Sunshine on a Cloudy Day

By Keith Teare • Issue #324

Silicon Valley is struggling to adjust to the post-2021 correction. Some signals are way up, like Snowflakes revenues and stock price. Others are down, like funding rounds. Venture is always a few steps behind on both the downside and the up. But today is sunny, and so is the near future.


Snowflakes Stellar Quarter

Essays of the Week

  • Worldcoin founder starts an AI Venture business
  • Netflix is not a Tech Company – Benedict Evans
  • Apple Car – Software and Money – Jean Louis Gassée
  • Fundraising in 2022 – Tomasz Tunguz
  • Paramount gets UEFA Champions League Streams till 2030
  • Why Youtube made its own Video Chip
  • Investments in Nuclear Fission and Fusion – Crunchbase

Elon Musk and Adam Neumann

  • Musk Welcomes a Whistleblower
  • Elon Musk subpoenas former Twitter CEO, Jack Dorsey
  • Everything you need to know about the Twitter whistleblower complaint
  • Can a Zebra Change its Stripes?
  • The Anti-Adam Neumann – TechCrunch

Startup of the Week

  • Thomvest

Tweet of the Week

  • Jason Lemkin of SaaStr


B Round investors in Snowflake are sitting on a whopping 480x return after the stock went up 22% following earnings announcements. Pessimists might point out that this is half of the 52-week high when they sat at almost 1000x. But it is almost 100% up from the 270x they had only a few months ago at the 52-week low.

Above, you can see the low (in red) and the high (in green). The numbers all track the multiple from the B round. Today’s value is in blue. Below is the actual share price, with the stock now sitting at $196 a share, up from

SignalRank research

So, despite everything, innovation and revenues continue to drive value.

The best venture investors and LP allocators to venture realize this, and now is the time they are focused on picking the next batch of winning funds and companies, even though they are seeing SoftBank’s vision fund write off billions.

This week’s essays are mainly about value creation. Beyond Snowflake, there is a great article by Jean-Louis Gassée about how Apple might think about a car and why it might not yet have appeared. Benedict Evans writes about why Netflix still has legs, and it isn’t the tech. Wordcoin co-founder Max Novendstern announces Mana – an AI company focused on automated capital allocation to startups (a cause close to my own heart).

“AI venture capitalist that will run autonomously on-chain” or “Blackrock for new economy,” according to the investor deck. 

Youtube shines a light on the fact that it uses its own video transcoding chip and Crunchbase reports on the growth of investments into nuclear energy – both fission and fusion.

This is truly a week where the sun shines brightly through the clouds.

This leads me the think (aloud) about why there is so much gloom and doom. The world is behaving like a spoiled child discovering that somebody took one of the ten ice creams from the freezer, and now there are only nine left. In what world are nine ice creams not wonderful? And 440x gain on your B investment in Snowflake is way better than any ice cream.

The pessimism of the soul we are witnessing is a self-fulfilling reaction to setbacks. Adopting the pose of a victim, especially when there is no victim, is not a good look.

Now is a time of huge innovation and progress on a world scale. Jason Lemkin puts it accurately in this week’s Tweet of the Week, writing about Getty Images. Getty is growing by only 4% a year but is worth $10 billion because it has revenue of almost $1 billion a year, much of it from recurring subscriptions. He also discloses that his first $60m fund is now worth 4.2x that. In 5 years.

More in the video, but here is a musical treat for now.

I’ve Got Sunshine on a Cloudy Day


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Snowflakes Stellar Quarter

SNOW Stock Pops As Revenue Growth Handily Tops Estimates

Boosted by customers in the financial services industry, Snowflake reported July quarter revenue that handily beat Wall Street views. Guidance for SNOW stock came in above expectations, sending the software stock soaring Thursday.

Snowflake (SNOW) said second-quarter revenue jumped 83% to $497.2 million from a year earlier. Analysts had estimated Snowflake revenue at $467.5 million. Revenue climbed 85% and 101% in the two previous quarters.

“Snowflake remains on the offensive, demonstrating durable secular growth despite challenging macroeconomic conditions,” Credit Suisse analyst Phil Winslow said in a note to clients.

The revenue beat catapulted shares of the enterprise software maker 23.1% higher to close at 196.28 on the stock market today. The enterprise software maker reported Snowflake earnings after the market close on Wednesday.

SNOW Stock: Revenue Tops Estimates

The report also said product revenue rose 83% to $466.3 million vs. estimates of $439 million.

“Among its five verticals, financial services delivered the best growth,” Raymond James analyst Simon Leopold said in a note to clients. “Advertising, media, entertainment and technology grew in line, implying that retail and health care grew slower.”

Snowflake added that it now has 246 customers with “trailing 12-month product revenue greater than $1 million,” up from 206 from the previous quarter.

The company reported a loss of 70 cents a share for the three months ended July 30, using generally accepted accounting principles, or GAAP. That compares with a loss of 64 cents a year earlier. Analysts polled by FactSet expected Snowflake to report a loss of 56 cents a share.

On an adjusted basis, analysts estimated Snowflake would report a loss of 1 cent per share. But the company does not break out adjusted earnings in its releases.  •  Share

Essays of the Week

Worldcoin co-founder leaves firm to start ‘Blackrock for new economy’

Worldcoin co-founder leaves firm to start ‘Blackrock for new economy’

Max Novendstern, co-founder and former chief executive of Worldcoin, is working on a new venture, according to sources and regulatory filings and an investor deck obtained by TechCrunch.

Worldcoin spokesperson confirmed that Novendstern left the firm last year, something which hasn’t been previously reported, but continues to advise the firm. Novendstern did not respond to a Twitter message Wednesday.

His new venture is called Mana and it is building an “AI venture capitalist that will run autonomously on-chain” or “Blackrock for new economy,” according to the investor deck. The startup is engaging with Tribe Capital, Multicoin Capital, Dragonfly and Variant to raise funds, according to sources familiar with the matter.

Multicoin did not respond to an email Wednesday.

An investor presentation obtained by TechCrunch described Mana as:

Their target is a general Al that can analyze any company and then fund it with one click. The goal is a venture model that scales like software—no marginal cost: anyone in the world can raise; anyone can invest; and because Al gets better with scale, the system improves in a flywheel. The core of their system is the ‘programmatic deal memo.’

For any investment criteria (team, product, strategy, etc.) an Al predicts the analyst’s judgment. Predictions are outputted by data pipelines, split between neural nets and human labelers. Analysts use the tool to work faster; by using the tool they train the Als (‘GitHub Copilot for investors’).

Success means beating every fund in the world in terms of speed-of-capital and cost-of-capital in an exponentiating market. Venture is no longer constrained to early equity checks into moonshots in the Bay. Rather, the new market entails underwriting all asset classes—debt, equity, and tokens—in all cities and industries simultaneously, as the globalization of software hits the ‘second half of the chessboard.’  •  Share

Netflix is not a tech company — Benedict Evans

Netflix is not a tech company — Benedict Evans

Way back in 1992, just as the ‘Internet’ was starting to sound interesting, a company in the UK used technology to disrupt television.

Rupert Murdoch’s Sky realised that you could buy football rights for far more than anyone had ever thought of paying before, and you could make your money back by selling the games on subscription instead of pay-per-view or advertising, and you would be able to deliver that subscription using encrypted satellite channels. This was a big deal, both for Sky and for the UK Premiership league, and it was the beginning of something much bigger.

Sky used technology as a crowbar to build a new TV business. Everything about how it executed that technology had to be good, and by and large it was. The box was good, the UI was good, the truck-rolls were good, and the customer service and experience were good. Unlike American cable subscribers, Sky subscribers in the UK are generally pretty happy with the tech. The tech has to be good – but, it’s still all about the TV. If Sky had been showing reruns of MASH and I Love Lucy no-one would have signed up. Sky used tech as a crowbar, and the crowbar had to be good, but it’s actually a TV company.

I look at Netflix in very much the same way today…..  •  Share

Apple Car: Software and Money

Apple Car: Software and Money

[I have just completed a full draft of my Grateful Geek book and can now return to the Monday Note habit.]

From its beginning, the still unacknowledged Apple Car has been the source of two pleasant fantasies. First, many of us dream of an electric vehicle that provides a quintessentially Apple user experience. Behold the CarPlay UI that Apple revealed at the June 22 WordWide Developer’s Conference:

Second, company executives and shareholders would love an Apple-sized bite of the auto industry’s $3T (as in Trillion) annual revenue. A successful Apple Car would be an answer to the perennial Next Big Thing question: Where will the next big wave of money come from now that margins from the saturated smartphone market are becoming depleted?

Last month, The Information published Inside Apple’s Eight-Year Struggle to Build a Self-Driving Car, a meticulous and sober summation of the Apple Car project’s long history. You won’t regret taking the time to read this 4,100-word piece by reporter Wane Ma.

My initial, top-level impression of Ma’s portrayal is that the project known as “Titan” has habitually failed to converge. Apple is a famously patient company, but eight years and counting of constantly revolving doors at the top and in the trenches tells us that the project continues to struggle. It isn’t about to enter the reassuring phase where only execution remains between the team and the big prize, the market.

Ma identifies a symptomatic sin that he calls the “Demoware Trap”: Make a great demo designed to impress top execs, and then convincingly assert that the team is close to a Minimum Viable Product. But while a specially-rigged Apple Car prototype successfully negotiating a heavily rehearsed itinerary might convince the blind faithful, it isn’t going to fool a seasoned executive. “Great job guys, we’ll circle back later!” (Having spent decades giving and receiving demos, I sympathize with both sides.)  •  Share

Fundraising Environment in 2022

Fundraising Environment in 2022  •  Share

Last week, I presented an overview of the fundraising market at the Traction Conference in Vancouver. The slides are embedded above & linked here.

My brief narrative of the slides follows

The current state of affairs arose as a result of the Global Financial Crisis. Since 2008, the US experienced an unabated 12 year bull market fueled by four waves of money printing which increased US money supply by 30%+. This experiment culminated with Covid. The supply chain shocks combined with many more dollars fueled inflation, which the Fed is fighting by raising rates.

Higher rates depress valuations of high growth companies & reduce corporate spend, slowing the economy. Public technology companies fell 60-70% in valuation.

Founders feel this impact in the public markets, expecting a 30% reduction in ARR this year amidst an uncertain fundraising market. Surveyed founders expected a 10% decline in valuations. If public comps apply to private companies, then the market should expect a ~70% reduction in private valuations.

Venture capitalists have continued to invest at similar prices & similar round sizes in the most sought after companies. But round volumes have fallen by at least 20% & likely much more.

$220b in dry powder (dollars VCs have raised but not yet invested) will buoy valuations higher than expected.

In addition, private market dynamics also invigorate this market. Private companies are marked to market every 12-18 months rather than every day. Similar recessions (1940s, 1970s, 1980s, 1990s) have lasted 14 months on average & the stock market begins its recovery 154 days before the end of the recession. If history rhymes, we should see six months to determine we’re in a recession (2 quarters of negative GDP growth), two months of sideways stock trading, then the recovery begins.

Some startups may escape a harsh repricing by virtue of their runway leaping from peak to ascent, avoiding the trough.

Single auction winners also buttress the market. A single player sets the price for a startup round, rather than a collection of buyers & sellers in the public markets. Market prices accelerate faster with single-winner auctions.

Publics are down 70%. Private data suggests a steady market but it’s a mirage. I think the market will settle in Q3/Q4 at a 40-60% decline to Q1 2022 & volumes will increase again in early 2023. Let’s see if any of these predictions hold!  •  Share

Paramount+ will stream the UEFA Champions League until 2030

Paramount+ will stream the UEFA Champions League until 2030

Paramount+ will be the home of UEFA Champions League soccer for the rest of the decade. Paramount Global (formerly ViacomCBS) has secured a six-year extension to stream the glitzy annual soccer tournament until the end of the 2029-30 season. The deal includes the English-language rights to the Europa League and Europa Conference League, the second and third tiers of international European club soccer competition.

The agreement is valued at over $1.5 billion, meaning that Paramount Global will pay around $250 million per year. That’s a steep increase from the $100 million per year the company is currently paying, according to Bloomberg, which first reported the news. Several media companies are said to have been interested in the Champions League rights, with Paramount believed to have pipped Amazon.

The deal marks an extension of the current agreement Paramount has with UEFA, which will expire in 2024. Although some Champions League games air on Paramount-owned networks like CBS and CBS Sports Network, Paramount+ streams all of them. The service will continue to do so for another eight years.  •  Share

Why YouTube decided to make its own video chip

Why YouTube decided to make its own video chip

Roughly seven years ago, Partha Ranganathan realized Moore’s law was dead. That was a pretty big problem for the Google engineering vice president: He had come to expect chip performance to double every 18 months without cost increases and had helped organize purchasing plans for the tens of billions of dollars Google spends on computing infrastructure each year around that idea.

But now Ranganathan was getting a chip twice as good every four years, and it looked like that gap was going to stretch out even further in the not-too-distant future.

So he and Google decided to do something about it. The company had already committed hundreds of millions of dollars to design its own custom chips for AI, called tensor processing units, or TPUs. Google has now launched more than four generations of the TPU, and the technology has given the company’s AI efforts a leg up over its rivals.

But as Google was developing the TPUs, the company figured out that AI wasn’t the only type of computing it could improve. When Ranganathan and the other engineers took a step back and looked at the most compute-intensive applications in its data centers, it became clear pretty quickly what they should tackle next: video.  •  Share

Nuclear power-related companies

Nuclear power-related companies

Venture Investors Put Billions Into Nuclear Fusion And Fission Projects

Nuclear power is having a big year for venture funding, and it’s not just fusion startups that are attracting capital.

A Crunchbase analysis of investment in nuclear projects shows companies pursuing both fission- and fusion-powered technologies have racked up huge rounds of late. Collectively, they’ve pulled in over $3.4 billion this past year.

We list 20 which have raised funds in roughly the past couple years below:

Crunchbase News  •  Share

Elon Musk and Adam Neumann

Musk Welcomes a Whistleblower

Musk Welcomes a Whistleblower

Of the many things that can be said about Elon Musk, one that I often return to is that he is really a CEO for the people. By that, I mean he’s an executive whose image is perpetually shaped and bolstered by the masses who adore him, look up to him or are in other ways obsessed by him. 

And so it is somewhat fitting that he appeared to receive some legal help not from the courts but from the people, specifically a former Twitter executive who decided in this moment to go public with a whistleblower complaint that included, among other things, the allegation that Twitter has no idea how many bots are on its platform. Of course, Musk, beset with buyer’s remorse for his $44 billion impulse buy, has been making that same claim to get out of the deal. What a coincidence!  •  Share

Elon Musk subpoenas former Twitter CEO Jack Dorsey in takeover dispute

Elon Musk has subpoenaed his friend and former Twitter CEO Jack Dorsey as part of an effort to back out of his $44bn agreement to acquire the social media platform.

The subpoena was revealed in a court document on Monday.

Musk and Twitter are embroiled in a legal battle after the billionaire businessman offered to buy the company – then tried to back out, claiming that Twitter had failed to provide adequate information about the number of fake, or “spam bot”, accounts on the platform. Twitter argues that Musk’s reasons for backing out are just a cover for buyer’s remorse.

Twitter and Musk are headed for a 17 October trial in Delaware that should determine whether or not the company can force him to go through with the acquisition.Continue reading…  •  Share

Everything you need to know about the Twitter whistleblower complaint

Twitter is about to find out what it’s like to be Facebook after its former security chief, Peiter “Mudge” Zatko, filed a whistleblower complaint with the Securities and Exchange Commission on Tuesday that is likely to lead to further investigations.

The complaint, which was first reported on by The Washington Post and CNN, alleged that Twitter has misled the Federal Trade Commission about its security standards, violated SEC rules, misrepresented itself to the board of directors and allowed foreign governments to infiltrate the platform.

In the complaint, Zatko accused Twitter of lying about bots to Elon Musk, failing to secure the company’s servers, withholding crucial details about breaches from its board and even succumbing to pressure from the Indian government to hire government agents and give them access to sensitive data. Zatko lays blame largely with former CEO Jack Dorsey, whom Zatko describes as “disengaged,” and current CEO Parag Agrawal, who the complaint alleges was defensive and in denial about the company’s security vulnerabilities.

“Mudge is proceeding with these disclosures quite reluctantly,” the complaint reads. “When ethical researchers find a vulnerability that bad actors can exploit, first they make a quiet ‘responsible disclosure’ so that the affected company or government can fix it. But sometimes the vulnerable institution doesn’t want to hear the truth.”  •  Share

Can a Zebra Change Its Stripes?

Can a Zebra Change Its Stripes?

As I’m sure you’ve heard by now Andreessen Horowitz announced Monday that it’s cutting its largest individual check ever — $350 million — in WeWork founder Adam Neumann’s new real estate company Flow. Andreessen Horowitz co-founder and Netscape internet icon Marc Andreessen is leading the deal and taking a board seat. (Andreessen Horowitz previously led a $70 million investment in Flowcarbon, a crypto company tied to Neumann.)

I spent Monday checking in with sources to see what they know and puzzling over the Flow investment. When I asked rival investors whether they kicked the tires on Flow, I received answers like “hahaha” and “No — it’s good to know there’s still a place for utter insanity though.”

This is not a deal that would get done in a world where an iron-fisted cabal of investors could blacklist founders from ever raising capital again. Plenty of icons got burned by Neumann: JPMorgan’s Jamie Dimon and SoftBank’s Masayoshi Son to name two. 

Even though Benchmark made money off WeWork, it’s obvious to anyone who has watched WeCrashed that the venture firm has a dim view of Neumann these days. 

So if you’ve made an enemy out of Benchmark, where better to go raising money than Andreessen Horowitz. After all, Andreessen once said about Benchmark’s Bill Gurley,“I can’t stand him,” and described Gurley as the Newman to his Jerry Seinfeld. 

Now Andreessen has found a Neumann that’s sure to irk his Newman.

Benchmark isn’t the only investor that walked away with a poor view of Neumann. One former WeWorker investor marveled at Andreessen’s decision to invest in the WeWork founder. “That is a lot of money to entrust with Adam Neumann. I certainly wouldn’t have done that.”  •  Share

The Anti-Adam Neumann

The Anti-Adam Neumann

According to earlier reports this week, Adam Neumann, the famed, controversial co-founder of WeWork, is in the process of creating a vast network of residential real estate properties that — we’re guessing — can be rented on a highly flexible basis to people who don’t want to be confined to one location or lease but to live as “global citizens.” It was the vision behind an earlier company that Neumann started, WeLive, a short-lived offshoot of his far better-known company, WeWork, and it’s an idea that in a post-COVID world where remote-work reigns, makes more sense than ever.

Here’s Neumann talking to The Guardian about the idea in 2016: “It’s going to be a new way of living, day to day, week to week, month to month, year to year. You will be a global citizen of the world. If you’re a member of one, you’re a member of all of them.”

The idea is so timely that another serial entrepreneur may be even further along with his version of it — even if you haven’t heard of him before. He’s Bill Smith, the 36-year-old founder of the three-year-old, 600-person, membership-only flexible, furnished rental company Landing.  •  Share

Startup of the Week

Thomvest Turns 25: Reflections on the Road Less Traveled in Venture

Thomvest Turns 25: Reflections on the Road Less Traveled in Venture

As we reflect on our twenty-five years of investing, our journey in the VC industry has been unique: we are one of the few family-owned venture firms to have grown to an institutional scale while remaining backed by the same founding individual. As our firm grew in scale, we saw an opportunity to develop a strategic focus on specific industries to assist entrepreneurs and win the opportunity to work with the best companies.  •  Share

Tweet of the Week