f you’ve been following what’s been going on lately in tech and focusing on the headlines, you might have missed the forest through the trees.
Silicon Valley Disruption Part 1:
Facebook just lost half a million users, the headlines screamed (out of nearly 2B, and no bigs, you’d think, but a) they’re not growing, b) those users are in the US: prime market, which meant they took a big hit on their profits and c) it’s the first time ever that FB lost users), and the stock was devalued 20%, wiping $200BN off the value of parent-firm Meta. Of course, founder Mark Zuckerberg was quick to come up with the excuses, par usual (ever notice that it’s never his bad?):Read More...
It isn’t often that a newco launches that fairly quickly captures unicorn-level attention the way that Clubhouse has. The audio-only social network, which has amassed 2M+ users and $100M in funding in just under a year after launch, seems to have raised the bar by lowering the barrier to participation, meaning, that in most rooms, anyone can raise their hand and, in most cases (depending on the moderator), participate in the discussion. It’s still in beta, so it’s currently iPhone only and invitation only: patience.
“If you could plug into a live conversation about a topic, you’re passionate about, on demand, anywhere in the world, and have an opportunity to not only listen to some of the smartest people on the subject, but also participate with them, would you?” asked Brian Solis in Forbes (The Latest Silicon Valley Unicorn, Clubhouse Raises $100 Million And Also Raises Attention To The Importance Of Audio-Based Social Networking). “…it represents an unquenchable thirst for meaningful community and engagement, especially in light of the chaos and devastation that played out in the forms of disinformation, political theater, and divisiveness across other social networks.”Read More...
It’s an odd time in the industry, to put it mildly. World economies have certainly been challenged (again, to put it mildly). Still, Crunchbase reported that “Despite the turmoil of an ongoing pandemic, global venture funding for the second quarter of 2020 was not as dire as we expected, but it was down from previous years.” Specifically, it was down 7% from the first half of 2019.
If you want to know what investors are thinking/looking at these days, a must-read is Elizabeth Yin’s (@dunkhippo33 @HustleFundVC – VC investing in hilariously-early founders) recent series of tweets:
“1) At the early stages (call it pre-A or the whole “seed range”), I’m seeing lots of bifurcation. On one hand, in the Silicon Valley, for some founders, it’s never been an easier time to raise. 2) These founders, largely serial entrepreneurs/pedigreed founders (based on schools & work), are highly sought after even at the pre-seed stage. 3) So with these founders (mostly in SF), I’m seeing massive party rounds — like $3m-$5m seed rounds. Sometimes higher! No product / no traction. My friend – fantastic founder – raised $8m recently. $30m+ post-money, no product. If you have this background, raising is EASY. 4) For non-pedigreed founders, if you are running a SaaS company & have some rev traction, also pretty easy to raise. VCs have gone gaga over SaaS in the last 2 months. They think predictable cap efficient companies are the way to go in light of issues at unnamed marketplace cos 5) And then, there’s everyone else. Still HARD to raise money. Even in the Bay Area, if you don’t check said boxes above. Outside the SF Area, even harder. 6) So we have a weird Goldilocks & the 3 bears situation. Some companies are really HOT. Others are really cold. The range of valuations are insane. Everything from < $1m post valuations to $30m+ for PRE-SEED! 7) The press mostly writes about the hot deals. After all, no one wants to read about someone’s poor fundraising situation. So, now everyone thinks Silicon Valley is littered with gold. The reality is that SF mostly has poop on the ground. 8) Then there’s the downstream. The later stages. In 2020, I think raising a series A or a series B will become incredibly challenging. (fundraising always is, but even more so than last yr). 9) Why? VCs all of a sudden care about profitability. Your co still needs to be growing at 30% MoM AND also profitable! (unclear why you need VC in this case but that’s beside the pt 🙂 )”
Actually, that is the point.
We know that raising funding is considered by many an entrepreneur to be a trophy of sorts, or a even proof of concept. Great! If you need the confirmation, go talk to investors – but bootstrap as long as you can. As an investor pointed out at one of our breakfasts, once you’re on the VC treadmill, there’s no getting off. And it’s not free money: You’ll be under more pressure and scrutiny that comes with it, especially in this funding climate.Read More...
If you’re starting a tech company and are in search of outside investment, your chances of raising that funding will rise exponentially if you’re potentially a unicorn. But there is something that you need to understand: that tech is driven as much by hype and press as it is by investment dollars. It’s the tech industry that produces the rock stars of today – and some of that spotlight has reflected back onto the industry’s now high-profile investors. But careful there: if you’re wondering why Adam Neumann’s name is still in the headlines, albeit via Monday morning quarterbacking and as a cautionary tale, his outsized ego is a wakeup call to the media’s – and some investors’ – sometimes priorities: their exaltation of the cult of personality, their acquiescence to the notion that it’s acceptable for a single individual to have enormous control over a company or vertical, and the idea that investment dollars trump common sense, even when the math doesn’t quite add up. Cases in point: Elizabeth Holmes (Theranos), Adam Neumann and yes, even Mark Zuckerberg qua his foray into the financial world with Libra.
First, if you’re going to hang your hat on the Cult of Personality, good idea to take a bold stance at some point – and aim for a hot button. In the We Company’s case, we will remind you that not too long ago, We advocated reimbursing employees’ meals at events only if they were meatless, in the name of corporate responsibility, of course. ““New research indicates that avoiding meat is one of the biggest things an individual can do to reduce their personal environmental impact,” (We co-founder Miguel) McKelvey told employees. WeWork estimates the ban will save 445 million pounds of CO2 emissions, 16.7 billion gallons of water, and 15 million animals by 2023,” Bloombergreported and never mind that Neumann’s contribution to the reduction of carbon emissions imperative was to travel on a company-owned Gulfstream – a fact that somehow never made it into that reporting.Read More...
Now that the LUPA/PAUL stocks have (mostly) gone public – Lyft, Uber, Pinterest and Airbnb), these supposed category killers aren’t exactly killing it in the stock market. It’ll be interesting to see how the massively funded We Company (nee WeWork) does and despite all of this, we’re still witnessing massive funding rounds. Vice, for one, despite its stalled growth, recently raised $250M, a pittance compared to the $575M raised by Deliveroo. At some point, growth does stall; hockey stick growth is unsustainable or as Douglas Rushkoff, author of Team Human et al, said at the Techonomy conference in New York last week, “exponential growth is a problem. The only thing that can grow exponentially forever is cancer, and then it kills its host.”
We’ve known Rushkoff personally since the early days of Web 1.0, which, he reminded us, was when we all innocently believed that the web would distract us from the insular world of television and bring us together, which Mark Zuckerberg told Congress was the intention of Facebook. Well, that and world domination, although he did not share the latter with Congress.
Back in those early days, Wired Magazine told us that the internet was going to be the salvation of the NASDAQ stock exchange. This was the attention economy, and, said Wired, thanks to digital, the economy would grow exponentially, unstopped, forever. And Alan Greenspan agreed: New paradigm! Unlimited growth! Forever! What they didn’t realize was that this economic system was a very old, obsolete operating system invented by the monarchs in the 12th and 13th century to prevent the rise of the middle class, Rushkoff noted.Read More...
