The TechCrunch Exchange - Tech companies predict the (economic) future

Saturday, March 20, 2021 • By Alex Wilhelm

Welcome back to The TechCrunch Exchange, a weekly startups-and-markets newsletter. It's broadly based on the daily column that appears on Extra Crunch, but free, and made for your weekend reading.

Tech companies predict the (economic) future

Earnings season is coming to a close, with public tech companies wrapping up their Q4 and 2020 disclosures. We don't care too much about the bigger players' results here at TechCrunch, but smaller tech companies we knew when they were wee startups can provide startup-related data points worth digesting. So, each quarter The Exchange spends time chatting with a host of CEOs and CFOs, trying to figure what's going on so that we can relay the information to private companies.

Sometimes it's useful, as our chat with recent fintech IPO Upstart proved after we got to noodle with the company about rising acceptance of AI in the conservative banking industry.

This week we caught up with Yext CEO Howard Lerman and Smartsheet CEO Mark Mader. Yext builds data products for small businesses, and is betting its future on search products. Smartsheet is a software company that works in the collaboration, no-code, and future-of-work spaces.

They are pretty different companies, really. But what they did share this time 'round the earnings cycle were macro notes, or details regarding their forward financial guidance and what economic conditions they anticipate. As a macro-nerd, it piqued my interest.

Yext cited a number of macroeconomic headwinds when it reported its Q4 results. And tying its future results somewhat to an uncertain macro picture, the company said that it is "basing [its] guidance on the business conditions [it sees for itself] and [its] customers currently, with the macro economy, which remains sluggish, and customers who remain cautious," per a transcript.

Lerman told The Exchange that it was not clear when the world would open — something that matters for Yext's location-focused products — so the company was guiding for the year as if nothing would change. Wall Street didn't love it, but if the economy improves Yext won't have high hurdles to jump over. This is one tack that a company can take when it talks guidance.

Smartsheet took a slightly different approach, saying in its earnings call that its "fiscal year ’22 guidance contemplates a gradual improvement in the macro environment in the second half of the year." Mader said in an interview that his company wasn't hiring economists, but was instead simply listening to what others were saying.

He also said that the macro climate matters more in saturated markets, which he doesn't think that Smartsheet is in; so, its results should be more impacted by things more like "the secular shift to the cloud and digital transformation," to quote its earnings call.

AI fintech products are operating at scale and investor interest is maturing

What the economy will do this year matters quite a lot for startups. An improving economy could boost interest rates, making money a bit more expensive and bonds more attractive. Valuations could see modest downward pressure in that case. And venture capital could slow fractionally. But with Yext forecasting as if it was facing a flat road and Smartsheet only expecting things to pick up pace from Q3 on, it's likely that what we have now is mostly what we'll get.

And things are pretty damn good for startups and late-stage liquidity at the moment. So, smooth sailing ahead for startup-land? At least as far as our current perspective can discern.

We still have a grip of notes from Splunk CEO Douglas Merritt on how to take an old-school software company and turn it into a cloud-first company, and Jamf CEO Dean Hager about packaging discrete software products. More to come from them in fits.

Tech companies predict the (economic) future image

Image Credits: Nigel Sussman

Solving a $32 Billion Paperwork Problem

Various and sundry

There were rounds big and small this week. Companies like Squarespace raised $300 million, while Airtable raised $277 million. On the smaller-end of the spectrum, my favorite round of the week was a modest $2.9 million raise from Copy.ai.

But there were other rounds that TechCrunch didn't get to that are still worth our time. So, here are a few more for you to dig into this weekend:

A so-called pre-Series A round for Lilli, a U.K.-based startup that uses sensors and other tech to track the well-being of folks who might need help to live on their own. Using tech to take care of folks is always good by me. The deal was worth £4.5 million, per UKTN.
An IPO for Tuya, a Chinese software company that raised $915 million in its American debut. Chinese IPOs on American indices were once a big deal. They are less frequent now. Surprised that I missed this one, but, hey, there's been a lot going on.
And the Republic round, worth $36 million, that is banking on the recently-expanded American crowdfunding regulations. Some startups have seen success with the approach, including Juked.gg.

Forget medicine, in the future you might get prescribed apps

Upcoming attractions

Next week is Y Combinator Demo Day week, so expect a lot of early-stage coverage on the blog. Here's a preview. From The Exchange we're looking back into insurtech (with data from WeFox and Insurify), and talking about Austin-based software startup AlertMedia's decision to sell itself to private-equity instead of raising more traditional capital.

And to leave you with some reading material, make sure you've picked through our look at the valuations of free-trading apps, the issues with dual-class shares, the recent IPO win for the New York scene, and how unequal the global venture capital market really is.

Closing, this BigTechnology piece was good, as was this Not Boring essay. Hugs, and have a lovely respite,

Alex