Startup Disrupting Consumer Trading

The TechCrunch Exchange: Startups and Markets Update

Greetings and welcome to this week’s edition of The TechCrunch Exchange, a newsletter focused on the startup ecosystem and market trends. This publication draws inspiration from the daily TechCrunch+ column of the same name.

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Today's Highlights

Good Saturday to all our readers. A substantial amount of information awaits your review. We’ll be covering a noteworthy funding event within the consumer financial technology sector, insights from the low-code development space following an earnings discussion with Appian’s CEO, Matt Calkins, and brief updates on initial public offerings (IPOs), Kidas’ venture funding, and the intersection of physical structures with Non-Fungible Tokens (NFTs). Let's begin!

Consumer Fintech Startup Funding

A compelling startup funding round has recently taken place in the consumer fintech arena. Details regarding the company, the amount raised, and its specific focus are outlined below.

Appian's Low-Code Insights

Recent earnings reports from Appian provided valuable perspectives on the low-code development market. An interview with CEO Matt Calkins revealed key trends and the company’s strategic direction.

Quick Updates

IPOs: Recent activity in the initial public offering market is being monitored closely.
Kidas: The venture capital round secured by Kidas has generated significant interest.
NFTs & Public Buildings: An emerging trend involves the integration of NFTs with physical structures.

These developments represent a snapshot of the dynamic landscape within the technology and startup world.

A Startup Disrupting the Growing Consumer Trading Landscape

The surge in individual investor activity propelled Robinhood to a public offering. Despite recent challenges, the company demonstrates the significant public appetite for not only stock purchases but also more complex options trading.

Our focus today is on the latter. Options AI, a geographically dispersed startup originating from Chicago, has secured $4.1 million in a Seed funding round.

This funding, led by Akuna Capital, Miami International Holdings, and Optiver Principal Strategic Investments, alongside other investors, brings the company within our area of coverage.

Options trading is inherently complex, and many new traders lack the necessary tools and expertise to make informed decisions. A conversation with experienced traders will quickly illustrate this point.

Options AI has developed a platform that enables traders to visualize potential trades before execution, improving their choices, particularly with multi-leg options strategies. The tool is remarkably effective, even for those with a basic understanding of options pricing and mechanics.

However, the platform’s appeal extends beyond enhanced charting. Notably, Options AI charges a fee for trades. This approach contrasts with the commission-free trading model popularized by Robinhood, Webull, and similar platforms.

Currently, Options AI supports equity options, but the company plans to potentially expand into crypto and futures options in the future. They are now transitioning from a development and testing phase, confident that initial user engagement and data validate their concept.

Consider this data point: why are consumer trading platforms prioritizing options trading? The answer is profitability. For instance, Robinhood generated $64 million from options trading in Q3 2021, exceeding the $50 million from equity trading. It represents a substantial revenue stream.

With a flat-fee structure and potential for Payment for Order Flow (PFOF) revenues, Options AI could establish a strong market position if it attracts a sufficient user base. Their target demographic is the trader who seeks more specialized tools to refine their strategies.

Robinhood’s user numbers suggest a considerable pool of potential customers who fit this profile. Further updates will be provided as we gather more data on Options AI’s growth and trading activity.

A New Approach to SaaS Pricing

Recent discussions in publications like TechCrunch regarding SaaS pricing have largely centered around the comparison between subscription models and on-demand, or usage-based, pricing structures. This perspective is particularly relevant given the current trend of startups originating as APIs, for which on-demand pricing often proves more logical. Furthermore, a degree of SaaS fatigue is becoming apparent within the market.

Appian is introducing a distinct alternative. I recently spoke with the company’s CEO, Matt Calkins, following their earnings call. While initially anticipating a conversation focused on the low-code market, process automation, and process mining, the discussion shifted towards their pricing strategy.

Appian has developed a pricing model termed unlimited, representing a form of SaaS with no predetermined usage limits. Traditionally, SaaS pricing is determined by the number of users or applications. However, Calkins and his team are implementing a system that blends the advantages of both SaaS and on-demand models.

Essentially, by establishing a fixed annual fee without restricting usage, Appian is incentivizing customers to extensively utilize their services, thereby increasing platform lock-in. This approach encourages deeper integration and reliance on the Appian ecosystem.

Calkins openly acknowledged that the unlimited plan could potentially provide certain customers with a highly advantageous pricing structure. He described his approach as a deliberate “innovation” in pricing, suggesting that while this model might result in lower costs for some users compared to alternative options, it’s a worthwhile investment to secure long-term customer commitment.

This strategy aims to cultivate a loyal customer base from which Appian can derive substantial, high-margin revenue over time. It represents a strategic exchange, prioritizing long-term value over short-term gains.

Initial Public Offering Review

The market anticipated a surge in IPOs, but the volume has been less than expected. Here's a summary of recent activity:

Recent Filings and Launches

HashiCorp submitted its IPO filing; a detailed analysis of its financials is available here.
Allbirds priced its direct-to-consumer IPO above the initial range, and experienced further gains upon commencement of trading. Pricing details can be found here, with financial reporting here.
NerdWallet priced its IPO within the midpoint of the projected range, subsequently trading at a higher valuation. While some gains have been tempered, the initial performance was strong. Financial coverage is accessible here and here.
Nubank also filed for an IPO, and an initial assessment of its economic factors is available here.

SPAC and Other Developments

The merger between Bird and its SPAC completed, though the stock's initial trading performance was underwhelming.

Backblaze announced initial pricing for its IPO, which garnered attention due to the company’s traditional revenue growth model.

It is worth noting that Felicia Shivakumar, a former TechCrunch employee, now works at NerdWallet, following her previous support of a video show initiative at TechCrunch.

Recent Developments in Tech and Gaming

This week brought several interesting updates in the tech and gaming sectors. Kidas, a startup focused on online child safety in gaming, secured $2 million in funding, supplementing its previous fundraising efforts.

Kidas: Enhancing Parental Oversight

Kidas aims to provide parents with insights into their children’s online gaming activities, fostering better communication around a shared interest. The company asserts it delivers information parents wouldn't typically have access to.

While increased monitoring of digital activity can be a sensitive topic, the expanding landscape of gaming communication channels necessitates tools for parental guidance.

A key feature of Kidas is its non-intrusive approach. The startup emphasizes that its technology doesn't disrupt gameplay or activate anti-cheat mechanisms, a crucial consideration for both parents and gamers.

It’s worth noting that Kidas is headquartered in Philadelphia.

LEX Capital Markets: A Novel Approach to Public Offerings

LEX Capital Markets, a company previously observed, has recently facilitated the public offering of a single building. This represents a unique model within the capital markets.

Mythical Games: Continued Investment in NFTs

Mythical Games, a company involved in the NFT space, has raised $150 million to support its NFT-integrated game. This funding may indicate a shift in the direction of NFT development.

—Alex