US Backers Rain Money On Savvy Startups

Despite headline-grabbing startup debacles, U.S. investors are still hot to bankroll up-and-coming companies like challenger bank Chime, The Financial Times (FT) reported on Tuesday (Jan. 7).

In nine months, the valuation for Silicon Valley’s Chime grew to four times its original size, with investors offering $1.8 billion when the startup was looking for $500 million in December, a source told FT.

“For the best companies, the money spigot is wide open,” Mark Goldberg, a San Francisco-based partner at Index Ventures, told FT. “If it’s an obviously top 10 percent company, there’s just a huge amount of money being thrown at them by the VC world.”

Goldberg said funding rounds in excess of $100 million typically are offered double the amount being sought.

The Prime Unicorn Index went up 58.4 percent through the third quarter of 2019 and is on track to be the second-best year after 2011. The index measures startups worth over $500 million that are backed by venture capital (VC).

Pitchbook showed that investments from non-traditional backers spiked over 80 percent in 2018 compared to 2017.

Analytics company Databricks accepted $400 million in October after being offered $900 million from investors, said Ali Ghodsi, chief executive of the company. Databricks is used by clients like Cisco and Shell and provides an open-source computing program and data analytics.

The funding was led by the VC firm Andreessen Horowitz, who said Databricks was worth $6.2 billion with the latest round, over twice its February valuation.

“Based on supply and demand, if we really wanted to optimize for maximum price, we could have raised the price,” Ghodsi said in an earlier FT interview.

Ghodsi said Databricks had surpassed $200m in annual recurring revenues but declined to comment on whether the company had turned a profit.

Chime chief executive Chris Britt said the startup would earmark the new funding to grow its customer base.

The funding round was led by DST Global and valued Chime at $5.8 billion, including the new round. Not only did it have to bypass some new investors, but several existing backers also want to activate a contract clause to up their ownership stakes.

New York-based FinTech startup Capital, an alternative financing company for startups, launched on Wednesday (Oct. 30) with a $100 million fund to invest in middle-stage companies.