Ignition Lane’s Weekly Wrap: BNPLs dive, VCs raise, employee share scheme changes & Lush drops social media bomb

This wrap goes out free to subscribers every Saturday. 

Here’s their review of the week. 

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The startup ecosystem: level up

More startups; more money; more govt lobbying (better policies – fingers crossed); more exits; more knowledge; more support; more startups; more money. All signs point to Australia’s startup flywheel levelling up a notch.

VC ain’t seen nothin yet. It looks like 2022 is shaping up to be the biggest fund raising year ANZ has seen. Blackbird, AirTree and Square Peg are said to be planning mega fund raisings early next year, which could bring a further $2bn+ into the ecosystem. SecondQuarter Ventures, which provides secondary funding (a means for early investors and founders to get some liquidity out early), is rumoured to raise a chunky new fund, too. And new players are coming into the fray – for instance, the artist management company behind Vance Joy and Illy, Unified Music Group, is expanding into early stage startup investing.

More fuel. German retailer Schwarz Group (Lidl and Kaufland supermarkets) is acquiring Israeli cybersecurity startup XM Cyber for US$700m, and that means that Aussie investors Macquarie Capital and Our Innovation Fund are in the money. Exits like these are great because they encourage investors to reinvest and tip more into the local ecosystem.

Fixing ESOP (slowly). Everyone’s favourite topic: tax! In an attempt to make ESOP tax rules less “complicated and restrictive,” new rules are being tabled in Australian parliament that will mean employees no longer have to pay tax on their employee shares when they leave the business. The existing tax rule makes no sense – tax shouldn’t be a disincentive to leave employment. Many early employees are not well suited to later stage operations and we’ve seen plenty of examples of ex-Canva, Linktree, Atlassian, etc, people go on to create other incredible startups and investment funds. The value cap on shares offered to employees is also expected to increase from $5,000 per employee, per year, to $30,000. Baby steps.

Founder knowledge bombs. Leigh Jasper shared his tips on going global (specifically into the US) based on his experience scaling Aconex.

A must read if you’re planning on creating a global empire.

Key takeaways:

• Location: Don’t assume the US should be your first geographic expansion. The UK, other countries in Europe, hubs like Dubai and Singapore, and some large Asian countries can also be attractive for expansion.
• Invest: Building a US presence will take longer and cost more than you think. Be clear about where you will focus your investment, time and effort.
• Target: Avoid the early Aconex mistake of trying to do it all – be selective and specific about your target segments, ensuring it’s a market where you are genuinely differentiated from your competitors. Understand customer differences and localise everything.
• Team: Relocate Execs and teams to help Aussie staff understand the international market/think global, ensure knowledge transfer to the newer local team and to help build a common global culture. Bring everyone together (in person). Bring US experience onto your board.

Listed la la land

Snoopy. ASX listed family location tracking company Life360 is acquiring Tile for up to US$170 million plus up to US$35 million in retention awards. Tile is known for its lost item trackers, but it also has valuable partnerships with over 50 different third-party devices, from wireless earbuds to laptops to dog collars. Tile has sold over 40 million devices to date and has over 425,000 paying customers. Life360 plans to create a unified platform where users can stay in touch and track their family members, while also tracking things like wallets, keys, remote controls.

Powershop sells out. News of Powershop’s $729m acquisition by Shell and ICG got the tweetersphere steamed up. Powershop has amassed a flock of customers thanks to its status as a green, ethical energy company. Plus, its gamified app and power buying experience was pretty novel when it launched back in the day. However its acquisition by Shell (from NZX/ASX listed Meridian Energy) means that Powershop’s profits will be funnelled back to a company that’s expanding its investments in fossil fuels. This could be a big win for disruptive renewable energy retailers like Enova Energy and Amber Electric.

BNPL woes. BNPL shares continue to tumble (except Afterpay) reports The Guardian:

Shares in Australian-listed buy-now-pay-later companies have plunged by an average of about 80% compared to peak prices within the past year, driven down by swelling losses and lower-than-expected consumer interest in the product.

Deal fatigue cont’d. After hyping up its float plans only a few weeks ago, UK-based online retailer MySale Group has abandoned its ASX listing saying it will reconsider its options in 2022.

Kogan’s two strikes. Investors aren’t happy with Kogan. The ecommerce giant received a vote of 41.7% against its remuneration report at its AGM this week – that’s two ‘strikes’ (an against vote of more than 25%) in two years. Ruslan Kogan is reportedly Australia’s sixth highest paid chief executive, bringing in $8.99m. Kogan’s share price has slide to around $8 from highs of $25 in October 2020 after significant inventory and warehousing issues impacted profits. Gross sales in the first four months of FY22 were up 19.2% to $432.7m. Kogan aims to 2.3x that run rate to hit $3bn in gross sales by 2026.

Splash for CaaS. ASX listed FirstWave Cloud Technology plans to acquire network management and IT audit software provider Opmantek in an all stock deal worth about $60m. Opmantek, which targets telcos and managed service providers, made $4m revenue and $800k EBITDA in the year to June 30. FirstWave, which provides cybersecurity as a service solutions (enterprise grade security for SMB), is raising $7m to fund transaction costs and repay a $1.5m Opmantek loan.

Cash for IaaS. ASX listed AUCloud is raising $35m, with $12.4m already committed by data centre provider NextDC. AUCloud plans to extend its infrastructure as a service (IaaS) footprint into Brisbane, Melbourne, and Adelaide, and expand its customer reach beyond government/defence into the security-conscious enterprise market.

Local raise roundup

Trend of the week: fancy fintech

SimPRO raised US$350m (A$485m) from K1 Investment Management with participation from existing investor Level Equity. The Brisbane-based field management software company has been on an acquisition spree – acquiring ClockShark, a US-based time-sheeting and scheduling platform, as well as AroFlo, an Aussie job management software provider.

Openmarkets Group (OMG) raised $17.8m for its tech platform that provides the infrastructure connecting trading platforms (e.g. SelfWealth and Superhero) and traders to Australian markets, investment tools and advice. OMG is also acquiring equities markets technology and API developer Cannon Trading at a $12.5m valuation.

Till Payments topped up its $110m September raise with a further $15m led by Touch Ventures. Till provides one platform for businesses to accept any payment wherever and whenever their customers shop – online or in-store. This week Till secured its acquiring license in NZ, making it just one of five non-bank merchant acquirers in the country.

Basiq raised an undisclosed amount from Visa. Basiq’s open banking platform currently provides a bridge between 100 banks and 150 fintechs, providing access to financial account data for lending, digital banking, investment, BNPL, and account-to-account payments.

FIN-PAY raised $10m to take on EFTPOS with a unified payments platform that can accept different payment types – cards, QR codes, crypto and SMS.

PADUA raised $9.8m Acorn Capital. PADUA is a fintech firm providing SaaS and tech-enabled services to financial advisers.

Zipline raised $6m for its compliance software and kiosk system designed for hospitals and aged care providers in a Covid world. Zipline says its annual recurring revenue (ARR) is $5m+. The raise was led by EVP and supported by King River Capital.

Preezie raised $5.5m for its online shopping experience platform, led by Touch Ventures and Steve Baxter’s investment syndicate, TEN13. Preezie’s tech helps to deliver a more personalised and guided shopping experience in order to boost sales conversions for brands like brands like Baby Bunting, Shaver shop, Adore Beauty and Guitar Center.

Riparide raised $4m from Macdoch Ventures and Upswell Ventures. Riparide is challenging Airbnb and Stayz with “soul-fulfilling escapes.” A caravan, yurt, tipi, an old tram or train carriage, a yacht, hotel or cottages – take your pick. The funds will be used to launch the startup’s first three international regions, starting with NZ.

Midnight Health raised $4m from nib insurance in exchange for 50% of the business. Here’s hoping nib provide a whooooole lotta value for that much of an equity chunk. Similar to Eucalyptus and him & hers, the digital health startup is launching a series of health brands – Youly for women (contraceptive & emergency contraceptive pill, thrush, sleep and HSV-1 & HSV-2 treatments) and Stagger for men (hair loss, ED, sleep and HSV-1 & HSV-2 treatments).

HelpPay raised $2.4m for its bill-sharing app, ahead of its launch on Monday. Money paid through the app goes straight to the company that issued the bill, ensuring that contributors don’t overpay.

On the socials around the world

Lush drops a social media bomb. Beauty and bath bomb retailer Lush has announced it is closing its accounts on Facebook, Instagram, Snapchat and TikTok until the social media giants do a better job of protecting users from harmful content. It will continue to engage wth its customers on YouTube and Twitter. Chief Digital Officer, Jack Constantine:

“When it gets to a point that our customers’ wellbeing is being put in jeopardy because of the channels on which we are trying to connect with them, then something doesn’t sit right for us”

It seems social media is addictive on all fronts. This is the second time the company has said it is quitting the socials, dropping out in 2019 only to relapse due to FOMO. Maybe they should just hire someone to slap them every time they open the ‘Book:

Related: Interesting piece on how Facebook and Google fund global misinformation by the MIT Tech Review. TikTok recently crossed 1 billion users outside China and has reportedly overtaken YouTube when it comes to US users’ average watch time. Owner ByteDance is expected to post revenue growth of 60 percent this year.

Live shopping hits the West. On Monday Twitter announced the debut of its first shopping livestream, a 30-minute “Cyber Deals Sunday” event on Sunday featuring Walmart merchandise and hosted by Jason Derulo (a singer & TikToker). Twitter joins Pinterest, Facebook and YouTube in launching a live-shopping stream – a trend that took off in China in 2020, where Alibaba’s Taobao Live has the lion’s share of live-streaming at around 80%.

Shopping under the influence. A shopping app featuring recommendations curated by social media influencers (aka ‘creators’), LTK, has raised $300m at $2bn valuation from SoftBank Vision Fund 2 – nearly 6x its previous valuation. LTK, which also operates an influencer marketing firm, was founded by fashion blogger Amber Venz Box when she wanted a way to earn a commission from readers who bought the products she recommended. LTK says it has turned more than 130 influencers into millionaires by making their posts shoppable and housing them on a central marketplace. This is SoftBank’s biggest investment in a woman founded startup.

Zoom’s big business slows. Zoom exceeded analysts’ estimates for the quarter (to 31 Oct) and issued better-than-expected guidance. Revenue was up 35% to $1.05bn (up 35%), while operating profit rose 51%. However its shares are down 20% this week and more than 30% this year as investors are disappointed by Zoom’s large customer growth, which as been eaten away by Microsoft Teams.

Grateful.

I invited a VC over for Thanksgiving. They:

– Asked who else was in before agreeing to come
– Stood around saying "let me know how i can help" while we cooked
– Wouldn't take food out of the oven as he "doesn’t do hardware"
– Said turkey was under-cooked and "a bit too early"

— Roshan Patel (@roshanpateI) November 25, 2021

That’s a wrap! We hope you enjoyed it.

Bex, Gavin and the team at Ignition Lane

• Catch Gav on the Startup Daily show every Monday at 2pm