By Keith Teare • Issue #314
The Dark Ages describes a time when little or nothing changed. There was no progress. It needed the agricultural and industrial revolutions to break out from the dark. 2022 might seem dark but there is innovation all around us. Adapt or Die is this week’s theme. And unlike the dark ages, adaptation is an option. Content from @bgurley @samirkaji @sethlevine @geneteare @sequoia
- Sequoia Capital advises founders on how to adapt
- Tech Layoffs accelerate
- Bill Gurley on Adapting
- Frank Slootman on Surviving – Podcast
- Tiger Global doing better than reported
- Samir Kaji on contextualizing the correction
- Venture Funds raising more money
- Steve Cohen believes in DeFi
- Coinbase lays off 18%
- Meta drops products and changes strategy
- Venture Deal terms do not favor Founders
- Apples 10 Year live soccer deal
- Investors are not very impactful – Seth Levine
- Celsius collapse
- Visual – The next 10 years in shifting Global Power
- Wesley Chan and Pegah Ebrahimi’s new $450m fund
- Venture Fund Raising – Samir Kaji
I am in Berlin this week at SuperReturn and SuperVenture. Several thousand venture capitalists and private equity investors convened to talk about the state of their industry.
SignalRank had four team members in almost continuous meetings speaking with investors.
You would imagine that this would be a time for humble reflection as public markets adjust to the new inflation-driven realities and rising interest rates. But, as we have observed in the past few weeks there is more than one thing happening simultaneously. This week’s content reflects that. Adapt or Die is the title I chose because the week has really been dominated by one of those trends – company layoffs and venture investors’ advice about how to survive the next two to three years.
Sequoia Capital has published four advice presentations to its portfolio and we lead with them as they are excellent at capturing what needs to be done. Bill Gurley complements that with a great thread along the same lines, but so well put that any founder with doubts about the need to adapt will have them severely challenged.
Gurley points to a podcast where Snowflake CEO Frank Slootman discusses his personal reaction to the dramatic reduction in the price of his stock, which basically says he ignores it and focuses on his core business metrics – costs, revenues, and innovation for customers. The stock will probably benefit from his narrowing of focus.
But back to Berlin and the other trend that lives inside of the adaptation. Venture and PE Funds are raising new capital at a very fast clip. The attitude is that whereas past investments need to adjust to new realities, new investments are going to be priced far lower than previously and therefore make the next two or three years excellent for investors. The name of the game is higher equity stakes for less capital in companies that become market leaders during the next five years.
Therefore the mood here is upbeat when looking forward and not so much when looking back.
That said, Samir Kaji and Gené Teare both write this week that the past is not as bleak as you may think. Yes, public markets are down, but not by as much as you might think. If you look back only as far as 2020 and look at today’s markets they are still up significantly. Samir’s chart is below.
And Gené writes about the current state of Tiger Global, telling a story of success in private markets that increasing form the core of Tiger’s strategy.
All of this gives context, important context, to the current situation. This is not the dark ages where nothing good is happening. It combines elements of correction with the birth of new opportunities. Only the latter provides a basis for action. So, let’s not be morose, but focus on building the products and services that will define the next decades.
In our essays of the week, we focus on Apple’s 10-year MLS soccer deal, complementing its Baseball deal. The Celsius collapse. A great essay by Seth Levine about investor impact on the companies they invest in (or lack thereof). Also, a 10-year look at which nations will prosper and which will decline.
Adapt or Die seems like a great way to capture the essence of this moment.
Adapt or Die
Digital toolkit based on presentations hosted by Sequoia to help founders navigate the current market conditions and emerge as strong, enduring companies.
After a banner year for tech, layoffs are here. In fact, as of mid-June, more than 19,000 workers in the U.S. tech sector have been laid off in mass job cuts so far in 2022, according to a Crunchbase News tally.
Tech companies as big as Netflix have slashed jobs this year, with some citing the effects of the COVID-19 pandemic and others pointing to overhiring during periods of rapid growth. Robinhood, Glossier and Better are just a few of the tech companies that have notably trimmed their headcount in 2022.
To keep tabs, we’ve compiled a list of U.S.-based tech companies that have laid off employees so far this year.
Frank Slootman is the chairman and CEO of cloud platform Snowflake. Frank has become one of the most revered CEOs in business. Over the past twenty years, he has three times taken over emerging enterprise software businesses – first Data Domain, then ServiceNow, and most recently Snowflake – and led them across the chasm into large, billion-dollar businesses.
Good News of the Week
In the past two years, Tiger Global Management has upended the venture industry by investing in startups at an unprecedented pace. Along the way, the New York-based investor has racked up more unicorn portfolio companies—271 by our last count—than any other firm, edging out even Silicon Valley’s largest and most active VCs.
But with 2022 lurching into bear market territory and the firm’s hedge fund business—which invests in the public markets—reportedly losing 52 percent of its value this year amid a precipitous decline for technology stocks, the firm faces massive headwinds.
One silver lining: Although Tiger’s hedge fund has taken a beating, its private equity practice—which invests in the startup ecosystem and last year overtook its hedge fund business in size—is proving much more resilient to the downturn, according to a source familiar with the firm.
In the past year, Tiger has grown its private practice further as the firm continues to invest heavily in startups, according to the source, and today that business represents around two-thirds of the value of the firm’s money under management.
Tiger Global declined to be interviewed for this article.
Tiger Global’s private equity business was worth around $64 billion at the end of 2021, according to a report in The Wall Street Journal. Since its start in 2003, the private equity business has invested a total of $34 billion and returned around $28 billion over all time, the source confirmed to Crunchbase News.
Quartz is a guide to the new global economy for people in business who are excited by change. We cover business, economics, markets, finance, technology, science, design, and fashion.
Point72, the venture firm run by the inspiration for the ‘Billions’ TV-show, Steve Cohen, is now officially no longer just dabbling in crypto.
Bad News of the Week
Crypto winter has come for Coinbase. The company is laying off 18% of its staff “to ensure we stay healthy during this economic downturn,” CEO Brian Armstrong wrote in a blog post on Tuesday. Armstrong said in his Tuesday blog post that the company grew too fast, though the crypto downturn is likely a major factor.
A series of new reports suggest that Meta is making some big decisions about its future. Is there trouble in the metaverse, or is the company simply sharpening its focus during turbulent times?
Meta is curtailing its ambitious AR plans in a bid to cut costs in its Reality Labs division, according to The Information. The company had a series of augmented reality glasses in the works, but is reportedly changing the release timeline.
- Instead of releasing a pair of AR glasses to consumers in 2024, Meta is going to use the first iteration as a demo device and refocus its work on a second version. That pushes the timeline for public launch back by years.
- The new strategy doesn’t appear to affect the company’s forthcoming VR headset, Project Cambria, which is due out later this year.
Portal is going away — for consumers. Meta confirmed to Protocol that its video-calling smart display will be repositioned as a device for businesses in an effort to boost hybrid work efforts.
- Meta introduced its smart display back in 2018 in a bid to compete with Amazon and Google. While Portal sales increased during the pandemic, the device hasn’t hit the way the company had hoped. According to IDC, Portal devices make up just 1% of the global smart display market, with Google and Amazon taking the lion’s share.
- Meta released two new displays last year, the Portal Go and a new version of the Portal Plus. Those will be the last targeted toward consumers.
A long-rumored smartwatch has reportedly been canceled. Honestly, that might be a good thing?
- A Facebook-associated watch with not one but two cameras faced an uphill battle to win over consumers when the Apple Watch so easily dominates the market.
- The decision was reportedly due to cost-cutting measures, according to Bloomberg. The device was due out in spring 2023 and would have cost $349.
- The company will instead focus its efforts on other sensor-packed devices for the wrist that can be used to interact with virtual worlds wearing VR headsets.
It makes sense to sharpen strategy amid all this market turbulence. With slowing revenue growth at Meta, this looks like a company playing things a little safer. The metaverse is unproven, after all, and with devices like AR glasses Meta is going up against Apple, as well as potentially Google and Amazon. Meta is staking its future on some of this technology, and it will want to stick the landing
Last year at this time, venture dollars flowed freely and founders could name their own terms and prices on deals.
There were stories of investors putting up money without meeting the founding team, not doing full due diligence, and agreeing to valuations far from the scope of any reality—all in an effort to not miss out on the “next big thing.”
Times obviously have changed.
Funding continues to trend downward and private valuations continue to take a beating as inflation, interest rates, geopolitical issues and public market woes have caused a pullback in the market.
Essays of the Week
Apple and Major League Soccer (MLS) today announced that the Apple TV app will be the exclusive destination to watch every single live MLS match beginning in 2023. This partnership is a historic first for a major professional sports league, and will allow fans around the world to watch all MLS, Leagues Cup, and select MLS NEXT Pro and MLS NEXT matches in one place — without any local broadcast blackouts or the need for a traditional pay TV bundle.
From early 2023 through 2032, fans can get every live MLS match by subscribing to a new MLS streaming service, available exclusively through the Apple TV app. In addition to all of the match content, the service will provide fans a new weekly live match whip-around show so they never miss an exciting goal or save, and also game replays, highlights, analysis, and other original programming.
Proof that Apple is getting serious about sports. (Via Jason Snell.)
Companies looking to raise money turn to venture capital for a variety of reasons. Top among them is generally access to capital, but often on the list is the hope that raising capital from experienced (and well-networked) investors will have other positive impacts on their business. Certainly from the venture perspective, VCs (Foundry included) pitch themselves to companies, co-investors, and LPs as more than just capital. Indeed, many firms even institutionalize the practice of providing help to portfolio companies through extensive platforms that may include PR, talent, marketing, technical, and other help (sometimes offered for free, sometimes offered ads a pay-for-service, but often at below-market rates for those services). There are venture firms that have dozens of people employed in…
The post Investors Think They’re More Impactful Than They Actually Areappeared first on VC Adventure.
Over the next decade, China is expected to surpass the U.S. in economic power, and India is primed to become the third-largest economy.