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Venture funds have historically counted on a few types of investors — or limited partners — for their investing capital. One of these groups is institutional investors — think pension funds, university endowments, hospital systems and the like. Another is corporations. A third bucket centers on wealthy individuals and often their family offices.
It’s a fairly small universe, in other words, but two new initiatives, both announced this week and both very different, are looking to change the equation — and could usher in similar efforts soon.
Arlan Hamilton came out with her news first. Hamilton is the founder of Backstage Capital, a venture firm focused on investing in startups founded by people of color, women, and teams with members from the LGBTQ community. In short, diversity is at its very core. But Hamilton, who is herself Black, isn’t interested in funding diverse founders alone; she is also interested in enabling more people from diverse backgrounds — including socioeconomically — to invest in venture capital as an asset class.
Toward that end, earlier this week, on the private investing platform Republic, she opened a new fund that anyone — including unaccredited investors — could back under a Securities and Exchange Commission rule called Reg CF, or Regulation Crowdfunding.
Hamilton hit the upper boundary of what Reg CF allows an outfit to raise — $1,070,000 within a 12-month period — in what seemed like hours from 2,790 investors who were invited to invest as little as $100. But more could be coming. The reason why: that rule underwent a change in November under former SEC chair Jay Clayton, and will next month begin allowing outfits to crowdsource up to $5 million. The process could be slowed down by the incoming SEC chief. (President Biden has appointed former regulator and former Goldman partner Gary Gensler, who must now receive Senate confirmation.) If it’s not, however, it’s easy to imagine more unaccredited investors being invited to fund other, and larger, venture funds soon.
Opportunity knocking
A second initiative this week has similar objectives to Hamilton — bringing more diverse investors into the ranks of limited partners — though it has a different approach and it’s targeting accredited investors only, which basically means individuals who are earning $200,000 a year and/or have a net worth of $1 million or more.
Launched by Acrew Capital — a Palo Alto- and San Francisco-based early-stage venture spearheaded by veteran VC Theresia Gouw — the firm revealed yesterday that it’s currently raising a traditional growth-stage fund with a twist. In addition to giving its current limited partners a crack at investing in the new fund, it is also opening the vehicle up to more women, people of color, and underrepresented individuals who may not have had a chance previously to invest in a later-stage private vehicle.
The key here is Acrew’s emphasis on growth-stage investing. While more women and people of color are breaking into the ranks of seed-stage investing, it takes a long time to make money with early-stage funding. Meanwhile, growth-stage funds are more exclusive because the companies they back are closer to an “exit” typically. That makes them very appealing to institutions — including mutual funds and hedge funds — which leaves a lot of room for the kinds of individuals who Acrew hopes to bring into the fold.
Like Backstage, diversity is in the DNA of Acrew, which Gouw cofounded with Laura Kolodny, Vishal Lugani and Mark Kraynak, colleagues from their previous fund, Aspect Ventures.
It’s little surprise that the firm — which says 88% of its overall team is female and 63% comes from underrepresented backgrounds — would be the first to publicly focus on pulling more diverse angel investors, board members, and C-level execs into the world of later-stage deals.
But it’s also strategic on the part of Acrew, which focuses largely on fintech and cybersecurity, and which has stakes in the highly valued challenger bank Chime, and the big data security analytics company Exabeam, among many others.
As Kolodny explains it, a growing number of companies is focused on enhancing diversity in the board room, and having an LP base filled individuals from underrepresented groups (with highly vetted networks), works out well for everyone involved.
In fact, it’s an approach that they hope won’t distinguish the firm for long, says Kolodny. “Our hope is that five years from now, a venture firm helping companies to add diverse independent board members and diverse executives won’t be a unique strategy.”
The hope,” she adds, “is [this effort] gets people to embrace a new standard around what is what is expected of venture firms.”
Pictured above: the members of Acrew Capital who are part of its first growth fund, which it has dubbed its Diversity Capital Fund.
Venture funds have historically counted on a few types of investors — or limited partners — for their investing capital. One of these groups is institutional investors — think pension funds, university endowments, hospital systems and the like. Another is corporations. A third bucket centers on wealthy individuals and often their family offices.
It’s a fairly small universe, in other words, but two new initiatives, both announced this week and both very different, are looking to change the equation — and could usher in similar efforts soon.
Arlan Hamilton came out with her news first. Hamilton is the founder of Backstage Capital, a venture firm focused on investing in startups founded by people of color, women, and teams with members from the LGBTQ community. In short, diversity is at its very core. But Hamilton, who is herself Black, isn’t interested in funding diverse founders alone; she is also interested in enabling more people from diverse backgrounds — including socioeconomically — to invest in venture capital as an asset class.
Toward that end, earlier this week, on the private investing platform Republic, she opened a new fund that anyone — including unaccredited investors — could back under a Securities and Exchange Commission rule called Reg CF, or Regulation Crowdfunding.
Hamilton hit the upper boundary of what Reg CF allows an outfit to raise — $1,070,000 within a 12-month period — in what seemed like hours from 2,790 investors who were invited to invest as little as $100. But more could be coming. The reason why: that rule underwent a change in November under former SEC chair Jay Clayton, and will next month begin allowing outfits to crowdsource up to $5 million. The process could be slowed down by the incoming SEC chief. (President Biden has appointed former regulator and former Goldman partner Gary Gensler, who must now receive Senate confirmation.) If it’s not, however, it’s easy to imagine more unaccredited investors being invited to fund other, and larger, venture funds soon.
Opportunity knocking
A second initiative this week has similar objectives to Hamilton — bringing more diverse investors into the ranks of limited partners — though it has a different approach and it’s targeting accredited investors only, which basically means individuals who are earning $200,000 a year and/or have a net worth of $1 million or more.
Launched by Acrew Capital — a Palo Alto- and San Francisco-based early-stage venture spearheaded by veteran VC Theresia Gouw — the firm revealed yesterday that it’s currently raising a traditional growth-stage fund with a twist. In addition to giving its current limited partners a crack at investing in the new fund, it is also opening the vehicle up to more women, people of color, and underrepresented individuals who may not have had a chance previously to invest in a later-stage private vehicle.
The key here is Acrew’s emphasis on growth-stage investing. While more women and people of color are breaking into the ranks of seed-stage investing, it takes a long time to make money with early-stage funding. Meanwhile, growth-stage funds are more exclusive because the companies they back are closer to an “exit” typically. That makes them very appealing to institutions — including mutual funds and hedge funds — which leaves a lot of room for the kinds of individuals who Acrew hopes to bring into the fold.
Like Backstage, diversity is in the DNA of Acrew, which Gouw cofounded with Laura Kolodny, Vishal Lugani and Mark Kraynak, colleagues from their previous fund, Aspect Ventures.
It’s little surprise that the firm — which says 88% of its overall team is female and 63% comes from underrepresented backgrounds — would be the first to publicly focus on pulling more diverse angel investors, board members, and C-level execs into the world of later-stage deals.
But it’s also strategic on the part of Acrew, which focuses largely on fintech and cybersecurity, and which has stakes in the highly valued challenger bank Chime, and the big data security analytics company Exabeam, among many others.
As Kolodny explains it, a growing number of companies is focused on enhancing diversity in the board room, and having an LP base filled individuals from underrepresented groups (with highly vetted networks), works out well for everyone involved.
In fact, it’s an approach that they hope won’t distinguish the firm for long, says Kolodny. “Our hope is that five years from now, a venture firm helping companies to add diverse independent board members and diverse executives won’t be a unique strategy.”
The hope,” she adds, “is [this effort] gets people to embrace a new standard around what is what is expected of venture firms.”
Pictured above: the members of Acrew Capital who are part of its first growth fund, which it has dubbed its Diversity Capital Fund.
Myanmar’s government extends its internet crackdown, Microsoft’s lobbying arm blacklists presidential election objectors and Dublin’s Frontline Ventures raises a new fund. This is your Daily Crunch for February 5, 2021.
The big story: Myanmar blocks Twitter and Instagram
The military government in Myanmar recently told telecom operators and internet service providers to block access to Facebook. Now it’s doing the same thing to Twitter and Instagram.
This comes after the military staged a coup in Myanmar to take power from the civilian government. The new government claims that Twitter and Instagram were being abused to spread propaganda and misinformation, posing a threat to the country’s stability.
Telenor Group, one of the country’s largest telecom providers, said in a statement that it is “gravely concerned with this development in Myanmar” and that “freedom of expression through access to communication services should be maintained at all times, especially during times of conflict.”
The tech giants
Microsoft PAC blacklists election objectors and shifts lobbying weight towards progressive organizations — After “pausing” political giving to any politician who voted to overturn the 2020 election, Microsoft has clarified changes to the lobbying policy of its employee-funded PAC.
Peloton will pump $100M into delivery logistics to ease supply concerns — Peloton has announced that it will invest more than $100 million in air and ocean freight deliveries due to “longer-than-acceptable wait times for the delivery of our products.”
PayPal is shutting down domestic payments business in India — It’s been less than four years since PayPal kickstarted local operations in the world’s second-largest internet market.
Startups, funding and venture capital
Dublin’s Frontline Ventures raises new $83.8M seed fund for European B2B startups — The firm is aiming to invest in up to 45 companies over the next four years.
BeGreatTV to offer MasterClass-like courses taught by Black and brown innovators — The courses are designed to teach folks how to execute and succeed in a particular industry.
Why these co-founders turned their sustainability podcast into a VC-backed business — These podcast co-hosts are turning validation from listeners into the blueprint for a standalone business called Brightly.
Advice and analysis from Extra Crunch
Lightspeed’s Gaurav Gupta and Grafana’s Raj Dutt discuss pitch decks, pricing and how to nail the narrative — The duo explained how they came together for Grafana’s Series A … and eventually, its Series B.
How the GameStop stonkathon helped Robinhood raise $3.4B last week — Robinhood has shown an impressive ability to raise enormous amounts of capital.
TechCrunch’s favorite companies from 500 Startups’ latest demo day — Startup picks from Alex Wilhelm and Jonathan Shieber.
(Extra Crunch is our membership program, which helps founders and startup teams get ahead. You can sign up here.)
Everything else
House punishes Republican lawmaker who promoted violent conspiracy theories — As the House moved to vote on the highly unusual resolution, Marjorie Taylor Greene claimed that her embrace of QAnon was in the past.
‘Orwellian’ AI lie detector project challenged in EU court — This suit highlights questions of ethics and efficacy attached to the bloc’s flagship R&D program.
Learn about the importance of accessible product design at TechCrunch Sessions: Justice — At our event on March 3, we will examine the importance of ensuring accessible product design from the beginning.
The Daily Crunch is TechCrunch’s roundup of our biggest and most important stories. If you’d like to get this delivered to your inbox every day at around 3pm Pacific, you can subscribe here.
Source: https://techcrunch.com/2021/02/05/daily-crunch-myanmar-blocks-twitter-and-instagram/
Demo days at startup accelerators are a pretty big deal around here.
These events aren’t just a chance to review the latest cohort of hopeful entrepreneurs — they also showcase the technology, products and services that will compete for VC and consumer attention over the next few years.
You never know where a hit will come from, which is why these events capture our attention. Here’s just one example from Y Combinator’s Summer 2013 Demo Day:
Positioning itself as the “FedEx of today,” it hopes to provide a logistics framework that goes beyond food and can be used for any type of on-demand order.
That startup was DoorDash, by the way.
Full Extra Crunch articles are only available to members
Use discount code ECFriday to save 20% off a one- or two-year subscription
Full disclosure: In 2016, I was 500 Startups’ Journalist-in-residence. I covered one demo day in person, spending most of my time backstage where founder teams practiced their pitches.
It was quite a scene: Several people literally jumped up and down to shake off their nervous energy, but I also recall one who calmly recited their lines while gazing through a window.
Yesterday, Jon Shieber and Alex Wilhelm covered 500 Startups’ 27th virtual demo day and selected eight companies as their favorites:
- Stack
- Adapty
- MightyFly
- Omnitron Sensors
- AWSM
- Memechat
- Ryu Games
- Apothecary
Thank you very much for reading Extra Crunch this week! I hope you have a safe, relaxing weekend.
Walter Thompson
Senior Editor, TechCrunch
@yourprotagonist
TechCrunch’s favorite companies from 500 Startups’ latest demo day
Image Credits: David Malan (opens in a new window) / Getty Images
How the GameStop stonkathon helped Robinhood raise $3.4B last week
Image Credits: Nigel Sussman (opens in a new window)
I’ve never used “stonkathon” in a headline before, but it’s been that kind of week.
The war between hedge funds and day traders over GameStop vaulted discount trader Robinhood into the headlines for days.
But how did it affect the company’s financial health?
This morning, Alex Wilhelm examined why Robinhood’s investors were willing to inject $3.4 billion more into the company in just one week.
“More trades means more PFOF (payment for order flow) revenue,” says Alex. “And Robinhood effectively doubled in size.”
Udemy’s new president discusses the reskilling company’s future
Image Credits: Andrew_Rybalko / Getty Images
Reporter Natasha Mascarenhas interviewed Greg Brown, new president of digital learning platform Udemy, after his company announced that it surpassed $100 million ARR.
A new arm of the company, Udemy for Business, just secured a 100,000-employee contract with Cisco Systems to offer software, business and technology courses.
“The opportunity that the company sees has really forced us to reallocate resources and strategy,” said Brown.
Why one Databricks investor thinks the company may be undervalued
Image Credits: Nigel Sussman (opens in a new window)
After scaling its ARR to $425 million and reaching a valuation of $28 billion, data analytics company Databricks is clearly IPO-ready.
Battery Ventures has backed Databricks since 2017, so Alex Wilhelm interviewed General Partner Dharmesh Thakker to understand why he thinks the company may be undervalued.
“Whether it’s digital transformation, whether it’s analytics, data is everywhere,” said Thakker. “So the TAM is massive.”
4 strategies for deep tech founders who are fundraising
Image Credits: MirageC (opens in a new window) / Getty Images
Deep tech founders face special challenges when pitching investors: they usually don’t have a product, customers or revenue.
It’s difficult enough to ask a stranger for a check when there’s a beta product, but how do you drum up interest in an unproven idea that may exist largely in your imagination?
“Early-stage investors are in the business of funding dreams,” says angel investor Jessica Li.
“Investors are less interested in the intricacies of your technology and more interested in what impact it can create.”
Step one: use storytelling to highlight your big vision.
Edtech valuations aren’t skyrocketing, but investors see more exit opportunities
Image Credits: Images by Tang Ming Tung (opens in a new window) / Getty Images
Investors funded edtech startups with $10 billion last year as the pandemic forced widespread adoption of remote learning.
The valuations of these companies aren’t rising at the same rate as SaaS or fintech startups, but “where edtech lacks in impressive valuations, investors see it gaining in exit opportunities,” writes Natasha Mascarenhas.
For this edtech investor survey, she interviewed:
- Deborah Quazzo, managing partner, GSV Ventures (an education fund backing ClassDojo, Degreed and Clever)
- Ashley Bittner, founding partner, Firework Ventures (a future-of-work fund with portfolio companies LearnIn and TransfrVR)
- Jomayra Herrera, principal, Cowboy Ventures (a generalist fund with portfolio companies Hone and Guild Education)
- John Danner, managing partner, Dunce Capital (an edtech and future-of-work fund with portfolio companies Lambda School and Outschool)
- Mercedes Bent and Bradley Twohig, partners, Lightspeed Venture Partners (a multistage generalist fund with investments including Forage, Clever and Outschool)
- Ian Chiu, managing director, Owl Ventures (a large edtech-focused fund backing highly valued companies including BYJU’s, Newsela and MasterClass)
- Jan Lynn-Matern, founder and partner, Emerge Education (a leading edtech seed fund in Europe with portfolio companies like Aula, Unibuddy and BibliU)
- Benoit Wirz, partner, Brighteye Ventures (an active edtech-focused venture capital fund in Europe that backs YouSchool, Lightneer and Aula)
- Charles Birnbaum, partner, Bessemer Venture Partners (a generalist fund with portfolio companies including Guild Education and Brightwheel)
- Daniel Pianko, co-founder and managing director, University Ventures (a higher-ed and future-of-work fund that is backing Imbellus and AdmitHub)
- Rebecca Kaden, managing partner, Union Square Ventures (a generalist fund with portfolio companies including TopHat, Quizlet and Duolingo)
- Andreata Muforo, partner, TLcom Capital (a generalist fund backing uLesson)
Deep Science: AIs with high class and higher altitudes
Image Credits: MF3d (opens in a new window) / Getty Images
In his latest recap of recent breakthroughs in applied science, Devin Coldewey looked at how researchers are using AI to:
- Categorize thousands of pieces of classical music
- Read MRIs to spot patients with schizophrenia
- Track elephant herds via satellite
- Improve accessibility on mobile phones
Spotify Group Session UX teardown: the fails and their fixes
Image Credits: Getty Images
In the latest of a series of articles that examines user experiences for consumer apps, UX expert Peter Ramsey and TechCrunch reporter Steve O’Hear studied Spotify Group Session, the shared-queue feature that permits users to create playlists collaboratively.
“Many of these lessons can be applied to other existing digital products or ones you are currently building,” such as the need to add context for important decisions and how to best use “react and explain” prompts.
Lightspeed’s Gaurav Gupta and Grafana’s Raj Dutt discuss pitch decks, pricing and how to nail the narrative
Extra Crunch Live returned this week with two guests: Lightspeed Venture Partners’ Gaurav Gupta and Raj Dutt, co-founder and CEO of Grafana Labs.
In addition to walking us through the presentation that encouraged Lightspeed to invest in Grafana’s Series A, the duo also gave direct feedback to audience members about their pitch decks.
Watch a video with our complete episode, or read highlights from the chat to get Gupta and Dutt’s insights on what goes into a successful pitch deck.
New episodes of Extra Crunch Live drop each Wednesday at 12 p.m. PST/3 p.m. EST/8 p.m. GMT.
Here’s a breakdown of the complete episode with Gaurav Gupta and Raj Dutt:
- How they met — 2:00
- Grafana’s early pitch deck — 12:00
- The enterprise ecosystem — 25:00
- The pitch deck teardown — 32:00
Subscription-based pricing is dead: Smart SaaS companies are shifting to usage-based models
Paper plane made from a ten-dollar bill. Image Credits: LockieCurrie (opens in a new window)/ Getty Images
Some IT managers may still be debating the merits of usage-based pricing versus subscription-based models, but SaaS investors have made up their minds.
Compared to their rivals, companies that employ usage-based pricing trade at a 50% revenue multiple premium. You can argue with success, but seven out of the nine IPOs since 2018 with the best net dollar retention offer usage-based models.
If you’re a founder who hopes to break into the $100M ARR club, this guest post can help you identify the right usage metrics for creating a sustainable customer journey.
For more actionable advice regarding SaaS pricing and sales, see these previously published Extra Crunch stories:
- Should your SaaS startup embrace a bottom-up GTM strategy?
- How should SaaS companies deliver and price professional services?
Bumble IPO could raise more than $1B for dating service
Image Credits: Nigel Sussman (opens in a new window)
How many dating networks can the public market support?
In Tuesday’s column, Alex Wilhelm examined the latest IPO filing from relationship-finding service Bumble.
The company set a range of $28 – $30 per share, so Alex set out to find its simple and diluted valuations, how much it expects investors to pay and “how those stack up compared to Match Group’s own numbers.”
Robinhood’s Q4 2020 revenue shows a return to growth
Image Credits: Nigel Sussman (opens in a new window)
Discount brokerage Robinhood stayed in the news last week as it became a proxy battlefield for institutional and retail investors, but its backers “put in another billion just last week,” says Alex Wilhelm.
Why were investors so bullish after days of screaming headlines?
In yesterday’s column, Alex unpacked Robinhood’s Q4 2020 numbers, “which shows a return to sequential-quarterly growth at the trading upstart.”
Trading app Public drops payment for order flow in favor of tips
Image Credits: Towfiqu Photography / Getty Images
Before Redditors came after GameStop, zero-cost trading service Public says it was seeing “steady ~30%” month-over-month growth.
Last week, however, “new user signups went up 20x,” founders Leif Abraham and Jannick Malling told TechCrunch.
After closing a $65 million Series C, Public announced yesterday that it would “stop participating in the practice of Payment for Order Flow,” replacing PFOF with an “optional tipping feature.”
Customer advisory boards are a gold mine for startup brand champions
Image Credits: Andrii Yalanskyi (opens in a new window) / Getty Images
Startups that don’t directly engage their earliest customers with purpose and intention are leaving money on the table.
Creating a Customer Advisory Board (CAB) is a proven method for soliciting product ideas, testing marketing plans and turning early users into loyal brand advocates.
Before you call a CAB, read this post to find out how to identify customers who’ll contribute real insights, establish goals and “pick members who play well together.”
Best practices as a service is a key investment theme to watch in 2021
Red and white stop sign on the wall. Image Credits: Karl Tapales (opens in a new window)/ Getty Images
Identity and access management company Okta announced in a study last week that its largest customers use an average of 175 different applications to manage their operations.
Managing Editor Danny Crichton says this “explosion of creativity and expressiveness and operational latitude” offers widespread benefits, but it’s “also a recipe for disaster,” since many end users aren’t well-trained when it comes to using these tools.
This enterprise version of the Tower of Babel creates an opening for companies that offer “best practices as a service,” says Danny. “The next generation of SaaS software has to take those abecedarian building blocks and forcibly guide users to using those tools in the best possible way.”
This week, flexible workspace operator (and one-time unicorn) Knotel announced it had filed for bankruptcy and that its assets were being acquired by investor and commercial real estate brokerage Newmark for a reported $70 million.
Knotel designed, built and ran custom headquarters for companies. It then managed the spaces with “flexible” terms. In March 2020, it was reportedly valued at $1.6 billion.
At first glance, one might think that the WeWork rival, which had raised about $560 million since its 2016 inception, was another casualty of the COVID-19 pandemic.
But New York-based Knotel was reportedly in trouble – facing a number of lawsuits and evictions – before the pandemic had even hit, according to multiple reports, such as this one in The Real Deal.
Jonathan Pasternak, a partner in the bankruptcy, restructuring and creditor rights group at New York-based Davidoff Hutcher & Citron, believes the company’s Chapter 11 filing was inevitable despite it reaching unicorn status after raising $400 million in Series C funding in August 2019.
“In addition to being grossly overvalued on the market, the company overextended itself with long term leases and lavish build-outs, leaving the company in significant debt while failing to ever turn a profit,” Pasternak wrote via email. “The pandemic exacerbated their vacancy situation, resulting in more than 35% vacancies in their 2.4 million square-foot NYC portfolio. The company overextended and likely ran out of cash.”
Newmark’s purchase of Knotel’s assets is an effort to recoup some of its investment, according to Pasternak.
Anytime a company that has raised more than half a billion dollars basically implodes, it’s worth taking a look at the roller coaster ride it was on before it got to that point.
2016
Virgin Mobile co-founder Amol Sarva and former VC Edward Shenderovich founded Knotel, essentially reversing the WeWork model. There’s hype around the company in its early days.
2017
Knotel raised a Series A round of $25 million in February from investors such as Peak State Ventures, Invest AG, Bloomberg Beta and 500 startups. It marketed its offering as “headquarters as a service” — or a flexible office space that could be customized for each tenant while also growing or shrinking as needed.
2018
In April, Knotel announced the close of a $70 million Series B financing led by Newmark Knight Frank and The Sapir Organization. In August, the company told me that it was operating over 1 million square feet across 60 locations in New York, London, San Francisco and Berlin, and that it was on track to reach 2.5 million square feet and $100 million in revenue by year’s end. Revenue growth had increased by 300 percent year over year, according to the company. Customers and users and clients ranged from VC-backed startups Stash and HotelTonight to enterprise customers such as The Body Shop.
“What they’re doing is different,” said Barry Gosin, CEO of Newmark Knight Frank, in a press release, at the time of the round. “It’s a new category the industry hasn’t seen and is rapidly adopting. We’ve watched their ascent from a distance and are now thrilled to join them on the journey. It marks a shift in how owners and tenants are coming together.”
2019
In August, Knotel announced the completion of a $400 million financing, led by Wafra, an investment arm of the Sovereign Wealth Fund of Kuwait. With the round, the company had achieved unicorn status and was being touted as a formidable WeWork competitor. At the time, Knotel said it operated more than 4 million square feet across more than 200 locations in New York, San Francisco, London, Los Angeles, Washington, D.C., Paris, Berlin, Toronto, Boston, São Paulo and Rio de Janeiro.
In a statement at the time, CEO Sarva said: “Knotel is building the future of the workplace, and we are excited to welcome a group of investors who believe passionately in our product, vision and ability to execute. Wafra will help us continue our rapid global expansion and solidify our position as the leader in a fast-growing, trillion-dollar flexible office market.”
2020
In late March, Forbes reported that Knotel had laid off 30% of its workforce and furloughed another 20%, due to the impact of the coronavirus. At the time, it was valued at about $1.6 billion.
The company had started the year with about 500 employees. By the third week of March, it had a headcount of 400. With the cuts, about 200 employees remained with the other 200 having either lost their jobs or on unpaid leave, according to Forbes.
“Business as usual is over,” Amol Sarva, Knotel’s CEO and co-founder, said in a statement to Forbes. “Knotel has decided to take sharp action to prepare for the worst case — a long health and economic crisis.”
In the second quarter, Knotel’s revenue slipped by about 20% to about $59 million compared to the first quarter, reported Forbes. Multiple landlords had filed lawsuits against the company.
By July, Forbes had reported that Knotel was attempting to raise as much as $100 million, according to various sources “familiar with the matter.”
2021
Knotel filed for bankruptcy, agrees to sell assets to investor Newmark for a reported $70 million after being valued at $1.6 billion less than one year prior.
“Newmark’s commitment offers a path forward amidst this challenging climate,” CEO Sarva said in a statement. “We are optimistic that, through a successful restructuring, we can refocus on our mission of providing state-of-the-art, tailored flex space in key U.S. and international markets.”
To facilitate the transaction under Section 363 of the United States Bankruptcy Code, an affiliate of Newmark agreed to provide Knotel with about $20 million in cash as DIP financing to support Knotel through the bankruptcy process.
Just as the startup and VC world watched as WeWork lost a significant amount of value over the past two years, we’re paying attention to the demise of Knotel and wondering what this means for the flexible workspace sector. As much of the world continues to work from home and office buildings remain mostly vacant as this pandemic rages, our guess is that things will only get worse before they get better.
