#9/2020

“It’s OK to not have an opinion on topics you don’t know anything about."
- Morgan Housel

Deals

Berlin-based hotel startup SuitePad closes 7-digit round of funding to accelerate global expansion (techstartups.com)
  • A provider of in-room tablets for the hotel industry to develop a modern hotel room operating system with key functionalities such as centralized room control, hotel room telephone and TV solutions.
  • Currently used mainly in private and chain hoteliers from Germany, Austria and Switzerland, but also has hotels in 8 other countries.
  • Presto: I believe there is a lot of potential in adding different functionalities to the tablet and monetizing current user base, so this will be very interesting to watch how it is going to develop. Also I believe the round size is €3 million.

Overstock’s VC Wing Leads $8.2 million Funding Round in GrainChain (coindesk.com)
  • A commodities tracing platform that uses smart contracts to open up liquidity for low-income farmers.
  • It brings farmers, bankers, insurers, exporters and trade associations on a unified blockchain platform where they can validate the movement of crops and commodities, and even make payments through event-triggered smart contracts.
  • Presto: We are currently looking at a similar startup in Europe and doing deeper dive in the agriculture.
  • Opinion: It seems that relatively a lot of startups are targeting SMEs in agriculture even though I believe that is a dying market especially in developed countries, except for niche specialty growers. It makes sense in developing countries where the labor is still very cheap, but the market is significantly smaller. Maybe I am missing something.

News / Analysis

Construction startup Procore files initial IPO paperwork (therealdeal.com) + S-1 filling here (sec.gov)
  • 17-year old company Procore, a construction management software company, recorded $289.2 million in revenue in 2019 and $186.4 million in 2018 (growth 55% YoY). The company saw respective net losses of $83.1 million and $56.7 million. Expected valuation of 4 billion USD (13,8x revenue).
  • “Not certain whether or when we will be able to achieve or sustain profitability in the future.” - Similar language that WeWork used in its IPO.
  • Biggest VC firms backing the firm are ICONIQ (44.3% pre-offering, led 4 of the 5 last investment rounds) and Bessemer (14.9%).
  • Presto: We are currently in talks with similar startups in CEE region.
  • Opinion: The valuation looks very high on the first look. 17 year old company growing 50% per year valued at 13,8x revenue. It would need to grow constantly 55% every year for 6 years to achieve 4 billion revenue. In addition there might be troubles with profitability. 
  • Also valued by VC metrics, the ARR multiple for the valuation is around 15x (180x MRR)
  • This valuation is high because the company is selling a story of becoming dominant construction management software and then cross-selling their clients (8 506 companies) other products and services, thus monetizing them much better over time.

AMarshall Islands to Power World’s First National Digital Currency with Algorand and SFB Technologies (algorand.com)
  • World's first national digital currency, the Marshallese sovereign (SOV) will circulate alongside the US dollar and help the Marshall Islands efficiently operate in the global economy.
  • The SOV supply will be algorithmically fixed to grow at 4% each year to prevent runaway inflation. The SOV will be introduced through a token pre-sale: rights to future SOV will be sold in a series of auctions as part of a time-release monetary issuance (TRMI), which is expected to begin this year.

Reading

BlitzFail: How Not to Go Off the Rails - or how companies fail by scaling too fast (medium.com)
  • Startups should move away from a “blended CAC” and attribute CAC by channel. This requires tracking conversion rates by lead source. The highest quality lead sources, like word of mouth, are harder to scale than the lowest quality channels, like advertising.
  • Mechanical Turk occurs when a startup compensates for product gaps by doing the work by hand instead of with software. The problem is that it’s hard to go back and automate.
  • Founder’s ability to “run through walls” causes them to stop noticing those walls — until they finally run into one that’s made of concrete.

Death, Taxes, and Three Other Inevitable Things (collaborativefund.com)
  • One is that winning opens doors, so perceived talent creates greater opportunities for actual talent. The best athletes get the best coaches; the best investors get the most patient capital.
  • Matthew Effect is the idea that success tends to snowball independent of skill because perceived talent can be more advantageous than objective talent.
  • The boom-bust cycle will never go away, because most people capable of driving growth don’t have the kind of personality that can quit while they’re ahead.

In case you are interested in helping us with evaluating some companies and industries or just you just want to discus any of these articles, feel free to reach out to Roman from Presto Ventures at roman@prestoventures.com or Linkedin.

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