Subscription biller Zuora was well-received by stock market investors on Thursday, following its public debut. After pricing its IPO at $14, the company closed at $20, valuing the company around $2 billion.
It was also much higher than expected. The company said in its filings that it planned to price its shares between $9 and $11, before it raised that range to $11 to $13.
Founder and CEO Tien Tzuo told TechCrunch that he believes “a bet on us is really a bet on an entire shift to a new business model, to a subscription economy.” He is optimistic that subscriptions are the “business model of the future.”
Zuora sees itself as an early pioneer in a growing category. The company believes that more businesses will shift their business models to subscriptions, across sectors like media and entertainment, transportation, publishing, industrial goods and retail.
It helps its 950 customers manage subscriptions, including billing and revenue recognition. Zuora touts that it has 15 of the Fortune 100 businesses as clients.
Zuora’s revenue for its fiscal 2018 year was $167.9 million. This was up from $113 million in 2017 and $92.2 million the year before. Losses remained constant in this timeframe, from $48.2 million in 2016 to $47.2 million in 2018.
“We have a history of net losses, anticipate increasing our operating expenses in the future, and may not achieve or sustain profitability,” warned the requisite risk factors section of the filing.
It also acknowledged a competitive landscape. Oracle and SAP are amongst the companies offering software in the ERP (enterprise resource planning) category. It also competes with other startups like Chargebee.
The largest shareholders are Benchmark, which owned 11.1% prior to the IPO . Founder and CEO Tien Tzuo owned 10.2%. Others with a significant stake included Wellington Management, Shasta Ventures, Tenaya Capital and Redpoint.
Zuora listed on the New York Stock Exchange, under the ticker “ZUO.” Goldman Sachs and Morgan Stanley worked as lead underwriters on the deal. Fenwick & West and Wilson Sonsini served as counsel.
After a slow start to the year for tech IPOs, there has been a flurry of activity in recent weeks. Dropbox and Spotify were amongst the recent public debuts. We also have DocuSign, Pivotal and Smartsheet on the horizon.
Stash, the finance app favored by first-time investors who are just learning the market, is getting into banking. The company announced this morning it will roll out a set of mobile-first banking services aimed at those left behind by traditional banks. The services include bank accounts with debit cards, no overdraft fees, access to a network of free ATMs across the U.S., as well as financial guidance on spending, saving, investing, and planning for retirement.
The startup itself isn’t becoming a bank, however. Instead, it has partnered with Green Dot Corporation and its subsidiary, Green Dot Bank, which is where the accounts will actually be housed. That means Stash accounts are protected by FDIC insurance, like any other bank.
The introduction of banking services in Stash comes at a time when the finance app market has begun to swiftly capitalize on younger users’ disinterest in standard banks with their physical branches and high fees, as well as millennials’ savvy use of technology for managing money.
There’s also increased interest from major players in finding new ways to serve the under-banked and unbanked – people who today often rely on payday lenders and check cashers, instead of having their own bank accounts.
In recent weeks, Amazon was reported to be in discussions with banks about its own launch of consumer-facing banking services, for example. And just days ago, PayPal announced its own launch of banking products for the unbanked. In addition, peer-to-peer money transfer apps – including PayPal’s Venmo and rival Square Cash – have been edging their way into banking with by handing out debit cards to users, which are tied to their online accounts. And there are now numerous digital banking services to choose from, for those who don’t need a bank with branches – like BBVA’s Simple, Chime, and Varo Money.
In other words, Stash will have some competition.
However, the company’s advantage here is that it’s not just a banking services provider – it’s also offering services that help teach people how to invest, save, and plan for their future, and can automate much of the activity required to build up your emergency funds or IRA.
The company aims to bring similar insights to its banking services, allowing people to view personalized insights about their spending behavior, and leverage its “Stash Coach” technology for financial guidance.
Stash, which just announced a $37.5 million Series D in February, had said then that its next steps would involve a move into banking. It claimed 1.5 million customers at the time of the raise – a figure that’s now grown to 2 million. It’s also says around 40,000 new clients are joining weekly.
The average Stash user is 29, but the company’s broader vision is to go after anyone – not just millennials – in need of simpler, mobile tools for banking, saving and investing.
“There are more than 100 million Americans who need a banking product just like the one we are building with Green Dot. Stash is committed to being a true partner and source of support for our clients, and for those who have systematically been left behind,” said Brandon Krieg, Stash’s co-founder and CEO, in a statement.
Stash’s announcement today is focused on its partnership with Green Dot, but it didn’t say when the banking services would actually go live in the app for all users. It also hasn’t yet disclosed its fee structure – something the company tells us will be disclosed more specifically when banking services are closer to launch
In the meantime, Stash’s app for investors is a free download on iOS and Android.
PayPal is expanding into traditional banking through partnership with smaller banks to offer consumers debit cards connected to their PayPal accounts, along with direct deposit for paychecks and other services, according to news the company shared with The Wall St. Journal. The company says its new products are targeted specifically at the unbanked, and will launch in the first half of 2018, following consumer testing.
As PayPal itself is not a bank, it’s been working with other banking partners behind the scenes to offer these new services. For example, a Delaware bank issues the debit cards and a Georgia bank helps with photo deposits of checks.
There are some small fees involved with using PayPal’s banking services, including ATM fees for withdrawals from those not in PayPal’s MoneyPass network, and 1 percent of any check deposited via a photo from a smartphone. However, it won’t charge monthly fees or require minimum balances.
Traditional banking customers may not want to pay for things like check deposits, but the lower fees will appeal to those who usually go to payday lenders, and don’t have regular bank accounts, the company tells us.
“We’re trying to bring more of those people into the digital economy,” Bill Ready, EVP and Chief Operating Officer at PayPal, tells TechCrunch. “For folks who don’t have bank accounts, for folks who don’t have credit and debit cards, we want to give them something so they’re not turning to prepaid cards, check cashiers and payday lenders.”
He says there are billions of people in the world without bank accounts, including some 30 million in the U.S. These people spend nine-and-half percent of their income on interest and fees from alternative financial services, he notes.
The new banking products won’t be tied to a yet another debit card, but will be offered to existing prepaid card holders – something that wasn’t detailed in the original report.
The banking services have quietly been in testing with select consumers over the past several months, Ready says, and will begin rolling out publicly in the “weeks and months” ahead. They will certainly be live in the first half of 2018, he confirms.
PayPal will determine the best candidates for the new banking products, based on how customers are already using its services.
“For the consumers already in our base that we see using things like loading cash directly onto a PayPal account in retail locations…we’ll reach out directly,” he says. In some “banking deserts,” it may also invest in out-of-home advertising to reach those people without as many options.
The company is not alone in targeting those underserved by mainstream banks.
Amazon was recently cited as having discussions with banks regarding its own possible launch of consumer-facing banking services. Meanwhile, Square’s Cash app has been doling out bank cards to its users, as has its rival, the PayPal-owned Venmo. There are also digital banking services like Simple, Chime, and Varo Money, for example, which take advantage of new technology to address consumer needs, while having accounts backed by traditional banking partners. (Or in the case of Simple, owners – given BBVA’s acquisition of the service years ago.)
However, many of these existing digital banking efforts are targeting younger consumers, including millennials, who prefer to use apps to manage their money, save, and even invest. And if they get a card at all, they opt for debit over credit, studies have found.
But PayPal says it’s not going after millennials with its new products, just the “unbanked” population in general.
“The [banked and unbanked] divide isn’t necessarily along generational lines…those that are unbanked don’t have access to traditional financial services. We’re giving them a pathway to the digital economy,” Ready says.
Redpoint Ventures has hired Annie Kadavy as its first female general partner. She’ll be on the early stage investment team.
Kadavy has a background in venture capital, having spent several years at CRV. Most recently, she ran strategic operations at Uber’s freight division. She also has an M.B.A. from Stanford University Graduate School of Business.
In a conversation with TechCrunch, Kadavy said she “wanted to focus on consumer but have the ability to do a broader set of investing.” Kadavy also “wanted to join an early stage fund that had a growth fund attached to it, so you can learn from both.”
But she’ll be most focused on seed, Series A and Series B rounds. Kadavy plans to look for opportunities in the Bay Area, LA, Seattle and NYC.
In her blog post, she elaborated on her decision to join Redpoint.
“For me, joining a flat and equal partnership was important. While this may be opaque to many, let me tell you, it matters. It is the economic manifestation of how investment decisions are made, how a venture team will work collectively for you (or not), and how that team will evolve over time. This is rare and it exists at Redpoint.”
When Kadavy was at CRV, she sourced or led deals in ClassPass, Patreon, Doordash and she was on the board at Laurel and Wolf. She’s still looking to invest in companies in similar categories.
Kadavy is part of a wave of venture firms finally hiring female partners, in an industry where only 8% are women. Rebecca Kaden recently joined Union Square Ventures, Jess Lee joined Sequoia Capital, and Naomi Pilosof joined Menlo Ventures, to name a few.
Streaming royalties are too expensive for Spotify to thrive as a public company just playing us songs. Spotify’s shares closed down 10 percent today during its NYSE trading debut. Luckily it controls much of the relationship between musicians and their fans on its app, poising it to build a powerful revenue and artist loyalty generator by connecting the two through native advertising and messaging that doesn’t stop the music.
Spotify already has a wide range of ad experiences built for traditional brands, from audio ads to display units to sponsored sessions where users get ad-free playback in exchange for watching a commercial. But none of these ad units are designed to help musicians grow their audience within Spotify, even if they can be bent to that purpose.
Spotify could win big by following Facebook’s roadmap.
Back in 2007, Facebook already had ads that led offsite. Think of these as Spotify’s existing audio and display ads. But when Facebook built Pages that let businesses reach you through the News Feed, it also launched ads that let them promote and grow their Pages within Facebook. Unlike the stock banner ads you see all over the web, these ads were native to Facebook, targeted with its profile data, and they used social referrals about Pages your friends interacted with to rope you in. These gave entities on Facebook a paid way to grow their popularity inside the platform.
This is Spotify’s opportunity.
Spotify’s existing ad units are designed for brands, not musicians
A few years ago, Spotify’s user base was too small for artists to focus on spending money there to get popular. But Spotify has grown to the size where it’s replacing top 40 radio, and over 30 percent of listening now comes from its recommendations and algorithmic playlists like Discover Weekly. The record labels now need Spotify to have a hit. Between that influence and it’s stature as the biggest on-demand music streaming service, Spotify has the leverage to offer artists the best tool to boost their fan base. Whether artists want to build a following on Spotify, sell collectors’ items, or fill premium front-row seats at their shows, Spotify could hook them up.
The no-longer-a-startup has already built the groundwork for this with the launch of its Spotify For Artists analytics dashboard app last year that shows a musician’s top songs, and the demographics of their fans including their location, gender, age, and what else they listen to. Spotify’s proven the power of this data with its Fans First email campaigns that let artists reach their most frequent listeners with access to concert ticket pre-sales and exclusive merchandise. It claims the emails see a 40 percent open rate, and 17 percent click-through rate — way higher than the industry standard.
But if Spotify built new surfaces for artists to reach out directly to fans within its apps, it could become the destination for record label marketing money. Since these artist ads and messages would all drive users deeper into the app rather than away from it like brand ads, Spotify could charge less than traditional ads and make them affordable to labels on a budget or musicians paying out-of-pocket.
Here are some ways Spotify could create native artist-to-fan marketing channels:
Sponsored songs on its algorithmic playlists could expose fans to artists in the most natural way possible, or turn one-time listeners into loyalists. Wherever there’s recommendations, there’s room for paid discovery. Listeners could easily skip the track or switch to a different playlist, but might end up falling in love with the band, and diving into their catalogue. It’s the equivalent of Facebook’s in-News Feed native ads, but with a musician promoted instead of a business’ Page. Spotify was actually spotted testing what was effectively a sponsored song in mid-2017 above the start of some playlists. While there was an opt-out option within the app’s Settings that’s since disappeared, Spotify has at least considered this idea.
Spotify was spotted testing what was effectively a Sponsored Song back in mid-2017
Promoted Artists could use a similar model to Google’s AdWords sponsored search results. When users search for an artist, they could be shown similar artists who’ve paid to be promoted in the search typeahead or results page. Spotify could also insert a box within the profile of another artist you’re browsing below their top tracks. Spotify already lists a slew of related artists in text, but could highlight one that pays, perhaps showing one of their songs that could be instantly played.
Featured Artists could give artists that pay a special slot on Spotify’s browse page. With so many recommendations here, it’d be easy to insert a sponsored section without feeling interruptive.
Sponsored Visualizations could make better use of your screen while you listen. Rather than just staring at the album art and playback controls, Spotify could let artists pitch fans their other music, tickets, gear, or social media channels. Spotify could also fill this space with entertaining silent video clips, photo slideshows, and biographical info as I suggested as a differentiator in 2016, and similar to how lyrics site Genius started doing with its Stories this week. Given users are currently listening to the artist, they might be primed for these experiences. Spotify has already tested letting artists show GIFs during playback, and has partnered with Genius to show Behind The Music factoids, but this is real estate that could help artists earn more money as well as entertain fans.
The most ambitious and audacious way to let artists reach fans would be a special artist-to-fan messaging channel. Spotify got rid of its in-app inbox and messaging feature for sending friends songs a few years ago, instead pushing users to share music via their chat app of choice. But similar to the Fans First email campaigns, Spotify could create a special artist-to-fan messaging section in its app that could alert users to new releases and playlists as brand advertising, or even push tours and merchandise as more direct performance advertising.
Spotify could give all artists a certain volume of messages they could send for free or let them reach out just to the top 1% of fans a certain number of times per month or year. Then artists could pay to send more messages beyond the limits. Alternatively, it could just charge for any use of messaging.
Done wrong, the above options could feel like Spotify gouging artists to reach their own fans. But done right, users might actually enjoy it. These connections wouldn’t be too far off from following an artist on other social media, but where people are already listening. Finding out about one of your favorite band’s new albums, tours, or t-shirts might feel less like an ad and more like an inside tip from the fan club.
Spotify might be able to get away with showing some of these different experiences to users who’ve subscribed if they don’t get in the way of music listening. Swinging to the other end of the opportunity spectrum, the company could just give away all these experiences to artists, boosting their loyalty to Spotify and getting them to promote their presence there instead of on competing streaming services like Apple Music.
If Spotify doesn’t figure out a way to improve its margins with additional revenue drivers, it may have a tough time surviving as a public company. If it becomes too profitable from just music streaming, the labels can always try to increase their royalty rates. Spotify might hope that more artists work with it directly, cutting out the middlemen, but the record labels still provide some important marketing, radio promotion, and distribution services that artists need. Meanwhile, startups including United Masters (which raised a $70 million Series A from Google parent Alphabet and Andreessen Horowitz) adnd subscription crowdfunding platforms like Patreon want to usurp the record labels and become the way artists earn more before Spotify can.
This New York Times’ chart shows why musicians feel screwed, even though it’s labels keeping their money not Spotify
Creating ways to connect with listeners could offer Spotify a way to combat the enduring narrative that it’s screwing over musicians. If Spotify can prove these artist-to-fan messaging options earn them more than they cost, it could be seen as the streaming service that’s actually trying to help musicians make a living.
Recorded music has become primarily a promotional tool for all of a musician’s other revenue monetization methods since the dawn of the MP3. Streaming’s on-demand structure and no-extra-cost-per-play nature turns the curious listener who’s only heard of an artist or just likes one single into a diehard fan who shells out the big bucks every time their favorite act is in town.
As we shift to an experiential culture where our possessions are digitized and its our interests that define us, people want to feel closer to the creators they love. Artist-to-fan messaging could bring the whole life-cycle from discovery to affinity to real monetization beyond the royalties all within one green and black app.
For more on Spotify going public, read our feature stories:
By Daniel Howley The Far Cry series is known for dropping players into huge, open-world settings and letting them sew chaos and destruction as they take on each title's menacing villain. But those settings and enemies have always been based in large…
CardUp founder and CEO Nicki Ramsay (front, second from right) with her team
CardUp, a Singapore-based startup that enables users to make large, recurring payments by credit card even to recipients that don’t accept cards, has raised $2.2 million SGD (about $1.7 million) led by Sequoia India and SeedPlus. This is CardUp’s first institutional investment round and will be used to expand its business serving small- to medium-sized enterprises.
Before launching CardUp in 2015, founder and chief executive officer Nicki Ramsay worked at American Express for seven years, where her last position before leaving was director of international business development in the Asia-Pacific region. Ramsay says she created CardUp to solve challenges for both credit card users and providers.
“In my years spent in the payments industry, we repeatedly set the same goal, which was to increase credit card usage, but a lot of initiatives actually just ended up shifting share from one card issuer to another,” Ramsay told TechCrunch in an email. “CardUp extends the way you can use credit cards, so it really grows the pie. On top of this was my own personal frustration that I was getting limited value from my credit card as I couldn’t use it for any of my big expenses.”
CardUp claims it’s seen an average monthly user growth rate of 41% since launching in late 2016, which it attributes to the fact that it doesn’t require payment recipients to sign up for a CardUp account, too, reducing barriers to adoption. It’s also inked partnerships with major financial institutions like UOB, Citibank, Bank of China and Mastercard to promote its services. Over the last 12 months, more than $55 million SGD in payments were made through CardUp, which it says represents more than one percent of overall credit card spend growth in Singapore from 2016 to 2017.
CardUp positions itself as the middleman between organizations that don’t usually accept credit cards, such as landlords or the government, and people who want to use their cards for recurring payments so they can take advantage of things like reward programs and extended credit terms. The company’s value proposition for small business owners is the ability to use their existing credit card limits to extend business payables up to 55 days, interest-free, which means they have more working capital and cash flow.
Ramsay says the company plans to pursue SMEs in Singapore and other countries as well, targeting the many types of payments that are still usually made by checks or transfers, including payroll expenses, rent and supplier invoices.
“A trillion dollars is still spent by check or bank transfer in Singapore alone, that’s 30 times that of the credit card industry,” she said. “Globally, 124 trillion in business payments is still going via cash, transfer or check, and only 1% of that is currently captured on cards. Right now we’re very encouraged by the strong user adoption we’ve seen, validating the need for our service locally, and are therefore focused on capturing this large local market opportunity, but of course the pain point we are solving for SMEs is universal, and so new markets are on the horizon.”
In a press statement, SeedPlus operating partner Tiang Lim Foo said “SMEs are the main economic driving force in Asia, but are currently underserved. CardUp is bringing an innovative payments and cash management technological solution to help SME owners better manage their cash flow and payments processes. We are truly excited to be working with Nicki and her team to embark on the mission to improve the economic productivity of SMEs.”