SILICON Valley got another addition to its stable of unicorns on Monday: Instabase Inc. The business tools company said it has raised US$105 million at a US$1.05 billion valuation.
But most people won't have heard of the company. Until today, Instabase's website offered only a single sentence saying it helps "solve problems" and "creates new breakthroughs".
In the age of WeWork's initial public offering meltdown, one might expect investors to be scaling back their bets on tech startups. WeWork parent We Co ousted its chief executive officer last month as prospective public investors gave its valuation a haircut of tens of billions of dollars.
Meanwhile, the stock of Uber Technologies Inc is down by about a third since its IPO in May. But those travails haven't dissuaded venture capitalists. Private VC investment in startups so far this year totals US$96.7 billion, according to the National Venture Capital Association, a trade group, putting startup investment on track to top US$100 billion for the second year in a row.
The Bloomberg US Startups Barometer, an index measuring the health of the private tech market, has almost doubled over the past year.
"In this valuation environment, you have to look for outliers," said Sarah Cannon from Index Ventures, the partner leading the outsized financing round in Instabase. That means seeking out companies that are upending markets without burning through cash, she said, adding that Instabase fits the bill. Instabase isn't the only startup that has recently raised significant sums.
Earlier this month, Texas-based energy services company RigUp raised fresh funding at a US$1.9 billion valuation, Australian online design platform Canva raised money at a US$3.2 billion valuation and San Francisco-based online banking startup Chime is said to be in talks for a funding round that would value the company at more than US$5 billion.
Instabase sells customisable apps, and the building blocks to make them, to companies seeking easy-to-use software for employees. For example, if the customer is a financial services company, Instabase offers apps that can verify customer income by combing through pay stubs, tax documents, bank statements and the like. Businesses can tweak the apps based on their needs. So the financial services company could adjust the software to look for certain time frames, or Social Security numbers, or addresses, and then tally and present the data in specific ways. Once an Instabase-created app works just so, the company can deploy it to staff.
Anant Bhardwaj, 33, was inspired to create the company after studying Apple Inc's App Store and wondering why no equivalent existed for companies.
"If a smartphone allows you to buy an app for a massage, why can't a bank buy an app for income verification?" he recalled asking himself. At big businesses, "Why is everything custom-built?"
Originally from Bihar, a rural state in eastern India, Mr Bhardwaj started working on the idea while studying for a PhD at the Massachusetts Institute of Technology Computer Science & Artificial Intelligence Lab. Eventually a professor introduced him to NEA venture capitalist Pete Sonsini - who in turn introduced him to Greylock Partners' Jerry Chen.
Mr Bhardwaj dropped out in 2015 to work on Instabase full-time after the VCs invested US$3.78 million in the company, which Mr Chen described as "profoundly different" from other business tools. Two years ago, the startup took its first large investment round, US$23.2 million, from investors including Andreessen Horowitz. Mr Bhardwaj says most of that cash is unspent.
Mr Bhardwaj's ability to line up customers, including Fortune 50 companies, helped convince Index Ventures' Ms Cannon to invest in the latest round at the more than US$1 billion valuation, she said, adding that Instabase already has several customers paying more than US$1 million annually for the product. Both she and Mr Bhardwaj declined to provide specific revenue figures.
While Mr Bhardwaj says Instabase is currently turning an operating profit, it plans to use the cash influx to help build up a sales force which could affect its profitability as the company spends money on growth. It also plans to expand its customer base, now chiefly in financial services, to sectors including government, legal, healthcare, retail and logistics.
Adamant that his company deserves major backing, Mr Bhardwaj said he still drew lessons from WeWork and its excesses.
"Our goal is not to be in some illusion because we raised at a high price," he said. "If we start behaving that way, we will fail. But if we know we have to catch up to that valuation by executing, we will succeed." BLOOMBERG