The global companies taking on Carta | 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 the Nuance behind the headlines my name is Alex and I'm joined today by senior Reporter on the fintech beat it's our Dear friend the Ace from Austin it's Maryann Netto hi hi Alex I have to come Up with a nickname for you now um the from Providence the poser from pu Tucket I don't know the Rhode Island Rascal whatever you want I'll think About that some more but those are Pretty good Maryann and I are here Because this is our Friday show where we Go back through some big news in the Week talk about some themes that we are Seeing before we get into the show Rundown though the equity team does have A request of of you if you've been Listening to the show for a couple of Weeks a couple of years a half decade or More the equity team would love it if You would drop us a review on Apple Podcast Spotify whatever you use if you Hang out with us and you have a couple Of minutes we'd love that we will give Out shout outs Maran to people on the Show who say particularly funny witty or Kind things and if you're particularly

Mean we might read that Too hopefully no mean comments we would Really appreciate it you know we do this Sometimes and reading these reviews it's A great motivator it's a great boost and We we want you to know how much we Appreciate you as listeners so even just A minute or two to drop a review we Would be so grateful thank you all right Now Maryann today on the podcast we have A big deal from a company called Muse we Love seeing a big round for a new Unicorn then we're talking about quota Lab a quick digression on the South Korean startup scene and also how CA has So much competition and then we're going To discuss competition in the world of HR Tech startups some of these have Become quite large including deal which Recently bought something that we have To talk about and then we're going to Close off with a round of everyone's Favorite party game it's Venture Capital Musical chairs but there's no music There's no chairs there's just a lot of People sitting around in vests Discussing how they like to ski but That's all to come Maryann first of all We're talking about Muse and not the Pokemon right so ingred covered this Round and it's so refreshing to see a Company actually talk about their Valuation it feels like it's so rare These days and I guess in this case they

Have good reason to do so since it's an U round and they now have achieved Unicorn status which at one time used to Be a commonplace nearly everyday thing And something that we see far less of so Muse which is described by ingred as a Hotel SAS startup raised $110 million Out of $12 billion valuation it's very Interesting to me because the company They provide SAS tools that help hotels Do things like make it easier for Checkin to pay make reservations and Help guests with room and service Booking but seems like there's a lot of Demand for this because they've seen They've seen a lot of growth in the past Couple of years yes quite a lot of Growth but I do want to point out that If you raise 110 at a $1.2 billion Valuation post money you sold less than 10% of your company and that's why these Higher valuations can be so awesome for Companies because hey you raised nine Figures for like what 9% I mean that Just has got to feel I mean it's got to Feel great if you're a Founder who was Selling a lot more for a lot less two Rounds ago you know Marian right very Good point Alex seems like a good deal For this company which is based in Amsterdam by the way I don't think I Mentioned that so they didn't disclose Revenues or net loss but they did share That their gross payment volume is now

$8 billion up from $2.3 billion at the End of 2022 which is a huge jump and I Assume that they you know obviously make A cut off of that they have more than 5,000 Hotel customers compared to 3253 a year ago yeah it's a really cool Business and the thing that I was Curious about was you know when you look At these vertical SAS companies there's A common component we see which is a Company goes after a vertical or a Sector that has outdated systems and They build software for it very standard And then they bring in a payments Component and unsurprisingly inic of Muse which is mews by the way they do Have a large payments business as marann Alluded to and that seems to be doing Quite well for them it's kind of this Really strong two-prong business model Software and payments together Shopify I Think Maryanne really showed how Profitable that can be and so I I'm not Shocked that Muse is doing well yeah I'm Not either and it reminds me of another Company I wrote about in 2022 called Self book and it obviously hasn't raised The same amount of money I think at that Time it was March 2020 2 they raised a $15 million extension but they were Valued at about 300 million at that time And tiger Global at that extension and What they do is provide software to give Hotels way to accept oneclick payments

Which I mean come on you would think That that's something that would be like More mainstream or easy to find but it's Really not and I I was burned badly Trying to book a hotel on Expedia a Couple of years ago when I had to cancel It was a complete nightmare to cancel a Booking at yeah at one point I had to Call the hotel directly I spent I mean Literally hours on the phone just to do Something as simple as canceling this Hotel reservation so to me like if there If there are more ways to deal directly With a hotel to be honest with you and Avoid having to spend hours on the phone With the likes of Expedia I love it I'm Trying to think about how much more Money I would be willing to pay if you Told me I never had to talk on the phone To media and the answer is hundreds of Dollars more to avoid that seriously so I mean yeah there there's demand here Right not only do consumers or guests Want this it makes it easier for hotels To book guests to make money just makes Everything easier so you know we can see Why there's demand also another Interesting thing about Muse is they Were saying they wanted to Branch out of Just the hotel space that they feel like Their software could be expanded which Makes perfect sense into like maybe Commercial properties airbnbs even hosts Things like that I don't think they've

Really gone after those segments as much As they had like indicated they might by Now maybe because they're doing so well In the hotel space but but I could see Where there would be applications Outside of just this segment of the Hospitality industry oh yeah I mean a Bunch of this code I'm sure could be Applied to multif family homes apartment Complexes Etc I mean the Tam for housing Is 100% right cuz it's all of us we need A place to stay so I can see this being A growth business for a very long time Fun to see a Dutch company do so well I Think we've been talking about Europe Quite a lot on the show lately France Has come up a number of times Germany as Well now throw Holland into the mix Seems to be a a a burgeoning and Bubbling time for building stuff in the European block if you will okay one last More thing about Muse before we move on It has been buying up other companies Ingred reported for us that it's bought Eight other companies in the hotel it Space So what we're seeing here is yes a Company that's doing well growing Multipart business model blah blah blah But also a a vacuum or a Hoover if you Will for smaller companies in its space And Mary you know we've been looking for More startup m&a maybe it's been under Our nose and just has been too small Dollar for us to kind of pay attention

But here's one unicorn that's rather Acquisitive absolutely yeah eight eight A lot I mean I I can see where the Strategy Works rather than spend the Time the money the people on building Out certain Technologies if there's Another startup out there that's doing What you want your company to be doing Already why not just buy it and speaking Of that theme of Acquisitions and buying Things to expand your product remit Instead of going out and building it Yourself to get your hands on an Existing customer base let's talk about A Korean startup that is taking on Carta Now this company is called quota lab it Began Life as a company called quota Book so if you recall that YC company That's who we're talking about and a While back it bought a company called Logos systems inside South Korea it paid 30 billion Korean wand for it or about $23 billion and MaryAnn that brought Together both the investor side and the Startup Equity side making quota lab I Keep almost saying quota book because That's how I first learned of it quota Lab very much like Carta the American Company because it Services both the Investing side and also the startup side Yeah I thought it was really interesting Too basically they want to take on CA And cap table management they want to Serve all the players employees the

Investors the LPS even and they're They're growing according to Kate Park Who wrote this article they have a 40% Market share on the startup side 80% Market share on the VC side and claim to Be the sole player on the lp side in Korea so that's a pretty large market Share in their Market the only problem Is we are talking about a a smaller Overall Venture Capital space so yes Quap is doing well inside of South Korea Which is the home to a number of Technology companies that we all know Samsung is the first name that comes to Mind always but it's far from the only One so it's doing well inside of its Market but I'll be very curious to see Maryann how the company does in the Future expanding to other Regional areas Because I mean there's a lot of Companies that really want to go after What CA is doing and we've seen these Players as as Kate mentioned in the Article across southeast Asia so if it Wants to go into Singapore for example It's going to have existing competition Which makes me curious is if we're going To see more deal Mak inside of the let's Just call it cap table management as a Broad term cap table management software Space or if it's going to go out there And just you know fight tooth and nail By showing up and trying to kick Everyone's butt yeah I mean it's a good

Point Kate also talked about that quota Lab in 2022 had mentioned wanting to Expand into southeast Asia not really Specifying which countries and it Doesn't sound like they've made that Move yet but it's also competing in Asia Alone with other companies such as uh Singaporean startup capita with a Q and Hong Kong Sprout so there are other Players in Asia but you know I I really Do think in certain markets like Asia Maybe in latam startups or investors in Those regions might be drawn to working With a company that's actually based There as opposed to one based in the US So there is that appeal and so I I think There is potential for growth it's a big Enough market there's room obviously for For many players so we'll just see how This plays out well okay so I want to Politely push back on something you just Said because yes and no it is a large Market Carta during I forget which one But during one of its latest management Brewhaha well put it that way did Discuss how big of a business it was oh I do recall this is when they decided to Get out of secondary trading because They' had that breach of internal data Rules yeah so the CEO said essentially The company's going to stick with about 370 Million worth of ARR after it got Rid of that small bit of its business so $370 million in recurring Revenue call

It annualized run rate whatever you want It's a big number but that's for the US Market which is the single largest Venture Capital Market in the world so If you think about the South Korean Venture Capital Market I think it does About four billion a year in investment That is much smaller and so the Potential revenue for quota lab is going To be much smaller so if card is doing 370 call it 500 tops once it goes public Maybe the rest of the world's worth like 600 700 million a year I don't know yeah I see your point but it's like not every Company necessarily has Ambitions to be That large like some companies yeah of Course they just want to grow make a lot Of money and be profitable you can be Profitable without necessarily having Hundreds and hundreds of million dollars In AR can you not well I mean you can But I mean we talk about these companies In very particular way because if you Are working in the Venture space you're Supposed to become the next alphabet Yeah I I hear you I see what you're Saying I guess I'm still always of that Mindset of like I would rather see a Company maybe not make as much revenue But actually be profitable than one That's like oh we have hundreds of Million dollars in Revenue but we're Losing a ton of money every year so you Know I mean it's all relative yeah and

Then last note on this because Maran Justes make a good point that you know Not everything has to become the next Mega Goliath huge Corp these companies Competing is going to be great for Founders because it'll mean lower prices More competition for their custom their Business and so that's got to be just a Net positive for all the founders out There but let's stick with this Acquisition theme we're going to take a Very very very short break and when we Come back we'll be talking about deal And another big Deal what's next in Tech that's not the Right question it's where Puerto Rico More than just a tropical par 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 pr.org Crunch so this week I wrote about deal The HR Deca corn which was last valued At $12 billion acquiring an African Company called pce space now this comes About one week after it announced it Acquired a munich-based company called Zavi deal acquiring pay space seems to Be a really big deal for the company I

Talked to CEO Alex baziz who said that It's their largest acquisition to date Unfortunately he would not share how Much they paid for the company but Payspace is a very large player in the HR World in Africa and I don't have Numbers for them specifically but Supposedly Revenue there was growing 30% Annually they've been around for about 20 years yes yeah and and actually They're not just working in Africa they Expanded to Brazil and the UK which are Two huge markets in and of themselves as Well and according to Alex this is a big Deal for deal because now they have a Lot more what he called engines with Which to run run his company in over 70 Countries right now so and they also Acquired a bunch of Enterprise customers Pay space has over 14,000 customers Across Europe lat am Middle East and Africa including Heineken Coca-Cola and Puma so yeah I'm sorry I feel like I Just said a ton of things in about 2 Minutes trying to capture all the Highlights of this deal but a lot here And another great example of a success Story in Africa yeah a good acquisition I think it's fun to see someone so busy And so aggressive I mean we talk about Deal a lot because they're always doing Something and I do love an inquisitive Strategy and I think part of the logic Here Mary and going back to the idea of

Regional specificity and kind of knowing The local rules and regulations is that If your deal you probably want to have The technology in each country to work On those rules and execute payroll Versus hiring another company to do it For you ironically kind of passing the Buck one link further away from the Employer and the employee because you Could save money and be faster and more Efficient so it makes a lot of sense to Me the question that I have and this is Not answered and we don't know so I'm Not trying to tee you up to answer this But what I am curious about is as deal Does all these transactions is it using Stock is it using cash I know it's Raised a lot of money I know it has Presumably a lot of cash but I'm curious What's the the currency at play here Well that's a good question I don't know But they claim that they still have $600 Million left in the bank they claim that They've been profitable since September 2022 And they also claimed that they just Crossed $500 million in ARR so you would Think if they have $600 million in the Bank they might have used cash to fund This acquisition but I don't know that Answer to that well it depends on what People want because on one hand getting Cash is great because it's liquid Currency and huzzah on the other hand if

You're a big believer in the power of The combined entity that your company's Going to be joining and you think Deal's Going to go out at 20 or 25 billion well Then I would want deal St so my guess Probably a blend but if you do the math On $600 million in cash at 4% interest a Year that's $24 million in free Revenue Like 100% gross margin is just cash in The bank so I don't know I might hold on To the cash just because it's it's so Valuable these days to have currency in Your accounts long live high interest Rates that's very very true I'm with you Thinking it was probably a blend of the Two and speaking of going public deal is Definitely I think a candidate for the Public markets but Alex said they're not Really looking at that until 25 2025 or 2026 now I like Alex I've talked to him Seems very reasonable and affable even Stop being a coward Alex you're doing All of us Alex is sad you're huge you Have tons of money go public what are You wait are you waiting for data bricks To go out Ali's never taking the company Out I'll be dead by the time that Happens someone needs to go first I Guess it's Reddit someone does I don't Know yeah I don't know when they're just Waiting and you know I I forgot to Mention this ppace has 14,000 customers Deal has 25,000 of its own including Clara Shopify Hermes and so Alex said

Some of their clients May overlap but he Did specifically point out the fact that Pace bace has so many Enterprise Customers was another appealing factor And one other thing I thought was Interesting is that he said they were Actually pay space's customer yes and That the internal team at deal was like Wow they really wanted to acquire the Company CU they were so impressed with The technology and the ability to quote Do on the spot calculations and that Means they probably paid a pretty penny For it and that's how you get a deal Done you create interest and then you Charge them to the nose for it so shout Out to pce for doing that and Maran you And Tage who wrote the story did note That there's been a a handful of other Deals in Africa lately right Tage is our Correspondent in Africa great great Reporter and he said that the deal Highlights a trend over the past 18 Months it's at least the third Acquisition that we know of involving Africa founded companies and Global Counterparts last January a German Vaccine manufacturer I'm not sure how to Pronounce this bio inch sure acquired an AI startup called instad Deep which Originated in Tunisia and then in June a Private Equity Firm midius bought exenia For over $100 million and then back in 2020 stripe also acquired pay stack out

Of neria so this is again a big deal For that ecosystem I remember the the Last deal that you mentioned we talked About that on the show because it was a Sufficiently large transaction that it Really caught our eye so not only have There been deals but deals that have Been so large that we sit up and take Note which I got to say bullish for the African startup ecosystem which has seen Its Venture inflows slow dramatically in The last couple years so great to see Some bullish signs but Maryann there's Another company in the deal world if you Will that misspelled its name and Dropped the tea Yeah I think we talked about this the Last time they raised Remo first raised $25 million this week and they are very Vocal about wanting to take on deal and Rippling as well in This Global HR Tech Space they are kind of like compare that Like David and Goliath right they're the They're the David to the goliaths of Deal and Rippling and they claim that What they're doing first of all that is Different from their competitors or Quote unquote better is that they offer More affordable pricing for example they Charge like $199 a month for certain Things that I believe deal charges more Like $599 a month for they also can Serve larger customers but they're very Focused on smbs which they say are very

Underserved in this space as all these Other companies seem to be going more And more after Enterprise customers and Lastly they say that they're better Because they actually partner with legal Experts in the markets that they operate In rather than setting up entities Themselves so that they are supposedly More compliant in what they do again I Am not saying that they are I am telling You what they're telling me that they Claim to be Maran is responding to my Face everything you said is great I just Want to talk about the whole snbs are Underserved that's always true there's Always a market to go after small Businesses because correct they are Never given enough shrift why is that The case it's because snbs are terrible Customers they go out of business all The time they're hard to land and They're small dollar accounts that's why Every company eventually goes up Market In the world of technology so Remo first Which I'm sure I'm pronouncing that Slightly wrong Remo first Remo first You're probably right I'm not sure to be Honest with you well when you said Remo First I was thinking that we could just Swap out one letter and have a brand new Tourism department for the City of Reno But Remo first is going to go up Market I guarantee it so right now they're Doing SB Focus but they're going to even

Eventually realize our software is good Enough to go after much larger accounts That are more profitable so they will They and they already are to your point Alex so it's not like that's all they're Doing and by the way I think you're Right it should probably be Remo first But they have thousands of customers Including Zach do the World Health Organization and MasterCard which is Massive but they do claim that they are Really eager to serve the S&B Market Well this gives us the famous slogan Some things in life are Priceless for Everything else there's you of remote First to pay your remote employees yeah They say that their ARR is up 10x since They announced their last raise in September 2022 they would not give any Hard numbers of course they also would Not share valuation saying only that it Was a strong U yes so strong they don't Want to tell us yeah now another Interesting thing about this deal is That octopus Ventures a European Investor is actually the firm that led This round and Remo first is trying to Expand into the UK and Europe so I think Ah that you know kind of that might help Explain some of that firm's interest in The company yeah absolutely so to Summarize deal now at a half billion in ARR very acquisitive remot first shown That there is a number of ways to

Approach this HR Tech space and is Growing very quickly and then elsewhere In the world of your deals is a company Called Gusto slightly different model Please don't call me everybody but it Reached the half billion recurring Revenue Mark last year so there's a Number of just really big companies yeah There are and I would be remiss not to Mention earlier this week that Tage also Covered a smaller player in the space That raised money this week remote pass In the UAE raised $5.5 million and then There's also remote which is all in this Space as well right there's just a ton Of players and the last round that I see Maybe they've raised more money since Then but ingred covered in April 22 they Raised 300 million at more than a $3 Billion valuation so there's a lot of Companies in this space and it's just it Feels like it's growing by the day well Look I think all the companies that have The word remote spelled correctly or not In their title have to merge by Definition so let's get on that because I'm not going to have Gusto about any Deals that don't combine all those Companies but Maran let's move on and Talk about our last theme which is Venture capital and musical chairs for Those of you who don't know there's not That many venture capitalist at Major Firms there's only you know half dozen a

Dozen Partners at most major firms and So there's just not that many names and So occasionally they move and we all go Huh really so Maryanne Sam blonde let's Start there yeah so Sam blonde he is the Former cro of brex the fintech and about 18 months ago I interviewed him about His decision to join Founders fund as a VC and you know he was all excited about At the time even though it seemed a Little odd because Founders friend was Like a big investor in ramp which is Brex is you know one of its biggest Competitors but anyway Sam seemed like a Very nice guy he seemed really pumped About becoming a VC all excited so then This week we find out that he has Stepped down from that role and what I Found most interesting about this Besides the fact that he only lasted There about 18 months is what he said And I I'd like to actually quote him Yeah please do he says full-time Investing slbe a VC isn't the right fit For me and I've decided to go back to Operating more on what's next for me Later he would not share what is what's Next but I do think this is an Interesting Trend and something that I've been hearing a lot of lately that a Lot of VCS are are growing disenchanted With the profession and are either Choosing to go work for startups start Their own companies do anything but be a

VC yep a couple reasons why that might Be the case off the top of my head Maryann we we just came off of Adventure Capital boom and there was so much going On so much money sloshing around I bet It was an incredibly electric time to be A private Market investor even if not All of those deals are going to age Particularly well I bet it was fun now Things are much more conservative They're more locked down they're more Buttoned up and they're probably less Overall exciting and I would Hazard that A good chunk of Adventure capitalist Workload today is helping portfolio Companies that are struggling do a Little bit better it's probably less Active Less Fun less glamorous more Nitty-gritty and also it's shrinking VCS Are raising less money funds are smaller There's fewer fees to go around I can I Can see this yeah I mean for sure I I Keep hearing chatter in the world of Venture about just just a lot of churn There's a lot of churn in the Venture World um this this was a more Public Announcement there's probably a lot more Going on that we don't even know about But it was only one of two such Announcements this week miles Grimshaw Announced that he was going to be Leaving Benchmark where he'd been for The past 3 years to rejoin Thrive Capital so he's not leaving to go be an

Operator or join a startup or anything But still it's kind of that's where we Got this musical chairs term to kind of PHA like coin this phrase of what's yeah Describe sorry I haven't had lunch to Describe what seems to be going on in The Venture world we don't know why we Don't know exactly what happened why he Left Benchmark after just 3 years think Alex just put a plate of what looked Like burritos on the camera no those are Very large donuts oh Which I'm going to finish eating after This recording so I'm totally on board With you I look like burritas Anyway Miles is leaving Benchmark he's left Benchmark he's rejoined Thrive Capital Which was founded by Joshua Kushner I Think it was 2012 or 13 I think 2012 Miles join 2013 before leaving for Benchmark so we don't know what exactly What happened but this is kind of Unusual yeah this is a weird one so do You remember when um well do you Remember of course you do it wasn't that Long ago but Keith raboy left founders And everyone was like w that's a big Change you know oh my gosh going back to The firm he left all right so what's Going on with certain firms you have to Understand that venture capital is not a Monolith so when you think about Benchmark for example go to their Website just put into Google or duck

Ducko or co-pilot whatever the hell you Use and go to benchmark's website and Look at it that is the ethos of the firm Old school VC there's no blog there's no Media arm there's no position papers There's no glossy photos there's a Couple of addresses and basically a Middle finger old school VCS and I if I Remember correctly Benchmark GPS are Mostly funding their own Vehicles now They're not even really going external For Capital and they've kept it small And that is one way to approach Venture The other way is kind of the Andrea Model on the Other Extreme to be super Public super loud super big getting Bigger becoming an raia etc etc etc so To see Miles leave to go to thrive it Could just be a culture fit frankly I Can see it being tough to join The Benchmark partnership to fit in to be Part of that tighter nit collection of People right and it you rais another Good point it seems like it's a very Different type of firm than Thrive I Mean Joshua Kushner when he founded it Was 25 right so and Miles himself I Believe he was 29 I'm trying to trying To remember off the top of my head I Think he was 29 when he first left th so Anyway it just feels like it's probably A very different culture very different Type of investment firm I wish I could Hear more about what really drove this

Decision but nobody would really would Comment on it well that's because it's Hard to get leaks and there's like four People who know what's going on and Don't want to talk to you but of course Not every venture capital is small I Mean like Benchmark and Union Square Ventures have kept in them pretty small But most have hired quite a lot and that Kind of goes to show just the new Climate of venture capital even in 2024 But Maryann when it comes to venture Copal musical chairs shall we see more Of this or are we done for a while do You think oh I don't think we're Anywhere close to being done Alex I Think this is probably just the Beginning we're going to see more and More of this I anticipate this is what We're only in March of 2024 right yes so Yeah so I mean this is probably going to Be the year of VC churn you just made me Panic I'm like are we not in March I Thought we were still in March did it Just start making me d my sanity yeah This is this is probably just the Beginning all right well everybody that Is all the time we have on this Excellent excellent Friday but Maryann Before we let people go you have Something special coming out tomorrow Involving someone who is quickly Becoming a friend of the show yeah I Interviewed Roger Lee who is both a

Co-founder and angel investor and Creator of layoffs.fyi and we had a Great conversation he recently put some Money into a startup that we talked About last week called Sunset which Helps other startups shut down so we we Talked about why he chose to invest in The space and how his work at Layoffs.fyi related to that we also Talked about just startup shutdowns in General I was astounded by the number of Startups or the percentage increase in 2023 of startups that shut down compared To 2022 and also layoffs and which Industries that we seeing more of both Of these things in so anyway great Conversation he was a really good Interview tune in this Saturday I just Want to say that if I was in charge of Sunset I wouldn't call myself the CEO I Would change my title to like the Undertaker or something no to be Specifically morbid show up with a Scythe be like I'm here to collect your Office chairs ha all right um before I Get in trouble we're going to go away we Are Equity pot over on X and threads we Are techch pods over on Tik Tok Maryann Is the best my name is Alex we are back On Saturday with the interview and then Of course Monday with our weekly kickoff Show everywhere you get your podcast We'll talk to you all soon goodbye

Bye Equity is hosted by myself Alex Wilhelm And Tech rench senior reporter Mary an Aeto we are produced by Teresa loans Solo with editing by Kell Bryce deran is Our illustrator and a big thank you to The audience development team and Henry Pette who manages Tech wrench audio Products thank you so much for listening And we'll talk to you next Time