If you have yet to visit the Guild Theatre in Menlo Park, you are missing out. Great venue, unbelievable acoustics, extraordinary acts. Drew Dunlevie, former Yahoo!, is the Peninsula Arts Guild, organization president.
- Substack Doubles Down on Success
- Venture Capital Trends
- A Big Week in Crypto — Spotlight
- Who’s Rich?
- Essay of the Week
- Startup of the Week
- Tweet of the Week
I visited The Guild Theatre in Menlo Park last Sunday evening. It opened in February and has begun to develop quite a lot of “chatter” in the area. Susto, a band made up of South Carolina, Georgia and Mississipi born musicians were the main act.
By way of background, at the ripe old age of 17/18, I was a DJ and later booked the bands at my University. Drinking Newcastle Brown with Ray Davies of the Kinks at Kent University as we watched 10CC (he managed them) is a highlight.
And in my hometown, Scarborough, I worked at and attended the only underground club within many miles — The Penthouse — with my friends Dave Walton and Frank Matthews. The Penthouse hosted Bowie, Arthur Brown, The Dooby Brothers, and hosts of other amazing performers. Roxy Music did their first tour there. Ferry and Eno and the others walked the beachfront the next morning.
So, I am pre-disposed to like live music. But this was a step above. I can’t imagine that all of the best touring performers, where this size venue is a fit, would not want to come. And the peninsula citizenry will benefit a lot from its existence. I’ll be back.
Hats off to Drew Dunlevie. I do not know Drew, but his brother Bruce was a regular TechCrunch meetup attendee in the very early days.
I’m in Canterbury as I write this. I am staying on the famous Cathedral grounds.
Tomorrow I will be honored with a doctorate. So no more extended editorial this week. And no video. Back to normal next week.
That said, great content is below. Enjoy.
The Guild Theatre held a soft opening last night, and the venue is a “wow.” The attention to detail, the feeling of intimacy with the just-right size, the lighting, the acoustics, the little extras like the various artifacts from the old Guild come together to make it a very special place indeed. Two musicians with […]
Substack Doubles Down on Success
A rundown of the latest product improvements to help Substack writers succeed.
Search for free stock images in the editor
A more powerful image search tool is helping writers find the right images to support their words. Image search allows writers to look for free stock photography from Unsplash using keywords and to insert them directly into a post. Start using image search now by clicking on the image icon in the editor, then selecting “Search for an image.”
Early-access post scheduling
By popular request, writers can now schedule a paid post to be published to free subscribers at a later date. The feature allows writers to offer “early access” to their writing or podcasts as a paid perk while keeping them accessible to everyone.
Activity alerts on the web
A new activity page has been added to the web version of Substack, allowing writers and readers to track their activity in one dedicated space — including new likes, comments, and replies.
Updates to how ARR is calculated
We’ve made some changes to improve how we calculate the annual recurring revenue (ARR) for a publication, which writers may have noticed on their subscriber dashboard. This covers adjustments to payment scenarios such as subscriber extensions, when a refund occurs, or when there are changes to the exchange rate for non-USD payments.
Stats now reflect the Substack app
We’ve made several improvements to give writers even more insight into where people are reading. These changes reflect additional data provided by the new Substack app.
For writers, the top chart in the stats dashboard now displays “Total traffic” instead of “New visitors,” and it counts all visits to their publication across email, web, and the app. As a result, the visit numbers shown may be higher than before.
Many readers who cancel their paid subscriptions indicate that they’d like to re-subscribe at a later date. This feature was first beta-tested with positive results for writers and readers, so it is now available to everyone. As a result, we now present a suggestion to pause paid subscriptions for one, three, or six months instead of canceling outright.
Venture Capital Trends
- Market turmoil has rocked the confidence of tech investors
- Investor has led a $60 million funding round in Cyera
The ongoing tech downturn has caused late-stage venture capital funds to pull back activity as risks to the economy mount, according to a senior executive at Sequoia Capital.
Venture capital funds have gone from telling portfolio companies “run, run, run” to “stop, stop, stop,” said Sequoia Capital Managing Partner Doug Leone in an interview. With “prices sticking downwards,” there are “fewer investors and fewer founders as typical in a down-market cycle,” he said.
Market turmoil has rocked the confidence of tech investors over the past few months. Instacart Inc., the grocery delivery startup that soared during the pandemic and backed by Sequoia, cut its valuation by nearly 40% to align with the state of the economy. Oyo, the high-profile affordable lodging startup that filed for an initial public offering last year, is considering slashing its fundraising target by half.
Allocators Want Access to Top Startups Without All the Competition. Venture Debt May Be the Answer. — Institutional Investor
Amid a hotly competitive market, there may be a better way for asset owners to tap into popular startups — without vying for access to the top venture capital managers.
Venture debt is a burgeoning section of the market which has long been dominated by just a few players. That is now changing, according to Zack Ellison, chief investment officer at venture debt firm Applied Real Intelligence.
“Once institutional investors wake up and smell the coffee, there’s going to be a ton of demand for this,” said Ellison. He spoke on the topic on Thursday at the Alts LA Conference in Los Angeles.
Venture capital was a major driver of asset owners’ massive returns in 2021, adding fuel to an already hot market. With allocators worried about missing out on the next great investment, VC firms have been able to raise capital at a rapid clip.
But many investors have trouble accessing brand name mega-funds like Andreessen Horowitz or Sequoia, which are scooping up portfolio companies left and right. Venture debt can offer a reprieve, according to Ellison.
Listen now (59 min) | The Homebrew co-founder explains his new, smaller strategy
Hunter Walk, co-founder of the venture capital firm Homebrew, is a staple of tech Twitter. Walk worked on Second Life and at YouTube before founding his own venture fund along with Satya Patel.
A month ago, the duo announced that they were dramatically changing their strategy. The firm had previously raised three funds from limited partners — $35 million in 2013, $50 million in 2015, and $90 million in 2018 — and invested in companies like Chime, Plaid, and Honor. Then, late last month, Walk and Patel announced that they had decided to change course and start investing their own money.
That strategy shift will drastically reduce their pool of capital. And it will mean forgoing lucrative management fees that provide a guaranteed income as they wait around for their portfolio companies to mature.
Walk came on Dead Cat to explain the decision to embrace an “evergreen” capital model. We chatted about founder archetypes and what types of founders he’s looking to invest in.
In the second half of the conversation, we talked about how his views on content moderation have developed since his time at YouTube. And he bristled at the idea that I saw his brand as a “good liberal” VC.
Give it a listen.
Listen to Dead Cat on Spotify. A podcast about Silicon Valley, hosted by newsletter writer Eric Newcomer and Tom Dotan, with Katie Benner as a regular special guest. www.newcomer.co
Swedish fintech Ark Kapital is announcing a €165m seed round (made up of €15m in equity and €150m in debt) led by LocalGlobe.
Alternatives to traditional VC funding are all the rage. There are at least 18 revenue-based financing startups now operating in Europe, which enable startups to get access to capital without parting with equity — and now there’s a well-funded loans provider too.
Today, Swedish fintech Ark Kapital is announcing a €165m seed round (made up of €15m in equity and, fittingly, €150m in debt) led by LocalGlobe. Fellow VC firm Creandum and angel investors including Supercell CEO Ilkka Paananen and iZettle founder Jacob de Geer also participated.
Ark Kapital offers non-dilutive loans of €1m-10m to European startups. Unlike most loans providers, Ark’s loans can last up to seven years and are based on future revenue projections. Repayments also don’t start for two or three years.
While revenue-based financing (RBF) startups predominantly focus on SaaS and ecommerce companies, offering capital in return for a percentage of future sales, Ark plans to work with all kinds of early-stage tech companies that have high growth potential but aren’t yet profitable.
“We think RBF is fantastic but we also feel it’s highly standardised and is made one-size-fits-all which makes it a little bit limited as a product,” says Axel Bruzelius, COO of Ark.
How does it work?
Ark, which launched last November, has developed an artificial intelligence platform, similar to EQT Ventures’ AI-driven investment platform which Ark’s cofounder Henrik Landgren developed when he was a partner at EQT. The AI platform at EQT uses internal and external data to help identify potential investments, and has helped the VC source companies like Peakon and Handshake.
For Ark, the AI is used to analyse potential borrowers, based on engagement data combined with relevant external market data. The platform then applies advanced modelling techniques to estimate when a customer will become profitable, when it will require a new capital injection and how quickly it can reasonably repay a loan. That data is used to decide whether a loan is possible.
Analytics and insights from the platform are also shared with customers to help them make good business decisions.
So why would a fintech startup focused on helping startups steer away from venture capital?
“For our customers, we are financing the predictable parts of their growth. For Ark, we have very high belief in our tech platform and what we’re building, but before we can show that it works we need a finance partner that can understand our lending and the metrics that go into that,” says Bruzelius.
Penny Crosman, Executive Editor, Technology American Banker; Robert Anderson, Partner, FTV Capital; Mariquit Corcoran, Group Chief Innovation Officer, Barclays; Arvind Purushotham, Managing Director and Global Head of Venture Investing, Citi Ventures; Ben Savage, Partner, Clocktower Technology Ventures
Atomico is raising $750 million for a growth fund and $600 million for a venture fund, according to filings with the U.S. Securities and Exchange Commission. The funds have already held a first close, according to a person familiar with the matter.
A spokesperson for Atomico declined to comment on the funding total.
The London-based firm has invested in prominent startups such as Klarna Bank AB and Stripe Inc. It’s led by Chief Executive Officer Niklas Zennstrom, who co-founded Skype. Atomico raised $820 million for a new fund targeting European startups in 2020. Bloomberg
Parkwalk has been named as the top investor into spinouts for 2021, in the latest research on ‘Equity Investment into UK Spinouts’, Beauhurst report
Key findings from the report:
- Spin-outs earned £2.5bn in equity investment in 2021, up 69pc from the £1.5bn in the previous year and a five-fold increase on investment in 2012
- A record 102 new companies received funding, with scale-ups attracting one in every ten pounds invested in private companies
- A total of 3,207 equity deals between 2012 and 2021
- There was £10.9bn of equity investment secured by spinouts between 2012 and 2021
- A record 40% of deals involved participation from international investors, which shows that the technologies spinning out of the UK’s universities are attractive enough to lure investors from abroad
Moray Wright, CEO, Parkwalk said: “This year’s report shows an increased appetite for first-time equity deals and a record level of overall funding for spinouts. But…We still believe that despite the world leading research produced here in the UK, deeptech is still hugely underfunded at the scaleup stage, especially from UK investors.”
Download the full Beauhurst report here.
Persuasion Through Stories: Our Investment in Tome. | by Greylock | Mar, 2022 | Greylock Perspectives
Persuasion is the centerpiece of work. Customers must be convinced to buy your product, teams must be inspired to come along with a strategic plan, partners need to be swayed to sign the deal.
Effective storytelling is at the very foundation of persuasion. Rhetoric and data, woven into the right story, can change minds. Storytelling is central to the way we work together — how we share ideas, collaborate on projects, and ultimately, move business decisions forward.
But most people struggle to communicate their ideas, let alone persuade. Effective storytelling is hard, and the new world order of hybrid-first offices and distributed teams has only exacerbated this problem.
Until today, the tools we’ve had to help us present and collaborate on our ideas simply haven’t kept up. We can organize data — but it’s rare that people are inspired from looking at a spreadsheet. We can master the perfect pitch deck — but it’s often too time consuming for the rhythm of modern work. We can create a detailed spec doc and message each other constantly, but critically important creative and intellectual work — synthesizing and communicating ideas — is harder than ever.
A Big Week in Crypto — Spotlight
The SEC wants to expand the definition of “dealer” in a way that could affect decentralized finance (DeFi) traders.
- The SEC has been releasing proposed rule changes this week.
- One proposal addressing electronic Treasury bond traders could impact liquidity on DeFi markets.
Seemingly tiny policy changes can have unintended consequences. Take the 1989 Exxon Valdez oil spill, which prompted states to hold tanker operators liable for future oil spills. In response, at least one oil company outsourced oil deliveries to independent ships with questionable records, paradoxically increasing the potential for disaster.
Same too with a rule proposed this week from the U.S. Securities and Exchange Commission dealing with electronic trading of U.S. Treasury bonds. A suggested tweak to the definition of “dealer,” tucked into a footnote, could upend crypto’s decentralized finance wing without ever referencing DeFi.
As explained by Blockchain Association head of policy Jake Chervinsky on Twitter, the rule, as proposed, “would expand the definition of regulated ‘dealers’ to include people who ‘employ passive market making strategies’ that have ‘the effect of providing liquidity’ to others.”
AltExchange, a company that aggregates and organizes information from more than 50 alternative investment platforms for wealth managers, launched yesterday. It already has just under $100 million on its own platform and a list of 300 investors waiting to use it.
Zak Boca, co-founder and CEO of AltExchange, likened his company to Plaid, a software that allows banks and other financial services companies, with permission from their customers, to access account information at unaffiliated firms. Banks and fintech companies then use that account information to help their customers analyze their finances and make decisions.
AltExchange is doing something similar for self-directed investors and financial advisors, who are investing more in alternatives and accumulating additional technology platforms to manage those assets. With AltExchange, users can view those assets in one place, and it helps them report, analyze and make decisions about alternative assets on other platforms.
Investors can connect private equity, venture capital, real estate, cryptocurrency, NFTs, collectibles, employee stock options, and other assets, to AltExchange. It tracks performance, can generate real-time reports, automate capital calls, and tracks the impact of fees on performance with net and gross returns. The platform also can help users benchmark illiquid investments against liquid assets and consolidate tax and investment documents for all the linked accounts.
Investments in emerging technologies such as Web3 and cryptocurrency increased to over $500 million in 2021 from $20 million in the previous year even as consumer technology, fintech, and software-as-a-service (SaaS) continued to account for a substantial pie of the total venture capital (VC) investments by value, according to a Bain & Co report.
Overall, India’s VC funding touched a record $38.5 billion in 2021, growing 3.8 times over 2020, the report titled India Venture Capital Report 2022 showed.
Notably, the share of the VC deal value within the cumulative private equity and venture capital investments reached more than 50% for the first time, it added.
The trick to being a great venture capitalist is being non-consensus and right. Multicoin Capital is a perfect example. In Part 2 of our trilogy, we explore how the fund reasons from first principles and remains disciplined.
Every venture capitalist hopes to be a contrarian. Many Medium posts and Twitter threads have been penned in bald pursuit of this coveted denomination. Such interest is not motivated by vanity alone — it is, after all, quite suave to cut an iconoclastic figure. Rather, that is where the money is.
As the saying goes, venture is a game of being “non-consensus and right.” It’s easier to understand the second of these: you do not make money if you are wrong. The importance of being non-consensus can be trickier for a newcomer to grasp. Because of venture capital’s skewed distributions, it is not enough to just be right — you must be right about something that everyone else ridicules or ignores. Only these opportunities produce enough value dislocation for monster returns. Accepted wisdom yields little alpha.
Multicoin Capital embodies this dictum. Not only has it been right (a lot), it has been right in the face of vociferous disbelievers. Few firms have been willing to look so foolish for so long in commitment to their convictions.
How does Multicoin do this? What does it mean to run a fund that is genuinely contrarian? Which factors allow the investment team to find and fund offbeat winners so reliably?
Based on my time spent with Multicoin, its limited partners (LPs), and portfolio founders, I’ve developed an understanding of how it answers these questions. In today’s piece, we’ll explore Multicoin’s investment process from start to finish, touching on:
- Thesis formation. Some funds operate opportunistically, investing in great founders that surface new ideas. That’s not Multicoin’s style.
- Sourcing opportunities. Once Multicoin has a thesis in mind, it searches for projects with a similar view of the world. Doing so involves making some noise.
- Evaluating investments. The partnership only funds businesses it believes are “first-order correct.” Adhering to this rule has involved missing some winners.
- Surfacing blindspots. To sharpen its thinking and disabuse itself of weak arguments, Multicoin runs investment committees that operate like debates.
- Sizing bets. Once Multicoin has decided to invest in a company, it thinks about how to size its investment. Part of what has made it most effective is its willingness to bet big.
- Adding value. With few exceptions, every investor tries to support its portfolio companies. Multicoin goes particularly deep with its founders and is proactive in providing support.
- Aggressively doubling down. Part of Multicoin’s approach is to follow its best bets with further investment. It does this even when other VCs seem to be taking a step back.
If you want the privacy of paper money, you need something that leaves no paper trail.WHEN YOU HEAR the phrase “digital cash,” what comes to mind? Perhaps a payment app, like Venmo, that you use in situations that used to call for paper bills, like paying back a friend for dinner. Or maybe you think of cryptocurrencies. After all, the original Bitcoin white paper is titled “Bitcoin: A Peer-to-Peer Electronic Cash System.”
But none of these digital payment options are really like cash. Unlike paper money, they require both an internet connection and a bank account to use. Above all, they lack what has long made cash the preferred medium of civil libertarians, dissidents, and criminals alike: privacy. The only kind of money that leaves no paper trail is paper.
A bill introduced in Congress on Monday seeks to re-create the virtues of cash, privacy and all, in digital form. The ECASH Act would direct the US government to experiment with issuing digital dollars that are stored on hardware, not in bank accounts, and can be used without an internet connection. The idea of new, surveillance-proof currency will surely face skepticism within government. But with paper money on a slow path to extinction, the case for a real digital alternative will only grow stronger.
It’s easy enough to understand why apps like Venmo, which infamously makes your transactions public by default, are an imperfect substitute for cash. Anyone using an app to send money around should be aware that they’re leaving a permanent digital trail that could be accessed by the government or malicious actors. With crypto, on the other hand, the lack of privacy is a bit counterintuitive. Privacy was an essential part of Bitcoin’s original appeal. Early crypto enthusiasts believed that the blockchain would free them from Big Brother. Using a distributed ledger rather than a centralized one would remove the need for a banklike middleman that could block transactions. And tying accounts to cryptographic wallet addresses, rather than offline identity, would keep transactions anonymous. This led to a profusion of illegal activity taking advantage of cryptocurrencies.
But, as my colleague Andy Greenberg illustrates in his forthcoming book, the early faith in crypto anonymity was misplaced. The thing about blockchains is that while your transactions might be hidden behind a crypto wallet address, they are also permanently stored on a public database. It didn’t take law enforcement agencies too long to figure out how to connect those transactions and wallets to the real-world identities behind them.
Today, the 10 richest people in the world control $1.3 trillion in wealth.
This scale of wealth is equal to approximately 1.4% of the world economy, Amazon’s entire market cap, or spending $1 million a day for 3,000 years. In fact, it’s double the amount seen just two years ago ($663 billion).
As billionaire wealth accumulates at a remarkable speed, we feature a snapshot of the world’s richest in 2022, based on data from the Forbes Real-Time Billionaires List.
Top 10 Richest People in the World
Essay of the Week
Salvador da Bahia gave the world samba and capoeira, now it wants to give us tech startups too, says Vale do Dendê’s Paulo Rogério Nunes.
What is unique about Bahia’s startup ecosystem and why?
In Brazil, the northeast is seen as separate from mainstream business ecosystems in São Paulo — the financial capital — and Rio, the tourist capital. But Salvador, the capital of Bahia, was the country’s first capital. It’s the cultural capital of Brazil and it’s at the heart of Afro-Brazilian culture. What’s different here is the creative economy. Salvador is the birthplace of Brazilian culture — samba and capoeira started here. This strong culture is a foundation for a very creative society. If you combine the creativity, innovation, and problem-solving skills we have here with technology, it makes something very special.
What are the biggest challenges for Black-led startups in Bahia and what is Vale do Dendê doing to tackle them?
The biggest barrier is definitely access to capital. We’re talking about descendants of enslaved people who have no inheritance. Black people in Brazil are three times more likely to get their credit denied by banks than their white counterparts. This gap in access to both traditional capital and VC funding is because investors lack relationships with Black people. That’s why we created Vale do Dendê, to focus more on those entrepreneurs.
Startup of the Week
In a country where 50% of its 100 million people are active smartphone users, two out of every three individuals have little or no access to formal financial services in Egypt.
With banks doing their best to deepen financial services to the underbanked and unbanked across the North African country, startups are also playing their part. One such provider is Cairo-based Khazna — a self-described “financial super app” that has raised a $38 million Series A in debt and equity. The company has received a total of $47 million since its inception.
The company, founded by Omar Selah, Ahmed Wagueeh, Fatimah El Shenawy, and Omar Salah in 2019, provides basic banking and various financial services focusing on middle and lower-income earners.