Deals of the day
Sources: TS, Pro Rata, FinSMEs
Landing, a San Francisco-based proptech company that offers renters a membership for flexible, long-term living, raised $30 million in equity and debt funding. Greycroft led the round, and was joined by investors including Maveron and Abstract Ventures.
HopSkipDrive, a Los Angeles based youth transportation solution for schools and families, raised $22 million in funding. Investors include Cyrus Capital Partners, State Farm Ventures, Upfront Ventures, FirstMark Capital and Greycroft.
Cherre, a New York-based real estate data and analytics platform, raised $16 million in funding. Intel Capital led the round, and was joined by investors including Navitas Capital, Carthona Capital, Zigg Capital, Dreamit Ventures, and Silicon Valley Bank.
Maven Machines, a Pittsburgh, Penn-based provider of fleet management software for commercial transportation, raised $7 million in Series A funding. Allos Ventures led the round, and was joined by investors including Hearst Ventures, Riverfront Ventures, and Great Oaks Venture Capital.
Laka, a London-based community-driven insurance technology company, raised $4.7 million in funding. LocalGlobe and Creandum co-led the round.
HouseCanary, a San Francisco-based home valuation company, raised $65 million in Series C funding co-led by Morpheus Ventures, Alpha Edison, and PSP Growth. www.housecanary.com
Rad Power Bikes, a Seattle-based e-bike brand and retailer, raised $25 million co-led by Vulcan Capital and Durable Capital Partners. http://axios.link/zQ2f
Foxtrot, a Chicago-based online convenience store, raised $17 million. Imaginary Ventures and Wittington Ventures co-led, and were joined by Fifth Wall, Lerer Hippeau, Revolution’s Rise of the Rest Seed Fund, M3 Ventures, The University of Chicago, Collaborative VC, Wasson Enterprise, Bluestein Associates, and Barshop Ventures. http://axios.link/VfxV
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Sources: MorningBrew, Axios
U.S. markets:
Casper Sleep, the mattress retailer that was valued at more than $1 billion by venture capitalists, last night priced its IPO at the bottom of an already-slashed price range.
Yes, this went just about as badly as most of us thought it would.
No, it shouldn't be used as an avatar for the broader DTC or IPO markets.
Bad bed: Casper originally filed to price shares at between $17-$19, which already signaled a valuation haircut. Then it cut the range to $12-$13, with insiders NEA and IVP agreeing to buy around 10% of the float (a very unusual move for VCs, outside of biotech).
It ended up pricing at just $12 per share, for an initial market cap of $476 million and a fully-diluted value of around $547 million.
History: Casper held sales talks in 2017 with Target. What happened next depends on who you talk to. One version is that Casper bailed after Target came in about $100 million short of its $1 billion asking price. Another version is that Target never formally bid, after concluding it was uncomfortable with owning a long replacement cycle product that takes up lots of floor space.
Target did end up making a minority investment, either because it still thought Casper had upside (version #1) or as a make-good (version #2).
Market matters: This is an unprofitable consumer product company whose fluffy IPO prospectus seems implies it discovered that sleeping people like to have buffers between themselves and the floor. It has a ludicrously generous return policy that mainly benefits landfill owners, and doesn't break out its non-mattress product sales.
Casper also has tons of competition — from the high end to low end, upstart to incumbent. One of those upstart rivals, Purple, has slightly higher annual revenue and a market cap just north of $700 million.
Bigger picture: Casper began life as a direct-to-consumer company and, like many other DTC startups, has expanded into physical retail (both third party and its own branded stores). But that's where many of the similarities end.
As Target realized, mattresses have very long replacement cycles. Even if you love your Casper mattress, chances are you don't plan to buy another one for years (maybe even a decade). It's more like luggage than shoes or makeup, let alone like software.
That's why Casper has worked to expand its product line into peripherals that range from bed-sheets to CBD gummies (to help you sleep). But Casper's decision to not provide data into how these other offerings have fared is not encouraging.
On the broader IPO front, two other companies this morning will list after pricing at the top of their range.
Bottom line: Conventional wisdom was right, but too much extrapolation would be wrong.
Renting an apartment in New York is ridiculously difficult and expensive, in no small part because of the dominance of a curious tribe of people known as "rental brokers." As the NYT explains, these creatures "have near absolute control over apartment listings, viewing appointments and leases."
Driving the news: In a widely applauded yet unexpected move, New York state regulators have decreed that renters can no longer be charged broker's fees.
How it works: Rental brokers charge astonishing sums for simply bringing together landlords and renters. The standard fee is 15% of the first year's rent, payable up front — that's $6,300 on an apartment costing $3,500 per month.
Brokers can charge that much because while they're hired by landlords, the landlords don't pay them, and are therefore price-insensitive. Meanwhile the renters, who have to make the payment, have no real choice but to pay whatever the broker charges.
What's next: If landlords want to continue to use brokers, they will have to pay them themselves. Brokers are warning that the broker's fee will then end up showing up in higher rent. But now landlords will have a clear financial incentive to use cheaper brokers. That should help drive prices down across the industry.
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More headlines…
Sources: MorningBrew
Tesla stock watch: Down 17.2%, its second worst single-day percentage drop ever.
Casper priced its IPO at $12/share, reports the WSJ, valuing it at about $476 million. It had been worth more than $1 billion.
New York State regulators said renters can no longer be charged broker fees.
General Motors posted a $6.6 billion profit last year despite the 40-day strike. That’s down almost 17% from 2018.
2020 is 10% over. Not sure who needs to hear that.