Good news for Rubrik and bad news for TikTok | Equity Podcast

This episode is presented by invest Puerto Rico if you believe your business Can go anywhere Puerto Rico is the [Music] Place hello and welcome back to equity a Podcast about the business of startups Where we unpack the numbers and Nuance Behind the headlines today is April 26th 2024 I'm marann aavo and joining me is Senior Tech crunch reporter Alex Wilhelm We're switching things up a little bit This week because instead of being in His usual recording space Alex is coming To us live from Tech crunch's early Stage event in Boston how's it going Over there Alex uh LEL my voice is shot I am over caffeinated because we Invested in three different espresso Stations here at the venue and I was 20 Minutes late because it turns out I Can't read a spreadsheet and properly Schedule a recording time for when I'm Off stage and so we were supposed to Start when I was still on stage but Apart from that Maryann everything's Going pretty darn good awesome glad you Could still make it on that's the most Important thing before we get to the Show rundown I want to ask our listeners Please don't forget to rate and review Us on the Apple pods Spotify or whatever Your preferred pod streamer is we really Appreciate it now today on the show We're going to talk about a variety of

Things including rubrics IPO pamelo Latest fundraise the Tik Tok ban and What happened at Tech crunch early stage So Alex tell us all about rubric yeah so This is the fourth major technology IPO That we've seen this year and if you Recall we saw Reddit and then aera labs And then we recently saw another company Go out and finally we have gotten our Way to rubric it's the company that I Have been most interested in how it will Price and trade and the company actually Managed to price above its range at $32 Per share and then it debuted at 38 so Maryann from a very high level I would Call this one a roaring success and Given the circumstances I'm a little Surprised are you surprised what were You expecting I mean less much less Because if I recall at the company's uh Original $28 to $31 per share price Range it was going to be worth I think Like 5.5 5.6 billion so the fact that it Priced above that and then went higher Means that it's valuation it's got to be Comfortably north of 6 ion now and it is A company that is only growing so Quickly which is a polite way of saying Not very fast in aggregate it does have A growth business in its Cloud Subscription model but that's still not All of its revenue and it's very Unprofitable so to me looking at this Company I was kind of like okay this is

A little aggressive I thought it was Only going to be the slam dunks that Were going to go out but instead rubric I mean golly G had a great pricing and Trading so to me an incredibly bullish Sign and I don't mean to take away from Rubric well Don congratulations on the Fundraise huzzah I just didn't expect That many people to show up to the party You know yeah I get it I mean when you Look at the numbers disclosing a loss of $354 million on revenue of 628 million Earlier this year in fact oh actually It's a bigger loss than the year prior It was $278 Million last year and Revenue was 600 million so a lot more of A loss little bit more Revenue I can see Why you're why you're a bit surprised Yes but inside of that very small gain From 600 to 628 million in Revenue year To year and it's a fiscal year so it's January 31 um then 12 months from there But that's a small detail the thing is They've been transitioning from some License Revenue to subscription revenue And so whenever you do that your overall Growth rate goes down a little bit as You swap essentially onetime revenue for Longer term recurring revenue and so the The Slowdown is not an enormous shock The fact that it only grew by that's Almost 30 out of 600 a little less than 5% a year-over-year you know that's just Not much but it seems that investors saw

The business and said look we don't care About that we care about the growth in Your Cloud subscription annual recurring Revenue and we're going to Value you Based on that and we're going to give You a relatively optimistic multiple What what more could you ask for that's That's a great freaking news it is it's Good for them we'll see how this plays Out long term though interestingly light Speed Venture partners own 23.9% of Rubrick shares prior to the IPO Greylock 12.2% so if it was let's say let's just Call it 6 billion for the sake of round Numbers and uh 23.9% is basically a Quarter and so that means about a Billion and a half to light speed right Uh yeah something like that putting I Think we often talk about valuation and Percentage ownership but we don't Actually multiply them together to get Out the numbers like dollar figures yeah Right so for all the money lights speed Put into this company if it's sold it Shares or it does in the near future About a billion four billion five I mean That's a check yeah I would say so gr Lock 12.2% less about half but still It's hundreds of millions of dollars to Those investors so if you are an LP in Gry loock or light speed congratulations You have a chat coming well done having A good day light speed and Greylock LPS Of which I am not yeah right do you

Think this is a sign of an IPO Market Rebound I mean this is the fourth Venture back company to go public in Recent months You know Maran I legitimately struggle To find a way to not answer that in the Affirmative like there's nothing here That makes me doubt that this is a Bullish sign and yes I have spent most Of today bopping around this venue in Boston talking to people and drinking Expressos but I still can't think of Anything about this that feels negative The price is good the pricing was good The trading was good you know it's the Fourth IPO in a row that we've seen this Year that's priced well and traded well If you're a unicorn founder and you're Sitting there on you know I don't know Between 90 and 150 million in AR and You're not working towards getting your Paperwork in place right now you're Really taking a bet that things are Going to be a lot better in the future And I'm not sure that's the case yeah I Mean I feel like there's got to be a lot Of startups out there that aren't losing So much money and probably aren't too Far behind Revenue wise so maybe this Will this will kind of give them some More confidence you know it's almost Like we've had a couple of these in the News lately perhaps rip Gusto deal remote I mean there's a bunch

Of companies right now that have the Numbers and have the I would say lack of Losses to ship an S1 and really make my Next week great so I think that if they Don't file next week marann we should Understand that as not indication that They're business cowards who are afraid To visit the public markets instead They're Tech wrench haters who don't Want us to have a good time which is Don't take it personally watch me oh Well so let's next talk about my deal of The week uh startup call pomelo and you Know there's a couple of fchs out there With this exact name so this is not to Be confused with an Argentinian ftech I Covered in the past this one is us-based However it's mostly right now operating In the Philippines okay so what the Company does is a little different it's That's why I wrote about it I have not Heard of this before they they are Self-described send now pay later Company and essentially they offer Credit to people here in the US To be able to send money back to the Philippines while at the same time Building their credit so oh for example As a user you can set up an account it Comes with credit cards you can as the Creator of the account you can set Limits pause cards view even view Spending habits and then you can send Cash in the form of credit to family

Members back in the Philippines and that Way they're helping the people here Build their credit and then they're Saying this way that it's it's just a More secure way to try to like monitor Where the money is at actually going Because you can even see the spending Habits Like where the money is being Spent so if you're worried about say Your brother or sister back home taking That money and spending it on video Games you can see where it's actually Going well I now see what you think of My hobbies okay but Maran I want to Drill down on the model here because I Think that I understand and I think it's Actually brilliant so I am a person in The US I want to send money to I don't Know family or friends in the Philippines I can go to a wire transfer Service or I can wise whatever I could Send the money that I have or I could go Through pamelo and say let's send my Sister Maryanne in the Philippines 100 USD and then I effectively owe them that 100 o pelo that $100 after they send it Therefore I've engendered a debt which I Can then pay with the $100 I was going To send anyways and therefore I've dealt With debt in a positive fashion credit Score goes up everyone's happy the only Risk here is really that pomelo sends Money and then doesn't get paid but I Presume they have a model for that so

They've essentially just turned Remittances into a way to build domestic Credit absolutely yeah and I think it is Super interesting they're looking to Expand to Mexico they've added new Payment options so that users can also Send funds through something called Gcash it's like an ewallet in the Philippines similar to venmo as well and It just raised a pretty decent series a Round $35 million led by Vi Capital Which is a Dubai Venture firm that's Pretty secretive and I think backed Elon In his purchase of X and then Founders Fund and AAR is it a as what is this uh A prime I think oh a prime capital I I'm Sorry I didn't figure that out before we Started recording they also participated In the round so 35 million series a Nothing to sneeze at in this market it Was one of Keith R boy's last deals Before leaving Founders fund yeah I Really think this is cool I think this Is a super cool model and especially They apply it to countries like Mexico There are lots of folks in the United States who could do well to have you Know a boost to their credit score but It's a pretty common ask amongst Everybody and remittances between the US And Mexico are incredibly common and It's a big business and so if there's a Way to kind of bring the two together It's one of those times Mary and that we

Love to talk about because it's a cool Business opportunity and it could help People just live better lives so it's Kind of it feels like a win-win yeah Agreed and you know I don't want to get Too detailed into the nitty-gritty but They do offer unsecured credit lines or Secured credit lines depending you know On the the customer and their their Underwriting criteria one other quick Note they don't charge interest but they Will charge a late fee if someone Doesn't pay them back so just wanted to Point that out it m it mostly makes Money through interchange revenue and Then foreign exchange is a smaller Component because they have cards in the Philippine market so therefore they make Money off the oh okay that makes sense Yeah no I think this is just super cool And Maran if I be so bold as to point Out something in your Niche it's a cool Fintech deal you know we been a little Bit down on fintech here's a cool one It's a cool one and as Christine Hall Recently reported crossb fintech is Pretty hot right now when YC did their Demo days a couple of weeks back that Was a common theme that she saw there Were several startups in that cohort Focused on crossb fintech and we've even Written about another doing a similar Thing called ala that helps various Banking needs of Latin or Central

Americans doing kind of a similar thing But with a debit card so anyway Hot Space fun deal I enjoyed it on that note After the break we are going to talk About Tik Tock and what could happen to It here in the US if it doesn't find a Buyer what's next in Tech that's not the Right question it's where Puerto Rico More than just a Tropical Paradise it's An Innovations Paradise where startups And global players coexist in a vast and Vibrant ecosystem where Talent runs deep Highly skilled and bilingual plus the Island offers the most competitive tax Incentives in the US if you believe your Business can go anywhere Puerto Rico is The place find out more at invest TechCrunch so Maryann Congress is famous For being a little bit slow but then Suddenly things happen and they Shake Loose and I feel like we went from the House passing it's Tik Tok d or ban bill Then nothing happened for a while and Then suddenly boom here we are it's Passed and gone through the president It's been a whirlwind week but the gist Seems to be that Tik Tok has nine months Plus a grace period to divest from bite Dance or face a ban in the United States And that sounds like it's going to be a Ban unless the company can fend this off In the courts but I'm not super Optimistic about that so here we are Kind of in the aftermath of a meteorite

That I didn't expect to hit for some Time yeah I mean there's been talk about That for a while it's not like it's a New thing we we knew it was probably Coming maybe just didn't realize it Would be coming now and the US is not The first country to ban or consider Banning Tik Tok right I mean this this Has happened this has played out in lots Of different parts of the world India is Probably the most well-known Tik Tock Band right and it's a huge consumer Market and that was like what five four Years ago June 2020 oh June of 2020 yeah I thought it was January but it's still That's back in the early days of Co That's a ago that was right so yeah they Bann Tik Tok they in India four years Ago almost Afghanistan usbekistan Sagal Somalia Nepal well Iran yeah actually When you list out the countries that That have done this it's not actually That attractive of a list I guess we've Joined the we've joined the party so Marann for folks who are behind what's The US's impetus here I believe it is Mostly privacy concerns right I mean There's a lot of worries about privacy And I don't know if there's any way that Could ever be overcome I think the Privacy is interesting but How much stock do you put in the Argument that there's a propaganda Concern of this app being misused by its

Parent company to essentially influence The American public at large given how Popular Tik Tok here is a fraction of Our population before and maybe even During an election that's very Interesting I had not really thought About that and I'll be honest I I'm not A Tik Tok user I'm just not I never got Into it I'm not much of a video person In general I know a lot of people who Use Tik Tok but do you think that that Could be one of the reasons why this is Happening right now I think so and I Think the concern is that the separation That b Dan has stressed and Tik Tok has Stressed between them is essentially Artful BS that it's not true that there Isn't actually that much operational Separation between the two companies and If that is the case given the Integration of the Chinese government Into its major corporations that means Effectively the Chinese Communist party Has a seat inside of Tik Tock which has The heart eyes and mind of so many kids And young voters and young adults and Just adults and if that's the case you Have to kind of think is that a Reasonable risk to allow and one way to Think about that is do other countries Allow that risk for example does China And the answer is no and does India and The answer is no and does the EU and the Answer is well they're kind of pissed

Off too so the answer appears to be in More places I suppose you know my brain Is just kind of going overtime here I I Don't know in a way though that makes me Think like is that good enough reason Though to ban Tik Tok yes hard yes you Would agree and just to put my my priors Out there for people I'm kind of on the Free speechy wing of the Free Speech Party and I know that puts me at odds With a lot of my generational Compatriots but in this case I just Don't think that first amendment Protections apply to Singapore based Compan with Chinese headquartered parent Companies and I I just don't think we Have to offer unilateral versus Reciprocal access to our market and so I Think the destor ban is a very Reasonable approach what are the chances Of this happening though I don't see B Dance selling do you so there was a lot Of chatter pre- signing of this and the Kind of the accelerated conclusion of This Saga that bite dance would Effectively would rather shut it down Than sell it that always struck me as a Little bit of bravado versus something That was really going to come to pass I Think the question is what can they Carve out and sell that would be enough Of an excision or a defenestration of The company from the bite Dance World to Plate the American regulatory

Infrastructure and the government at Large and if there is a compromise to be Had in that situation that would still Allow by Dan to keep the algorithm the Secret sauce of what makes Tik Tok so Popular I mean the only thing I know About that is that lawyers are going to Be eaten good and everyone else is going To be up late yeah super curious to see How all this plays out I can imagine There's going to be an outcry though There's so many people here in the US That that use it not just for pleasure But for business right there's marketing People who use it to try to sell Products creators influencers businesses In general who've shifted their ad Dollars from meta and you know Instagram Or Facebook to Tik Tok like this has a Really broad potential impact right no But that's the stakes if it didn't have A potentially broad impact we wouldn't Care about it like that's why we're Talking about Tik Tok this is not an app That has a million monthly active users In the US it's not an app that has 10 Doesn't it have something like 130 140 Million monthly active users yeah it's a Lot and how many people live in the US Maryann 330 that's damn near half Half I'm sorry it has 170 million TK Tok Users in the US so that's more than more Than okay so yeah so who's probably Hoping that this works out Mark

Zuckerberg yes cuz Mark was famously not Making enough money over at meta and nor Is alphabet doing well enough in the Advertising Market I think this is Incrementally good for them I think Wouldn't it help like Snap more than Those two companies in terms of like uh Potential growth I forget about snap to Be honest with you wow wow Maryann why You GNA do Evans Speagle dirty like that No nothing personal but I mean I've Never really been a Snapchat user I Think I was slightly too old for it when It came out and then I wasn't cool Enough when it got bigger but that's Life but I will say that is a company That has been tenacious and very Vision Driven and so if anyone's ready to jump On a unlocking of AD dollars I hope it's Them so they'll give the other social Giants kind of a run for their money it Could be good for X2 I do think though That the Tik Tock ification of content Will persist this short form reals type Thing that everyone talks about I think That's going to stick we will see well Now I'm curious since I have event Envy Can you tell us what is going on at Early stage who's there what are they Saying what's the Hot Topic besides AI I Mean I want to hear it all oh no you Can't you can't say what's the Hot Topic Minus the Hot Topic well I mean you know We're g to of course talk about AI but

Like what else besides AI is being Talked about so we're in Boston which People will note is not San Francisco And is not New York city so we are not In the two kind of like Apex hubs here In the United States and I like that to A degree because we're slightly out of Center in that way but the Boston area Has a very rich pedigree in software Biotech a lot of hard tech given its Density of higher institutions of Education you have you know mit's around Here and Harvard's around here and UMass Amherst and Williams maybe also Somewhere around here I haven't been in College in a while so I'm starting to Forget I don't remember myself there's a Lot of them and so it's fun to get here Because you do get a slightly more biote Techy robotics SE type crowd and that's A lot of fun but the thing that's really Hit me Maryann is we have talked a lot About how Venture Capital has slowed Down and fintech has slowed down and you Know the stock market's gone up some but It's still valuations are low and if you Just like I mean honestly if you just Listen to us you might get a perspective That things are not very fizzy yeah you Know but the energy here today and not Just trying to Big up our events I just I love early stages as an event but like It's popping we had a women in Technology breakfast to start and it's

Been like every session has been pretty Much packed with people standing around The edges and questions have been great I just got off stage for my two sessions And it was lovely people were as very Engaged and so the biggest thing that I'm taking away from this is you know Don't worry too much about the big Picture numbers that everyone talks About the founders are still hungry and The founders are still building and Everything else is just noise that's Great to hear there's something to be Said for that in-person energy that you Feel at that sort of event especially I Think in the early stages right because There's still a lot of excitement a lot Of passion I hope for what could be next What's what's going to happen you Moderated a couple of panels right tell Us about those yeah so I was on the Tam Panel which is always good fun I had an Investor Toby from felicis and then I Had the co-founder of selino and the Co-founder of quotient Ai and they were Fantastic and the questions from the Audience were pretty technical but Clearly people are thinking about the Best way to put their good fee forward To talk about their business with Investors and raise as much Capital as They can so that was very encouraging And I I think that what's always Illustrative to me at these events is

How important it is to go over the Basics because I think that if you've Done our jobs as long as we have Maryann You get a little bit inured to hearing About pre and post money valuations and This and that but for a lot of Founders This is the first time they've dipped Their feet into this world and so it's Really exciting to see people asking Admittedly occasionally a relatively Basic question because it implies an Upwelling and a new stream of new Founders so that was good and then I had Rebecca Lee Whiting from epigram and she Did our essentially early stage Fundraising session talking about safes Convertible notes and that was a very Good session once again for Basics but Also for context and as she put it it's More of a buyer Market than a sellers Market and that means that the power out There has shifted from Founders to VCS And that out certain terms certain Pitfalls and certain of fundraising and So and so it was interesting to hear her Strike that tone in a room that was so Energetic and so forth but yeah VCS have Pulled back more than Founders I guess Is maybe the way I'd summarize both of Those yeah and I mean I think clearly we Can see that and there was a Founders Market back in 2020 2021 obviously That's changed I think pretty Dramatically and you know it's tough

Right it's a tough thing for Founders in A way it's like here we are we're Writing checks we can't wait to give you Money we can't wait to Value you at a Really really high dollar amount and Then to go from that To so $100 million in Revenue so I don't know it's like we've Talked about it before sort of a Whiplash but yes but it's a whiplash Only from the the finance side and I Think that's that's the thing that I That I'm really stuck on because the People building stuff are just as busy As ever I had a little session called Date which is new to Tech events I think It's like a third party service anyways It's a way to like set up small chats With people so I did a brain date with Three founders and I'm not going to go Through what each one of them is working On because it would take too long but They're not slowing down they're all Going straight ahead thinking about Their Market their model their product And so you know I I wish there was a way To like track like founder energy in the Same way that we can track Venture Capital dollars I wonder how often those Diverge and and the Venture Capital Story is just a flawed image of what the Market really is very true and very fair Because I think there's a lot of great Startups out there that are probably not

Even trying to raise Venture money right Let's be real here I mean there are some Who have been like you know what I've Seen what's happened to other startups And term sheets being pulled at the last Minute and you know fighting for your Life as a result and you know I don't Want to give up all my Equity to an Investor that may desert me next time Want to raise money so I mean honestly I'm not trying to bash VCS at all I'm Just saying that you know I I think that What has happened over the past couple Of years has also just made some people Realize okay maybe there are other ways To grow you don't necessarily have to be Venture backed to be successful oh yeah And in fact that's actually what the Advice that one of my Founders in my Little session gave to another founder Who was thinking about his marketing and Go to market motion he's like you don't Need VC what you need right now is one Angel and I it was it was really fun to Sit there at the table and like listen To them help one another that was Probably fun yeah that was probably fun I don't know Maryann I I think startups Are really cool and so it's fun to be in A room with tons of Founders I mean even To this day after all these years of you And I covering this space you know that Little bit of jazzed you get when you Talk to a Founder who's really excited

About what they're building yeah yeah It's contagious I would say probably for Me and I've been covering startups for a Very long time off and on right for Since the boom and bust I think the Reason I've always still been drawn to Covering startups is that they represent Hope in a lot of ways right Hope for Change hope for improvement hope for a Better world let me get you know kind of Corny here but you know yeah we've had Some bad players we've had some bombs We've had a lot of Crash and burns but There's still fundamentally there's hope That there's a startup that's going to Come along and just really change the Way something is happening whether it's A market or way people are living their Lives or medically or whatever so that's That's why I love startups I mean okay So I was on stage with seleno earlier And they won teun disrupt 2021 I think which was a remote disrupt If you recall we had to do it that way For a little bit which was not nearly as Fun as doing in person let me tell you Although it was easier on the travel Budget but uh you know so she her Company won she's the co- Fender and CEO And it's just like hearing her talk About how we're going to do targeted Therapies almost down to the individual Level for what works for you and the Different bottlenecks they're running

Into and how they're thinking about Their Market size it was a tam panel After all you couldn't help but get Excited about what's going to exist in 30 years or what will become normalized In 30 years when it comes to medical Stuff and that is the power of new Companies trying new things right I'm Leaving here with very little voice left And I'm slightly tired but I am Spiritually kind of uh rejuvenated I can Tell I can see it that's awesome that's Great all right well we'll have to leave It there but don't fear Equity will be Back on Monday or let me rephrase that Alex will be back with equity on Monday It's True until then you can find me on X Bay Area Rider Alex on X at Alex and Equity Under the handle Equity pod on X and Threads and don't forget to check out Our sister show found which Dives deep Into the stories behind startups with The founders who built them thanks for Listening Bye Equity is hosted by myself Alex Wilhelm and techren Senior reporter Mary An aeto we are produced by Teresa loans Solo with editing by Kell Bryce Durban Is our illustrator and a big thank you To the audience development team and Henry pavet who manages Tech runch audio Products thank you so much for listening And we'll talk to you next time


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