Startups

MariaDB’s potential take-private deal is an indictment of 2021’s SPAC mania

Comment

hands signing checks
Image Credits: Bryce Durbin / TechCrunch

The potential sale of MariaDB to K1 Investment Management for $37 million is a capstone on the failed era of SPAC mergers that gained prominence for a brief time in venture circles during the last startup boom.

Remember SPACs? Special purpose acquisition companies, also known as blank-check companies, were used heavily in 2021 and 2022 to take a number of venture-backed startups public. The myriad combinations generated lawsuits, bankruptcies, and a great sum of deleted shareholder wealth.

And while some companies that took this shortcut to the public markets were speculative, others were more serious businesses — MariaDB was one such company.

After raising nine figures over a decade, MariaDB said it had closed a $104 million Series D round alongside a merger with Angel Pond Holdings, a SPAC. In its initial pitch, MariaDB said its equity valuation after the merger would be $973.6 million, with an enterprise value of $672.1 million — the difference in valuations here was attributed to a large fundraising event that would come as part of the proposed SPAC deal.

However, by the time the merger was closed, much of the SPAC cash was nowhere to be found. Some 99% of the shares held in Angel Pond were redeemed at $10 per share, removing $263 million from the deal’s value. The investors who chose to sell their shares in this way did better than anyone who stuck around, because MariaDB’s stock tanked sharply during its first day as a public company. Today, MariaDB’s stock trades at $0.36 per share, which is somewhat better than its 52-week low of $0.16 per share on February 2.

Modest rally aside, MariaDB has not lived up to its investors’ expectations. In its SPAC pitch, the company forecast its annual recurring revenue (ARR) to reach $53 million in FY 2022, and $72 million in FY 2023. It also expected revenue of $47 million in FY 2022 and $64 million in FY 2023.

But the company was an entire year behind its projected growth curve, reporting revenue of $53.1 million and ARR of $50.3 million in 2023. In the first quarter of FY 2024, MariaDB reported revenue of $13.6 million, up from $12.8 million a year ago. In addition to that modest improvement in top line, MariaDB also managed to more than halve its operating loss to $5.6 million and narrowed its net loss to $8.9 million from $12.8 million a year earlier. More importantly, the company dramatically reduced its cash consumption. And in the same quarter, its operating cash deficit improved to $1.4 million from $14.1 million.

But these improvements seemed to come a little too late: The combined effect of revenue increasing slowly and rapidly emptying coffers meant that MariaDB couldn’t go much longer without raising more money. It makes sense, then, that the company issued a “senior secured promissory note” to RP Ventures worth $26.5 million last October. That funding was used to satisfy the end of a term loan with the European Investment Bank. But the company went into breach of its rescue loan and now finds its options are limited.

That situation makes K1’s offer all the more interesting, since the terms of the RP note were clear regarding the limitations it set on the company. Presumably, K1 expects RP to clear a potential purchase of MariaDB.

MariaDB wound up going public while unprofitable, but without as much fuel as it might have hoped for. For any startup, this state of events is pretty much a worst-case scenario: You go public (more scrutiny) while losing money (cash reliant) against limited reserves (cash balance), coupled with a slowdown in the industry and a suddenly conservative valuation climate. You wind up cash-poor and without much equity value to throw around. Investors send your share price to effectively zero, and the value of all those years of work and roughly $50 million in annualized revenues becomes nil.

MariaDB makes for a two-part example. First, it’s a reminder of the exuberance that led to SPAC deals that were, in retrospect, too expensive and poorly timed. Second, it shows that not all software companies that reach modest scale, say annualized revenue of $25 million, are going to keep growing at a sufficient pace to sustain as a public company.

Beware exotic deals in heady times, and never count your future ARR growth as certain — even if you reach critical growth thresholds.

More TechCrunch

A new crop of early-stage startups — along with some recent VC investments — illustrates a niche emerging in the autonomous vehicle technology sector. Unlike the companies bringing robotaxis to…

VCs and the military are fueling self-driving startups that don’t need roads

When the founders of Sagetap, Sahil Khanna and Kevin Hughes, started working at early-stage enterprise software startups, they were surprised to find that the companies they worked at were trying…

Deal Dive: Sagetap looks to bring enterprise software sales into the 21st century

Keeping up with an industry as fast-moving as AI is a tall order. So until an AI can do it for you, here’s a handy roundup of recent stories in the world…

This Week in AI: OpenAI moves away from safety

After Apple loosened its App Store guidelines to permit game emulators, the retro game emulator Delta — an app 10 years in the making — hit the top of the…

Adobe comes after indie game emulator Delta for copying its logo

Meta is once again taking on its competitors by developing a feature that borrows concepts from others — in this case, BeReal and Snapchat. The company is developing a feature…

Meta’s latest experiment borrows from BeReal’s and Snapchat’s core ideas

Welcome to Startups Weekly! We’ve been drowning in AI news this week, with Google’s I/O setting the pace. And Elon Musk rages against the machine.

Startups Weekly: It’s the dawning of the age of AI — plus,  Musk is raging against the machine

IndieBio’s Bay Area incubator is about to debut its 15th cohort of biotech startups. We took special note of a few, which were making some major, bordering on ludicrous, claims…

IndieBio’s SF incubator lineup is making some wild biotech promises

YouTube TV has announced that its multiview feature for watching four streams at once is now available on Android phones and tablets. The Android launch comes two months after YouTube…

YouTube TV’s ‘multiview’ feature is now available on Android phones and tablets

Featured Article

Two Santa Cruz students uncover security bug that could let millions do their laundry for free

CSC ServiceWorks provides laundry machines to thousands of residential homes and universities, but the company ignored requests to fix a security bug.

1 day ago
Two Santa Cruz students uncover security bug that could let millions do their laundry for free

OpenAI’s Superalignment team, responsible for developing ways to govern and steer “superintelligent” AI systems, was promised 20% of the company’s compute resources, according to a person from that team. But…

OpenAI created a team to control ‘superintelligent’ AI — then let it wither, source says

TechCrunch Disrupt 2024 is just around the corner, and the buzz is palpable. But what if we told you there’s a chance for you to not just attend, but also…

Harness the TechCrunch Effect: Host a Side Event at Disrupt 2024

Decks are all about telling a compelling story and Goodcarbon does a good job on that front. But there’s important information missing too.

Pitch Deck Teardown: Goodcarbon’s $5.5M seed deck

Slack is making it difficult for its customers if they want the company to stop using its data for model training.

Slack under attack over sneaky AI training policy

A Texas-based company that provides health insurance and benefit plans disclosed a data breach affecting almost 2.5 million people, some of whom had their Social Security number stolen. WebTPA said…

Healthcare company WebTPA discloses breach affecting 2.5 million people

Featured Article

Microsoft dodges UK antitrust scrutiny over its Mistral AI stake

Microsoft won’t be facing antitrust scrutiny in the U.K. over its recent investment into French AI startup Mistral AI.

1 day ago
Microsoft dodges UK antitrust scrutiny over its Mistral AI stake

Ember has partnered with HSBC in the U.K. so that the bank’s business customers can access Ember’s services from their online accounts.

Embedded finance is still trendy as accounting automation startup Ember partners with HSBC UK

Kudos uses AI to figure out consumer spending habits so it can then provide more personalized financial advice, like maximizing rewards and utilizing credit effectively.

Kudos lands $10M for an AI smart wallet that picks the best credit card for purchases

The EU’s warning comes after Microsoft failed to respond to a legally binding request for information that focused on its generative AI tools.

EU warns Microsoft it could be fined billions over missing GenAI risk info

The prospects for troubled banking-as-a-service startup Synapse have gone from bad to worse this week after a United States Trustee filed an emergency motion on Wednesday.  The trustee is asking…

A US Trustee wants troubled fintech Synapse to be liquidated via Chapter 7 bankruptcy, cites ‘gross mismanagement’

U.K.-based Seraphim Space is spinning up its 13th accelerator program, with nine participating companies working on a range of tech from propulsion to in-space manufacturing and space situational awareness. The…

Seraphim’s latest space accelerator welcomes nine companies

OpenAI has reached a deal with Reddit to use the social news site’s data for training AI models. In a blog post on OpenAI’s press relations site, the company said…

OpenAI inks deal to train AI on Reddit data

X users will now be able to discover posts from new Communities that are trending directly from an Explore tab within the section.

X pushes more users to Communities

For Mark Zuckerberg’s 40th birthday, his wife got him a photoshoot. Zuckerberg gives the camera a sly smile as he sits amid a carefully crafted re-creation of his childhood bedroom.…

Mark Zuckerberg’s makeover: Midlife crisis or carefully crafted rebrand?

Strava announced a slew of features, including AI to weed out leaderboard cheats, a new ‘family’ subscription plan, dark mode and more.

Strava taps AI to weed out leaderboard cheats, unveils ‘family’ plan, dark mode and more

We all fall down sometimes. Astronauts are no exception. You need to be in peak physical condition for space travel, but bulky space suits and lower gravity levels can be…

Astronauts fall over. Robotic limbs can help them back up.

Microsoft will launch its custom Cobalt 100 chips to customers as a public preview at its Build conference next week, TechCrunch has learned. In an analyst briefing ahead of Build,…

Microsoft’s custom Cobalt chips will come to Azure next week

What a wild week for transportation news! It was a smorgasbord of news that seemed to touch every sector and theme in transportation.

Tesla keeps cutting jobs and the feds probe Waymo

Sony Music Group has sent letters to more than 700 tech companies and music streaming services to warn them not to use its music to train AI without explicit permission.…

Sony Music warns tech companies over ‘unauthorized’ use of its content to train AI

Winston Chi, Butter’s founder and CEO, told TechCrunch that “most parties, including our investors and us, are making money” from the exit.

GrubMarket buys Butter to give its food distribution tech an AI boost

The investor lawsuit is related to Bolt securing a $30 million personal loan to Ryan Breslow, which was later defaulted on.

Bolt founder Ryan Breslow wants to settle an investor lawsuit by returning $37 million worth of shares