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Quick S-1 Teardown: nCino

[July 14, 2020 IPO update – stock popped + 195% first day of trading, see end of post for details on IPO] The upcoming nCino IPO is an interesting story, and a good reminder that strong cloud/SaaS companies can be built outside of the usual Silicon Valley or NYC venture path (even with VCs on … Continue reading Quick S-1 Teardown: nCino

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[July 14, 2020 IPO update – stock popped + 195% first day of trading, see end of post for details on IPO]

The upcoming nCino IPO is an interesting story, and a good reminder that strong cloud/SaaS companies can be built outside of the usual Silicon Valley or NYC venture path (even with VCs on board)

(As a side note: we often do those S-1 summaries internally to keep tabs on the software IPO market, so my colleague Avery Klemmer and I figured we’d “open source” this one in case it might be interesting to others – thoughts and comments welcome. Our firm FirstMark is not an investor in nCino)

HIGH LEVEL THOUGHTS & LESSONS:

nCino is a refreshing example of a successful software company that’s built a little bit outside of what’s currently in favor in venture capital circles:

  • Vertical software:  Many VCs these days tend to prefer broad horizontal opportunities, with a concern that vertical software ultimately has a limited TAM, even a large one – but nCino is 100% focused on the banking market
  • Service heavy, no bottoms up GTM: nCino sells its products through AEs , with long sales cycles, and significant implementation services are involved
  • Platform dependency? Being built on top of someone else’s platform is often a concern for investors. nCino is built on top of Salesforce (like Veeva). They’ve seemingly safeproofed this relationship by reselling Salesforce products in their deals, and raising money from Salesforce, wnich is a large investor.
  • Not a Silicon Valley or NYC story:  Launched in 2012 by executives of North Carolina-based Live Oak Bank as a spin-off venture. Still based in Wilmington, North Carolina
  • It’s a spinoff from a bank: the company was originally founded as a majority-owned subsidiary of Live Oak Bancshares, a bank holding company. It then raised $9m in seed funding in 2013 from a variety of individuals including John Mack of Morgan Stanley and Chip Mahan, the Chairman of Live Oak Bank. So nCino didn’t have the structure that most VCs like to see, where the founding team has high ownership and the first money in comes from institutional investors. This history as a spin-off is probably the reason why the CEO of the company owned only 1.6% at IPO time, although we don’t know this for sure).

NOTES

  • Product: multi-tenant SaaS to digitize bank workflows including bank onboarding, loan origination, and account opening
    • Built on salesforce, currently on a 7 year license with them
  • Background: started in a bank, spun out in 2011
  • Market: $10B serviceable addressable market
  • Financial Results:
    • Revenue (FY18, 19, 20): $58M, $91M, $138M (54% CAGR, subscription growing at 65% CAGR)
    • $178.8M Q1 2021 run rate – on the lower end of the spectrum of recent SaaS IPOs
    • $35M of services revenue in FY20
    • Blended Gross Margin (FY18, 19, 20): 48%, 49%, 54%
      • Subscription Gross Margin (FY18, 19, 20): 67%, 69%, 70%
    • Net loss (FY18, 19, 20): $18.6M, $22.3M, $27.6M
    • Subscription Revenue Retention (FY18, 19, 20): 188%, 163%, 147% – strong “land and expand”
  • Customers:
    • 1.1K financial institutions on the platform
    • 290 total customers
    • Customers include BofA, Barclays, Santander, TF, as well as community banks and credit unions
    • 161 > $100K ACV customers
    • 21 > $1M ACV customers 
  • Shareholders (pre-IPO stakes):
    • Insight — 46.6%
    • Salesforce — 13.2%
    • Wellington% — 9.5%
    • CEO — 1.6%
    • Total raised: $213.2M from Salesforce, Insight, Wellington, T Rowe Price
LOGO

July 14, 2020 Update:

  • IPO turned out to be pretty spectacular
  • Roadshow was done fully virtually, reaching over 800 individuals and over 300 institutions, with 31 1×1 meetings and 11 group meetings
  • According to BoFA, nCino generated $11.8 billion total aggregate dollars of demand – an order book that was ~50x oversubscribed based on indications of interest and over 17x covered on a 1×1 basis
  • The final price was $31 per share, above the initial $22-$24 range and the revised $28-$29 range (representing a 35% file / offer premium)
  • According to BoFA, nCino priced its IPO at the highest forward revenue multiple ever for a vertical SaaS company (i.e. in the double-digits)
  • The NCNO stock popped +195.45% on the first day of trading (compared to original price), closing at $91.59
  • While exciting from a demand perspective, this is yet another example of the IPO market not functioning efficiently, at least from the perspective of the company, which could have raised a lot more money if the shares had been properly priced by the underwriter to reflect accurate market demand for the shares. As a reminder about how those things work:
    • IPO investors purchase the shares from the company at the offering price.
    • Therefore, the company sold shares last night at the offering price of $31 a share ($250m worth of shares in total)
    • Yet this morning trading opened up at $71 this morning and closed at $91.59)
    • Therefore the IPO investors (who are free to sell their shares in the open market once trading begins) had an immediate and very substantial gain today, but the company did not.

Source: http://mattturck.com/ncino/

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Private Equity

Alternative Investments: Accelerate’s Alt ETFs Now On RBC Dominion Securities A+ Platform

Accelerate Financial Technologies Inc announced this week that its alternative ETFs have been added to the RBC Dominion Securities A+ platform. RBC Dominion Securities describes the A+ as the next level of wealth management.

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Alternative Investments: Accelerate’s Alt ETFs Now On RBC Dominion Securities A+ Platform

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The A+ is for you if “you require serious investment management for your serious money.”

Accelerate Financial Technologies Inc announced this week that its alternative ETFs have been added to the RBC Dominion Securities A+ platform.

RBC Dominion Securities describes the A+ as the next level of wealth management.

For select clients with serious money, the platform provides greater convenience, customization, RBC’s Unified Managed Account technology, access to elite money managers worldwide, and tax efficiency.

Accelerate’s Alt ETFs on RBC A+

The range of alternative ETFs from Accelerate allows investors to diversify beyond stocks and bonds by including alternative asset classes in their portfolios.

The firm is known as a pioneer in institutional caliber alternative ETFs including hedge fund and private equity ETFs. It claims it is “disrupting the asset management industry by offering performance-oriented alternative investment strategies previously reserved for wealthy investors at a fee significantly lower than competitors.”

“We are pleased to be chosen by RBC Dominion Securities, a global leader in wealth management, as one of the select group of high-quality investment managers on the exclusive A+ platform for RBC Dominion Securities advisors and their clients,” said Accelerate CEO Julian Klymochko. “In an era of rock-bottom interest rates and record-high stock market volatility, we are pleased to provide investors with diversification, alternative yield, and alpha generation solutions through alternative investment strategies including absolute return, arbitrage, enhanced equity, and private equity replication.”

Selected ETFs

The alternative ETFs on the RBC Dominion Securities A+ platform include:

  • Accelerate Absolute Return Hedge Fund (TSX: HDGE) – a diversified, liquid, and performance-oriented long-short equity hedge fund
  • Accelerate Arbitrage Fund (TSX: ARB) – provides exposure to SPAC arbitrage and merger arbitrage investment strategies
  • Accelerate Enhanced Canadian Benchmark Alternative Fund (TSX: ATSX) – combines exposure to the S&P/TSX 60 plus a long-short Canadian equity overlay
  • Accelerate Private Equity Alpha Fund (TSX: ALFA) – designed to provide investors with private equity-like investment returns

Related Story:  Liquid Alt ETF Provider Accelerate Offers Ready-Made Alternative Investment Strategy                                                

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Source: https://dailyalts.com/accelerates-alt-etfs-now-on-rbc-dominion-securities-a-platform/

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Private Equity

Venture Capital: AgTech Startup Benson Hill Lands $150M

Benson Hill, an agtech startup based in St. Louis, announced Thursday its close of a $150 million Series D round led by Wheatsheaf and GV (formerly Google Ventures). It uses biotechnology and data science to enhance the nutritional qualities and sustainability of crops.

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Venture Capital: AgTech Startup Benson Hill Lands $150M

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Benson Hill uses biotechnology and data science to enhance the nutritional qualities and sustainability of crops.

Benson Hill, an agtech startup based in St. Louis, announced Thursday its close of a $150 million Series D round led by Wheatsheaf and GV (formerly Google Ventures).

The company said other strategic and ESG focused investors also participated. These included Argonautic Ventures, Caisse de dépôt et placement du Québec (CDPQ), Emart, GS Group, Louis Dreyfus Company, iSelect Fund, Fall Line Capital, Mercury Fund, Prelude Ventures, Prolog Ventures, S2G Ventures, and additional strategic and family office investors.  (FOOD navigator-USA.com)

Benson Hill technology

Benson Hill uses biotechnology, data science, and AI to enhance the nutritional qualities, flavor, and sustainability of crops and vegetables.

The firm’s “Cloud Biology” is the fusion of data, machine learning, and AI techniques with biology. Its “CropOS” is a proprietary platform that facilitates the accessibility and actionability of Cloud Biology.

The CropOs platform uses plant phenotyping, predictive breeding, and environmental modeling algorithms to better control the plant breeding process and realize these advantages:

  • Produces plants that are highly productive, highly nutritious, and better tasting
  • Better texture
  • Reduce the number of processing steps
  • Reduce the need for additives
  • Grow plants that “do more with less,” thus boosting sustainability

The company’s work so far has been concentrated around soybeans.

Its new, ultra-high-protein (UHP) soy products spiked the interest of investors. They come from a highly productive non-GMO soybean that is rich in oleic oil content.

Use of funds

Benson Hill plans the commercial launch of the first Ultra-High Protein soybean varieties in 2021, among other product launches.

It also plans to expand its team by adding top talent and continue the development of Cloud Biology and CropOS.

“As a society, we’re at a crossroads made more evident as the pandemic has revealed strengths and vulnerabilities in our food system,” said Matt Crisp, Benson Hill CEO. “Food choices that create enjoyment, make us stronger, and help preserve our environment need to be accessible to everyone, and the power of plant diversity and technology innovation can help fuel that evolution.

Related Story:   Smart Farm Technology To Take The Drudge Out of Plant Breeding

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Source: https://dailyalts.com/agtech-startup-benson-hill-lands-150m/

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FinTech: Alliance Data Buys BNPL Fintech Bread For $450M

Alliance Data Systems (NYSE: ADS) said Thursday that it will acquire Bread and its digital platform for $450 million of which $100 will be paid through Alliance stock. The transaction would expand Alliance Data’s own digital offerings by including buy-now-pay-later (BNPL) products.

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FinTech: Alliance Data Buys BNPL Fintech Bread For $450M

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Alliance Data will pay in cash and stock for the acquisition.

Alliance Data Systems (NYSE: ADS) said Thursday that it will acquire Bread and its digital buy-now-pay-later (BNPL) platform for $450 million of which $100 will be paid through Alliance stock.

The transaction would expand Alliance Data’s own digital offerings by including BNPL products. BNPL is a major trend now that consumers have embraced the interest-free, zero-fee facility to pay in installments. Alliance is a provider of data-driven marketing, loyalty, and payment solutions. (Alliance)

Digital BNPL is particularly popular with millennials and the younger set. They prefer not to run up credit card debt and like the speed and convenience. The technology and products acquired from Bread will address this segment of the population.

Bread already has tie-ups with merchants such as online jewelry seller Noémie, the luxury watch seller Hublot and Newton Baby, the crib mattress provider.

BNPL customer experience

“Bread’s flexible, easily-integrated payment solutions, coupled with Alliance Data’s Enhanced Digital Suite, will improve the digital customer experience and support increased acquisition and checkout rates, offering the best payment product to the right consumer at pivotal moments in the customer’s online shopping journey,” Alliance said in a statement.

Alliance intends to leverage Bread’s solutions along with its own existing private label, general-purpose and commercial products.

COVID-19

Its brand partners will therefore get another advantage in the eCommerce channel, with online businesses already getting a boost from COVID-19.

“With the timing of the holiday season upon us, the COVID-19 pandemic has accelerated the adoption of digital technologies, and perhaps nowhere as significantly as in financial services and payments,” said Val Greer, chief commercial officer, Alliance Data.

BNPL is now crowded with cash-rich players

Payments giant PayPal (NASDAQ: PYPL) announced in August that it would begin offering BNPL services, recognizing that COVID-19 had triggered a dramatic increase in their popularity.

Other players in the BNPL field include Klarna, Affirm, Afterpay, and Quadpay.

In a recent study, Tech Crunch found that PayPal had the highest retailer coverage with a presence of 65% retailers. Afterpay was a distant second at 10%, then Affirm 6%, Klarna 5%, and QuadPay 2%.

The study concluded that PayPal was primed to dominate the BNPL wars.

Related Story:   PayPal Challenges Klarna In U.K. BNPL Tussle                                                

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Source: https://dailyalts.com/alliance-data-buys-bnpl-fintech-bread-for-450m/

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