance systems (ADAS).

This proactive approach aims to gain the approval of local governments and highlight the positive impact of scooters within urban environments.

Responding to Regulatory Pressure

Rebecca Bellan details how this technological shift is occurring as a direct response to the need to “reassure local administrations.”

Operators are actively deploying these systems to ensure compliance and foster a more favorable perception of micromobility.

How the Technology Works

The implemented technologies are designed to curtail undesirable rider actions and enhance overall safety.

Bellan’s analysis delves into the specific functionalities of these systems and their potential to mitigate risks associated with scooter usage.

Financial Implications and Startup Opportunities

The adoption of ADAS-like technology presents both financial challenges and new avenues for innovation.

Scooter operators will face costs associated with implementation and maintenance.

However, this also creates opportunities for startups specializing in micromobility technology to develop and provide these advanced solutions.

Key Benefits of the New Systems

• Enhanced safety for riders and pedestrians.
• Improved compliance with local regulations.
• Positive public perception of micromobility.
• Potential for new business ventures in the micromobility tech sector.