...

Divining the real value of my favorite fintech sub-niche 




  • In Business
  • 2021-09-18 17:15:59Z
  • By TechCrunch
 

Welcome back to The TechCrunch Exchange, a weekly startups-and-markets newsletter. It's inspired by what the weekday Exchange column digs into, but free, and made for your weekend reading. Want it in your inbox every Saturday? Sign up here.

Thank you for clicking on this email. With a subject line like that you are legend for being here.

Of course, we're talking buy-now-pay-later (BNPL) companies today, a particular part of the larger fintech world that is more than interesting.

Thanks to recent mega-buys of players in the BNPL space from Square and PayPal, we've been getting closer to understanding just what the value of the companies in the space may really be -- and for the myriad BNPL startups in the market, it's big news.

But while I was on vacation (Michael's fault, it turns out), Goldman Sachs decided to buy GreenSky, a public BNPL company. Which means that we can quickly run some numbers on the deal and add this latest arrow to our How To Value A BNPL Company quiver.

My friend and colleague -- and former deskmate, back in the day -- Ryan Lawler has an interview with Goldman that is worth reading. The transaction is worth $2.24 billion, per Goldman, driving the value of GreekSky dramatically higher in its aftermath, as investors digested the implied deal premium to the company's previous share price.

What sort of volume was GreenSky's home-improvement-focused BNPL doing? Here's the company's latest earnings report:

So a $6 billion run-rate at a price of $2.24 billion. That works out to about $0.37 in corporate value for each dollar in GMV that GreenSky handles. Which is the lowest number we've seen to date.

As a reminder, here's what we've found more recently, with both of us keeping in mind that not every figure below is perfectly apples:apples; these are directional figures more than absolutes:

  • Affirm: $2.94 in value per dollar of serviced GMV

  • AfterPay: $1.84 per dollar of serviced GMV (at Square price)

  • Paidy: $1.80 per dollar of serviced GMV (at PayPal price)

  • Klarna: $0.57 per dollar of serviced GMV

GreenSky sits at the bottom of the list. Perhaps growth is the reason? A 14% GMV growth rate doesn't give the company much leeway to grow, even if it manages a higher take rate. It's hard to burnish a growth rate that starts with a one, especially if the leading line atop your investor relations page is "GREENSKY, INC. IS A GROWTH COMPANY."

Akin to how we've seen diverging SaaS revenue multiples, striated along the axes of revenue growth and revenue quality, there's likely something similar afoot here. Loss ratios, take rates, and GMV growth are vectors by which BNPL companies will be valued differently.

BNPL startups can find their most accurate comp in growth and loan quality terms, and then work backwards to their present-day market worth. It's good to have data.

Mammoths?

I was going to spend the bulk of this newsletter discussing Mammoth Biosciences, and its plan to Jurassic Park the world, but TechCrunch beat me to it. I spoke to one of its investors -- Thomas Tull -- about the deal, but will hold onto those notes for a bit. I suspect we'll need them in time.

One neat funding round to close us out

Disrupt is next week, and with an IPO cycle upon us I've fallen behind my usual funding round cadence. (And comms, sorry!) So, here's a makeup entry for our shared enjoyment: Postal.

The company works in the marketing tech space, operating what its website claims is the "largest" business-to-business "gifting marketplace." More simply, it helps companies send personalized physical goods to customers. Which it claims has a very high ROI.

In a somewhat ironic twist, I actually have to do some disclosures at this juncture. It turns out the company's leading investors are Mayfield and OMERS. Those two firms led my former employer's Series B and C rounds, respectively. But if I didn't write about companies to which my Crunchbase connection didn't cause some sort of awkward frisson, I'd have to cut out too large a swath of the market. I'll just keep bringing up the matter when we have to.

Postal works in a somewhat similar space to Sendoso, though, to my understanding, the latter company deals a bit more with employee gifting over customer-focused efforts. In time they'll compete directly if they both keep growing. Sendoso raised $100 million earlier this week, because of course it did.

Other players in the space include Reachdesk and Alyce (which raised $30 million earlier this year), among others. The business of building tech to deliver personalized physical goods is pretty big, it turns out. (You can make an NFT joke here, if you'd like.)

PitchBook pegs Sendoso's new valuation at $640 million (post-money) and Alyce at $135 million (post-money). Present-day valuations for Reachdesk and Postal.io were not available.

Okay that is enough for now. Have a delightful weekend, and I'll see you at Disrupt! You may see a lot of me on the Extra Crunch stage. -- Alex

COMMENTS

More Related News

Wall St ends up with Goldman; Dow posts biggest weekly rise since June
Wall St ends up with Goldman; Dow posts biggest weekly rise since June

NEW YORK (Reuters) - U.S. stocks ended higher on Friday after Goldman Sachs became the latest big bank to report strong quarterly earnings, and Wall Street's...

Goldman Sachs
Goldman Sachs' profits jump 60% helped by deal-making frenzy
  • US
  • 2021-10-15 14:32:55Z

Goldman Sachs' profits jumped 60% in the third quarter, as the deal-making bonanza that dominated financial markets this summer brought in hundreds of...

Founded by ex-Braintree and PayPal execs, Pagos raises $10M to offer API-driven payment intelligence
Founded by ex-Braintree and PayPal execs, Pagos raises $10M to offer API-driven payment intelligence

Pagos, a payment intelligence infrastructure startup founded by former Braintree and PayPal execs, has raised $10 million in seed funding. Started earlier this year, the remote-first Pagos is building a data "platform" and API-driven micro-services that it says can integrate with any payment stack. CEO Klas Bäck and CPO Albert Drouart held senior leadership positions at Braintree/Venmo and PayPal over the last eight to nine years (Braintree/Venmo was acquired by PayPal).

Goldman Sachs cashes in on M&A wave to cap stellar quarter for U.S. banks
Goldman Sachs cashes in on M&A wave to cap stellar quarter for U.S. banks
  • US
  • 2021-10-15 12:32:49Z

(Reuters) -Goldman Sachs Group Inc on Friday reported a 66% surge in third-quarter profit that swept past expectations, as Wall Street's biggest investment...

Leave a Comment

Your email address will not be published. Required fields are marked with *

Cancel reply

Comments

Top News: Business