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Of course, today we are talking about Buy Now Pay Later (BNPL) companies, a particular part of the larger fintech world that is more than interesting.
Thanks to recent mega-purchases of BNPL space players from Square and PayPal, we’re one step closer to understanding the real value of space businesses – and for the myriad of BNPL startups in the marketplace, that’s great news.
But while I was on vacation (Michael’s fault it turns out), Goldman Sachs has decided to acquire GreenSky, a public company from BNPL. Which means we can quickly run a few numbers on the deal and add that last arrow to our How To Value A BNPL Company quiver.
My friend and colleague – and former office colleague at the time – Ryan Lawler has an interview with Goldman that is worth reading. The deal amounts to $ 2.24 billion per Goldman, pushing up GreekSky’s value considerably later as investors digested the implied trade premium over the company’s previous share price.
What kind of volume was the BNPL focused on GreenSky home improvement doing? Here is the company latest earnings report:
Transaction volume: Second quarter transaction volume was $ 1.5 billion, an increase of 14% from the second quarter of 2020. Lines of credit approved for the quarter were the highest of the company’s history and are a positive indicator of the dynamics of the home improvement supply chain. and labor market shortages are easing.
So a $ 6 billion run-rate at a price of $ 2.24 billion. This equates to approximately $ 0.37 of enterprise value for every dollar of GMV managed by GreenSky. Who is the the lowest number that we have seen so far.
As a reminder, here’s what we found more recently, both keeping in mind that not all of the figures below are perfectly apples: apples; these are more than absolute directional figures:
- To affirm: $ 2.94 in value per dollar of GMV served
- AfterPay: $ 1.84 per dollar of GMV served (at Square price)
- Paying: $ 1.80 per dollar of GMV served (at PayPal price)
- Klarna: $ 0.57 per dollar of GMV served
GreenSky is at the bottom of the list. Maybe growth is the reason? A 14% GMV growth rate does not give the company much leeway, even if it manages a higher take rate. It is difficult to improve a growth rate that begins with a a, especially if the main line at the top of your investor relations page is “GREENSKY, INC.” IS A GROWING COMPANY â.
In the same way that we’ve seen divergent SaaS revenue multiples, streaked along the revenue growth and revenue quality axes, something similar is probably happening here. Loss ratios, catch rates and GMV growth are vectors through which BNPL companies will be valued differently.
BNPL startups can find their most precise mix in terms of growth and loan quality, and then revert to their current market value. It’s good to have data.
I was going to spend most of this newsletter discussing Mammoth Biosciences and its plan for Jurassic Park around the world, but TechCrunch got ahead of me. I spoke to one of its investors – Thomas Tull – about the deal, but I’ll keep those notes for a bit. I think we’ll need it in time.
A careful financing round to close us
The disruption is next week, and with an IPO cycle, I’ve fallen behind my usual fundraising cycle pace. (And communications, sorry!) So here’s a makeup entry for our shared pleasure: Postal.
The company works in marketing technology and operates what its website claims to be the “biggest” business-to-business gift market. More simply, it helps companies to send physical goods to customers. Which, according to him, has a very high return on investment.
In a somewhat ironic twist, I actually have to make some disclosures at this point. It turns out that the company’s main investors are Mayfield and OMERS. These two companies ran my Former employer Series B and C, respectively. But if I wasn’t writing about companies that my Crunchbase connection didn’t cause some kind of awkward thrill, I would have to cut out too much of the market. I will continue to raise the issue when we have to.
Postal works in a somewhat similar space to Sendoso, although, to my knowledge, the latter company treats employee gifts a bit more than customer-focused efforts. Over time, they will be in direct competition if they both continue to grow. Sendoso raised $ 100 million earlier this week, of course it does.
Other players in the space include Reachdesk and Alyce (who raised $ 30 million earlier this year), among others. It turns out that the work of building technologies to deliver personalized physical goods is quite extensive. (You can play an NFT joke here, if you want.)
PitchBook puts Sendoso’s new valuation at $ 640 million (after money) and Alyce at $ 135 million (after money). The current valuations of Reachdesk and Postal.io were not available.
Good enough for now. Have a nice weekend, and see you soon at Disrupt! You can see a parcel of me on the Extra Crunch stage. – Alexis