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Digital Expansion Opens Door for Compliance-Technology Startups
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By Marc Vartabedian, WSJ Pro
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Good day. As companies expand their digital operations, there’s increasing demand for startups that help them comply with regulations, help bolster internal governance and protect organizations from a variety of risks.
These so-called governance, risk and compliance startups fall into the financial technology sub-sector of capital markets. Investors poured $5.1 billion into capital-markets startups in the second quarter, a 113% increase from the second quarter of 2020, according to a report by analytics firm CB Insights. Compliance and risk-management startup deals contributed to the growth.
Deals in the quarter included a $120 million investment into ComplySci, a startup that provides web-based regulatory compliance technology and services for the financial sector, from investors including K1 Investment Management.
The GRC sector looks to be carrying this growth into the third quarter. Today, LogicGate Inc., a Chicago-based provider of risk and compliance software, plans to announce that it has raised a $113 million Series C funding round led by growth equity firm Providence Strategic Growth Capital Partners. The startup’s cloud-based services can be used in industries including technology, healthcare and energy.
As more startups mature and a crop of companies recently listed on public markets, it remains to be seen if their increased attention on financial compliance will further bolster the sector.
And now on to the news...
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Havenly employees at work in the interior-design startup’s Denver headquarters. PHOTO: CHET STRANGE FOR THE WALL STREET JOURNAL
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Talent war's new front. Some of the biggest names in tech aren’t just allowing existing workers to relocate out of the Bay Area, they are also starting to hire in places they hadn’t often recruited from before, The Wall Street Journal’s Katherine Bindley reports. The result is the most geographically distributed tech labor market to date. That’s leading to above-market rates for workers in smaller hubs, forcing local companies to raise wages to keep up with the cost of living and fend off deeper-pocketed rivals from California, Seattle and New York.
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'What remote work does is it turns every hire into a national competition.'
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— Mark Muro, a senior fellow with the Brookings Institution
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Ride-Sharing Startup Swvl Nearing Deal to Go Public With Female-Led SPAC
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Middle East-based ride-sharing technology startup Swvl Inc. is nearing a deal to go public via a merger with a special-purpose acquisition company, according to people familiar with the matter, the Journal’s Corrie Driebusch reports. Dubai-based Swvl plans to merge with Queen’s Gambit Growth Capital in a deal that values the company at roughly $1.5 billion, the people said. Swvl was co-founded in 2017 by Mostafa Kandil, who formerly worked at ride-sharing company Careem, which is now a subsidiary of Uber Technologies Inc.
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Swvl operates mainly in the Middle East and Africa, providing ride-sharing in areas where mass transit is plagued by poor reliability.
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The Queen’s Gambit SPAC, whose name is a nod to an opening sequence in chess as well as the fact that it’s led by women, raised $300 million in January and then tacked on an additional $45 million of investment via the underwriters' overallottment option.
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Private-Equity Firm Makes First Blockchain Bet
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Private-equity firm Mercato Partners has made its first investment in the blockchain and cryptocurrency sector by leading a $64 million Series A round for crypto-custody startup Prime Trust LLC. Zane Busteed, a principal investor at Mercato, said that the firm has stayed on the sidelines of the crypto market until it found Prime Trust. “Certainly, digital assets will play a growing role in the global economy, and we will continue to find and fund financial infrastructure companies like Prime Trust that will shape the growth of this market,” Mr. Busteed said. Las Vegas-based Prime Trust says its annual revenue run-rate crossed $100 million based on monthly revenue in May. That compares to a revenue run-rate of $18 million in June 2020.
—Yuliya Chernova
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Remote-Learning Startup Class Technologies Valued at $800 Million Less Than a Year After Founding
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Education-technology startup Class Technologies Inc., founded last year in response to the rise of remote learning, has raised $105 million in Series B funding led by SoftBank’s Vision Fund 2 at a post-money valuation of just over $800 million, according to Michael Chasen, chief executive and co-founder of the startup.
Class enhances Zoom video sessions through tools such as taking attendance, giving quizzes, and collecting data on classroom participation. The startup was founded in September 2020 and released its first full product eight weeks ago, after running a beta version for a couple of months, Mr. Chasen said.
The velocity of the ed-tech market is accelerating as K-12 schools, colleges and corporations buy online-education tools driven by billions of dollars in pandemic-related government funding and the general shift to remote learning, said Mr. Chasen, who was previously co-founder and CEO of ed-tech company Blackboard Inc.
“Our average sales time is 30 days,” Mr. Chasen said, adding that he does expect that to slow down in the future. Class has more than 250 customers.
Mr. Chasen said that the return of in-person learning is causing about a third of K-12 schools with which Class is in contact to stop using online learning in the coming school year.
Class, which has about 200 employees, is expanding internationally and plans to open a U.K. office, the CEO said. Class has raised more than $160 million to date, including from several early Zoom Video Communications Inc. investors, such as Emergence, Maven Ventures, and venture capitalist Bill Tai. Class backers also include GSV Ventures, Owl Ventures, Insight Partners, Learn Capital, among others.
—Yuliya Chernova
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Funds
King River Capital held the first close of its second fund with $95 million in commitments to continue making early through growth-stage minority equity investments in the software sector across Australia and the U.S. The new fund recently completed its first investment with its participation in Paystand’s $50 million Series C round.
People
CybeReady Inc., a Tel Aviv-based autonomous cybersecurity training platform for enterprises, named Eitan Fogel to the post of chief executive. He previously worked at GeoEdge and Idomoo. Baseline Ventures led CybeReady’s $5 million Series A round in 2019.
Enterprise API security startup Noname Security appointed Karl Mattson as the company’s first chief information security officer. He previously held the same position at PennyMac Loan Services. Palo Alto, Calif.-based Noname earlier this month said it raised a $60 million Series B round led by Insight Partners.
Fabric appointed Karen Brewer as executive vice president and chief marketing officer. Earlier this month, Fabric said it raised a $100 million Series B round from Stripes, B Capital Group, Greycroft, Norwest Venture Partners, Redpoint Ventures and Sierra Ventures.
Exits
Stockholm-based buy-now-pay-later payments specialist Klarna Bank AB bought Apprl, a software-as-a-service platform that allows content creators and retailers to work together to bring shoppable content to consumers. Terms weren’t disclosed. In June, Klarna said it raised $639 million in funding led by SoftBank Vision Fund 2 that gave the company a valuation of $45.6 billion. Apprl was backed by Spintop Ventures, among others.
Uniphore, a provider of conversational AI technology for customer service, agreed to acquire Jacada, a low code/no code platform for contact center automation, for an undisclosed amount. Palo Alto, Calif.- and India-based Uniphore earlier this year raised a $140 million Series D round from investors including Sorenson Capital, Serena Capital, Cisco Investments, March Capital and National Grid Partners.
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Fireblocks, a New York-based startup that secures digital assets in transit, scored $310 million in Series D funding at a $2 billion valuation. The new round was co-led by Sequoia Capital, Stripes, Spark Capital, Coatue Management, DRW Venture Capital and SCB 10X.
Nium, a Singapore-based business-to-business payments platform, secured more than $200 million in Series D financing. Riverwood Capital led the round, which saw participation from Temasek Holdings, Visa, Vertex Ventures, Beacon Venture Capital and others. Nium's current valuation is above $1 billion.
Wiliot, an Israel- and San Diego-based internet-of-things startup, raised $200 million in Series C funding led by SoftBank Vision Fund 2. Additional investors in the round included 83North, Grove Ventures, M Ventures, Maersk Growth, Norwest Venture Partners, Qualcomm Ventures, NTT Docomo Ventures, Vintage Investment Partners and Verizon Ventures. Amit Lubovsky, investor for SoftBank Investment Advisers, will join the company’s board.
At-Bay Inc., a San Francisco-based digital insurance startup, closed a $185 million Series D round, bringing the company’s valuation up to $1.35 billion. Icon Ventures and Lightspeed Venture Partners co-led the investment, which included support from existing investors Khosla Ventures, M12, Acrew Capital, Qumra Capital, Munich Re Ventures and Glilot Capital. Preeti Rathi, general partner at Icon Ventures, joined the board.
Onto, a U.K.-based electric vehicle subscription service, nabbed $175 million in Series B equity and debt. Alfvén & Didrikson led the equity portion, with the debt facility coming from Pollen Street Capital.
Landis Inc., a New York-based startup that allows people to rent homes before buying them, completed a $165 million round of Series A equity and debt financing. Sequoia Capital led the Series A investment, with additional participation from Arrive, Dreamers VC and Signia Venture Partners.
Pendo, a Raleigh, N.C.-based software adoption platform, landed $150 million in Series F funding, valuing the company at $2.6 billion. B Capital Group led the investment, which included additional support from Silver Lake Waterman, Battery Ventures, Meritech Capital Partners, Sapphire Ventures, General Atlantic, Tiger Global Management, FirstMark Capital, Geodesic Capital, IDEA Fund Partners and Contour Venture Partners.
Mohalla Tech, the parent company behind Twitter Inc.-backed Indian social media platforms ShareChat and Moj, raised $145 million in a Series F funding round that values the company at $2.9 billion. Temasek Holdings and Moore Strategic Ventures led the investment.
1Password, a Toronto-based enterprise password-management provider, grabbed $100 million in new funding, valuing the company at $2 billion. Lead investor Accel was joined by Sound Ventures, Skip Capital and others in the round.
ActiveFence, an Israeli startup whose technology protects against disinformation, hate speech and other online harms, fetched $100 million in Series A and B funding. CRV and Highland Europe led the Series A portion, with Grove Ventures and Norwest Venture Partners leading the Series B round.
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PHOTO ILLUSTRATION BY EMIL LENDOF/WSJ; PHOTOS: ISTOCK
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