Mixed Signals

Global technology is creating a new class of companies valued over $100B. But who is winning and who is losing, and how can we ensure the benefit is evenly spread?

By Keith Teare • Issue #23 • View online



Elad Gil is one of the World’s angel investors and a “helper of startups”. His LinkedIn profile says:

Entrepreneur, operating executive, and investor or advisor to private companies such as AirBnB, Airtable, Coinbase, Flexport, Gusto, Instacart, Opendoor, Optimizely, PagerDuty, Pinterest, Square, Stripe, Wish.

Co-Founder and Chairman at Color Genomics. Was CEO of Color from 2013 to fall 2016.

Previously, was the VP of Corporate Strategy at Twitter, as well as ran various product teams (Geo, Search).

Joined Twitter via the acquisition of MixerLabs, a company was co-founder and CEO of. MixerLabs ran GeoAPI, one of the early developer-centric platform infrastructure products.

Spent many years at Google, where I started the mobile team and was involved in all aspects of getting the team up and running. Involved with 3 acquisitions (including the Android team) and was the original product manager for Google Mobile Maps and other key mobile products.

Prior to Google, had product management and market seeding roles at a number of Silicon Valley companies. Also worked at McKinsey & Co. Received Ph.D. from MIT and have degrees in Mathematics and Biology from UCSD.

This week his 2019 article titled “Markets at 10x Bigger Than Ever” somehow found its way into my inbox. Despite almost 18 months of a global pandemic, it seems as pertinent as ever, except bigger. Take his note that Salesforce is valued at $120B. Well it is now $222B. Or Google at $890B, now at $1.66T.

In 2019 he said that more companies would grow from a $1B valuation to $10B. Today it is clear that many will reach over $100B.

The driver is technology and global scale. Companies can get to be big, fast, in single markets and bigger still when global.

The G7 met last week and noted that global and big has often led to chaos in taxation and is set to levy a 15% global tax on all companies that make 10% profit outside of their home base:

Under what the G7 ministers called a “two-pillar” strategy, the new framework would apply to large global companies with a profit margin of 10 percent or more. Those firms would be required to pay taxes on 20 percent of profits they earn above the 10 percent threshold in the countries where they generated the revenue.

This globalized policy-making is simply an acknowledgment that global and big is set to become more normal. And as if we needed more evidence that global tech will create disruption, the nation of El Salvador has decided to make Bitcoin a legal tender in the country. Previously the US$ played a key role. This is IMHO going to become a trend in developing nations with weak indigenous currencies. Bitcoin is a global first store of value.

Globalization also has victims. The Economist looks at Europe’s decline as a commercial center.

At the start of the 21st century 41 of the world’s 100 most valuable companies were based in Europe (including Britain and Switzerland but excluding Russia and Turkey). Today only 15 are.

The rise of China is key to understanding, as is the rise of global US technology players.

With the rapid creation of new global wealth comes the challenge of sharing it more evenly. This week two stories point to public trading of venture fund portfolios, enabling retail investors to participate in unprecedented growth. While SPACs seem to be slowed, IPOs and direct listings are not. But with Softbank’s investment in Mexican giant Grupo Bursátil Mexicano (GBM) capital is throwing its weight behind vehicles that are available to small investors too. UK based Seraphim Capital announced a stock market flotation too, joining already public Draper Espirit.

These trends are is stark contrast to First Minute Capital, also in the UK. It announced that 100 Unicorn founders had invested in its new private fund, including:

22 founders of $10bn+ businesses have also invested in the second Firstminute fund, as well as high-profile former and current chief executives of global tech companies and investors — such as Google’s Eric Schmidt.

So, mixed signals this week. Is it rain or is it shine? We discuss it in this week’s video.

Mixed Signals

Markets Are 10X Bigger Than Ever

Over the last few years, the number of people and businesses online has ballooned. Spend on the Internet has grown rapidly as you can now reach billions of people, and hundreds of millions of businesses, in a frictionless way. While in the late 1990s people were scared to put their credit card number into a website, today people use their phones to pay grocery stores and order Ubers. Growth of the internet has spilled over to all classes of software including enterprise SaaS and SMB segments.

This in turn has yielded much larger outcomes than anyone expected for online software companies. The large IPOs of the last year, and the ongoing growth and scaling of prior generation SaaS companies, reflects massive growth and scale of the internet and its usage.

Market caps of some SaaS companies:

  • Salesforce: $120B
  • Workday: $44B
  • Atlassian: $29B
  • Shopify: $29B
  • Stripe (private): $22.5B
  • Zoom: $19B
  • Twilio: $16B
  • Okta: $11B
  • Dropbox: $10B
  • Slack (private): $7B (TBD as public company)
  • Github (acquired for $7.5B)

A similar trend has existed in consumer companies, with a recent slate reaching massive market caps:

  • Google — $809B
  • Facebook — $539B
  • Uber (private for one more day) — $80B
  • Twitter- $29B
  • Lyft — $15B
  • Pinterest — $15B

In general, software markets and businesses are 10X bigger than they were 10–15 years ago. This is due to the liquidity provided by the global internet. A company that would have been a $10-$20M subscale revenue business is now a $100M revenue company, which means many more companies can now be worth $1B or more, and many more SaaS businesses have the potential to be $10B+.

blog.eladgil.com • Share

The Rise of SPACs: IPO Disruptors or Blank Check Distortions?

For decades, the process that companies in the United States have used to go public has followed a familiar script.

The company files a prospectus, providing prospective investors with information about its business model and financials, and hires an investment banker or bankers to manage the issuance process. The bankers, in addition to doing a roadshow where they market the company to investors, also price” the company for the offering, having tested out what investors are willing to pay, and guarantee that they will deliver that price, all in return for underwriting commissions.

During the last decade, as that process revealed its weaknesses, many have questioned whether the services provided by banks merited the fees that they earned. Some have argued that direct listings, where companies dispense with bankers, and go directly to the market, serve the needs of investors and issuing companies much better, but the constraints on direct listings have made them unsuitable or unacceptable alternatives for many private companies.

In the last three years, SPACs (special purpose acquisition companies) have given traditional IPOs a run for their money, and in this post, I look at whether they offer a better way to go public or are more of a stop on the road to a better way to go public.


  1. A Sober Look at SPACs, 2020, Klaussner, Ohrlrogge and Ryan
  2. SPACs, 2021, Gahng, Ritter and Zhang.

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Bill Ackman’s Universal Music deal heralds the era of Spac 2.0

Bill Ackman has already once tried — and failed — to redefine the Spac.

Now he is trying again.

The hedge fund manager’s special purpose acquisition company, Pershing Square Tontine Holdings, which raised $4bn last year, was not just the largest blank-cheque vehicle ever launched. It did away with some of the perks for founders, such as free shares, which have given the Spac phenomenon a bad name in some quarters.

Few Spacs followed the model, as the boom in new issues continued into this year, only to suddenly cool in the past few months. With his complex deal to buy a stake in Universal Music and split PSTH into three, announced on Friday, Ackman is positioning himself for the next phase of the Spac era.

The headline acquisition was not what anyone expected. Instead of buying a Bloomberg or a Stripe, private companies of the size and stature to go public in the US through a $4bn Spac, Ackman said he was purchasing a 10 per cent stake in the music publisher at a $40bn valuation and would distribute Universal shares to PSTH investors after the company lists in Europe later this year. That looked more like a short-term hedge fund deal than a traditional Spac transaction.

Yet it was the other parts of the announcement that could be a harbinger of what is to come for Spacs, as they navigate a new landscape of investor scepticism and regulatory pressure.

After the distribution of Universal Music shares, PSTH will carry on as a smaller blank-cheque company that will continue to hunt for targets. There is also to be a new vehicle that will give his current investors an option to finance another future transaction, but without having to pony up the cash in advance as they do in a traditional Spac.

www.ft.com • Share

Customers Love Free Stuff … But That’s Not Your Problem

Thanks to the pioneering work of Barry McCarty and others, paying the “IPO Pop Tax” is now 100% optional.

The main reason that the “Hot IPO” is such an obvious marketing tool is that transferring billions and billions of wealth to a prospective customer group is really, really, really effective. If $60 million can build Paypal, imagine what you can do with $34 billion in a single year! And as noted early, what if you could get some other naive third party patsy to be the one that funded the whole thing?


Regardless of whether it is run by Goldman Sachs, Morgan Stanley, Sofi, or Robinhood, the “Hot IPO” access marketing game has two key elements:

  • Element 1: A method for systematically exploiting VC-backed companies by convincing them that selling shares in their company at a steep discount to the market price (where supply and demand would match) is in their own best interest.
  • Element 2: Some process or program where you then transfer this wealth to your customers.

In the marketing announcements from SoFi and Robinhood, they focus entirely on element 2 of this system without mentioning that the entire program is dependent on the continued exploitation of these companies through intentional underpricing (Element 1). It doesn’t matter how they get access to the “hot shares” — the program is still 100% dependent on the company funding the free giveaway by agreeing to underpricing. If IPOs were priced “fairly” there would simply be no price “pop” to exploit or giveaway.

Make no mistake about it, an IPO “pop” is expressly a wealth transfer.

abovethecrowd.com • Share

Bitcoin Legal Tender, A Financial Earthquake For Dollarization?

Dollarization is dead, long live bitcoinization? That’s what some might be wondering as a new financial order upgrades with a dollarized country declaring bitcoin legal tender.

The declaration is wholistic and total, stating bitcoin (and only bitcoin where cryptos are concerned) must be accepted for any and all payments in shops, or for debts, or for taxes.

The state of El Salvador is also to direct its civil service towards the promotion of bitcoin acceptance in a novel official government policy.

There have been no studies whatever as far as we are aware, nor any economic theories, on what bitcoinization might mean, except Krugman, who hates bitcoin, once stated that “microeconomic efficiency would be maximized with a global currency” back in 1993.

That seemingly different era was the height of dollarization. Brazil had their money pegged to USD, as did Argentina, while the dollar strengthened and strengthened to all time high, which it never reached again.

www.trustnodes.com • Share

El Salvador becomes first country to adopt bitcoin as legal tender after passing law

  • El Salvador just became the first country to adopt bitcoin as legal tender.
  • Lawmakers in the Central American country’s Congress voted by a supermajority in favor of the Bitcoin Law.

“The purpose of this law is to regulate bitcoin as unrestricted legal tender with liberating power, unlimited in any transaction, and to any title that public or private natural or legal persons require carrying out,” the law reads.

Prices can now be shown in bitcoin, tax contributions can be paid with the digital currency, and exchanges in bitcoin will not be subject to capital gains tax.

www.cnbc.com • Share

Silicon Valley bets on crypto projects to disrupt finance

Uniswap is not even three years old, but it has already turned millions of dollars into billions for venture capitalists who bet on a new kind of cryptocurrency exchange.

Instead of acting as a traditional broker, Uniswap is an automated software program that allows users to trade cryptocurrencies directly with each other, without any intermediary.

Last year venture capitalists who had invested a total of $12.8m in the company behind the project received a sweetener: Uniswap began distributing 1bn digital tokens to users, giving investors 18 per cent of the total. The tokens, which give holders voting rights in the project, have surged to a price of $28, rewarding the investors with a stake worth roughly $5bn were all the tokens issued.

Uniswap has outlined a four-year vesting schedule for the tokens, which currently have a market capitalisation of about $16bn, according to CoinMarketCap data. Uniswap has plenty of company. In the past year, the fastest-growing cryptocurrency start-ups have been those aiming to abolish financial intermediaries. They have also brought along a new crop of venture capitalists, producing returns that are the envy of more conservative peers.

Decentralised finance, or “DeFi”, projects aim to replicate basic financial services such as lending and trading using software programs known as blockchains, cutting out traditional middlemen.

www.ft.com • Share

What is a Creator to Do?

How Facebook killed blogging — and Twitter reinvented it

We didn’t stop blogging. We just do it 280 characters at a time now.

I owe my journalism career to blogging. I blogged daily from 2004 to 2006; that got me noticed by editors at sites like Ars Technica, which enabled me to quit my day job and become a full-time freelance journalist in 2007.

The online news landscape has been transformed in the last 15 years. Today, the blogging community that helped launch my journalism career barely exists. The 2000s-style blogs that still exist are nowhere near as central to the online conversation as they were in the George W. Bush years.

Social media plays a central role in this story. In the early 2010s, big tech platforms — especially Facebook, but also Google, Reddit, and Twitter — became the most common way many readers found news stories. That profoundly shaped the incentives of an emerging class of web-first professional journalists — many of whom were former bloggers.

One big consequence: blogging became less social. It became much less common for writers to recommend and critique one another’s work. Twitter picked up much of the resulting slack; the kind of intellectual discussion that once happened on blogs now largely happens on Twitter.

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Future of Media — a quick reality check — On my Om

I came across this opinion piece about the role of social media in the demise and subsequent rebirth of blogging, a topic not unfamiliar to readers of my blog. It credits Twitter for providing a platform that allows for interactions similar to those that distinguished early blogging communities. And at least in a superficial way, that’s not wrong, I guess. But there is a wide gulf between the impulses that drive social media and the “why” of blogging. And the author completely overlooks the latter in his eagerness to report that, after many bloggers were wiped out, some elements of the activity formerly known as blogging survived. (Fact check: classical blogging continues to flourish in all corners of the Internet.)

As I have noted a time or two, blogging and the behaviors it inspired were the genesis of many contemporary activities on the Internet. Yet, despite this, we still seem unable to fully appreciate what was at the heart of blogging — that thing that makes so many of us nostalgic for its heyday, even as we tweet until our thumbs ache. And this brings me to my long-standing quibble with the media establishment: why can’t they recognize significant changes until it is too late?

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Will Apple Mail threaten the newsletter boom? — Platformer

Today, let’s talk about one of Apple’s many announcements this week at its Worldwide Developer Conference, which some see as a possible threat to the rise of journalism distributed by email. If that sounds self-indulgent, given that it’s coming from a journalist who distributes his work via email, I apologize. But it touches on so many of the subjects of interest to us here — a tech giant’s ability to reshape markets to its liking; how journalism will navigate the platform era; what we mean when we talk about privacy — that I hope I can pique your interest at least a little.


Start with the news. On Monday at WWDC, Apple announced Mail Privacy Protection, which will limit the amount of data that people who send you emails can collect about you. Here’s how the company describes it:

In the Mail app, Mail Privacy Protection stops senders from using invisible pixels to collect information about the user. The new feature helps users prevent senders from knowing when they open an email, and masks their IP address so it can’t be linked to other online activity or used to determine their location.

When you eventually update your iPhone to iOS 15 this fall, you’ll see a screen at launch that invites you to opt in:

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Global Taxes?

G7 seals breakthrough deal to tax global companies — POLITICO

G7 countries reached a landmark agreement Saturday aimed at making it harder for the world’s largest companies to avoid paying taxes.

Under the deal, reached during a G7 finance ministers meeting in London, members agreed to set a minimum 15 percent global corporate tax threshold, a step they say will force companies to pay taxes in the countries where they generate their business, instead of siphoning profits offshore to tax havens.

While the G7, which includes the U.S., Japan, Canada and leading European countries, doesn’t have the power to impose global norms, the agreement by seven of the world’s largest industrial nations is seen as an important step toward forging a worldwide accord on corporate taxation.

www.politico.eu • Share

Facebook Plays Defence

Why you can’t write for Bulletin, Facebook’s new Substack clone

Facebook is recruiting and paying writers for its paid newsletter product for a late June debut

Facebook wants to launch its newsletter product later this month. But it doesn’t want controversial writers using it — just the ones it’s recruiting.

Substack made email newsletters buzzy — and controversial. Then Twitter bought a Substack competitor and launched its own version. Now it’s Facebook’s turn: The social network is prepping its take on subscription newsletters with something called Bulletin. It’s aiming for a launch at the end of June.

Like its competitors, Bulletin is a simple proposition: Find a writer you like who covers something you’re interested in, sign up and receive a regular stream of content in your inbox. Some version of it will be free, and there will also be a paid option at some point.

And the Facebook twist on the product is … Facebook. Specifically, Facebook’s massive reach, with 2.85 billion users worldwide, and its ability to target and segment people who might be receptive to reading and paying for a newsletter that covers topics they’re interested in.

www.vox.com • Share

Disrupting Venture Capital

The Figures that Will Move the Venture Capital Market in the Next 5 Years

This weekend, Janet Yellen said the US economy would benefit from an increase in interest rates. The Fed has been struggling to combat historically low inflation. The combination of both the 25% increase in the money supply from last year’s stimulus plus the proposed infrastructure spending should trigger inflationary pressures. What does it mean for venture capital and Startupland?

In short, we should expect some cooling.

Let’s examine the relationship between total venture capital investment and the 10 year Treasury in some detail. The x-axis plots yield of the 10 year Treasury (average for the year). The y-axis tracks enture capital investment by year and the year of the data point resides in the reddish circle.

Our story starts in the bottom right of corner in the year 2000 with 6% interest rates and $18.2b of VC. Over time, rates decline and then in the 2012–2014 era, they begin to surge upward culminating 6–8 years later at the top-left of the chart and $200b+ invested.

Do you remember this shape from high school math? It’s a rectangular hyperbola and it suggests a relationship of y = A/x^n, which is exactly the net present value formula’s form.

In other words, the market is acting according to theory. As the interest rate approaches zero, venture capital spend approaches infinity. Given the pace of investment and valuations in Startupland, it sure feels like there’s infinite capital in the market.

Mean round sizes and deal counts when plotted against the 10 year yield also reveal rectangular hyperbolas.

This phenomenon isn’t limited to venture capital; PE demonstrates the same rectangular hyperbola, but the PE chart is smoother, implying the market responds more quickly to changes in rates than venture capital.

Here’s the bottom line: as interest rates increase, we should expect venture capital investment to regress. When the cost of capital is low and yields on cash are small, investors seek greater risk to attain a return. As the risk-free rate on Treasuries increases, market forces should engender enough friction to pull venture investment from the stratosphere into the troposphere or below.

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100 unicorn founders back London-based VC fund Firstminute Capital — Sifted

100 unicorn founders back London-based VC fund Firstminute Capital Sifted

Firstminute Capital has become the first venture fund to be backed by over 100 founders of unicorn-status companies, as global tech leaders bet on the continued growth of European startups.

This week London-based Firstminute closed its second seed fund of $160m, thanks to investment from the founders of companies such as Farfetch, Flixbus, Checkout.com, iZettle and Babylon.

They joined the founders of companies such as Adyen, Zalando, Ocado, Supercell, Calm, Check Point, MuleSoft and MongoDB who invested in the firm’s debut $100m fund which closed in 2017.

22 founders of $10bn+ businesses have also invested in the second Firstminute fund, as well as high-profile former and current chief executives of global tech companies and investors — such as Google’s Eric Schmidt.

This comes as more money is flowing into European startups than ever before, with a record $41bn of investments in 2020 compared to just $27bn two years prior. The first quarter of 2021 saw a record $20bn, more than double Q1 2020, according to Dealroom.

The past 12 months in particular have seen some remarkable success stories, with events company Hopin, and grocery delivery startup Gorillas consecutively breaking the record for the fastest European startup to reach unicorn status.

sifted.eu • Share

Seraphim Capital venture fund focused on SpaceTech set to float — Proactive Investors UK

Seraphim Capital venture fund focused on SpaceTech set to float Proactive Investors UK

Space may be the final frontier but it is no barrier for venture capital funds, it appears.

Sky News reports that a division of Seraphim Capital, which styles itself as the global leader in SpaceTech investment, is in talks with investment bankers on plans for an initial public offering of a fund that would focus on the space industry.

The company has already supported 63 SpaceTech start-ups, including AST Space Mobile, which is developing a cellular broadband network that can be accessed by standard smartphones, and Panet Watchers, experts in synthetic aperture radar-led analytics.

The Seraphim Space Fund is backed by leading “space corporates” and international space agencies, including investors in Airbus, SES, Teledyne, Telespazio, SSTL and accelerator partnerships including Rolls Royce, Inmarsat, European Space Agency and the UK Space Agency.

According to Sky News, Seraphim will be looking to raise around £250mln in fresh capital via its flotation.

www.proactiveinvestors.co.uk • Share

SoftBank pours up to $150M into GBM, a Mexico City-based investment platform

Grupo Bursátil Mexicano (GBM) is a 35-year-old investment platform in the Mexican stock market. In its first three decades of life, GBM was focused on providing investment services to high net worth individuals and local and global institutions. Over the past decade, the Mexico City-based brokerage has ramped up its digital efforts, and, in the […]

techcrunch.com • Share

The super non-obvious guide to raising a Series B — Five Links (and three graphs) by Auren Hoffman

10 non-obvious rules for founders and VCs

SafeGraph recently raised a $45M Series B and I have gotten a ton of inbound from entrepreneurs in similar stages for best practices. This piece is for other entrepreneurs but also for venture capitalists who want to better understand what crazy founders are thinking. This was originally published on the SafeGraph blog.

If there is one thing common across humanity, we all just want to be loved and felt loved.

If you are looking for a spouse, my best advice is your number one criteria for a partner should be someone that truly loves you. And if you are picking a venture capitalist to be your financial partner, find the firm that most loves your business.

So, without further ado, here are the ten non-obvious rules to raising a Series B — both for founders and VCs…

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Startup of the Week

The country of El Salvador


Tweet of the Week

The land that ambition forgot — Europe is now a corporate also-ran. Can it recover its footing?

American and Chinese businesses have left their European counterparts in the dust

In 1984 a besuited 20-something American executive on a visit to France offered Europeans a few tips for corporate success. Entrepreneurs needed to be given a second chance if they failed and government bureaucrats made for lousy investors, he told a television interviewer. His advice was sage. But European companies ruled the global corporate roost alongside those of America and, occasionally, Japan. Why should they take advice from this uppity Californian newcomer?

Nearly four decades later the company founded by that young upstart, Steve Jobs, is worth more than the 30 firms in the German blue-chip dax index combined. Its value is not far off that of all 40 companies in France’s cac index. Apple’s success has been notable, but it is the decline of corporate Europe that is truly striking. At the start of the 21st century 41 of the world’s 100 most valuable companies were based in Europe (including Britain and Switzerland but excluding Russia and Turkey). Today only 15 are (see chart 1).

www.economist.com • Share

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