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XHow to Startup: Mission Acquisition
Spencer Rascoff
Spencer Rascoff serves as executive chairman of dot.LA. He is an entrepreneur and company leader who co-founded Zillow, Hotwire, dot.LA, Pacaso and Supernova, and who served as Zillow's CEO for a decade. During Spencer's time as CEO, Zillow won dozens of "best places to work" awards as it grew to over 4,500 employees, $3 billion in revenue, and $10 billion in market capitalization. Prior to Zillow, Spencer co-founded and was VP Corporate Development of Hotwire, which was sold to Expedia for $685 million in 2003. Through his startup studio and venture capital firm, 75 & Sunny, Spencer is an active angel investor in over 100 companies and is incubating several more.
Numbers don’t lie, but often they don’t tell the whole story. If you look at the facts and figures alone, launching a startup seems like a daunting enterprise. It seems like a miracle anyone makes it out the other side.
- 90% of startups around the world fail.
- On average, it takes startups 2-3 years to turn a profit. (Venture funded startups take far longer.)
- Post-seed round, fewer than 10% of startups go on to successfully raise a Series A investment.
- Less than 1% of startups go public.
- A startup only has a .00006% chance of becoming a unicorn.
Ouch.
If your goal is to reach billion-dollar valuation and be publicly traded, the odds will never be in your favor. It does happen, of course, but it’s an exceedingly rare outcome for even the best startups. Holding on too tightly to that hypothetical can actually work against you, blinding you to the importance of planning for a different kind of exit.
It’s been said before, but it bears repeating—companies are bought, not sold. Better exits happen when someone sees the value your startup can bring to their business and is actively trying to purchase it, rather than you having to convince prospective buyers of what your services or products can bring to the table. In the latter scenario, your footing is much less secure and your odds of a successful transaction are inherently lower. You have much more power and are in a much better position when buyers are actively pursuing you.
Getting acquired may not feel like the fairy tale ending your startup deserves, but it’s more than just a back up plan—and it doesn’t happen by accident. Beginning to build the infrastructure today can give you much more control of what happens to your company in the future.
Here’s my advice to startup founders who want to be savvy about their acquisition strategy:
- Make a Buyer List: If your startup has successfully reached Series A or B funding, it’s time to put pen to paper and make a list of your top potential acquirers. Doing so does not indicate failure, just prudence. Who is in your space and could benefit from your company? What company would you like to be a part of? Who shares your mission? Questions like these can help guide you. Aim for having between 10 and 25 potential acquirers in mind.
- Make Connections: Now that you have your short list of companies, be intentional about reaching out and forging relationships with their leadership team. Shoot for the top—a CEO-level contact is ideal. Also consider speaking with people at Corporate Development, but don’t forget another key area of focus—the operating level.
Say, for example, you’re a rental software startup that serves the multifamily sector. Zillow would be a natural fit for your M&A list. Instead of just going after the Corp Dev contact, get to know the person at Zillow who runs the rental business. M&A deals need executive sponsors from the operating unit. Understanding what they do and how they do it is a big advantage when envisioning how your start up can fit into their ecosystem. - Make Those Connections Count: After you’ve connected with the right people at your potential acquirers, make sure you keep them in the loop. Every quarter or six months, reach out to them directly to keep them apprised of what’s going on in your business areas. Tell them what you’re working on. Share your big wins. Ask about potential business development partnerships. See how you might be able to sync up and compare notes.
If you go into these conversations in the name of collegial collaboration, you can form meaningful business relationships that can lead to the best possible outcome for both parties: your startup getting acquired and their company gaining new value.
We acquired 16 companies during my decade as CEO of Zillow. I estimate that the median length of time from the first time I met each of those 16 founders to when the acquisitions were completed was three years. It takes a long time to build relationships with strategic acquirers. Get started now.
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Spencer Rascoff
Spencer Rascoff serves as executive chairman of dot.LA. He is an entrepreneur and company leader who co-founded Zillow, Hotwire, dot.LA, Pacaso and Supernova, and who served as Zillow's CEO for a decade. During Spencer's time as CEO, Zillow won dozens of "best places to work" awards as it grew to over 4,500 employees, $3 billion in revenue, and $10 billion in market capitalization. Prior to Zillow, Spencer co-founded and was VP Corporate Development of Hotwire, which was sold to Expedia for $685 million in 2003. Through his startup studio and venture capital firm, 75 & Sunny, Spencer is an active angel investor in over 100 companies and is incubating several more.
https://twitter.com/spencerrascoff
https://www.linkedin.com/in/spencerrascoff/
admin@dot.la
Proptech Startup Snappt Raises $100 Million To Help Landlords Flag Fraudulent Rental Applications
05:00 AM | March 15, 2022
Photo by Isaac Quesada on Unsplash
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Snappt, a West Hollywood-based proptech startup that helps landlords detect fraudulent rental application documents, has landed a $100 million Series A funding round led by venture capital giant Insight Partners, it announced Tuesday.
The startup is the part of an expanding real estate tech sector that raised a record $9.5 billion in funding last year to produce products ranging from retail analytics to energy efficiency technology to tenant management platforms.
Snappt, in particular, addresses the problem of financial document fraud by rental applicants, by providing landlords with a software platform that can detect when pay stubs and bank statements have been fraudulently altered. More than just a surface-level scan, the software analyzes the source code behind the documents to make sure it matches that of legitimate forms by banks and financial institutions. The startup claims its technology has a 99.8% accuracy rate, while roughly 12% of the forms it processes are flagged as fraudulent.
Snappt co-founder and CEO Daniel Berlind
Courtesy of Snappt
“Financial institutions’ documents come in incredibly consistently,” Snappt co-founder and CEO Daniel Berlind told dot.LA. “A Bank of America statement will always come in with the exact same properties. And if you're going to move these properties around, there’s obvious evidence of that.”
Berlind and fellow Snappt co-founder Noah Goldman experienced such issues firsthand; their families both run property management businesses based in Los Angeles, and the pair would often consult with one another on problems they were having with tenants. In 2017, they noticed a surge of fraudulent bank statements and pay stubs; the numbers wouldn’t add up, or the format of various forms submitted from the same bank were inconsistent.
The pair founded Snappt that year and quickly gained traction with the platform, which is used at over 1,000 multifamily properties across the U.S. While real estate is still their target audience for the software, Berlind said other potential use cases could include mortgages, auto loans, utility bills and health care documents (such as forged COVID-19 vaccine cards).
“At the core of what we've built is a fraud detection engine,” Berlind said. “It’s more about how we tune it and the information that we have available.”
In a statement, Insight Partners managing director Thomas Krane said Snappt “is revolutionizing the rental screening process” by addressing “the biggest challenge for today’s property manager—lowering eviction rates and thus reducing bad debt.” Snappt claims its platform helped customers avoid more than $105 million in bad debt last year.
The startup’s previous investors include New York-based early-stage venture firm Inertia Ventures, which provided it with $1.5 million in seed funding, according to Snappt. The company did not provide its current valuation.
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Keerthi Vedantam
Keerthi Vedantam is a bioscience reporter at dot.LA. She cut her teeth covering everything from cloud computing to 5G in San Francisco and Seattle. Before she covered tech, Keerthi reported on tribal lands and congressional policy in Washington, D.C. Connect with her on Twitter, Clubhouse (@keerthivedantam) or Signal at 408-470-0776.
https://twitter.com/KeerthiVedantam
keerthi@dot.la
LA Fintech Dave Goes Public on the Nasdaq After Sealing SPAC Deal
12:21 PM | January 06, 2022
Neo-bank Dave makes it debut on the Nasdaq with a billboard.
West Hollywood-based banking app Dave made its much-hyped debut as a publicly traded company on the Nasdaq stock exchange on Thursday.
Shares in Dave (ticker: DAVE) opened trading at $8.27, giving the company a market capitalization of roughly $3 billion. After swooning close to $7 per share, Dave’s stock rebounded above the $9 mark before closing the day at $8.53.
The fintech startup, which is notably backed by famed billionaire investor Mark Cuban, wrapped up its merger with a special purpose acquisition company (SPAC) sponsored by Chicago-based investment firm Victory Park Capital on Wednesday. The company is expected to raise up to $465 million in capital as a result of the merger, and is looking to use the proceeds to further grow its business—including a potential foray into crypto.
Dave founder and CEO Jason Wilk told dot.LA that part of the reason the company decided to go public was because he had personally grown weary of “the distraction of having to raise private capital.”
“We had a lot of interest in the private market, but we really thought to go public—and give the everyday retail investor the chance to invest in the company and grow with us—was a really good opportunity,” he said. “It makes it easier for us to raise more capital as a public company. Of course, there are some headaches of being a public business, but access to capital is far easier.”
Dave is among a wave of fintech startups aiming to disrupt the retail banking sector with low-fee, digitally-enabled banking services. The firm launched in 2017 as a financial planning app to help customers avoid the billions of dollars in overdraft fees charged annually by traditional banks.
It has since grown its offerings to include a checking account, and now has 11 million customers who use its services for banking, overdraft protection, building credit and finding side-gigs. Dave estimates that it has helped customers avoid nearly $1 billion in overdraft fees to date through its flagship feature, ExtraCash, and earn over $200 million in income through its gig-economy job board, Side Hustle.
As part of the IPO, Wilk and several other Dave executives rang the Nasdaq’s opening bell on Thursday—though the ceremony actually took place in L.A. several days ago, and not in New York City on the day of the company’s market debut.
Because of COVID-19 protocols and social distancing restrictions, the stock exchange shipped a duplicate podium to Dave’s old offices in the Mid-Wilshire district. The podium arrived from San Francisco, where it is occasionally used for bell-ringing ceremonies involving Silicon Valley tech firms.
Though Dave moved its headquarters in October to the Pacific Design Center in West Hollywood, Wilk and the other executives pre-recorded the opening bell ceremony in their old digs on Tuesday. “It was really cool to ring the bell in the place where we used to pump out code with just a few of us sitting around a desk or a coffee table,” Wilk said.
Dave is not the only L.A.-based neo-bank that has looked to go public via a SPAC merger. Marina del Rey-based Aspiration, which offers banking services with an environmentally-conscious angle, is pursuing a similar route and aims to make its market debut by the end of March.
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Pat Maio
Pat Maio has held various reporting and editorial management positions over the past 25 years, having specialized in business and government reporting. He has held reporting jobs with the San Diego Union-Tribune, Orange County Register, Dow Jones News and other newspapers in Ohio, West Virginia, Maryland and Washington, D.C.
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