YARDSTIQ

Yardstiq connects you to 1000s of interviews w/ the world’s largest network of software buyers. Access first-hand intel on quality, competition, pricing & more

[YARDSTIQ @yardstiq]

Startups’ key advantage is their ability to move quicker than incumbents on product innovation⏩

For this customer, AI development platform @togethercompute beat out Google and AWS because of its speed

Together announced a $106M raise this week

[Anand Sanwal @asanwal]

🧩🎯 M&A strategy teardown

Why did @HubSpot ($HUBS) acquire @clearbit?

TL;DR
1. The obvious near-term opportunity is going after @ZoomInfo $ZI
2. More interestingly, this really sets up a longer-term fight with @LinkedIn Sales Navigator (owned by $MSFT)

First, let's talk ZoomInfo

A quick look at @CBinsights interview transcripts with software buyers shows that Clearbit was already battling and beating ZoomInfo

As this buyer highlights, vs $ZI, Clearbit was "overwhelmingly the best database for the companies we sell to".

Add in it was already integrating with Hubspot which likely allowed the HUBS corp dev team some insight into the product's value/usage by customers

While the above comment is a signal of volume, this conversation transcript highlighted Clearbit winning over ZoomInfo because they "had a higher accuracy rate with our total addressable market"

In our scorecard of data enrichment vendors based on these interviews, we see CSAT for ZoomInfo lags other players including Clearbit

Interestingly, here is where we also saw LinkedIn Sales Navigator enter the chat which did score higher than Clearbit

And so the medium-term target of Hubspot is likely LinkedIn's Sales Navigator business

The reality is customers already see them as competitors

And so by the transitive property of M&A*, ZoomInfo and Hubspot are now competitors.

It's hard to tease out exactly how big the LI Sales Navigator business is but some data we've gleaned:

* In 2016, LinkedIn Premium Subscription were $155M (prior to closing of their acquisition by MSFT

* The business now goes by different names so it's hard to know exactly where Sales Navigator now sits and MSFT disclosures on it are minimal, but we do know that LI Sales Solutions grew to $1B+ in revenue by 2021

So needless to say that LI Sales Navigator has been incredibly fast growing, big and sticky.

And now Hubspot has a competitor and additional product arrow in its quiver to capture a slice of that Navigator pie

Of course, there are tons of other players in the data enrichment space which also pose challenges for ZoomInfo and LI Sales Navigator including @MeetApollo, @RocketReachCo, @Cognism and @LushaData

So this deal also portends more M&A / consolidation in the space

Here is a snapshot of still private ZoomInfo competitors from CB Insights

* transitive property of M&A competition

If A is a competitor of B and B is now acquired by C, then C is now a competitor of A

[Anand Sanwal @asanwal]

1 area of generative AI facing headwinds is...

...the text generation & editing space

Earlier this week Jasper, valued at $1.5B, replaced its CEO

And earlier this year, Grammarly, valued at $13B, also named a new CEO

There are lots of highly valued companies in this space as the graphic from @CBinsights below highlights

The challenge these players face is the result of 2 things:

1. Huge, well-capitalized competitors attacking
2. Lofty valuations which may be tough to grow into

--ON COMPETITION--

chatGPT from @OpenAI is a problem

And so are @Google and @Microsoft as they integrate AI capabilities into MS Word, Google Docs, etc

When we talk to their customers, they bring this up repeatedly.

The big dogs are innovating quickly as this buyer highlighted in this conversation (source: @yardstiq)

And the large competitors are also putting immense pricing pressure on players like Jasper as this customer highlighted in this @yardstiq interview transcript

It's not competition only from the large incumbents.

@Grammarly understandably and logically, is attacking the enterprise market but there, they are running into players like @Acrolinx

This conversation with a Fortune 500 customer of Acrolinx highlights that they evaluated Grammarly as well, but it didn't have the integrations they required

--LOFTY VALUATIONS--

The other challenge for players in the text generation and editing space are skyhigh valuations which may be challenging to grow into.

Some of the most highly valued players in the space per @cbinsights are:

* Grammarly $13B valuation
* Jasper $1.5B
* Writer $500M

What about valuation multiples:

Jasper 16.67x (2022 multiple) based on a reported $90M of 2022 revenue

For comparison, @Turnitin, a Grammarly competitor was acquired by family office Advance for $1.75B in 2019 and was reportedly doing $130-170M the year prior

That would give Turnitin a 10.29x - 13.46x revenue multiple

By this comp, Jasper's multiple isn't crazy provided they can keep growing despite pricing and competitive pressures and keep churn under control

At the high end of that range (13.46x), Grammarly would need to be doing almost $1B of revenue (~$970M) to justify their $13B valuation

Grammarly was bootstrapped in its early years and admirably keeps a low profile so CB Insights hasn't picked up on any recent whisper revenue numbers

But for comparison, OpenAi is on track for $1B in revenue this year. Translation: $1B is a big-ass revenue number and is no joke

The boom in generative AI isn't ending anytime soon, but if there is a pocket of weakness within it, it is in the text content generation and editing space

WDYT?

Anyone seeing tailwinds for companies in this space that makes the valuations look reasonable or even a bargain?

As always, if any of my assumptions are wrong, feel free to comment and if it changes the analysis dramatically, I'll edit

--SOURCES--

Source for all quantitative and qualitative info and screenshots is CB Insights or Yardstiq (a CBI product)

Jasper company profile - https://t.co/8GV0pQx9FI

Grammarly company proifle - https://t.co/rlSLPHNIYq

Text content generation and editing market report -
https://t.co/o87LISSyc0

[YARDSTIQ @yardstiq]

@Adyen, @NiumGlobal, and @RapydGlobal are leaders in our cross-border payments vendor scorecard. Here's what other fintechs can learn from them: https://t.co/O1SROgNe55

[YARDSTIQ @yardstiq]

Here's where Nvidia is investing in #genAI: https://t.co/kXQEfq9DIv

[YARDSTIQ @yardstiq]

We break down the bitter competition in cloud security and the latest buyer perspectives on the space: https://t.co/X1Q3WsxMpe

[YARDSTIQ @yardstiq]

We spoke with customers of companies that offer global payroll solutions — and they told us what they want to see in the products they use. Here's what they said: https://t.co/uNPXyWUKL5

[YARDSTIQ @yardstiq]

CISOs are paying anywhere from $10K to $800K per year to acquire solutions that protect critical data and operations in cloud environments. We dig into buyer perspectives on what drove their vendor selection: https://t.co/u5B6W8gOTf

[YARDSTIQ @yardstiq]

We spoke with customers of expense management companies — like @brexHQ, @tryramp and @pleo — about the products they use. Here's what they said: https://t.co/jBDEjXWVzz

[YARDSTIQ @yardstiq]

Our list of the 50 most promising private insurtech companies of 2023 is out now. Here's what customers are saying about them #Insurtech50 https://t.co/3OKkgAnq6W

[YARDSTIQ @yardstiq]

Open banking is ushering in a new era of financial services. We dig into what customers think about players in the space like @Plaid and @TrueLayer https://t.co/PFf0Oyg9Ah

[YARDSTIQ @yardstiq]

As generative AI startups gain momentum, we highlight top markets and what software buyers are saying about players in the space: https://t.co/qH61eNTa3R

[YARDSTIQ @yardstiq]

We mapped the 300+ startups developing genAI applications and infrastructure. https://t.co/xEGiEq118h Here's what software buyers are saying about them:

[YARDSTIQ @yardstiq]

Pharma companies are paying anywhere from $75K to $5M per year to acquire datasets that can speed up drug discovery, clinical trial design, and regulatory reporting. Here’s who executives are buying data from: https://t.co/CQVT2Dvqqe

[YARDSTIQ @yardstiq]

How are top healthcare execs adapting genAI to their operations? We'll be looking at more execlusive interviews with software buyers in this upcoming webinar: https://t.co/oYopeVcZuz

[YARDSTIQ @yardstiq]

The #AI100 includes companies at different stages of maturity, product development, and funding. https://t.co/RTQpJs5qVt

@OpenAI leads in funding, with over $10B raised. Other companies on the list, like @CohereAI, recently joined the unicorn club 👇

[YARDSTIQ @yardstiq]

We released our list of the most promising artificial intelligence startups of 2023. Now, here's what customers are saying about some of the #AI100 https://t.co/AJq612ZafX

[YARDSTIQ @yardstiq]

Big tech is looking to build #AI copy generation and editing capabilities into their products. We look at what customers are saying about players in the space. https://t.co/g1puxMdoCm

[YARDSTIQ @yardstiq]

A bit of a... fixer upper? https://t.co/FQjUnqgt71

[YARDSTIQ @yardstiq]

LLMs content licensing battles are going to intensify... https://t.co/8QANXMnkCE