First Round Capital sees successful SPAC merger, IPO

More than five years ago, First Round Capital announced it was leading a Series A investment round into a startup named Clover Health.

In announcing the investment, Partner Josh Kopelman said: “First Round is a seed stage firm, and our average initial investment has remained $500K–600K for the last 8+ years. Our $4M investment in Clover is the largest initial investment we’ve ever made in our decade-long history (In fact, it’s more than double our previous largest investment).”

“The unique nature of our investment here underscores exactly how unique we think Clover is. It deserves to break the mold in more ways than one. Its mission to improve health care and drive down medical costs is big, ambitious, and vital.”

Clover’s goal was to deliver a lower cost, improved Medicare Advantage experience for its members., relying on the use of data and analytics.

After testing its business model in some New Jersey counties, Clover now serves selected counties in Arizona, Georgia, Mississippi, New Jersey, Pennsylvania, South Carolina, Tennessee, and Texas..

Last week, Social Capital Hedosophia Holdings Corp. III , a SPAC, merged with Clover Health, forming a new public company under the Clover Health Investments Corp (NASDAQ:CVLOV) name.

Clover, which had raised $925 million from investors prior to its SPAC merger, is expected to gain $1.2 billion in cash through the merger. It ended Friday with a market cap near $7 billion.

Also, in late December another First Round portfolio company, Silicon Valley fintech lender Upstart (direct loans to consumers) went public. It jumped 47% on its first day of trading. As of Friday, Upstart had a market cap of $3.8 billion; First Round had owned 5.2% prior to the offering. Upstart also uses predictive data, in this case to assess the likelihood of loan repayment.

Next up is a big one for First Round: gaming platform Roblox. It delayed its IPO into 2021, and just did another pre-IPO investment at a valuation of $29.5 billion.

Roblox to delay IPO until 2021

First Round Capital owns sizeable stake

Tom Paine

Roblox, the popular gaming platform for children, announced in a memo to employees yesterday that it would delay its planned IPO, previously scheduled for December, into next year, the Wall Street Journal reported.

First Round Capital was an early investor and owns 7% of Roblox shares, according to the S-1 filing released three weeks ago.

“Based on everything we have learned to date, we feel there is an opportunity to improve our specific process for employees, shareholders and future investors both big and small”, Roblox CEO David Baszucki said in the memo, which was viewed by the Journal.

The staggering post-IPO market receptions for both Airbnb and DoorDash this week led Roblox and its bankers to rethink pricing strategy for its IPO. In its first day of trading on Thursday, Airbnb shares more than doubled from their offering price and ended with a valuation over $100 billion.

Roblox’ platform, which lets user invent games, had already seen its user base soar before the pandemic, which further increased its popularity.

Roblox was valued at $4 billion in its latest round earlier this year.

First Round Capital invested multiple times in Roblox, dating back to its Series A in 2005 according CrunchBase.

Leaving Silicon Valley

Tom Paine

Houston campus when completed Source: HPE

Hewlett Packard Enterprise, one of the successor companies to the original Hewlett-Packard Co., which was the very archetype of Silicon Valley’s iconic image, is picking up its headquarters and moving east to Houston. The original company, founded in 1939 in a Palo Alto garage, began by building electronic instruments used in the World War II effort.

Stories are beginning to multiply of companies and individuals leaving the Valley for emptier fields, spurred on by the high cost of living and less need of geographic proximity because of the Covid-19 effect.

An individual case is that of Rob Hayes, one of the earliest partners of First Round Capital, dating back to 2006. Hayes built much of First Round’s west coast presence, and is credited with its investments in Uber (one of the most successful in VC history), Square and Mint. In 2018 he announced he was stepping back from his investing partner role to being a board partner, which would give him more flexibility .

Recently I picked up on Twitter that Hayes was in Philadelphia, having apparently moved his family there. I reached out to him on LinkedIn but haven’t received a response. . Rob is a west coast person as far as I can tell, getting his undergrad degree from Cal Berkeley. He came east to attend Columbia Business School, where he received an MBA and currently serves on its Board of Overseers. I don’t have a clue why he is living in Philly, and whether it has something to do with First Round. But being drawn to Philly is opposite to the usual route.

Bloomberg: Match Group asks Meet Group to consider tying the knot

Tom Paine

Tinder owner  Match Group has approached smaller rival Meet Group, Bloomberg reported yesterday.

New Hope-based Meet Group’s (NASDAQ: MEET) shares rose by as much as 21% in New York trading Thursday, and closed Friday at $6.05, for a market cap of $464 million. Match, which is being spun off by IAC/InterActiveCorp, was up 12% at one point on the news yesterday. Its market cap is near $23 billion.

Meet was founded as MyYearbook in 2005 by then high school student Catherine Cook and her brothers, Dave and current CEO Geoff Cook . First Round Capital was an early investor. Meet Group has been smart in positioning itself as a steaming site for people to interact, making good niche acquisitions, and meeting most goals it sets for itself. Geoff Cook, who sold a startup to Thomson while still in college, is very capable. But its relatively small size in the market might raise questions about its future viability as a stand alone company.

Facebook entered the market last Fall with a new app, Facebook Dating..

The German broadcasster ProSiebenSat.1 Media SE was reported to be interested in acquiring Meet Group by Reuters in December.