Nothing to See Here


This week Facebook announced the NothingVerse (read it, you’ll see) whereas Sequoia Capital fundamentally changed their organization and venture capital forever. What a contrast.

By Keith Teare • Issue #280 • View online



I wish I could have found a picture of Mark Zuckerberg naked because I do believe that the emperor has no clothes this morning as I write this editorial. Instead, I have placed the image of Zuckerberg inside an empty MetaVerse. Alone with his logo. That seems apt for what was announced yesterday. I didn’t count how many times he said it, but a recurring sentence was “of course this is a ways out”. He was talking about real innovation not yet in place that will be required to build his vision. And he was talking decades not years. He was honest about that. Yet, yet, he changed the company name to Meta, and put his assets — Facebook, Instagram, Whatsapp, and so on — under the Meta brand.

This was a bold move, but not as bold as when he acquired Instagram for $1bn or Whatsapp for $19bn. These really were game-changing bets on mobile. We might forget but he also tried to release a Facebook smartphone and failed.

If you want to grasp what Meta is, it is an acknowledgment of failure. Failure by Facebook’s standards. The bar is high.

Facebook wants to be the container for all content, and the place you go to get it. It wants its own Internet, with you inside. It builds wonderful features to attract you, and get your attention. But that container is increasingly your smartphone, owned by Apple and Google. And the smartphone universe is punishing social media’s privacy invasions and impacting its revenues. Zuckerberg needs a new container, and new canvas, that he can own. The MetaVerse is just that. An all-encompassing canvas owned and run by Meta, containing the entire world. If it works the smartphone will be rendered way less meaningful.

There is one very large problem. For the MetaVerse to exist we:

  1. all need to wear VR face masks or,
  2. we need to make use of technology that is yet to be realistic — AR glasses. And even then,
  3. we have to want to do so.

At its root, this is an enormous problem. We do not want to do 1 in large enough numbers. 2 is not real yet, and likely will not be for decades. And most of us will not want to use these technologies. So the MetaVerse is reduced to a small side play for gamers and others. It is not a lot better than Second Life was back in the day. I think it is dead on arrival.

That makes Apple and Google still in the driving seat, and the smartphone still the primary container for content for many years yet. Sorry, Mark.

That said. Sequoia Capital also made huge changes to its organization this week. Roelof Botha, Doug Leone were both featured talking about Sequoia abandoning the Venture Capital model and replacing it with a more traditional company structure, similar to an asset owner or manager. There are lots below, but be assured, venture capital has changed forever. If you don’t yet realize it you are the likely victim. It doesn’t mean that there is less room for venture players. Gené Teare’s piece on the explosion of seed investing shows that. But how to play the game is evolving faster than at any point I can remember. SignalRank Corp is betting on that. More in the week’s video.



Welcome to Meta

The metaverse is the next evolution of social connection. Our company’s vision is to help bring the metaverse to life, so we are changing our name to reflect our commitment to this future.


Facebook is now Meta, but it’s not quite a metamorphosis

Zuckerberg also highlighted his company’s efforts to build new products for the metaverse, including new virtual and augmented reality hardware, highly realistic digital avatars, and new video game experiences. Facebook’s new focus on the metaverse comes seven years after the company purchased Oculus, which builds virtual reality headsets that allow people to play 3D virtual games.


Mark Zuckerberg on Why He Won’t Step Down as CEO and Facebook’s New Name

Facebook CEO Mark Zuckerberg says he hasn’t thought “very seriously yet” about spinning off the company’s augmented and virtual reality and metaverse unit Reality Labs from the rest of the business. In an interview with The Information, Zuckerberg also said he had not considered stepping down as CEO.

His comments to The Information were made ahead of Zuckerberg’s disclosure today, at the company’s Facebook Connect AR/VR event, that he is changing its corporate name to Meta. Zuckerberg said the new name was meant to evoke the company’s focus on building for the metaverse while also clearing up what Zuckerberg called “an inherent awkwardness” in having the company’s name match that of its flagship product. (The Information was not told the name ahead of time, but Zuckerberg answered questions on the subject.)


Mark Zuckerberg just announced the end of Facebook

Facebook is an app. Meta is the company. That was the final message of Mark Zuckerberg’s keynote at the Connect conference, in which he also explained a number of the ways Facebook — sorry, Meta — is thinking about the metaverse.

Meta is a “metaverse-first” company. That’s what Zuckerberg said he hoped the name change signals. But both in making that change and in some of Meta’s other new announcements, one thing is abundantly clear: Facebook is going from the center of a digital universe into just another app in the portfolio. And its days may be numbered.

  • Going forward, users won’t need Facebook accounts to log in to other apps and services; they’ll each be able to operate on their own. (It also sounds like a “Meta account” is going to be a thing, but who knows what that’ll look like.)
  • In fact, Facebook the app hardly came up at all during Zuckerberg’s keynote. He was far more focused on Meta’s Horizon products than any of the company’s existing social platforms. Though he did acknowledge they’ll have a place in the metaverse.
  • The writing has been on the wall for a while here: Facebook’s popularity has begun to level off, and even decline, among younger users. Throw in a half-decade of nonstop scandals, and while Facebook still generates a huge amount of revenue, it’s not a particularly good brand anymore.
  • Zuckerberg also hinted to The Verge that he knows the F-word is tainted. “I think it’s helpful for people to have a relationship with a company that is different from the relationship with any specific one of the products,” he said, “that can kind of supersede all of that.”

He does intend to keep the company together, though: He told The Information he hasn’t thought “very seriously” yet about splitting the social and the metaverse, though that’s how the company reports its earnings from now on. (Also, fun fact: It’s no longer $FB on Wall Street, it’s $MVRS.)


Facebook teases ‘Project Cambria’ high-end VR headset, retires Oculus brand

Facebook is going to release a new high-end standalone VR headset in 2022, the company revealed during its Connect developer conference Thursday. Separately, the company also announced that it was going to retire the Oculus brand for its VR products.

Code-named “Project Cambria,” the new VR headset will be backwards-compatible with the company’s Quest platform, but not a Quest device itself. That suggests that apps specifically developed for Cambria won’t run on Quest headsets.

The new VR headset will feature eye, facial and body tracking, and high-resolution video pass-through as well as 3D room sensing for mixed-reality experiences. The headset will use something Facebook calls “pancake optics” for a slimmer lens design.


Meta — Stratechery by Ben Thompson

Facebook’s reorganization into Meta is the ultimate bet on the power of founder control.

The obvious analogy to Facebook’s announcement that it is renaming itself Meta and re-organizing its financials to separate “Family of Apps” — Facebook, Messenger, Instagram, and WhatsApp — from “Facebook Reality Labs” is Google’s 2015 reorganization to Alphabet, which separated “Google”, including the search engine, YouTube, and Google Cloud, from “Other Bets.” The headline for investors is just how much Facebook is spending on Reality Labs — $10 billion this year, and that amount is expected to grow — but next quarter’s financials will also emphasize just how good Facebook’s core business is; if it plays out like Alphabet, this could be a boon for the stock.

At the same time, while the mechanics may be similar, it is the differences that suggest the implications of this transformation are much more meaningful. Start with the name: “Alphabet” didn’t really mean anything in particular, and that was the point; Larry Page said in the announcement post:

What is Alphabet? Alphabet is mostly a collection of companies. The largest of which, of course, is Google. This newer Google is a bit slimmed down, with the companies that are pretty far afield of our main Internet products contained in Alphabet instead. What do we mean by far afield? Good examples are our health efforts: Life Sciences (that works on the glucose-sensing contact lens), and Calico (focused on longevity). Fundamentally, we believe this allows us more management scale, as we can run things independently that aren’t very related. Alphabet is about businesses prospering through strong leaders and independence.

“Meta”, on the other hand, is explicit: CEO Mark Zuckerberg said that Facebook is now a metaverse company, and the name reflects that. It is also focused: Alphabet included a host of ventures, many of which had no real connection to Google; Facebook Reality Labs is a collection of efforts, from virtual reality to augmented reality to electromyography systems, all in service to a singular vision where instead of looking at the Internet, we live in it.

The biggest difference, though, is Zuckerberg: while Page and Sergey Brin, as I wrote at the time, “may be abandoning day-to-day responsibilities at Google, [they have] no intention of abandoning Google’s profits” to pursue whatever new initiatives caught their eye, Zuckerberg quite clearly remains fully committed to both the “Family of Apps” and “Reality Labs”; more than that, Meta is, as Zuckerberg said in an interview with Stratechery, a continuation of the same vision undergirding Facebook:

I think that this is going to unlock a lot of the product experiences that I’ve wanted to build since even before I started Facebook. From a business perspective, I think that this is going to unlock a massive amount of digital commerce, and strategically I think we’ll have hopefully an opportunity to shape the development of the next platform in order to make it more amenable to these ways that I think people will naturally want to interact.


Is this the end of social media?

At Facebook Connect today, Mark Zuckerberg is expected to unveil additional details about his company’s quest to build the metaverse. That includes a new generation of social media services that brings real-time communication to AR, VR and other platforms, complete with varying degrees of embodied presence (in the future, we’ll all be avatars).

Facebook has been spending heavily on the metaverse, including more than $10 billion in 2021 alone. But while it starts to take shape, one question still remains: If Facebook wants to be a metaverse company, then what does that mean for Facebook, the app and service? And is there room in the metaverse for Instagram, Messenger and WhatsApp?

The metaverse could replace social media as we know it. Facebook’s newly announced financial reporting changes seem to support the idea: Starting in Q4, the company will break out revenue and expenses for FRL, the unit tasked with building AR and VR hardware and services as well as devices like the Portal.

  • Most of Facebook’s existing business will be reported as part of a new “Family of Apps” segment that includes Facebook, Instagram, WhatsApp, Messenger and more. It’s where all the money currently comes from, but the grouping also has a strong legacy business stench to it.
  • There’s already some evidence that parts of Facebook’s legacy business have plateaued; daily active user metrics for Facebook, the service, have essentially been flat in Europe and North America since the beginning of 2020 — a trend that is apparently so alarming to the company that it now wants to refocus on young adults.


The End of Venture Capital? Sequoia is no longer Sequoia

Sequoia Capital just blew up the VC fund model

Sequoia Capital, one of the world’s oldest and most successful venture capital firms, is forming a single fund to hold all of its U.S. and European investments, including stakes in publicly-traded companies, Axios has learned.

Why it matters: Venture capital is the money of innovation, but the industry itself rarely innovates. This is a radical exception.

  • “We think the VC model is outdated,” Sequoia partner Roelof Botha explains. “It creates an odd dynamic between us and founders, where on the eve of an IPO they’re asking if we’re going to have to get off their boards and quickly distribute the stock. Why should that be the default, particularly when so much value creation happens later?”

Details: The Sequoia Fund will serve as an open-ended capital vehicle; the sole limited partner for all future Sequoia “sub-funds” (seed, venture, growth, etc.). Sub-fund managers will decide on when to contribute assets into The Sequoia Fund, optimizing for their own return profiles.

  • Limited partners will keep accounts with the Sequoia Fund, with annual redemption rights, and make allocation requests to sub-funds out of those account balances. In other words, the closed-end funds and the open-ended fund will continuously feed each other.
  • Sub-funds will maintain Sequoia’s premium fee structure, including a 30% carried interest, while The Sequoia Fund will have a <1% management fee and a long-term performance fee with what I’m told is “a very high hurdle.”
  • Sequoia employees will contribute at least 5% of The Sequoia Fund’s capital.

More: Sequoia also plans to become a registered investment advisor, which could let it expand its investments in areas like crypto and secondaries. The firm also told investors that it doesn’t plan to ever become publicly-traded.

  • These changes won’t immediately apply to Sequoia investments in India or China, such as TikTok owner ByteDance, although those platforms could eventually be incorporated.

The why: Sequoia argues that all of this is designed to better align interest between itself and founders, and itself and limited partners.

  • In terms of founders, the argument is about being able to remain involved and invested long after a company goes public. Roelof Botha, for example, remains on the board of Square.
  • In terms of LPs, Sequoia believes the traditional fund structure has prompted it to sell shares too early (including in companies like Google). One internal analysis of distributions over the past 15 years shows that had Sequoia held onto shares for just 12 additional months, it would have resulted in over $8 billion in added returns.


Why Sequoia is blowing up a 50-year-old financing model | PitchBook

Sequoia is fundamentally overhauling its fund structure, the most significant sign to date of the venture industry’s move from a model that increasingly looks outdated in today’s private markets.

Sequoia can be a true crossover investor

The evergreen fund structure makes it more like hedge funds and asset managers, but Sequoia will differ in that new assets come from a pipeline of sub-fund investments.

This change positions Sequoia to contend with crossover investors, which invest in both public and private companies. In many ways, Sequoia is already a member of this group: The value of its public company holdings has grown to $45 billion.

“They are setting themselves up to be even more long-term investors for companies,” said Kyle Stanford, a senior analyst at PitchBook. “Whereas crossover investors normally take the baton from VCs, Sequoia is now saying they are going to be set up to be long-term investors after the company’s IPO.”

Sequoia is also broadening its scope by becoming a registered investment adviser, following in the footsteps of rivals like Andreessen Horowitz and General Catalyst. That status gives firms flexibility to invest in crypto, IPOs, secondaries markets and seed investing programs — all strategies of interest that Botha called out in Tuesday’s announcement.


Iconic VC firm Sequoia is breaking from the venture capital model to hold public stocks longer

Sequoia Capital said in a blog post that the 10-year venture fund has “become obsolete.”


  • Sequoia Capital is creating a new structure so that all its investments will roll up into a single fund called the Sequoia Fund.
  • “For Sequoia, the 10-year fund cycle has become obsolete,” the Silicon Valley firm wrote in a blog post.
  • By eliminating timelines for returning capital to outside investors, Sequoia says it can hold on to public companies longer.


Sequoia to restructure itself away from traditional VC model

Silicon Valley investor wants to hold on to its investments for longer

Miles Kruppa in San Francisco

OCTOBER 26 2021

Sequoia Capital, one of Silicon Valley’s oldest and largest venture capital firms, has launched a bold restructuring to create a single overarching fund.

The Sequoia Fund will take in capital from investors and funnel it to Sequoia’s traditional venture funds, which invest in US and European start-ups.

It will also hold Sequoia’s stakes in publicly listed companies, such as Airbnb. It will also charge a management fee of under 1 per cent, and potential performance fees, adding an extra layer of fees on top of its existing venture funds, a person briefed on the changes said.

Sequoia hopes that the ambitious plan will give it and its investors more flexibility. Its investors will not have to commit their money to a specific VC fund for several years while Sequoia will be able to hold on to its investments for longer than other VC funds, which typically aim to return money to investors within a decade.

“Investments will no longer have ‘expiration dates’,” wrote Sequoia partner Roelof Botha in a blog post. “Our sole focus will be to grow value for our companies and limited partners over the long run.”

Sequoia also said it would file with the US Securities and Exchange Commission to become a registered investment adviser, allowing it to invest more money in cryptocurrencies, public stocks and private shares that it does not purchase directly from companies.

The firm was meeting with investors this week to explain the changes and ask how much of their fund holdings they want to contribute to the new structure, said one person briefed on the changes.

Sequoia manages $45bn of public stock holdings for its partners and investors, which includes $43bn of investment gains, the person said.


Tiger Global raises $8.8B, while a16z targets $6.5B for new funds | PitchBook

Money continues to flow into the venture capital ecosystem at a torrid pace, with two of the industry’s more active investors closing or seeking to raise giant funds, according to reports.


The Rise of the Seed Asset Class

How Seed Funding Has Exploded In The Past 10 Years — Crunchbase News

Seed-stage funding to startups has exploded in the past decade and become an asset class of its own. If that wasn’t obvious already, consider that in just the past few months, three of Silicon Valley’s largest and best-known venture firms — Andreessen Horowitz, Greylock and Khosla Ventures — all announced large new dedicated seed funds.

Subscribe to the Crunchbase Daily

To visualize this dramatic change in the venture ecosystem and understand how much seed investment grew in the past 10 years, we decided to look at the number of U.S. startups that were funded over various five-year time frames and at different stages.

Crunchbase data underscores an impressive rise in funding to the smallest startups: Fewer than 3,200 companies received seed funding in the period between 2006 and 2010. A decade later, that had ballooned to more than 23,000 startups.


Best of the Rest

Andreessen Horowitz Values Music Startup UnitedMasters at $550 Million

UnitedMasters, a music distribution app for independent musicians, has raised $50 million in a round led by venture firm Andreessen Horowitz at a $550 million valuation, including the new investment. The New York–based startup will use the cash to further its international expansion into regions like Latin America and also pay for acquisitions, said CEO and founder Steve Stoute.

The four-year-old company is part of a wave of music startups capitalizing on the popularity of TikTok and other short-video features, such as Instagram Reels and YouTube Shorts. The shared videos, which often feature music, have allowed musicians to find audiences without the help of record companies, which typically own the rights to their music.

In exchange for a fee, UnitedMasters lets artists retain full ownership of their recordings while offering additional services like brand partnership opportunities and analytics tools to track fan activity.


New York-Based Venture Capital Firm Wagers On Sports Betting Industry

New York-Based Venture Capital Firm Wagers On Sports Betting Industry NY Sports Day

Sports bettors still can’t place mobile wagers on the World Series or NFL in New York, but that doesn’t mean progress isn’t being made.

Yes, it’s frustrating that New York hasn’t yet implemented mobile sports betting, and the target date of 2022 seems far away. State and industry leaders, however, are laying the groundwork for what should be one of the biggest and most anticipated launches of mobile sports betting the United States has seen.

In August the state released a list of sports betting license applicants, which set off a flurry of speculation on which sportsbooks will be in place early next year when New York flips the switch on mobile sports betting.

In a move earlier this month that shows significant emphasis being placed on the up-and-coming industry, New York-based Sharp Alpha Advisors announced the closing of Sharp Alpha Fund I — an oversubscribed $10 million venture capital fund that will invest in early-stage sports betting technology companies.

Sharp Alpha Advisors Managing Partner Lloyd Danzig said making an early investment in the sports betting industry is the best approach.

“Not only is the sports betting industry at an inflection point, but market leaders are choosing to buy rather than build at every turn,” Danzig said. “With M&A (Mergers and Acquisitions) serving as the primary mechanism through which operators achieve differentiation and vertical integration, it is a great time to underwrite next-gen infrastructure.”


Nvidia’s bold bid for Arm is in big trouble

Nvidia’s Jensen Huang and Arm’s Simon Segars — two of the most important CEOs in the chip industry — are a study in contrasts.

The British-born Segars exudes a “can-I-hold-the-door-for-you” politeness. Huang is audacious, known for sporting a trademark leather jacket at public events and forging Nvidia’s play-to-win culture.

Huang’s bold vision for Nvidia’s future centers on absorbing Segars’ diplomatic strategy for Arm through a $40 billion bid to acquire the chip designer. It’s a transformative deal for both companies that would reshape the semiconductor industry: not just in terms of what it would mean for Nvidia, but also in the implications for the thousands of businesses around the world that rely on Arm’s technologies to make chips.

For Nvidia, the ambition is clear. If the deal closes, the company aims to sell Nvidia’s technology through Arm’s network of partners, create a full data-center platform that combines ARM server chip tech with Nvidia’s own data-center products and participate in “inventing the future” of cloud-to-edge computing, Huang said last year in an investor conference call.

“We’ve invested so much across all of these different areas that we felt that we really had to take the opportunity to own the company and collaborate deeply as we invent the future,” Huang said.


Crypto lending is taking off. Regulators may not be able to slow it down.

Crypto lending has come under scrutiny from the Securities and Exchange Commission and state regulators. These products, which often tout high yields, are securities, the agencies have said.

The field is growing fast, despite increasing regulatory pressure. There are a host of ways crypto owners can get paid interest or its equivalent. Some are steeped in the decentralized finance (DeFi) world, while others have more connections with traditional finance. They vary in how they’re set up and who operates them — details which may prove crucial both to investors seeking to navigate this world and regulators seeking to put guardrails in place.

Underlying crypto lending is crypto trading and speculation. There is strong demand to borrow crypto because hedge funds — and a range of investors — have found they can make money placing leveraged bets on tokens and crypto derivatives. Because these players can make considerable sums with their trading strategies, they can afford to pay middlemen high rates to borrow crypto. Those payments, minus a profitable cut, trickle down to ordinary crypto investors as yields that far exceed what they could get from bank deposits.

Of course, the products aren’t FDIC-insured. And ultimately, the higher risk of the products explains why there are higher rewards. So far, there hasn’t been a high-profile example of a crypto lending failure. But if there were a scenario where crypto tokens are loaned out and not returned, that could bring cascading failures throughout the crypto world and even the traditional finance system. That’s why regulators are increasingly talking about the systemic financial risk crypto poses.


Startup of the Week

Uber will rent up to 50,000 Tesla EVs to drivers

Uber will rent up to 50,000 Tesla EVs to US drivers through Hertz, potentially saving them money as they help the planet..


Hertz reportedly orders 100,000 Teslas in the single largest EV purchase ever

Tesla has just had a double-shot of good news on the sales front today..


Tweet of the Week

Web3 vs Web2 — AVC

Now that we are beginning to see what consumer applications are like in the decentralized web (web3), it is interesting to compare that to what consumer applications are like in the centralized web (web2). It became clear early in the 2000s that the big opportunity in the web would be to build large networks of […]


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