The TechCrunch Exchange is back with a weekly newsletter about startups and markets. This newsletter is inspired by the weekday Exchange column, but it's free and can be read on weekends. You want it delivered to your inbox every Saturday? Register here
Hello team! Alex here. Next week, I will be away. Anna, my regular copilot on the weekday columns, will handle next weeks newsletter. It will be amazing. Enjoy!
We took a look back at some startup results a few weeks ago, with a focus in growth. We are narrowing our focus today to one company from the list of startups who wrote in: Water Cooler Trivia.
Many startups start out as a solution for a problem. Developers find a problem in their workflow and code a solution. Later, they build the product. This is what it looks like.
Collin Waldoch did something a little different. He turned a hobby into a business.
Waldoch was born into a family with six children in what he described as a competitive family. He hosted trivia nights at bars during college and then sent weekly trivia questions to his work place after he finished his education. The habit was carried on throughout his early career, including a stint with Lyft.
Waldoch discovered that many companies are willing to spend a lot on team activities during his corporate career. Waldoch was a part of a soccer team that his employer had set up, but that struggled to attract enough players. He wondered if companies would spend that much money on a sport that only a few people wanted. Perhaps there was a budget that he could use to attack trivia products.
So Waldoch founded Water Cooler Trivia. He started it as a corporate product and then he and a few friends grew it to $20,000 in ARR. Its success was described by the founder as "pretty good beer money" at the time. The project's revenue was brought in by a very low churn rate. This helped Waldoch quit his job at Lyft to pursue his side project full-time.
Water Cooler Trivia today has $300,000 in ARR and boasts a team of workers from around the world that support it. You can choose the difficulty level of your weekly trivia questions, and you can track employee scores using longitudinal leaderboards.
Waldochs believes that the idea is successful because it is designed for employees, not HR. It's actually quite fun. The company's net retention rate is just below 100%, despite some churn. This is a great result for a product without enterprise-SaaS upsells.
The service is also very affordable. It's probably a bit too inexpensive. Water Cooler charges $100 per month for 100 seats. This could increase its costs and help to drive up its revenues. Waldoch indicated that the company may raise its rates in quarter four of this year. Water Cooler believes that its core product has enormous growth potential, even if that happens.
I dig it. Software making life easier is a long-lasting goal.
Drift, Xometry and Carrot
Although it was a busy week, with endless IPO filings and eight million YC startups pitching for funding, there were other important events that occurred that we should talk about.
I am curious about Drift's sale to private equity. Drift, a Boston-based company, announced this week that it had sold most of its shares to Vista Equity Partners. I've been to Drift's offices before, when the company provided a space for us to record a podcast. They were friendly. Drift reported a 70% increase in ARR for 2020. I find it a bit strange that they didn't raise more capital to continue growing. In the past, Drift was able raise a lot of private capital, including a $60 million round in 2018. It feels strange to sell the majority of the company so early, much like how Gainsight's sale to PE was. The exit for Boston is good news, as it could help attract new angel investors. It still feels like an exit that is missing a crucial detail.
Xometry: We found this one in our notes folder, but it was too old. After his company had reported earnings a few months back, I spoke to Randy Altschuler, CEO of Xometry. Xometry went public in January. Altschuler was generally positive about the COVID-19 era's public offerings. He described his Zoom roadshow as efficient, allowing his company to talk to more people while also saving money on travel-related exhaustion.
Xometry continued: Altschuler left me a few thoughts that stand out from the usual post-IPO chatter. First, inflation can have a negative impact on technology companies. Companies like Root are affected by rising costs. They have to deal with the impact of used car prices on claims costs. Inflation is also a problem in Xometrys, which connects manufacturing demand and manufacturing supply. This is a reminder that macro market conditions are important in the technology industry, but not in the ways we can see.
Xometry is even more: Altschuler said that he believes that a carbon tax will eventually be implemented. This was brought up during our ongoing discussion about onshoring American manufacturing. It is very expensive to ship stuff today, and it would be even more expensive if we added carbon emissions tax. This could increase the competitiveness of local manufacturing, particularly. This could be a boon for those who support more industrial production in postindustrial societies. It is important to remember this for tech companies that deal in physical-world goods.
Let's talk about Carrot, the last entry in our notes archive. A few weeks ago, the startup raised $75 million. I asked the company questions about its growth and other details. Carrot offers a product for employers to help them offer fertility benefits to their employees. This coverage is likely to grow in popularity due to falling fertility rates.
There are many other factors at play, but the past 18 months have been a catalyst for Carrots business. According to the company, the company has experienced a nearly 5x increase in overall sales over the past six quarters. By 2021, the startup will have 450 customers. This will make it a total of around 1 million people covered.
Carrot declined to share the valuation differential between its Series B and its Series C. Happily, PitchBook has data about the matter so we can report that Carrots value rose from $66 million post-money to $260 million after its Series B. This is a great markup for founders and employees.
My general optimism about rising fertility support needs matches the company's ethos. It sent an email explaining that fertility and family-forming care could be and should be the fourth Pillar of employee benefits and more broadly health care.
Okay, so that's it for the next few weeks. Keep safe, get vaccinated and be kind to each other. Alex
