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Enter , which this morning announced it raised $6 million in seed funding led by .

, and founded Pipe in September 2019. Their goal is to offer SaaS companies a way to grow without diluting their current cap table.

Pipe claims it does this by offering an instant cash advance against the full annual value of a company’s software subscriptions. So basically, according to co-CEO Hurst, it turns monthly recurring revenue into annual recurring revenue.

“We built this for SaaS companies because they, in particular, benefit from immediate payment,” he wrote via email. “With Pipe, they don’t need to discount revenues to entice customers to prepay.”

, , ����dzܲԻ�����, General Counsel , , and also participated in the round. (There’s been a recent trend of startup founders investing in other startups as of late, such as in the case of Front, which we wrote about here.)

The premise behind the Los Angeles-based company was appealing to , co-founder and general partner at Craft Ventures. Historically, he said, the main financing option for SaaS companies has been dilutive equity rounds.

“Pipe is the tool every SaaS founder has been waiting for,” he said in a written statement. “It allows SaaS companies to grow without dilution by financing their SaaS receivables.”

How it works

Pipe says it is addressing a (as of 2018), which is growing by double-digit percentages year over year.

The Pipe’s platform assesses a customer’s key metrics by integrating with its accounting, billing and subscription management systems. It then makes “an instant decision on whether the company qualifies for a PipeLine of finance.” Facilities range from $10,000 per month to several million dollars per month for later-stage companies.

I was curious as to how Pipe could provide such facilities with just $6 million in seed funding. Hurst told me the company is also backed by debt providers (such as ) to be able to provide the facilities to its customers. But he emphasizes that Pipe is “not providing debt,” and is “not a loan.”

CEO said his SaaS company has risked losing deals in the past by requiring annual upfront payments when customers wanted to pay monthly.

“Pipe solves this for us and allows us to invest more heavily into our growth,” he said. “It may easily save us a fundraise.’’

Pipe has only officially been in the market for a few weeks but Hurst said it’s been “growing 100 percent week-over-week during beta.” The company is officially launching out of beta today.

The six-person company plans to use its first round of funding to expand its sales and engineering teams out of its L.A. headquarters and in San Francisco and Phoenix. But looking ahead, the company considers what it’s doing “as a global opportunity.”

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This morning we’re back to annual recurring revenue (ARR), a metric that modern software companies love to report. It’s a forward result, a calculation of the amount of subscription revenue a startup can expect on an annualized basis. If your company did $5 million in monthly subscription revenue in July, you have $60 million of annual recurring revenue.

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The prominence of ARR makes it a critical concept to understand if you track quickly-growing private companies, and doubly so if you care about tech startups. They’re mad for the stuff. In that vein, I asked startups — tongue in cheek, mostly — to send in their ARR growth from the first half of 2019 (H1 2019) compared to the same period of 2018.

A few people did, which is fun. We’ll share those results first, and then put them into context using some public earnings results from yesterday.

Startup Results

You can still send in your H1 2019 ARR growth, as I’m accepting emails all weekend on the matter. So feel free to mail in your brag or confession to alex@crunchbase.com. We appreciate the clarity real numbers bring. Candor is good!

In that vein, here’s what was sent in:

• wrote that its “growth rate in ARR from H1 2018 to H1 2019 was 691 [percent],” which is quite good. We can presume that Uselytics didn’t have the World’s Largest revenue base at the start of 2018, but putting up nearly 700 percent growth is impressive. That’s a high watermark, frankly.
• wrote in, saying that it had “50 [percent] YOY growth rate which we just released today,” including a link to . Given that we specifically requested H1 2019 ARR growth over an H1 2018 result, we’re presuming that this metric fits the ask. Signal Vine has according to Crunchbase and is based in Virginia.

A 50 percent growth result, mind, isn’t slow. From a reasonable revenue base, that can be an impressive result. (Hold onto that number until we get to Okta’s details.)

I’d like to see more companies share more metrics, as it would help demystify the startup world some and reduce the stress that top-decile numbers can bring. Everyone in the startup world hears about the companies that are growing like hell, but fewer folks hear about startups that are merely doing well.

Now, let’s put our two startup numbers (more here, mind) into context.

Earnings Reports

Yesterday brought a raft of SaaS earnings to the public, with and and reporting, among others. Results among the ARR-creating firms were a bit mixed. Let’s get an overview of each result set, quickly.

I spoke with Okta’s co-founder and COO after the company reported its results, but before its earnings call. The company revenue growth of about 50 percent, rising sales and marketing spend, as well as minor increases to its net and operating losses.

Kerrest described the results as in-keeping with the firm’s vision for its future that it set a few years back. Okta has plenty of cash and generated around $20 million in operating cash flow in the first half of calendar 2019. And, the COO told Crunchbase News that the size of its largest 25 contracts in the second quarter of 2019 was twice as large as the same result from a year ago.

Shares of Okta are off about 6 percent this morning. Why, is the question. I’d reckon that Okta’s somewhat modest projection for sequential-quarter revenue growth is the issue.

Box, in contrast, is up a point this morning after far more modest revenue growth. But in contrast to Okta, which has seen its share price appreciate in recent quarters, Box is trading at its lowest levels since late 2016. So there’s some mismatch in context for the two companies’ earnings results.

Note, however, that the faster-growing company has had better recent public market results. ARR growth is still investor catnip, even this far into the bull cycle.

The growth point was welcome to Zuora investors this quarter, with the SaaS firm’s SaaS-focused product better than expected forward revenue guidance. That boosted growth expectation sent, and recent results, sent Zuora’s equity up over 6 percent this morning.

Summing quickly since this post has gone on longer than I meant it to, startup ARR growth rates are generally faster than those of their public counterparts. But the same mechanics and tension between growth, profit, and valuation work on both sides of the public-private divide.

Perhaps each earnings season we can get a few startups to disclose some of their performance to go along with our regular, summary glance at public company results.

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And the company just raised $5.2 million in a Series A round led by to help cater to this shifting customer base.

“A lot of conversations we’re having today are centered on the U.S. consumer, and all the businesses who had to cater to that,” Barber said. DataGrail’s to date is $9.2 million.

Other investors in the round include and . This was one of Okta Ventures first investments, after closing its first fund about 4 months ago.

Monty Gray, Okta’s senior vice president of corporate development said “we look forward to partnering with the company to help our joint customers navigate the increasingly complicated regulatory landscape,” in a statement provided to Crunchbase News.

Compliance is becoming a domestic mindset. For example, the will take effect January 2020. Nevada enacted an “online privacy law requiring businesses to offer consumers a right to opt-out of the sale of their personal information,” . Nevada’s law will be effective Oct 1, 2019. We might see the soon, as well.

DataGrail works with enterprise companies that want their customers to be able to move or delete their data on demand. The 30-employee company integrates with more than 100 infrastructure systems, from to (AWS). It lets businesses “continuously comply with data privacy regulations,” the statement said.

For example, if a JetBlue customer wants to delete all their data so they can move to another airline, JetBlue has to do that.

Barber said that it’s not good for companies to lose customers, but legal pressures are forcing them to make it an option. While DataGrail first worked with enterprise companies, Barber said it’s finding interest from customer-facing companies.

A company like , for example, has a lot of customers so it has a “higher risk,” according to Barber.

“They have a higher, higher risk especially for privacy regulations and a significant number of consumers,” on its platform, he said. Barber also said that DataGrail’s customers have tripled in less than a year, and include , , and .

Barber mentioned how Europe’s (GDPR)  “was the forefront of starting this social economic trend.” The transition to those beyond the European footprint, he claims, is just beginning.

Illustration: .

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Yesterday was a pretty big day in the earnings cycle. Each quarter, public companies disclose their recent financial performance. It’s a key moment for every concern, showing off recent performance to investors, and usually making projections for the future.

Three tech companies that we care about reported their own results yesterday: , which we care about as it’s a high-profile decacorn built with an ocean of private capital (our coverage). , because it’s a recently-public SaaS company growing quickly, making it a measuring stick for how public investors are valuing unprofitable growth (our coverage). And, , as a SaaS company selling SaaS-tooling, is a firm that is an obvious temperature-check for SaaS itself (our coverage).

Let’s quickly examine these, digging up in each case the lesson for private companies.

Uber

Yesterday Uber reported its as a public company. After releasing its results, shares in the company rose and fell before settling up about 2 percent.

What did the firm do to earn the bump? Here are the vital statistics, making comparisons to the year-ago quarter:

• Gross Bookings: $14.6 billion (+34 percent)
• GAAP Revenue: $3.1 billion (+20 percent)
• Adjusted Net Revenue: $2.8 billion (+14 percent)
• Operating Loss: $1.0 billion (-116 percent)
• Adjusted EBITDA: -$869 million (-210 percent)
• Net Cash Used In Operating Activities: $722 million (-143 percent)
• Contribution from Core Platform: -$117 million (year-ago result positive)
• Contribution from Other Bets: -$71 million (-255 percent)

That’s a lot of numbers, I admit. Let me walk you through them. First, spend on Uber’s platform is rising faster than both revenue, and Uber’s adjusted revenue metric. That means that Uber is building gross spend over time that it takes less of a cut from, meaning that its newly acquired gross bookings are less efficient for its business. Uber Eats did over $3 billion in gross booking during the period but generated revenue of just 17.4 percent of that total. In the same quarter Uber’s ride-hailing business brought in 20.7 percent of its own gross bookings total.

Moving on, Uber’s operating loss shot higher, as did its adjusted EBITDA. Its net loss also worsened, but I didn’t share it above as the year-ago result was impacted by a divestment. Finally, Uber’s two businesses both had negative contribution. That means after they paid for themselves, they contributed negative profit to the company.

But as Uber had signaled that all this was coming, its shares rose. The lesson here is that normal rules don’t appear to apply to Uber. The firm just posted slim year-over-year growth for a growth-oriented company while losing a pile of money and watching its core business fail to contribute to the rest of the company’s costs.

If you can figure out why Uber’s stock picked up a few points after all that, email me.

Okta

Since its IPO, Okta has been busy growing somewhat outside the media spotlight. Worth a little over $12 billion, the firm doesn’t have the same profile as, say, which is worth just a smidge more, but that doesn’t mean it’s not an interesting shop.

Following a revenue beat and a promised uptick in spend, shares of Okta rose 6 percent in after-hours trading.

I caught up with its COO, , after its . The firm is in Asia-Pacific to serve that customer base (replete with the ability to constrain customer data to those servers so that their information doesn’t touch the United States for obvious reasons), and announced a few new high-profile clients including the newly-famous .

But all that is company-specific. What can we take away for private companies? That revenue growth is still well-liked by public market investors. Okta grew by 50 percent year-over-year, its subscription revenue grew 52 percent year-over-year, and customers that pay the firm $100,000 or more each year grew 53 percent.

And while Okta’s GAAP net loss sharply grew 41.4 percent to $51.8 million in the quarter, it generated $21.3 million in cash from operations. There’s more information in those figures. Notably that you can spike your all-in losses provided that at-scale growth is hot. And, I’d argue, that you are still a firm with a clear path to profitability. Strong operating cash flow means that Okta can reign in its GAAP results in reasonable time.

So startups, if you want to start the year just over $60 per share and break $110 by the end of May, follow Okta’s performance.

Zuora

If Okta is a bull case-study, Zuora is a bear warning. Shares of Zuora fell by just over a third after-hours, following its .

Zuora, a company that provides billing tooling to subscription companies, beat expectations regarding its quarterly loss while essentially meeting revenue forecasts. But the future is what tripped the company up. :

[T]he company said revenue for the full fiscal year will come in at between $268 million and $278 million, well below the $291.1 million average analyst estimate, according to Refinitiv.

Splat. If the top-end of your revenue guidance is under the consensus mark, that’s bad.

The lesson for private companies in this is that if you are going to continue to lose money as a public company, you still must have the growth to back it up. The market had one set of expectations for Zuora, and Zuora had a very different set of projections. And the market repriced Zuora from the former to the latter after it found out.

I am not sure if we should view weakness in Zuora’s results as indicative of weakness in SaaS. But certainly the company’s struggles can’t be viewed as overly rosy for the sector, Okta aside.

And now, back to our regularly-scheduled private market coverage!

Illustration: .

Okta its fourth-quarter earnings March 7th (FQ4’18). It pulled in revenue of $77.8 million, up 59 percent year-over-year, a GAAP loss of $24.7 million, a non-GAAP loss of $10.1 million, and positive net cash flow from operations of $0.2 million.

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As you might expect in a SaaS business, Okta’s revenue is largely recurring. $72.0 million of its $77.8 million in revenue during the quarter was subscription. That’s about 93 percent.

Shares of Okta are up today after its results beat both on profit metrics (lower-than-anticipated adjusted per-share loss) and revenue growth (exceeded by $3.9 million).

What the situation does is let us pick out a few metrics from the company’s performance and generate a new set of revenue multiples. We traditionally do this for Box. However, adding Okta into our regular mix of benchmarks seems like a good idea—especially as Box decelerates.

So here’s the rundown:

• Okta FQ4 revenue: $77.8 million.
• Okta approximate ARR: $311.2 million.
• Okta F2018 revenue: $260.0 million.
• Okta valuation: $4.26 billion (, as of the time of writing).
• ARR multiple: 13.7x.
• Trailing revenue multiple: 16.4.

Holy hell, you are probably thinking, those multiples are bonkers. To some extent, those multiples are bonkers. But Okta grew 62 percent last year, including 67 percent growth in its subscription revenue base. Those are good growth figures for a company that just posted positive operating cash flow (especially in SaaS).

But what’s odd about the Okta picture is that its guidance is only so aggressive. The company, according to its own notes, expects F2019 revenue of $343 to $348 million, up just 33 to 35 percent from its F2018 result. That’s a pretty dramatic growth deceleration on a percentage basis. What’s even odder is that the street expects the same, anticipating F2019 revenue of $343 million according to .

So Okta is richly valued today and very richly valued compared to Box’s post-earnings 4.8x ARR multiple and 5.2x trailing revenue multiple, obviously. But both the company and its observers expect dramatically slower growth.

And yet its stock is up today. If you can square that circle, call us, but today there’s a least one SaaS company out there in the public markets putting up 2014 multiples.

That’s notable.

From The :

• Uber founder and former CEO Travis Kalanick is launching a venture fund called 10100 that will focus on large-scale job creation. The fund will back for-profit and non-profit ventures in areas including real estate, ecommerce, and education.

Corporate bio VCs do more deals

• Large biotech and pharma companies are doing more venture deals, and bigger ones too, a Crunchbase News analysis finds. Since last year, the largest corporate investors in the space took part in rounds valued at more than $6.4 billion. Trendlines show investment is still on the rise.

• , a two-year-old startup that sells bone broth protein supplements, has raised $103 million in a financing led by VMG Partners and joined by Hillhouse Capital, ICONIQ, and others.

China-US joint venture could set blueprint

• ��.��.-�����������, a maker of industrial wearable computers is forming a joint venture with China-based , a developer of augmented reality technology. Founders say the deal could set a blueprint for future cross-border collaborations.