September by D’Ornano+Co.: European Unicorns, Warby Parker's IPO, and why European valuations are hot
This is the first issue of our monthly newsletter dedicated to Tech x Investments
As you may have already read somewhere, the first half of this year has been exceptional in terms of investment in European Tech, with unprecedented valuation levels (43.8 billion euros raised in H1), even for French Tech, which has already raised more funds in 6 months than in the whole of last year.
Nevertheless, despite securing more than 400 deals this year, France still lags behind the German and UK Tech sectors. We are not yet at Macron's objective of 25 Unicorns by 2025.
Do we even have the capacity? We have every right to hope so, given that the number of Unicorns in France has tripled in 3 years, and that this acceleration has no parallel among our European neighbours! Also, French unicorns no longer shy away from their international ambitions, and want to become global champions, which of course attracts more and more global funds in turn, including the largest American funds, whose appetite for French and European unicorns has only grown in recent months, well aware of the unprecedented value they can now achieve.
With the growing interest of non-traditional investors, of which Private Equity, for this asset class, we can expect a consolidation and amplification of these trends in the upcoming months and years.
Just before the summer break, Raphaëlle wrote about the exceptional S1 for French Tech, with now over 19 unicorns in France, and what this meant for the whole Tech ecosystem. As we move into S2, the trend should continue. But to go from a “scale-up nation” to a nation of “large Tech companies”, there are several critical steps still to be taken, which Raphaëlle explores in the article.
This month's spotlight is on Warby Parker, which is planning to list on the NYSE.
Warby Parker (the « Company ») is a seller of direct-to-consumer prescription eyewear aiming to offer at an affordable price (glasses starting at $95, including prescription lenses) a wide range of designer eyewear. Founded in 2010, the Company’s growth was partly fueled by the digital transformation wave fostered by the coronavirus pandemic (with a clear inversion of channel mix between E-commerce and Retail in FY20). The Company filed to go public on the NYSE on August 24, 2021, through a direct listing. Before going public, it had raised c.456m€*;
The Company stresses its impact in its S1- filing, perhaps to a higher degree than peer companies, considered here as a strong intangible asset, but also as a risk of not being able to maximize stockholder value. On top of the Company’s wish to deliver affordable eyewear, its core mission, it has a unique “Buy a pair, give a pair” program, and has obtained the relevant certifications as it is both a public benefit corporation and a B corporation ;
The Company is disrupting a legacy market, that of the optical industry, in which competition is fierce. To that extent, it is notable that the Company operates in both the e-commerce and Health tech verticals, unlike most DNVBs which generally operate on the sole e-commerce vertical. As such it has to comply with strong regulations both relating to e-commerce and to the Company’s operations in the optical industry ;
The Company operates a direct to consumer business model, with an integrated supply chain (through both in-house laboratories and partnerships with a limited number of third-party manufacturers), with the originality of having a hybrid distribution model through brick-and-mortar stores (40% of FY20 net sales) and strong online presence (60% of FY20 net sales) ;
The Company has incurred strong growth over FY18 – YTD21, with a 2M+ customer base at June 30, 2021. The Company presents a positive Adjusted EBITDA of 21,9m$ in FY20, with however a (55,0)m$ net loss in FY20 (to be compared to a nil result in FY19). Note that on top of the hit related to COVID (with a reliance on brick-and-mortar stores at the time), a significant part of the loss was driven by a stock-based compensation charge at the time of the Company’s Series G, not reflected in the Adjusted EBITDA ;
On top of financial and operational KPIs, the Company presents customer unit economics, in the form of average gross profit per customer and average contribution per customer, by bringing respectively its gross profit and its contribution margin (after acquisition and selling costs) to the number of active customers, i.e. unique customers that have made at least one purchase in the preceding 12m period. CAC is more complex, and the S-1 only presents a blended one. With the switch to a dominant e-commerce model, digital acquisition shall be closely monitored in the future!
*per Pitchbook data
This study shows that new records are being set across the venture capital investment chain, from Seed to Growth, well above the record levels already set in 2020. The rise in start-up valuations is driven by interest in certain verticals, including e-commerce and cybersecurity, and by the relatively new, and greatly expanded upon, participation of non-traditional investors.
This article looks at the returns made by investors in publicly traded unicorns, and shows that historically listed unicorns have delivered significant returns to their investors. Even if very high valuations do not mechanically translate into returns for VCs (who do not own all the shares of the unicorns), it is prudent to consider that this boiling over of valuations should translate into real financial success.
Rydoo
D’Ornano+Co. assisted Marlin Equity Partners in their acquisition of Rydoo, a leading SaaS Travel & Expense Management platform, from Sodexo.
Our team, led by Raphaëlle d'Ornano and Thomas Priolet advised on the deal via our holistic approach combining financial, social, tax and legal due diligence and guidance.
Botify
D'Ornano+Co. advised InfraVia Capital Partners in its $55 million Series C investment in Botify, the French scale-up specialized in automation to #SEO.
Our team of experts, led by Raphaëlle d'Ornano, Cécile Auvieux and Grégoire Longou, conducted the financial and legal due diligence and is proud to have taken part in this structuring deal for the French start-up ecosystem!
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