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Fair Value Measurements
 12 Months Ended
Dec. 31, 2021
Fair Value Disclosures [Abstract]  
Fair Value Measurements Fair Value Measurements
The Company measures certain financial assets and liabilities at fair value on a recurring basis. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. A three-tier fair value hierarchy is established as a basis for considering such assumptions and for inputs used in the valuation methodologies in measuring fair value:
Level 1Quoted prices in active markets for identical assets or liabilities.
Level 2Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
The Company utilizes the market approach to measure fair value for its financial assets and liabilities. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.
The following table summarizes the Company’s financial assets (cash equivalents, marketable securities and liabilities) at fair value as of December 31, 2021 (in thousands):
Fair Value as of December 31, 2021
Basis for Fair Value Measurements
(Level 1)(Level 2) (Level 3)
Assets:
Money market funds, included in cash and cash equivalents$16,498 $16,498 $— $— 
Fixed income mutual funds, included in short-term investments96,397 96,397 — — 
Total$112,895 $112,895 $— $— 
There were no liabilities measured at fair value on a recurring and non-recurring basis as of December 31, 2021.
The following table summarizes the Company’s financial assets (cash equivalents, marketable securities and liabilities) at fair value as of December 31, 2020 (in thousands):
Fair Value as of December 31, 2020
Basis for Fair Value Measurements
(Level 1)(Level 2) (Level 3)
Assets:
Money market funds, included in cash and cash equivalents$5,062 $5,062 $— $— 
Fixed income mutual funds, included in short-term investments11,689 11,689 — — 
Total$16,751 $16,751 $— $— 
Liabilities:
Redeemable convertible preferred stock warrant liability369 — — 369 
Total$369 $— $— $369 
The money market funds are highly liquid and primarily invest in short-term fixed income securities issued by the U.S. government and U.S. government agencies. The Company’s available-for-sale investments comprise short-
term investments in fixed income mutual funds, which primarily consist of debt securities issued by the U.S. government and U.S. government agencies and corporate bonds and notes.
The following is a summary of the Company’s available-for-sale debt securities (in thousands):
December 31,
2021
2020
Cost basis$96,702 $11,656 
Unrealized gain (loss)(305)33 
Fair value$96,397 $11,689 
The following table sets forth a summary of the changes in the fair value of the Company’s Level 3 financial instruments (in thousands):
Derivative InstrumentRedeemable Convertible Preferred Stock Warrant Liability
Fair value as of January 1, 2020$4,719 $— 
Recognition of redeemable convertible preferred stock warrant liability— 550 
Recognition of derivative instrument related to 2020 Convertible Notes1,669— 
Change in fair value included in other income (expense), net(149)(181)
Extinguishment of derivative instrument
(6,239)— 
Fair value as of December 31, 2020
$— $369 
Change in fair value included in other income (expense), net— 5,236 
Net exercise of redeemable convertible preferred stock warrants— (5,605)
Fair value as of December 31, 2021
$— $— 
The fair value of the derivative instrument was estimated at the date of inception and at the subsequent balance sheet date using a two-step approach to valuation, employing a probability-weighted scenario valuation method and then comparing the instrument’s value with-and-without the derivative features in order to estimate their combined fair value, using unobservable inputs, which are classified as Level 3 within the fair value hierarchy. In order to estimate the fair value of the 2019 Convertible Notes and 2020 Convertible Notes, the Company estimated the future payoff in each scenario, discounted them to a present value and then probability weighted them based upon the Company’s best estimate of the likelihood of each event occurring.
The primary inputs for the valuation approach included the probability of achieving various settlement scenarios that provide the lenders the rights or the obligations to receive cash or a variable number of shares upon the completion of a capital transaction. The probability assumptions as of inception dates in 2019 included a 99% probability of conversion into equity in a capital transaction, discount rates of 1.7% - 11.5% were applied, and the expected time to the occurrence of the respective scenarios ranged between 0.5 years and 1.8 years. The probability assumptions as of inception dates in 2020 included a 50% probability of conversion into equity in a capital transaction, discount rates of 0.07% - 12.2% were applied, and the expected time to the occurrence of the respective scenarios ranged between 0.3 years and 0.8 years.
In August 2020, the derivative instrument was extinguished in connection with the issuance of Series B’ redeemable convertible preferred stock and conversion of all outstanding convertible notes and accrued unpaid interest into shares of Series B’ redeemable convertible preferred stock.
In determining the fair value of the redeemable convertible preferred stock warrant liability, the Company used the Black-Scholes option pricing model to estimate the fair value using unobservable inputs including the expected term, expected volatility, risk-free interest rate and dividend yield (see Note 8). There were no warrants outstanding
for the purchase of redeemable convertible preferred stock as of December 31, 2021, as all such warrants were net exercised to shares of common stock upon the closing of the IPO.