The TechCrunch Exchange: Startups, Markets, and IPO Buzz

Welcome to this week’s edition of The TechCrunch Exchange, a newsletter focused on the world of startups and markets. This publication is inspired by the daily content found on Extra Crunch, but is freely available for your weekend reading. Interested in receiving it directly in your inbox every Saturday? Sign up here.

This week, we’ll be discussing financial trends, emerging startups, and current speculation surrounding initial public offerings.

Divvy's Acquisition and the Corporate Spend Market

The recent substantial acquisition of Utah-based Divvy by Bill.com for $2.5 billion continues to be a significant topic of discussion. This exit is noteworthy not only for its size, benefiting both the company and the local business ecosystem, but also due to the compelling nature of its target market.

Divvy operates within the corporate spend market, alongside other prominent unicorns such as Ramp and Brex. With Divvy now part of Bill.com, the remaining competitors are actively establishing distinct differentiators.

Brex Revitalizes Out-of-Home Advertising

Brex is re-engaging with out-of-home advertising, launching campaigns in several U.S. cities. Those familiar with Brex’s early days in San Francisco may remember its extensive branding efforts throughout the city. This strategy provided a cost-effective method for generating substantial brand awareness.

The startup is now extending this approach to Houston, Miami, and Washington D.C. Brex CEO Henrique Dubugras explained to The Exchange that the company has two primary objectives with this renewed marketing initiative. First, Brex aims to emphasize its software capabilities, moving beyond its initial image as a corporate card provider for startups. Second, it seeks to communicate to business owners that its services are available to companies of all types, not just those connected to venture capital firms.

Focusing marketing efforts on cities with strong business climates, but less concentrated startup activity, is a logical step for Brex if it intends to broaden its customer base. However, the emphasis on its software offerings is particularly noteworthy.

The Rise of Software-Driven Corporate Spend Solutions

Brex recently introduced Brex Premium, a suite of software services offered at approximately $600 annually. Brex, along with competitors like Ramp and Divvy, has invested considerable resources in developing increasingly sophisticated software to complement their core corporate card products. These developments are resulting in codebases capable of replacing other enterprise software solutions, such as expense management systems.

While Brex is actively promoting its paid Brex Premium package – which, according to Dubugras, is exceeding initial performance expectations – Ramp is highlighting its free software as a competitive advantage.

Ramp's Strategy: Free Software as a Growth Driver

Ramp CEO and co-founder Eric Glyman directed The Exchange to his company’s updated pricing page, which prominently features its zero-cost software offerings. He further stated, via email, that this new page contributed to the company’s “fastest growth month ever.”

A New Approach to Corporate Spending

Collectively, Ramp, Brex, Divvy, Airbase, and other companies in this sector are challenging established norms in corporate spending with more agile and affordable solutions. Their success demonstrates a significant, previously unmet demand for innovative and improved alternatives. The rapid growth experienced by these competitors validates the existence of this demand.

For further insights, you can review our detailed analysis of the Divvy-Bill.com deal here.

Recent Developments in the Startup Ecosystem

This week saw considerable activity surrounding Special Purpose Acquisition Companies (SPACs), leading to a number of noteworthy venture capital rounds that deserve attention. Several promising companies secured funding, presenting intriguing opportunities for deeper analysis.

• ProducePay Secures $43M in Series C Funding: Based in Los Angeles, ProducePay provides agricultural producers with access to financial resources, software solutions, and crucial market intelligence. The company connects these producers with food purchasers, such as importers. Notably, ProducePay recently provided $500,000 in funding to an asparagus farm in Bajío, Mexico, to facilitate hiring and operational improvements, with repayment linked to product shipment.
• The agricultural sector presents unique challenges, including inherent unpredictability, substantial expenses, and often, a mismatch with conventional lending criteria. Coupled with an increasingly interconnected global food supply chain, it’s clear why G2VP and IFC jointly led this investment round.
• Furthermore, The Exchange confirmed that ProducePay’s reported doubling in 2020 was based on Generally Accepted Accounting Principles (GAAP) revenue. The company’s gross margins experienced an increase exceeding 75% between 2019 and 2020, attributed to enhanced underwriting practices and reduced funding costs as transaction volume increased, according to their public relations team. This represents a significant achievement.

Another company attracting investment this week was Panther, which successfully raised $2.5 million. Panther aims to streamline the hiring process for companies operating in 160 countries. Our assessment indicates that, as remote work becomes increasingly prevalent, services like Panther will become essential for many organizations. Gusto is also a competitor in this space, suggesting a dynamic market ripe for both venture capital investment and potential mergers and acquisitions.

Panther is headquartered in Florida and received funding from Tribe Capital, Eric Ries, Naval Ravikant, and Carta Ventures, as stated in their press release.

Lance, a neobank specifically designed for freelancers, also completed a funding round this week, securing $2.8 million. The investment was led by Barclays, BDMI, Great Oaks Capital, Imagination Capital, Techstars, DFJ Frontier, and New York Venture Partners, alongside contributions from angel investors, according to the company.

Following the emergence of successful neobanks like Chime, it’s logical to see more specialized financial institutions emerge. Lance CEO Oona Rokyta believes the freelance economy will continue to expand. Considering recent shifts in the labor market, this appears to be a well-founded prediction.

Finally, a brief update on Alpaca. TechCrunch has previously covered this startup, as it aligns with our focus on API-driven services and operates within the consumer fintech sector, providing equities trading services to other companies. We spoke with CEO Yoshi Yokokawa this week to discuss the company’s progress since our last report.

Insights into the consumer investment landscape – particularly those gleaned from companies like Robinhood – are valuable, given the recent global surge in savings and investment activity.

According to Yokokawa, Alpaca is pursuing international expansion, with plans to launch with new partners across multiple continents in the coming months. The company is currently adding 1,000 new accounts daily outside of the United States, a number Yokokawa anticipates will increase substantially. They have also recently developed a broker API to simplify user onboarding for their partners.

These developments indicate strong growth potential. We will continue to monitor Alpaca’s progress and provide further updates as available.

Alex