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Hey team! Alex here. I am on vacation next week. Anna, my regular co-pilot on the Workday column, will be handling next week’s newsletter. That would be beyond good. Enjoy!
A few weeks ago we took a look at some startup results, with a focus on growth. Today we’re turning our attention to just one company with a collection of startups written in it: Water Cooler Trivia.
Many startups start life as a solution to a problem. A developer finds a flaw in their workflow, codes a solution for it and later builds that hack into a product that scales. that sort of thing.
Colin Waldoch Did something different, turned his hobby into a business.
Coming from a family of six that he called a competitive family, Waldoch hosted bar trivia during college, and later sent weekly trivia questions to his workplace after completing his schooling. He maintained the habit during his early career, which included a stint at Lyft.
It was during his corporate life that Waldoch realized that companies were willing to spend heavily on team activities. Like a football team he joined during a job his employer spent a few grand on, but which was struggling to find enough regular players. If companies left so much money on group games that some of its citizens would want, he thought, maybe there was some budget he could attack with a trivia product.
So Waldoch started Water Cooler Trivia, building it as a corporate product that he and some friends raised as a side project to about $20,000 in ARR. The founder described the level of success at the time as “very good beer money”. Helping the project turn in revenue was a super-low churn rate, something that helped Waldoc decide to quit his day job at Life and complete the project full-time.
Today Water Cooler Trivia reaches an ARR worth $300,000 and sports a collection of workers from around the world who help run it. Companies can select difficulty levels for their weekly trivia questions and track employee scores with longitudinal leaderboards.
Part of the success of this idea, in Waldoch’s view, is that it is designed for the end user — the employees, rather than the human resource. That means it’s really fun. Today the company has experienced some churn, but still the game’s net retention rate is just under 100%. This is great for a product that doesn’t have enterprise-SaaS level upscaling features.
And the service is cheap. Maybe frankly very cheap. At $100 per month for 100 seats, the water cooler can potentially increase its fee and increase its revenue in short order. Waldoch said his company may start raising rates in the fourth quarter of this year. But even without it, Water Cooler thinks there’s a huge amount of development open to it from its core product.
I dig it. Long live software makes life a little more fun.
drift, axiometry, carrots
It Was a Busy Week With Infinite IPO Filings and Eight Billion YC Startups Pitching, But Other Things did It so happens that we need to talk about:
I’m curious about Drift’s sale to private equity: Boston’s Drift is selling the majority of its shares to Vista Equity Partners, it announced this week. I’ve been to the Drift offices, because the company once gave us a room to record a podcast. The people there were nice. But with the company reporting a 70% ARR growth in 2020, I’m curious why Drift hasn’t raised more capital and continues to grow. The company was able to raise a lot of private money in the past, including, say, a $60 million round back in 2018. Exiting the bulk of the company seems a bit odd, similar to what Gensite’s sales to Pei were. A head scratcher. For Boston, the exit is good news because it could help new angel investors. But it still feels like an exit for which we are missing an important detail.
Axiometry: It’s been in the Notes folder for a very long time, and we’re including it here since I’m off next week. I spoke with Axiometry CEO Randy Altschuler after his company reported its earnings a few weeks ago. Recall that earlier this year Zometry went public. Altschuler generally reported rapid views on the process of going public during the COVID-19 era, describing his company’s Zoom roadshow as efficient in a way that allows his company to connect with more people while saving on travel-related exhaustion. Chat allowed.
Axiometry, continued: But after the standard post-IPO chit chat, Altschular had a few notes that stand out in my memory. The first is that inflation can affect technology businesses. The rising cost is affecting companies like Root, which have to deal with the prices of used cars, which affects the cost of claims. Inflation also increases in the business of axiometry by linking manufacturing demand to manufacturing supply. It’s a good reminder that macro market conditions really matter in the technology world, and not in ways we can always easily see.
Axiometry, even more: Altschler also said he thinks a carbon tax is inevitable at some point. This came up over time in our discussion of onshoring manufacturing in the United States. Shipping goods is expensive today and will prove to be even more expensive if we add to the cost of carbon emissions through taxes. This could especially make local manufacturing more competitive. Perhaps this would prove to be a boon to people in post-industrial societies in favor of more industrial production. For tech companies dealing with physical-world goods, this is something to keep in mind.
And, finally, carrots: Another entry from the Notes collection, let’s talk about carrots. The startup raised $75 million a few weeks ago, so I asked the company about its growth history and a few other things. Carrot sells a product to employers so that they can provide fertility benefits to their workers. Given the declining human fertility rate, in my view, this type of coverage is likely to become more popular over time.
Of course, other factors are at work, but the carrot business has picked up momentum over the past 18 months. According to the company, it has seen “almost 5x growth in aggregate” over the past six quarters. The startup expects to reach 450 customers by the end of 2021, which will add about one million covered people.
Carrot declined to share the valuation difference in its Series C from its Series B. Happily PitchBook has data on the matter, so we can report that according to its dataset, Carrot’s valuation rose by about $66 million (post-money) after the $21 million series. About $260 million after its Series C from B. This is a good markup for company employees and founders.
My general uptick about the growing need for fertility support matches the company’s ethos, which she described in an email as saying that it thinks fertility and “family care should be the fourth pillar of employee benefits and health care.” Could be more broadly. Medical or dental or vision.” A tough yes to that.
OK, that’s all from my side for a few weeks. Stay safe, get vaccinated and be kind to each other. – alex