$BIRD Allbirds, a shoe company based in San Francisco, founded in 2015 by Joe Zwillinger and Tim Brown. They filed for an IPO and are looking to raise $200 – $300M in funding at $3B-$4B in Valuation.

$BIRD is a global lifestyle (shoes and apparel) brand with a focus on sustainable shoes. In 2016 Time Magazine name their Wool Runner, the “Worlds most comfortable shoe”.

$BIRD online and direct to consumer channels account for 89% of their revenue, while 27 stores account for 11%.

Since their founding $BIRD has sold 8 Million pairs of shoes to 4M customers worldwide, of which 3.3M are in the US.

Financial facts: 2020 $BIRD revenue was $219M +31% YoY, at 51.4% gross margins, generating $25M in losses.

Market Opportunity: $BIRD targets the $1.8T footwear and apparel market, ($366B in footwear alone).

$BIRD estimates their shoes cause 30% less carbon footprint than competitors sneakers. Thanks to this, they have a purpose driven brand and customer who are engaged and connected with the products.

Approximately 53% of $BIRD net sales in 2020 came from repeat customers.

$BIRD last raised $100M on Sep 2020 at $1.4B in valuation. Given the current brand hype we can expect $3B – $4B in valuation, which would imply a 15X – 20X EV/Revenue with negative EBITDA.

The biggest risks to $BIRD are counterfeit knockoffs are proliferating the market, the perception that the brand produces expensive products and it is a niche brand appealing to a very limited set of customers.

I am going to watch this from the sidelines. I like $BIRD and it has a cult-like following, but I am going to watch the post Covid and post IPO execution as a public company for 1-2Qs.

If I do see acceleration in revenue and EBITDA I might be interested in $BIRD.

S1 filing.

$FRSH I first met Girish Mahtrubootham (Founder & CEO of Freshworks) in 2010 just a month after he started FreshDesk. We met at Infinitea Cafe in Bangalore. He had left Zoho, his previous employer to start his new venture FreshDesk.

Through the years I kept in touch via WhatsApp messages and emails to see the remarkable success story he created. This week $FRSH filed to go public, showing $308M in LTM revenue growing at 49% YoY. IT was last valued at $3.9B in Nov 2019. Expect a $7B – $12B valuation at IPO.

$FRSH makes Software-as-a-Service solutions for businesses to help them with sales, customer service and help desk automation.

The Customer Relationship Management (CRM) market is a $120B worldwide opportunity, with 100s of companies, most notably $CRM (Salesforce), $MSFT (Microsoft Dynamics), $SAP (SAP), $NOW (Service Now), and $ORCL (Oracle) dominating the enterprise segment.

In the Small and Medium business (SMB) segment, there are many other competitors including $ZEN (Zen desk), $HUBS (Hubspot) and many others who compete with $FRSH

In the Gartner magic quadrant from May 2021, $FRSH Freshworks is named as a Visionary, with the large companies occupying the “Leader” category.

$FRSH has 52K customers worldwide, and in 2020 reported $250M in revenue and $57M in losses. With 80% Gross margins, sustained growth over 10 years and a global presence, this stock should do well given good market conditions.

$FRSH operational metrics: DBNER (Dollar Based Net Expansion Rate) is 118% and while CAC and LTV metrics are not shared, the cost of sales and marketing is 45% of revenue. Over 11K customers spend more than $5K per year on their software.

The company is spending significantly in marketing to attract customers. Churn among customers certain industries which were affected by Covid was higher is what the company shared.

$FRSH company culture is explained using the acronym CHAT – Craftsmanship, Happy work environment, Agility with accountability and True friend of the customer. In addition they use the word Kudumba (family) which binds the team together.

$FRSH Competitors: $HUBS is growing at 30% YoY with $808M in 2020 revenue and is valued at $30B, while $ZEN is growing at 25% YoY with $1B in 2020 revenue, valued at $15B. At $7B in valuation, the company will be valued at 22X NTM EV/Revenue and will be in the mid point of valuation for SaaS companies at 50% growth. At $12B in valuation, it will be valued at 38X EV/NTM, making it among the top 5 richest valued companies in the SaaS space.

$FRSH largest shareholders currently are Tiger Global (26%), Accel India (25%) and Accel USA – Sameer Gandhi (25%). While founder Girish owns 7.8%.

I am going to buy $FRSH shares at IPO depending on the price and hold for a long period. I personally know Girish well, and few others members of his team as well are close friends. I expect them to continue to execute well.

$TOST Toast a Boston based technology company providing payments and software for restaurants (competes with $OLO) filed to go public this week.

$TOST Toast provide Point of Sale (POS) offerings and software to restaurants. It was founded in 2011 by Aman Narang, Jon Grimm, and Steve Fredette.

$TOST sells restaurant payment-processing hardware, including tablets and handheld devices, as well as cloud-based software to manage orders, payroll, and marketing.

According to Statista there are over 660K (860K according to $TOST) restaurants in the US alone, of which 48K (7% market share). The average restaurant makes about $125K per year, and spends 4% – 11% of revenues on Toast.

$TOST claims a $15B addressable market of which it currently does about $1.2B in revenue NTM (next twelve months). $TOST processes $38B in payments (Gross Sales via its platform) as of June 2021.

In Feb 2020, $TOST raised $400M in funding at valuation of $4.9B. It recorded 100% revenue growth in the 1H of 2021 growing to $704M, as losses hit $235M increasing 88% YoY. Most recently in Nov, it allowed secondary sale of its stock by employees at a $8B valuation.

$TOST Toast takeout is the app the company provides to restaurants to help them grow online takeout and delivery options for consumers.

$TOST competes with $SQ Square, $LSPD Lightspeed commerce, and $FSV Fiserv in the payments market for restaurants. $OLO also competes with $TOST but focuses on offering chain restaurants end-to-end solutions instead of only segmenting independent restaurants.\

In April 2020, Toast cut its staff by 50% to 1300 after Covid, but by Nov 2020 it raised market valuation again $8B.

$TOST also lends money to restaurants using Toast Capital (similar to $SQ Loans and Lend).

At $20B valuation, $TOST will be valued very rich at 6.6X NTM gross profit (nearly 3X $SQ) and nearly 13X NTM revenue (not a good measure given low gross margins) for 100% Covid fueled recovery.

Key risks for $TOST are very low gross margins (10% aggregate) and less than 9% gross margins in payment business, very competitive landscape for restaurant software, payments and high churn rate of restaurants (11% of customers go out of business each year) and slower growth going forward from Covid recovery easing out.

I am going to watch $TOST but not take a position yet. S1 filing indicates late September IPO.

$WEBR Outdoor Bar B Q grill maker and 75 year old company Weber filed to go public looking to raise $750M at $5.5B Market Cap.

Weber makes makes 7 types of grills – Charcoal, Gas, Smokers, Pellet, Electric and Tech-enabled grills.

$WEBR has grown dramatically thanks to the pandemic, recording 17% YoY growth to end 2020 (Sep) at $1.5B in revenue with 43% Gross Margins (+78% YoY) and $150M in Net profit

The market for grills is about $5B in 2020, growing at 5% YoY, and is expected tor each $7B by 2025 and $WEBR Weber has over 25% market share.

Competitor Traeger $COOKhas also filed to go public.

$WEBR plans to use proceeds to pay down debt of $220M and for other corporate purposes.

Valuation: While EV/Rev is not a valid metric, it is 2.98 and with EPS of $0.47 the Covid growth rate of 61% might slow causing shares to form a base to grow into the valuation, given the EV/EBITDA will be about 26.

$COOK is valued higher given its 100%+ Growth rate during the pandemic and is at EV/Rev of 4.4 and EV/EBITDA at 32.

The biggest risk to $WEBR is slower growth post the pandemic tail winds. I expect this to be a steady performer, but not a growth stock. At this point I dont plan to take a position, but it will return 10% – 25% annual would be my expectation.

$RSKD Riskified, a software and services company focusing on payments industry, helping eCommerce vendors reduce fraud from online transactions, went public last week at $21 valuing the company at $3.3B.

$RSKD Riskified was founded in 2012 by Eido Gal (CEO and Assaf Feldman (CTO). It has raised over $70 M from General Atlantic, Fidelity Management and others

$RSKD core product is Chargeback Guarantee which automatically approves or blocks online transactions. Riskified’s business model is to collect a percentage-based fee on gross merchandize value (GMV).

$RSKD In the second quarter of 2021, Riskified expects revenue of $54.8-$55.7 million, up 46% from the corresponding quarter of 2020. Gross Margins are in the 53% – 54% range.

$RSKD Gross profit in the second quarter is expected to be $30.1-$33.7 million, up from $20.1 million in the corresponding quarter of 2020, while the operating loss is predicted to be between $900,000 and $5.5 million, narrowing from $7.7 million in the second quarter of 2020. 

$RSKD Net loss in the second quarter of 2021 is expected to be $19.4-$24.8 million compared with $7.3 million in the corresponding quarter of 2020.

$RSKD While no public competitors exist, there are 10-15 startups including Forter, ClearSafe, Kount and Sift Science.

The market for fraud prevention is expected to grow from $20B in 2020 to $38B by 2025.

There are 5 products that Fraud detection and prevention vendors offer:

Automated Workflows

Automates the sending of order details, payment fraud checks, blocking of suspicious devices, fulfillment, cancellation of fraudulent orders, and more so merchants can review even a high volume of orders quickly.

Machine Learning

Uses real-time insights that are fed into the machine learning models. Machine learning does faster and more complex calculations across a much wider range of online fraud signals when compared with manual review.

Insights Dashboard

Insight dashboards report synthesize relevant fraud prevention data, display algorithmic conclusions where given, and highlight suspicious activities via a single, easy to use interface. This means there is no need to switch between multiple views to see all relevant information, in turn making it much easier to organize and effectively execute a fraud prevention process.

Device Fingerprinting

Device fingerprinting is the technique of recording information about the device a shopper uses when placing an order. A wide variety of data points are analyzed, including things like the computer’s operating system, the browser the shopper used during check out, and even the language options installed. The information collected is then used in a risk assessment to identify fraudsters. For example, a shopper claiming to be from a country whose national language is not installed on their computer can indicate the shopper is using a VPN to hide their true location.

Chargeback Guarantee

Chargeback guarantees are a contractual obligation on the part of a fraud prevention solution to cover the cost of any chargebacks incurred by a merchant using their platform. When merchants use a fraud prevention solution that offers one, they never have to pay the cost of a chargeback themselves.

Growth and valuation

$RSKD expects to do $210M – $220M in FCY21 revenues, growing at 51% YoY. At the current price of $26, it is valued at $3.45 Billion giving it roughly 16X P/S for 2021. Given the growth, and comparables at 17-19X SaaS valuations, at 60% margins, $RSKD is fairly valued.

$RSKD Risks include the ability for payment vendors ( $PYPL $SQ and $AFRM among others) to include these “features” or fraud detection with their core product. Second, the slower growth expected post Covid for eCommerce GMV.

$RSKD I think the valuation and numbers are good for an initial starter position under $25 with a risk of falling to $21 (IPO price)

Since many folks ask me about recommendations for email newsletters I read and follow, I thought I’d put together a list. I subscribe to over 300 and get daily updates from 50, of which I skim about 40 and read 20 daily in detail.

Here in no particular order.

Top SubStacks which I like (in no particular order)

1. Protocol Source Code

Why: A good view into tech in the early stage

Link: https://www.protocol.com/

2. Exec Sum

Why: Summary of M&A, early IPOs and private investments

Link: https://execsum.co/

3. Accelerated By Justin Moore

Why: Early technology startup view and summary

Link: https://readaccelerated.com/

4. Alphacharts

Why: Charts and Brian’s view into trending 

Link: https://alphacharts.substack.com/

5. Allegory of Finance

Why: High level thinking and investing mindset

Link: https://sahilbloom.substack.com/

6. NZS Capital

Why: Great summary of the best links in technology and finance

Link: https://www.nzscapital.com/

7. CB Insights

Why: Funding news on Unicorns

Link: https://www.cbinsights.com/newsletter

8. The Compound Newsletter

Why: Data rich view into stocks that are moving

Link: https://compoundadvisors.com/newsletter

9. Clouded Judgement

Why: A view into comps for cloud / SaaS companies from Jamin Ball

Link: https://cloudedjudgement.substack.com/

10. Digital Native – Rex Woodburry

Why: Emerging creator economy VC with a view on upcoming trends

Link: https://digitalnative.substack.com/

11. Farman Street

Why: Self help

Link: https://fs.blog/

12. Fintech Brain Food

Why: The best fintech roundup from Europe and beyond

Link: https://sytaylor.substack.com/

13. First Round Review

Why: Great content from founders on how to get started with startups

Link: https://review.firstround.com/

14. Hedge Fund Insight by Yvonnne

Why: She picks a new hedge fund each week and talks about their holdings and why

Link: https://foryoureyesonly.substack.com/

15. Hacker News Letter

Why: Keep on top of new things that developers are interested in

Link: https://hackernewsletter.us1.list-manage.com/subscribe

16. Investopedia the daily

Why: Quick summary of daily highlights

Link: https://link.investopedia.com/join/53o/00-house-daily

17. Jonah’s Growth Stocks

Why: He’s a good guy and finds some good winners early

Link: https://jonahlupton.substack.com/

18. KnowHow Capital

Why: Macro insights into market movers

Link: https://knowhowcapital.substack.com/

19. Macro Markets Daily

Why: Visually attractive macro data in 2 minutes

Link: https://www.macromarketsdaily.com/

20. The Irrelevant Investor

Why: Michael Batnick has some good insights on stock movements

Link: https://theirrelevantinvestor.com/

21. NFX – Network effects

Why: To understand marketplace companies such as $UBER $FVRR

Link: https://www.nfx.com/

22. Net Interest Marc Rub einstein

Why: Fintech insights

Link: https://www.netinterest.co/

23. Rob’s Educated Guess

Why: Rob is super smart and an experienced Hedge fund investor

Link: https://robs.substack.com/

24. SPAC Track

Why: Daily Summary of SPACS

Link: https://spactrack.substack.com/

25. Software Stack Investing

Why: In depth analysis and breakdown of software companies

Link: https://softwarestackinvesting.com/

26. The Exponential View

Why: Out there thinking very forward looking

Link: https://www.exponentialview.co/

27. The Hard Fork by Marvin Liao

Why: Silicon Valley insider news

Link: https://hardfork.substack.com/

28. The Long Game by Mehdi Yacoubi

Why: Links to some long reads on the future

Link: https://thelonggame.xyz/

29. What’s hot in enterprise and VC?

Why: Enterprise SaaS company investing but early stage

Link: https://whatshot.substack.com/

30. Week in Ethereum

Why: Roundup of all #ETH News

Link: https://weekinethereum.substack.com/

$DIDI is going public on June 30th, selling 288M shares at $13 – $14 per share, raising $4.5B at $63B to $68B. $SFTBY (Softbank) $UBER (Uber) and $TCHEY (Tencent) are among the biggest shareholders. $AAPL (Apple) is also an investor.

$DIDI my big fear is revenue recognition is inconsistent, which makes valuations and metrics seem better than they are. That’s the biggest risk.

$DIDI was founded in 2012 by Will Wei Cheng, merged with Kuaidi in 2015 and acquired $UBER China in 2016. It operates in China, Brazil, Mexico and 11 other countries.

Didi Chuxing $DIDI is the leader in the Chinese shared mobility sector, which is over $300B and growing as a market.

$DIDI revenues were down 8% in 2020 thanks to Covid, but were growing over 20% before. China mobility still accounts for over 90% of revenue.

$DIDI gross margins are in the 10% – 12% range and albeit small, have scale on their side.

At 24X last 12 months gross profit, the valuation for $DIDI is rich, but if growth can go back to over 20% YoY from 2022, this current price of shares might be a good value.

D-Market, $HEPS Hepsiburada, the #3 eCommerce marketplace in Turkey, is going public on Jun 30th, seeking to raise $680M at $3.9B Market cap. The company did $2.4B in GMV and $751M in revenue growing at over 100% YoY.

$HEPS is selling 41.67M shares at $13. In terms of valuation, they are the lowest of the entire regional eCommerce companies and much better than $OZON or $CPNG from a valuation and growth standpoint.

$HEPS makes 43% gross margins and like most eCommerce companies is branching into logistics, payments and local delivery. They aim to be a super app in Turkey.

Turkey is not a very large market with $60B in eCommerce and $250B Retail, but it has 24% penetration of eCommerce and growing. Compared to Turkey, $CPNG operates in South Korea with a $543B Retail market.

Hepsiburada is actually #3 in the market (although they claim to be #2 by some metrics). Trendyol.com and sahibinden.com are the largest 2 players.

I think the stock will do well given the valuation metrics. It is valued lower than comparable players, is growing quickly and has a little attention from retail and wall street.

I am yet to make up my mind on if I I will take a position at the IPO.

Risks: Small TAM (Turkey alone), Regional and political issues (similar to $OZON) and a number 3 player in a small market.

LegalZoom, Inc. $LZ, an online platform for legal and compliance solutions for small- and medium-sized businesses, start trading as a public company on Wednesday, June 30.

$LZ IPO pricing range of $24 to $27 per share implies a market cap ranging from ~$5.0B to $5.7B

$LZ is planning to sell up to 19.12M shares raising $500 – $600M. It has 211M shares outstanding.

The market for business legal services among SMB is about $40B according to $LZ.

Along with formation, $LZ LegalZoom offerings include ongoing compliance and tax advice and filings, trademark filings, and estate plans.

$LZ helped form 378,000 businesses in 2020 and helped create 250,000 estate plan documents in 2020.

$LZ LegalZoom was started in 2001, by Robert Shapiro (former attorney
of O.J. Simpson).

$LZ saw revenue accelerate to 27% in Q1 2021 due to new company formations.

Metrics

$LZ has 71% to 73% Gross Margin (vs. 67% in 2020) and 30%-plus Adj. EBITDA margin.

$LZ is planning to repay all of its outstanding debt of ~$523mn from IPO proceeds.

$LZ IPO pricing range implies approx. 7.25x to 8.25x on 22E Revs, 30.0x to 34.0x 22E Adjusted EBITDA.

$LZ Risks include an inherently high churn rate among SMBs and a relatively high level of customer acquisition-related marketing spend on a recurring basis.

$LZ 2021 revenues are estimated in $565M range and 2022 revenues at $675M. growing at 18% YoY.

Krispy Kreme is going public again as $DNUT looking to raise $600M at $3.9B Market Cap. With 1.1B in revenue for 202, growing at 12% YoY and EBITDA at $137M, the EV/EBITDA is 29X, which is rich.

$DNUT sells doughnuts, cookies (Insomnia acquisition) and coffee via its own stores and 3rd party stores. It was public before it was acquired by JAB partners a Private Equity Firm in 2016.

$DNUT is planning to sell $30M shares at $24/ share to raise $600M to pay down debt and grow the franchise.

The revenue growth for the next few years is expected in the 9 – 11% range YoY with EBITDA growth in 12 – 15% and EPS growing at 20%.

$DNUT has its own stores & franchises in US and Canada which are 70% of revenues. 67% of revenue comes from the “original glazed donut”.

$DNUT operates 9,000 stores and is expecting to grow to 15,000 in the next 5 years.

2022 revenue for $DNUT is expected in $1.3 – $1.4B range and EBITDA in $170M – $175M range.