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The year of the disappearing lock-up

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The year of the disappearing lock-up

That startup founders are in the driver’s seat has been plain for a while now. Consider the extent to which funding has soared, with investors reportedly plugging a record $93 billion into early-stage U.S. startups last year — triple what they raised five years earlier. Consider that the median valuation for seed- and early-stage startups doubled over the same period.

Consider also the continued rise of dual-class shares that provide founders with outsize voting power. Almost 30% of IPOs between 2017 and 2019 had dual-class structures, and that number likely increased between 2019 and the end of last year.

But another, less discussed proof point about how far founders can push their investors — and eventually bankers —  in a frothy market centers on disappearing lock-up periods. Typically a 90- to 180-day window after a company begins to trade publicly — time during which founders, investors, and employees agree not to sell their shares to show their faith in the company and instill confidence in new shareholders — lock-ups aren’t just slowly slipping away. Instead, according to new research from Renaissance Capital, which manages IPO-focused exchange traded funds, early lock-up provisions “exploded” last year.

According to the outfit’s findings, fully one-quarter of the year’s IPOs (or 91 offers) had provisions that allowed for early lock-up releases. That’s more than five times the number in 2020. Unsurprisingly, tech IPOs accounted for 60 of the new issuers with early lock-up provisions, or 66% of the group.

You might recall reading at the time about some of these offerings, including that of Coupang and Robinhood. In the case of Coupang, South Korea’s biggest e-commerce retailer, it announced an early stock lockup agreement release for about 34 million shares just one week into its March debut on the NYSE based on a specific condition — that its stock needed to close at or above its IPO price of $35 — that was quickly satisfied. (The shares today trade at roughly $26 apiece.)

When Robinhood began trading at the end of July, employees were allowed to sell 15% of their holdings immediately and another 15% three months later.

Other companies to loosen lock-ups include Snowflake, the data warehousing company that went public in the fall of 2020 and allowed employees to sell as much as 25% of their vested stock three months afterward; Airbnb, which went public in December 2020 and allowed employees to sell up to 15% of their shares in its first seven trading days; and DoorDash, whose underwriters similarly agreed to cut in half the company’s 180-day lockup agreement for some shares after it also went public in December 2020.

Dutch Bros, Allbirds, The Honest Company, TuSimple, and Affirm also featured early lock-up provisions, notes Renaissance’s report.

Lock-up periods have never been required by the Securities & Exchange Commission but were long considered a good faith sign to outsiders and even helped some public market shareholders plan their stock purchases. (Often, a company’s shares will fall in price following a traditional lock-up as early investors unload their shares en masse, driving up the supply of available shares. When Uber’s lockup period ended in 2019, for example, its shares dropped to 43% below their IPO price as newly sold shares flooded the market.)

So what’s going on exactly? A number of trends have since conspired to whittle away such measures, from the longer stretch that many companies now operate as privately held concerns (creating greater demand for liquidity by insiders), to the advent of direct listings. Just one of 12 direct listings to date has featured a lockup, that of Palantir.

The rise last year of special purpose acquisition companies, or SPACs, is yet another factor. As the New York Times reported last spring, many related deals contain language that restricts sponsors from selling shares for a year from the day the deal is completed, but there are much faster ways out. According to one popular provision, if a SPAC’s shares trade slightly above their initial pricing for more than 20 days in a 30-day period, the lockup provision vanishes. Sometimes, the terms are even more porous. Indeed, when ride-hail giant Grab began to trade publicly last month following a tie-up with a blank-check company, more than 20% of shares held by company shareholders were immediately tradable after the merger.

The unifying thread here is that all involve founding teams who demanded, and received, more flexible lock-up terms from their investors, who also largely benefit from the trend. (What VC would prefer to have his or her hand’s tied for three to six months after a public offering?)

In the meantime, as Renaissance notes in its new report, lockups aren’t just fewer in number but they’re becoming more difficult to track. As the report observes: “Instead of a simple reduction in lock-up days, early releases are now regularly based on earnings dates or blackout periods that are undetermined at the time of the IPO. The release date may also be a moving target, dependent upon the share price hitting a certain threshold (for example, once shares are 33% above the IPO for 10 out of 15 consecutive trading days).”

More, it adds, “Early releases are often buried in complex legalese, and may be vague regarding the actual number of shares released . . .”

The big question is whether public market shareholders care about the increasing disappearance of lock-up periods, and right now, there isn’t a strong case to make why they should. While SPACs have significantly underperformed typical IPOs, direct listings — perhaps because they are far fewer in number — have performed better.

As for the broader market, U.S. stocks enjoyed a record-setting year in 2021, so investors aren’t likely to push back on much until that changes.

Source: Tech

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Boston Dynamics’ warehouse robot gets a $15M gig working for DHL

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Back in March of last year, Boston Dynamics unveiled its second commercial robot, Stretch. The system, built from its impressive box-moving Handle concept, is designed to bring the company’s advanced robotics technologies into a warehouse/logistics setting – easily one of the hottest categories in robotics, these days.

Today the Hyundai-owned firm announced its first commercial customer – and it’s a big one. Logistics giant DHL has committed to a multi-year, $15 million deal (or “investment” as the parties are referring to it) set to bring the robot to its North American facilities. Specific details on the number of robots being purchased haven’t been revealed, but Boston Dynamics says it’s going to be bringing a “fleet” of the robots to DHL logistics centers over the next three years.

Stretch will get to work unloading trucks to start – a feature its creators have highlighted as a key part of its initial rollout. Additional tasks will be added, over the course of the roll out, in an effort to further automate the package handling process.

Says CEO Robert Playter, “Stretch is Boston Dynamics’ newest robot, designed specifically to remedy challenges within the warehouse space. We are thrilled to be working with DHL Supply Chain to deliver a fleet of robots that will further automate warehousing and improve safety for its associates. We believe Stretch can make a measurable impact on DHL’s business operations, and we’re excited to see the robot in action at scale.”

The partnership will be a key proving ground for Boston Dynamics’ commercial ambitions beyond its on-going Spot deployment. Package handling is an intensive, highly repetitive job that requires long hours, strain and multiple points of failure. This will be a major test for the company under Hyundai, which has sought to further its commercial ambitions.

For DHL, meanwhile, it’s an opportunity to automate some logistics roles during a time when blue collar jobs have proven difficult to keep staffed. It’s also a chance to more fully embrace automation as it competes with the likes of Amazon, which has begun steadily encroaching on the package delivery space.

Source: Tech

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Polly snags $37M in Menlo-led Series B to automate workflows for mortgage lenders

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Polly, a SaaS technology startup aiming to “transform” the mortgage capital markets, announced today that it has raised $37 million in a Series B funding round led by Menlo Ventures.

New backers Movement Mortgage, First American Financial and FinVC joined existing investors 8VC, Khosla Ventures and Fifth Wall in participating in the round. The latest financing brings the San Francisco-based startup’s total funding raised to $50 million.

Adam Carmel, founder and CEO of Polly, says the company has increased its customer count by nearly 3x over the past year, including “several of the country’s top 100 lenders.”

He founded the company in 2019 under the premise that while many industries have undergone digital transformation initiatives, the mortgage industry is still largely reliant on “the same expensive and cumbersome processes and tasks that have been in use for decades,” Carmel said. 

Polly’s mission is to fundamentally change the way lenders and loan buyers operate by giving them the ability to make data-driven decisions. The company’s software is “uniquely configured to automate customer workflows and improve execution — from rate lock to loan sale and delivery,” Carmel said.

Carmel previously founded Ethos Lending (which sold to Fenway Summers in 2014) and it was that experience that helped him conclude there were serious gaps in the market for automating workflows for lenders.

The need certainly seems to be there. For example, one company in the space is Optimal Blue, which was purchased by Black Knight for $1.8 billion in 2020. 

Carmel believes Polly stands out from others in the industry in that it is helping create a fourth category in the mortgage sector — capital markets.

“I viewed it as a sizable opportunity to build a vertically integrated software platform that would automate workflows for a mortgage company,” Carmel told TechCrunch. “My view is that over time consumers are going to expect not only a digital experience but also a mortgage product, loan and associated pricing that are customized and tailored for specific purposes.”

To that end, he added, Polly is laser focused on doing just that so that its customers “can configure individual loans as dynamically as they would like.”

“The goal is that ultimately, they are able to deliver a lower mortgage price to their consumers or to their customers while increasing their own profitability,” Carmel said. “We want to help these lenders move away from spreadsheets and telephony and email as a transaction medium, and instead do everything in the cloud. Over time, we want to be able to transition into a system of record for the customers themselves.”

Polly, he said, is able to help configure loans on a multi-dimensional basis.

The startup has increased its customer count by nearly “3x” over the past year and signed several of the country’s top 100 lenders. While it invested mostly on its product in 2021, it plans to put some of its new capital toward its go to market strategy while continuing to be “heads down focused on product.” That includes expanding its product and engineering teams and investing in AI and machine learning capabilities. 

“The next year or two is going to be a really exciting time for us,” Carmel said. “We see this as a compelling window and opportunity to really help transform the market.”

Menlo Ventures partner Tyler Sosin, who is joining Polly’s board of directors as part of the financing, believes the startup is “taking on a sector held back by sclerotic incumbents with dated, disconnected and dragging solutions” and “driving transformation and winning customers at an impressive rate.”

He said Menlo was interested in leading the company’s Series A round but “was a little bit too slow.” Impressed with Polly’s traction even at that point, the firm still participated in that financing with a smaller check and stayed close to the company.

We’ve gotten to know Adam and seen how the customers and the product and the team had evolved, so we leaned into the lead this round,” Sosin told TechCrunch.

Source: Tech

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Tinder updates its approach to handling reports of serious abuse and harassment

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As a result of its ongoing partnership with nonprofit and anti-sexual assault organization RAINN (Rape, Abuse & Incest National Network), Tinder today announced a handful of product improvements as well as training for internal teams at the dating app maker designed to better support survivors of abuse and harassment. Soon, Tinder also says its members will have access to background checks on their matches through Garbo, a nonprofit the dating app maker invested in last spring.

One key aspect of the partnership with RAINN involved training Tinder’s customer care team. Through the training, staff learned how survivors may report abuse and harassment, and how to spot reports of serious abuse — even if the reports use vague language to describe the events. The training, which is now also a mandatory part of Tinder’s onboarding and training curriculum, additionally provides instructions on how team members should respond to these types of reports when they occur.

Meanwhile, in the Tinder app, survivors will gain access to a more direct way to report someone they’ve unmatched with, even if they’ve waited some time before making their report. And they can now opt whether or not they want to receive follow-up information about actions taken, as some prefer to receive updates and others do not.

The app will also provide alternative support options, as not everyone will feel comfortable making a direct report. Through the Tinder Safety Center, a dedicated Crisis Text Line will be provided as well as the upcoming feature offering access to background checks on matches from Garbo. Tinder invested a seven-figure sum into New York-based Garbo in March 2021, which offers an alternative to traditional background checks that surface a wide variety of personal information — like drug offenses or minor traffic violations. Garbo instead focuses on whether or not someone’s background indicates a history of violence. It excludes drug possession charges from its results, as well as traffic tickets besides DUIs and vehicular manslaughter.

The Tinder Safety Center is now also accessible from anywhere in the app, reducing the number of taps it takes for a user to locate the resource.

“Our members are trusting us with an incredibly sensitive and vulnerable part of their lives, and we believe we have a responsibility to support them through every part of this journey, including when they have bad experiences on and off the app,” said Tracey Breeden, VP of Safety and Social Advocacy for Tinder and Match Group, in a statement about the changes. “Working with RAINN has allowed us to take a trauma-informed approach to member support for those impacted by harassment and assault,” she added.

Breeden, who held a similar position at Uber, joined Tinder in September 2020 as Match Group’s first-ever head of safety and social advocacy, tasked with overseeing the company’s safety policies across its apps, including Tinder, Hinge, Match, OkCupid, and Plenty of Fish.

Tinder and other dating apps have put a higher focus on member safety features after a 2019 report revealed how dating apps run by Tinder parent Match Group allowed known sexual predators to use its apps, due to the lack of background check features. Other reports have highlighted the very real safety concerns that accompany the dating app market, particularly those impacting young women — a key dating app demographic.

In early 2020, Tinder invested in Noonlight to help it power new safety features inside Tinder and other Match-owned dating apps, ahead of its investment in Garbo.

But Tinder’s changes aren’t only about protecting dating app users — they’re about protecting Tinder’s business, as well.

Tinder’s top U.S. competitor, Bumble has marketed itself as being more women-friendly, launching a number of features designed to keep users safe from bad actors, like one that prevents abusers from using the “unmatch” option to hide from victims, for example. Tinder has followed suit, launching new safety features of its own.

The company has also felt the pressure to get ahead of coming regulations impacting tech companies, like those operating social media apps and dating services. Tinder, which dominates the dating app market, today plays in social networking as well, with additions like quick chat features, an interactive video series, and other additions to its new Explore hub in the app.

“By adopting more trauma-informed support practices, Tinder will be better positioned to support members who may have experienced harm and take faster, more transparent action on bad actors,” noted Clara Kim, Vice President of Consulting Services at RAINN, in a statement.

Source: Tech

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