KJHburg

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5 hours ago, SouthEndCLT811 said:

Tresata in an e-mail newsletter that comes out daily

https://thehustle.co/Tresata-unicorn-funding/

 

It's absolutely ridiculous that Tresata is claiming to have a billion dollar valuation. Without knowing any of the actual goings-on here, and why they'd announce this in such a way, there are a *ton* of red flags here. This newsletter seems to have touched on a lot of what's extremely strange about this. IMO trumpeting this doesn't look good for Charlotte tech. 

1. They have a billion-dollar valuation and yet the best publication to report on it is "siliconangle"? Not even sure what this site is, but no one reputable outside of CLT touched the story. 

2. The investor is a PE firm that generally does control investments. So you're saying they invested for a 5% stake, at the top end of their usual investment number? That's...odd. They also have invested almost entirely in banks, with a couple tech investments - the other tech deal I saw numbers for was a $12.5M Series B. It strains credulity that they'd do a deal for $50M at a BILLION dollar valuation, without some major caveats. 

3. Tresata announced the following numbers as a part of the INC 500, which generally requires legit financials: $11M revenue, 182% 3-year growth rate in 2017 (this is cumulative, so the annualized growth rate is slightly over 40%.) The annualized 40% growth rate is good, sure, but nothing NEAR what would result in such a massive multiple of revenue. In fact, the growth rate is similar to many public SaaS companies (of which, is Tresata really? I don't know, it seems more like a consultancy...almost all their employees are "data engineers"), which average around a 10x revenue multiple. This is all to say a $100M valuation might make sense, given both the PE firm's investment type, and the revenue numbers, and even $200M would be feasible if they have some strong growth potential once they begin scaling with this capital. But a billion? I'd love to see any other startup type person or investor say this is a legitimate possibility, and why, because I am baffled as to why they would make this bizarre claim. 

4. I certainly hope they invest in their marketing materials with this $50M. If they have some legitimate tech advantage, and aren't just implementing big data tech as a consultancy-type upsell model, they should be able to say something more compelling on their website than they do. Like that post mentions, it's truly horrible marketing buzzword bingo. 

Don't believe the hype. 

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Another Charlotte base tech company Stratifyd raises $20 million to grows it AI business.   Organic tech companies can grow and thrive and attract the talent they need here in Charlotte.

https://www.wraltechwire.com/2018/10/12/charlotte-artificial-intelligence-startup-stratifyd-raises-20m-video/?ssid=112928427

 

As for that about Tresata not sure what to think about their valuations.  

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To comment blindly on Tresata, as the previous poster did as well, $1B valuations are not un-commonly "manufactured".  And while the post was filled with cynicism, I'll just speculate that like many "unicorn" valuations on high growth/high potential/high risk deals, there are lots of levers.

 

I don't think this puts Charlotte in a bad light, per see, rather it's a bit where we are in the tech cycle, and there are plenty of examples in Silicon Valley where you see deals structured to imply $1B but the investor has far more protections than a big blank check for a small part of the company....also, I'd say that investors push for unicorn valuations more than companies as there is a halo affect and egos at play.

Lastly, I think the skepticism around the actual product reflects their original business model (analytics consulting), but it seems like they have developed an actual software package that takes over passive data collection, warehousing, analytics, and learning.....but I dunno...seems interesting to me.

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Investors push for unicorn valuations when they can get tons of protections, which I would argue is not really a billion-dollar valuation. If your 5% immediately converts into 50% upon some goal not being hit, it's hard to say that was truly a billion-dollar valuation. 

I'm sure they have developed some sort of actual software package, but the website does not really show that. Maybe they'll up their marketing game now that they're a Unicorn and need to be selling to more/larger clients (I'm not sure who they work with besides Harris Teeter, and likely the banks). 

If this was a typical unicorn-investor (large VC firm, etc.) I'd believe the valuation more. But a private-equity firm who usually doesn't invest in tech deals, going for a 5% slice of the company? Also, you'll notice the investor didn't mention anything about the valuation, Tresata is the one throwing this around. So they seem to really care for whatever reason. Being obsessed with your valuation rarely ends well for a startup, due to as you mention, investors being able to build in protections and "use the founders' ego against them" in many cases. 

I hope they live up to the valuation - biggest plus is now that they have $50M, they should end up hiring way more than ~30 employees, good for those looking for tech jobs in CLT. 

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Here is a story about locally based Stratifyd and its $25 million in funding.  The owner is committed to building this tech company here in Charlotte.

https://www.bizjournals.com/charlotte/news/2018/10/16/charlotte-tech-firm-stratifyd-closes-25m-funding.html?ana=e_ae_set2&s=article_du&ed=2018-10-16&u=oAaDx%2B74FoP4qOJ%2By4AU6dhJPpc&t=1539719131&j=84446251

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