Hello and welcome back to our regular morning look at private companies, public markets and the gray space in between.
Late last week two Boston-based companies raised big rounds. The size of the two investments — each over the $100 million mark — and their rapid succession made them stand out.
The pair of investments raised a question: Is Boston seeing an acceleration in the pace at which it attracts venture capital? Of course, Toast raising $400 million and Flywire raising $120 million within a day of each other does not, by itself, constitute a trend. So we’ve pulled some recent, and historical data from Boston to figure out what’s up.
Today let’s take a look at how many rounds of $50 million or more, and $100 million or more, have been raised in Boston so far in 2020 compared to the city’s full-year 2019 results from each category. We’ll be able to see if Boston is ahead of the pace it set last year. This will let us know if Boston’s venture scene is heating up, or cooling thus far in 2020. (Recall that we wrote about the Northeast in December, and found its venture activity to be intense.)
We’ll start with a quick peek at the Flywire and Toast rounds, and then dig into the data.
Winged Bread
Toast, Boston’s restaurant payment processing unicorn, put together $400 million in fresh funding last week, adding to its preceding haul of just over $500 million in known capital. The company, founded in 2011, has now raised $902 million, according to Crunchbase.
You’ve probably used Toast to checkout at a restaurant before; its payment tech and constituent software stack are popular around the country. Toast charges for its software ($79 and up), hardware ($899 and up), and payments technology. This means that Toast makes money in several ways from its customers: Recurring SaaS fees, infrequent hardware incomes and payments revenue.
Bessemer, Greenoaks, Tiger Global and TPG took part in its latest financing. Toast, an obvious IPO candidate given its implied scale, is worth $4.9 billion and, according to the Wall Street Journal, expanded its revenue by 109% in 2019.
Turning to our second round, Flywire’s $120 million investment pushed the valuation of the company to over $1 billion, according to Crunchbase News. A player in the payments market, per its own bumpf, Flywire “enable[s] the global payment and receivables process.” As we’ve seen recently with big rounds for Finix (payments infra) and Stripe (payments tech) and Toast (see above), working to help others move and use money is a huge industry.
Flywire has now raised over $260 million, and its most recent round was led by Goldman Sachs, an increasingly active investor in recent years. Spark Capital, Temasek and Bain have also put capital into the company;.
So that’s $520 million raised on February 13th and 14th. Are the two rounds indicative of something more than just two investments that happened to line up temporarily? Let’s find out.
2020 v. 2019
We’re slicing Boston’s venture market into two segments to figure out if there’s a new trend afoot. We’ll sift the city’s activity by looking at rounds of $50 million or more and $100 million or more. From each group, we’ll divvy up the results by year, comparing 2019’s results against about 1.5 months’ worth of 2020 data. Why we’d compare such differing timeframes will soon be clear.
Here’s the data for the first funding category:
- In 2019, Crunchbase records 24 rounds for Boston-based companies that were worth $50 million or more. They were worth a total of $2.94 billion.
- In 2020 so far, Crunchbase records 7 rounds for Boston-based companies that were worth $50 million or more. They were worth a total of $1.08 billion.
As we expected, 2019’s full-year tally is larger than what Boston has seen thus far in 2020. But if Boston were to keep up its pace set so far, would it surpass its 2019 totals? Today we’ve lived through 13 percent of 2020. This implies a full-year pace of around 54 rounds of $50 million or more in 2020 if things don’t slow down. Using the same math on the dollar value of those rounds, Boston’s companies would raise a lot more than they did last year.
Boston is having a hot year so far in terms of big venture rounds; its current pace is more than double what it recorded in 2019. We’re extrapolating heavily, however, so let’s see if the trend holds true with larger investments:
- In 2019, Crunchbase records 10 rounds for Boston-based companies that were worth $100 million or more. They were worth a total of $1.98 billion.
- In 2020 so far, Crunchbase records 5 rounds for Boston-based companies that were worth $100 million or more. They were worth a total of $946 million.
You can already see that Boston is way ahead of its 2019 pace for nine-figure rounds. For the city, that’s welcome news. And the growth in pace of $100 million rounds makes Boston’s acceleration in the pace at which it raises $50 million rounds appear less like a possible fluke.
Our little experiment shows us that, so far, Boston-based companies are raising at a hell of a clip. We’ll check back in Q2 to see if the hot streak continues, but, for now, it’s all rather healthy for one of America’s key venture markets.