The IPO window is all but closed to tech companies in the wake of a massive downturn in the market, but for some, an opening remains in the form of SPACs. Near — a data intelligence firm that has collected 1.6 billion anonymized user profiles associated with 70 million locations in 44 countries — announced today that it would be listed on Nasdaq through a merger with KludeIn I Acquisition Corp., one of the many blank check companies created to list privately held companies, at a valuation of “nearly” $1 billion. It will trade on Nasdaq using the “NIR” ticker.
In addition, the company is raising a $100 million investment in its business from CF Principal Investments, a subsidiary of Cantor Fitzgerald.
If you’ve been following Near or the SPAC market, you may remember that in December, there were rumors that KludeIn was talking to Near. At the time, Near was reportedly targeting a valuation of between $1 billion and $1.2 billion with the listing. In recent months, however, the IPO market has virtually ground to a halt, along with a massive decline in technology stocks across the board and a broader decline in technology investment in general, even in much smaller, earlier-stage startups.
Founded in Singapore in 2012 and now based in Pasadena, Near had raised approximately $134 million in funding, including a round of $100 million in 2019 — marking the company’s last major raise.
Investors include Sequoia India, JP Morgan, Cisco, and Telstra (who have agreed to a one-year lockout according to KludeIn’s SEC filings). Company records from PitchBook show that Near had attempted a fundraiser in May 2021 but canceled it.
All in all, Near is an interesting example when considering the predicament many late-stage startups may find themselves in.
On the one hand, the company has some big customers and potentially interesting technology, especially in light of the shift from regulators and the public to demand more privacy in data intelligence products.
Based on a wealth of information that near sources and then aggregates from phones, data partners, carriers, and customers. It partners with major brands and companies, including McDonald’s, Wendy’s, Ford, the CBRE Group, and 60% of the Fortune 500, who use Near’s interactive, cloud-based AI platform (branded Allspark) to tap into anonymized, location-based profiles of users. It claims that the database is built “with privacy by design”.
It describes its approach as “seams”. It says it’s patented, making it a sort of moat against other competitors, and potentially some value as an asset to others building big data businesses and needing more privacy-based approaches.
On the other hand, while the financial data detailed in KludeIn’s SEC filings show growth, it’s at a very modest pace — numbers may not look great to investors, especially in the current climate. In 2020, Near posted revenue of $33 million, estimated $46 million for 2021, $63 million for 2022, and $91 million for 2023. The company forecasted its gross profit margin for this year would be 72% ($44 million). But estimates that EBITDA has been negative and will remain until at least 2024.
If you look beyond Near, it will be interesting to see how many others follow the company in taking the SPAC exit route, which has generally proven to be a controversial vehicle.
On the plus side, SPACs are being hailed by supporters for being a faster, more efficient route for strong startups to enter the public markets and thus raise money from more investors (and give way out to private investors): this is very much the Take the Near and KludeIn position.
“Enterprises worldwide have trusted Near for more than a decade to answer the critical questions that help drive and grow their business. The demand for human movement and consumer behavior data to understand changing markets and consumers is growing exponentially, and now is the time to accelerate the penetration of the large and untapped $23 billion TAM,” said Anil Mathews, Founder, and CEO of Near, in a statement. “The IPO gives us the credibility and money to double our growth and continue using our winning flywheel for better business results in the coming decade.”
“I am excited to partner with Anil and the entire team at Near as they continue to help global enterprises better understand consumer behavior and derive actionable information from their global, full-stack data intelligence platform,” added Narayan Ramachandran, the chairman, and CEO of KludeIn. “We believe this merger is highly attractive based on the diversified global customer base, superior SaaS flywheel, and network effects of Near’s business, highlighted by the company’s strong net retention.”
On the negative side, those positives are also the reason for some of SPAC’s problems: Simply put, they have enabled public listings for companies that might have found it much harder, if not impossible, to do so through the research of more traditional channels. Sometimes that ended well, but sometimes it ended badly for everyone. Just this week, Enjoy – also listed on a SPAC – said it was on track to run out of cash by June and was reviewing its strategic options.
Time, the hunger for more data intelligence, and possibly some factors beyond our control, such as the investment climate, will ultimately tell which way Near will go. The transaction is expected to generate $268 million in gross proceeds, assuming no redemptions and a successful private placement of $95 million in KludeIn common stock, KludeIn said.