SMBs Continue to Rack Up the $$$

Guava's launch, TaxJar's acquisition, Zoom & Shopify's $4B in ARR

👋🏾 Welcome Back! What to Expect in This Month's Newsletter:

• In our fourth installment of the newsletter we look forward to sharing some extraordinary wins from the SMB space in April. The weather is warming up, the country is opening up, and SMB tech is open for business. Let’s get started!

📜 What's New With the Crew?

• Bonfire Ventures is ecstatic to announce that its portfolio company, TaxJar, was acquired by payments giant Stripe. Congratulations to this incredible team!

• Precursor Ventures is excited to share that one of their investments in the SMB tech space just launched! Guava is a neobank created by and in service of Black Americans to directly address the racial wealth gap, starting with Black-owned small businesses. Check them out here: https://guavabank.com/

• Slauson & Co. led an investment in EngineEars, a workflow management platform for music professionals founded by one of Hip Hop's top audio engineers MixedByAli. Other investors include industry elites such as Kendric Lamar and DJ Khalid.

📰 SMB News Roundup

• Bill.com is buying the expense reporting startup Divvy in a transaction valued at approximately $2.5 billion. Bill.com makes cloud-based software that simplifies, digitizes, and automates complex back-office financial operations for SMBs.

• Human Interest, a provider of 401(k) programs to small and midsized businesses, just raised a $55 million Series C led by Glynn Capital, with participation from NewView Capital. This brings their total amount raised to over $136 million.

• Kickfurther, a seven-year-old, Boulder, Co.-based platform that provides working capital to small and medium-size product businesses in the U.S., just raised a $5.9 million seed round led by Grand Oaks Capital.

• Cora, a Brazilian digital lender to SMBs, raised $26.7 million in Series A funding. Ribbit Capital led the round and was joined by Kaszek Ventures, QED Investors and Green Oaks Capital.

• SaaStr details how SMBs have fueled the massive growth clocked by Zoom and Shopify during Covid

• Restaurants will start receiving their federal relief dollars this week

✍🏾Deep Diligence

YC Loves SMB Tech. How Much? Let me Count the Ways.*

The Winter YC 2021 batch featured an amazing group of companies. It was really exciting to learn about the 317 for-profit companies presenting. One of the themes that popped out to me was SMB tech. 14 of the companies, or about 5%, in this batch were focused on the SMB sector. To put that in perspective, that was the same percentage of companies presenting in the social space and almost the same percentage of companies presenting in Ed-Tech. It is exciting to see SMB tech begin to command the same amount of attention as other sectors. I wanted to point out a few trends that I saw among the SMB tech companies presenting at YC with the hopes that it helps push our thinking on the opportunities in this space.

Location, Location, Location

Of companies building for SMBs in the most recent YC batch:

• 3 are based in India

• 5 are based in the US

• 4 are based in LatAm

• 2 are based in SE Asia

It is exciting to see capital go towards companies that are supporting local businesses across the world. One of the similarities across companies building internationally is that they are building payments processing on top of WhatsApp. We haven't seen that done much in the US except with Whym Tech, which focuses on SMS instead of WhatsApp. It will be interesting to see how streamlining payments for SMBs continues to evolve in the coming years.

Fintech is hot

Of companies building for SMBs in the most recent YC batch:

9 are in Fintech

Most of the companies here were building accounting and banking for SMBs. It was a great reminder of how much there is to left to be desired in banking for SMBs. Brex saw this hole in the market and is raising at a $8B valuation. Mercury saw this and in 2019 raised at a $100M valuation - I have to believe it's worth many multiples times that now. I think there is plenty room for more billion dollar companies in this space.

SMBs are a growing market

Of companies building for SMBs in the most recent YC batch:

1 makes it easier to buy SMBs

1 makes it easier to start SMBs

It was so awesome to see how founders are thinking creatively about how to facilitate the growth of SMBs across the ecosystem. I will be tracking the success of both of these companies closely.

*Phrase borrowed from the iconic Poem: Sonnets from the Portuguese 43: How do I love thee? Let me count the ways by Elizabeth Barrett Browning

See you all next month!

Jen, Sydney & Austin