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The storied 37-year-old venture firm announced this morning it has closed two new funds worth a combined $2 billion.

The fund closures represent a 60 percent increase from the $1.25 billion raised almost exactly two years ago. (Over the past decade, its have been raised every two to three years.)

Specifically, the firm is announcing today it has closed on Battery Ventures XIII, a $1.2 billion investment fund, and Battery Ventures XIII Side Fund, a companion vehicle capitalized at $800 million.

According to Crunchbase, Battery Ventures has been steadily increasing its fund size over time, raising a total of $5.8 billion since 2010. Battery Ventures XII closed in February 2018, while Battery Ventures XII Side Fund  at that time.

I hopped on the phone with , a general partner at Battery Ventures, to find out more details. He emphasized that the side fund is not an opportunity fund. Rather, it invests alongside the main fund in later-stage growth investments and buyouts.

“The side fund is essentially a co-investment vehicle for later-stage deals and larger checks,” Brown told Crunchbase news. “It doesn’t cherrypick investments.”

With 49 investment members (including 10 general partners), Battery Ventures is one of the busiest global venture firms out there today. It says its staff operates as “one global team” out of offices in Boston; San Francisco; Menlo Park; New York; London; and Herzliya, Israel, outside Tel Aviv.

Investing approach

Historically, the company’s primary focus is on investing in B2B software companies. Beyond that, it backs companies in sectors such as enterprise IT (including cloud computing, artificial intelligence and cybersecurity), online marketplaces and industrial technology.

Since its 1983 inception, Battery says as of Sept. 30, 2019, it had invested in 426 companies globally, excluding seed deals, “resulting in 61 total IPOs and 167 M&A events.” The firm declined to provide more specifics outside of directing me to its website. But according to Crunchbase data, one of those recent includes chipmaker for $2 billion in December. Also last year, Phoenix-based health care software startup by , and at a valuation of $1.5 billion. Other previous high-profile exits include online home goods retailer going public in 2014 and being by Japan’s for $1.2 billion in 2018, according to Crunchbase.

The firm’s approach is multistage; backing companies at “all stages of maturity.”

“We invest in companies in the pre-product, pre-revenue stages all the way through to very large companies,” Brown told me.

Battery also prides itself on diversity, Brown said, in terms of geographies in which it invests, stages and sectors. For example, it likes backing companies outside the coasts here in the U.S., and it’s also putting money into European startups. Within software, it backs companies “ranging from applications you and I would use into the infrastructure layer,” Brown added.

“Within that software stack, we like industries such as health care IT and fintech,” he said. “Overall, we think B2B software, where we spend most of our time, has a lot of opportunity ahead of it.”

The details

When it comes to sourcing deals, Battery “does a lot of research internally” and then talks to research analysts and founders, and attends conferences.

“We have created a holistic approach to what’s going on in the market so we can make early bets,” he said. “So while some of our sourcing is data-driven, at the end of the day that usually results in our getting on the phone or on a plane to talk to entrepreneurs about their businesses, and how we can partner and help them grow.”

LPs are a mixed bag of investors, primarily U.S.-based, according to Brown. They include public and private pension funds, university endowments, financial institutions and fund-to-fund investors. Most LPs in the latest fund have invested in multiple prior ones, Brown said, with “some new ones” participating.

Battery also announced that, in conjunction with the new fund, has been promoted to partner. Smotherman first joined Battery in 2013 and focuses on later-stage investments in the industrial technology sector.

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News broke yesterday that , an Internet security and content delivery company, will pursue an IPO early this Fall. According , Cloudflare intends to float this September after filing a confidential S-1 with the SEC “earlier in the summer.”

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Cloudflare is best known for its CDN, or content delivery network; the company’s services help speed Internet content to consumers around the world, helping the patchwork quilt that we call the web function with minimal delays.

Cloudflare’s business is part of the furniture to a degree. It’s also something critically important to how well online video works, for example. Which makes its debut interesting and somewhat exciting. Here’s part of the Internet’s backbone, going public.

Let’s remind ourselves of where Cloudflare stands as a private company regarding capital raised, private valuation achieved, and revenue-scale.

Cloudflare

Since its 2009 founding, Cloudflare has , including a modest , a , a , a , and its most recent round, a from this March.

BusinessInsider’s describes that final round as valuing Cloudflare at around $3.2 billion (we’ve reached out to the company for comment on the valuation), making the company a multi-unicorn in startup finance terms. led Cloudflare’s Series E. (FTI has put capital into , , , and since its Cloudflare investment.)

The reported valuation makes sense. In a noting that the company could go public in the first half of 2019, Cloudflare’s revenue was reportedly “well north” of $100 million (recurring-ish, we presume), with “84 percent” gross margins (very good). Toss in some growth and the fact that GeekWire that the firm is “being run at breakeven” and its $3.2 billion valuation looks a little cheap.

Perhaps we’ll see Cloudflare aim for an even higher pricetag in its IPO.

As with many large, private tech companies looking to list, Cloudflare’s IPO coverage has been regular for some time. GeekWire itself cited a in its 2018 piece, for example. However, Reuters said that Cloudflare would go public in the first half of 2019. If the September mark holds up, the company will have come in just a few months late.

Fastly

Cloudflare will not be the first CDN to go public this year. , another provider in the space, went public earlier this year.

After pricing its IPO at $16 per share, Fastly’s equity skated higher in early trading. Today Fastly is worth $23.19 per share, up about 45 percent. That is a good tailwind for Cloudflare’s own offering. (Crunchbase News spoke with Fastly’s founder here about the offering.)

Cloudflare is a neat company (), and one that we when it makes a mistake. But regardless of all that real-world chatter, we’re probably going to see an S-1 from the company in short-order and I’m here for it. Bring on the numbers.

Illustration: Dom.

After and struggled following their world-famous IPOs, the state of the public offering market was in question.

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Then, two growth-oriented companies with strong private capital backing and stiff losses priced their IPOs at the very top of their respective ranges. I wrote that just that alone was a bullish signal; investors were not scared off from Uber and Lyft’s failure to rise.

But the story became all the more salutary this morning when both companies opened sharply up from their IPO prices. Here are the results:

:

• IPO price: $17
• Opening trade: $25
• Current price: $24.12

:

• IPO price: $16
• Opening trade: $21.50
• Current price: $24.23

Luckin Coffee is currently up around 42 percent, while Fastly is up a sharper 51 percent. Those are incredibly strong results and could spark the usual that the companies mispriced their IPOs. Maybe, but at a minimum, they did manage to land the top of their range, and then perform.

It’s hard to be too sad at that result.

So What

The public market still wants to buy growth. That’s clear. And it’s even willing to pay for it in different guises.

Luckin and Fastly share little aside from deficits in the name of growth, and an IPO date. The former is a quickly growing coffee chain with a strong mobile and delivery component; Fastly helps get Internet content to users more quickly for big brands. There’s not too much more that overlaps.

But each found a warm welcome today. That means for companies that have some sort of path to profitability, and at least medium-temperature growth, the IPO window is open.

Which is why, I reckon, Fiverr is trying to get out while being slightly undersized.

Illustration: .

Luckin Coffee, a quickly growing and deeply unprofitable China-based coffee group, sold 33 million shares at $17 each in its debut. Fastly, a company that powers the distribution of Internet content, sold 11.25 million shares for $16 apiece.

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The twin pricings were expected. Both companies will begin to trade Friday morning. However, instead of kicking off their lives as a public company in their own sunlight, they will debut under two shadows.

First, Uber’s post-IPO troubles are now infamous. You can’t demand as much as attention as has over time, and then fail to measure up to your own hype. And, second, first earnings report as a public company did not go as well as expected, sending its shares down sharply in after-hours trading.

So, not the easiest moment to go public for any firm, but Fastly and Luckin are going out all the same. If it’s time, it is time.

Luckin

That Luckin is going public at the top of its range is a good thing. Why? It consumes lots of cash.

Luckin sold 33 million shares in its IPO, not 30 million as initially intended. So, discounting the underwriter’s option, Luckin raised $561 million (gross). That’s a lot of money for a company founded in just 2017.

When Luckin first indicated its IPO price range, we doodled up a chart of what the firm could raise in its offering. Recall the scale of those initial estimates compared to the firm’s prior rounds:

So no matter where it priced, Luckin was set for a record single-serving haul of capital.

Which is for the best, as Luckin torched $93.5 million in the first quarter of 2019. In all of 2018 its operations consumed $195.3 million. The big numbers continue, with the firm’s Q1 2019 loss coming in at $82.2 million. It’s full-year 2018 loss was a steeper $241.3 million.

Fastly

Fastly’s pricing has a slightly different vibe to it than Luckin’s. The firm isn’t growing as quickly, nor is it as cash-hungry. With smaller losses, Fastly doesn’t have the same capital needs.

But pricing at the top of its range is still a welcome result. It goes to show that firms growing at less than 50 percent that still lose money can find a reasonable response from the public markets. For a lot of other firms looking to debut, that’s good news.

The IPO parade is stretching longer with each passing day (hello, Fiverr), making Fastly’s success good news. And since the market just saw Lyft, Uber, and Pinterest stumble in quick succession, the good news is welcome.

Next up for each company is first-trading. More on that shortly!

Illustration: .

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Welcome to Uber IPO Week. The ride-hailing giant is expected to price Thursday and begin trading on Friday.

If you were bored of hearing about , its path to the public markets, its , its various valuations and the like, sorry. You are going to hate the next few days. (You could , instead?)

Regardless, we have a host of questions outstanding regarding Uber’s impending liquidity event, though by the time Friday wraps we’ll have a much better feel for the answers to many.

Here’s what’s on my mind:

• What is Uber worth? I have no idea. The company is hard to price given a number of factors. But it will receive a price this week and sell a boatload of shares. What the final sticker price is will be fascinating.
• Relatedly, are investors worried about Uber’s slowing growth? Part of the company’s impending valuation dance will revolve around how investors handle worries about slowing growth at the giant company. As we’ve banged on about for some time, in Q4 of 2018 and Q1 of 2019, Uber’s growth slipped, slowing to a crawl. Losses didn’t follow suit. We’ll see what the public markets think.
• How much net cash does Uber put into its pocket? Those losses require reserves, and Uber is looking to bolster its cash position to fund itself. The final dollar amount raised in its IPO will be historic and material. But will it be large enough for Uber to avoid a later, dilutive follow-on offering?
• Following the offering, does Lyft go up or down? Depending on how Uber prices, Lyft, a smaller, competing company could see its shares rise or fall. Uber could re-price Lyft, in effect.

That gives you the picture. After endless hype, capital, problems, and successes, it’s finally time for Uber to go public.

We’ll talk about something else next week, I promise. The impending IPO, for example. The smaller but interesting company is expected to price Thursday and trade Friday just like Uber, but a week after. More from Crunchbase News on that deal here.

Illustration: .

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A day after the Zoom and Pinterest IPOs took off, demonstrating strong market appetite for tech shares, publicly filed , the visible portion of its debut process.

Are you tired of IPOs yet? Are you bored of S-1 filings? Then you are living in the wrong year. After a slow 2014 and 2015 and 2016 and 2017 and only a passable 2018, the technology IPO market is hot. And it looks like a host of unicorns want to jump through the public offering window while it’s still open.

Fastly is the latest example of the trend.

Before we get into the top and bottom lines, let’s remind ourselves what Fastly is. Fastly’s products helps power the Internet as you know it. The firm’s “edge cloud platform” puts applications and data closer to end-users. It also sells load-balancing services, “cloud security,” and vends a content delivery network. Fastly is therefore in the background of your Internet life, helping speed up the experience.

That’s not as holy shit as products that we’ve all used like Zoom and Pinterest, but it’s critical tech all the same. And tech shops going public is something we cover as best we can. So let’s peek at the numbers and see how healthy or not, big or not, and quickly growing or not, Fastly is.

Numerical Overview

Let’s start simply. Fastly crossed the $100 million revenue mark in 2017. It grew a little under 40 percent in 2018. The company’s net loss fell slightly in dollar terms from 2017 to 2018, descending a sharper 10 percent from 31 percent to 21 percent of revenue.

In cash terms, Fastly does not yet generate cash from its operating activities, and has regular capital expenses that provide its balance sheet with negative investing cash flow. And with just under $37 million in cash, Fastly’s IPO, if successful, will provide the firm with cash to power operating and investing deficits over the next few years.

Finally, over the two years detailed in its filing, Fastly’s gross margin improved by 100 basis points from 54 to 55 percent.

In aggregate, Fastly is a healthy business with a decent growth rate, losses that are falling in dollar and percent-of-revenue terms, operating in a fun place in the market. It has lower gross margins than many SaaS companies, but given the firm’s light losses on top of its 45 percent cost-of-revenue, investors may not mind too much.

Now let’s talk about growth.

Growth

In 2018, Fastly’s revenue grew just under 38 percent from $104.9 million to $144.6 million. Powering that growth was sales and marketing spend of $40.8 million in 2017 and $50.1 million in 2018. As you can see, Fastly spent more on sales and marketing in 2018 than it added in revenue during the year.

Is that bad? It depends on how you think about the results. Fastly sells a service to customers that they can buy more of over time. That means that spending more dollars in one year than the company added to revenue isn’t as odd as it might seem. Indeed, in its S-1 Fastly notes that:

[o]ur usage-based revenue grows as our customers’ websites and applications deliver, process, and protect more traffic, as they adopt more features of our edge platform and as they more broadly adopt our platform across their organization. A meaningful indicator of the increased activity from our existing customers is our DBNER, which was 147.3% and 132.0% for the years ended December 31, 2017 and 2018, respectively. [Bolding: Crunchbase News]

“DBNER” is short for “Dollar-Based Net Expansion Rate,” or what we loosely think of as negative churn.

In simpler language DBNER is the amount that Fastly customers spend _more_ over time. So, customers that stay with Fastly spent 132 percent more in 2018 than they did the year before. It’s a solid result. However, the company does remove companies that churn from its DBNER, so it is an adjusted metric.

But the fact that Fastly customers — the ones that stick around — do spend more with the company over time really matters. It makes its sales and marketing expense easier to understand next to its growth; the company spent a lot to acquire new customers, but as those accounts will grow over time, the spend is more efficient than it first appears.

Fastly doesn’t pass the Rule of 40 test, its growth of just under 40 percent stacked next to its roughly 20 percent net loss in 2018 put it at about half of the expected result. On the latter point Fastly’s December 31, 2018, quarter had its smallest net loss of any quarter detailed, aside from the March 31, 2017, period.

The firm also posted a 57 percent gross margin in its most recent period, leading to a net loss of just 18 percent of revenue. That’s improvement.

The Offering

Fastly has a placeholder, $100 million figure in its S-1 filing for its raise. That number will change when Fastly names a price range and a share figure. As a private company . Its investor list includes Battery Ventures, August and ICONIQ, Sapphire and Deutsche Telecom.

It’s hard to find a valuation figure for Fastly, either from its or rounds ($50 million and $40 million apiece), so I can’t really tell you what to expect in terms of valuation. But I suspect that the company will target a valuation of $1 billion or more, given that a trailing revenue multiple of 7x would get it there based on its 2018 numbers alone; add in Q1 2019’s figures and the target is even more achievable.

We’ll have more as this IPO progresses. Stay tuned!

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