SPAC Fever high, Google Under Fire.

That Was The Week, #41

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Editorial: My Take

I’m drawn to Bill Gurley again this week. He has been relentless in calling out the Investment Banks for “stealing” money from founders and employees’ pockets. He does not mince words.

Bill is on the record preferring Direct Listings, where companies raise capital from investors before their IPO and characterize the IPO process as “brain dead.” He clearly has a point, but it is not as strong a point as he pretends. Bill’s role as a VC means that he really wants all of the upside from an IPO to be in the stock before listing. He wants public market investors to have to wait for the company to execute more before benefitting from the increased value in the stock they purchase - just as the VCs and founders had to. I can’t fault the logic from his point of view, but all public offerings serve three stakeholders - former investors, the company employees and founders, and the new investors.

Whether the cash to the company comes in before the IPO (direct listing), at the IPO (traditional IPO), or via a SPAC (before an IPO) does not really impact the company. The main difference is who gets to place capital early and benefit from that. VCs do so in a direct listing; SPAC organizers and PIPE (private investment in a public entity) investors in a SPAC; and public market institutional investors in a traditional IPO.

Bill’s Bloomberg interview is worth watching to see if you can detect his self-interest that masquerades as support for the company employees and founders.

There are many commentators focused on special purpose acquisition corporations (SPACs). Increasingly voices are suggesting that SPACs are a bubble or, worse, can be a scam. The Wall Street Journal has a thoughtful piece on why the SPAC bubble may never burst. Laura Forman shines a light on an investor-friendly element of a SPAC:

But it isn’t all about fools rushing in. A lesser-known feature of today’s SPACs is that investors can opt-out, redeeming their shares plus interest around a shareholder vote on a proposed target. Investors in regular public companies inking a deal would love the ability to jump ship relatively unscathed before what could be a disastrous deal.
SPACs are seeing a golden era that will fade as speculative appetite does, but they are unlikely to fade away entirely—they are too useful to everyone involved.

What is really happening here is that companies like OpenDoor, part of Chamath Palihapitiya’s IPOB (ticker) plans, are using SPACs to fund their earlier stage companies where much of their growth is in the future. This reverses a trend where many private companies would go public later after most of their growth took place as private entities. Because of this, so long as good companies with growth potential use the SPAC process, it is likely that the public will be able to share in the growth that previously only VCs could imagine. SPACs can be a good thing.

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This week's video is here:

--News Of The Week

-Silicon Valley & Wall Street

-Google & Anti-Trust

--Worth a Mention

--Echoes (Reactions From Last Week)

Startups Of The Week: Tekion, AirBnB, Handshake

Podcasts Of The Week: Gangister

Tweet Of The Week: Go Vote

--News Of The Week

-Silicon Valley & Wall Street

Legendary tech investor Bill Gurley: We’re investing in start-ups without an office now, and we didn’t before


Another change toward a work-from-home world courtesy of Covid-19: Bill Gurley, who has invested in the likes of Uber and Zillow, says he’s now investing in start-ups that do not have a traditional office.

“We are now backing start-ups without offices, which isn’t something we had done before,” Gurley, who was a long-time investor with Silicon Valley venture capital Benchmark, told Bloomberg Technology host Emily Chang, in an interview posted online on Thursday.

Indeed, in a June survey by venture capital firm NFX, “60% of VCs said they were less likely to invest in start-ups that had the majority or all of its employees working remotely,” the San Francisco Business Times reported. Remote companies are seen as more fragile, because employees can easily leave for the next remote job, NFX managing partner James Currier told the publication. And according to Trulia co-founder and NFX managing partner Pete Flint, being nimble and creative, as start-ups need to, is more easily accomplished when people are together in the same physical space.

But for Gurley and the Benchmark team, “we do early stage investing. We back companies with five to 10 employees, and they are founding those without an office” now, said Gurley (who announced in April that he won’t be participating in the firm’s next round of investing).

And there are some advantages to investing in remote businesses. For one thing, “a lot of times you end up taking on geographic diversity [in hiring] because you’re not thinking about there being an office,” Gurley said. Previously, “people struggled with building large engineering teams [in Silicon Valley] anyway because it was just so competitive and expensive.”

The culture has changed virtually overnight because of the forced social distancing required by the coronavirus pandemic. Now, when tech companies want to make an additional hire, “every company” is saying to themselves, “Well, maybe that person could be remote because everybody else is already,” said Gurley.

SPAC To The Future: How Blank-Check Acquirers Could Reshape Emerging Companies’ Roles In Public Markets

Crunchbase News

  • That includes pre-revenue companies with moonshot goals (rather literally in the case of Virgin Galactic ), automakers with no cars available yet ( Fisker ), and startups in sectors like autonomous driving that have attracted enormous VC and corporate investment but have few pure-play offerings for public investors.
  • Generally, the VC-funded companies chosen as SPAC acquisition targets have lower revenues and less established business models than those opting for IPOs or direct listings, Butler said.

SPACs Could Be a Bubble That Never Quite Pops

Though they benefit from speculative froth, blank-check companies aren’t only a good deal for their sponsors
Wall Street Journal

Sorry, haters: The SPAC could be here to stay.

What seems like today’s hottest path to a public listing comes with a lot of baggage. The basic premise of a Special Purpose Acquisition Company is that a sponsor raises money in a public offering with the expectation that it will identify a target company for a merger or an acquisition within a specified period of time. As of the market close on Oct. 16, there have been 143 SPAC IPO transactions this year, according to SPACInsider, an online subscription database that tracks SPAC performance. There were 13 in all of 2016.

Many believe the meteoric rise in an asset class that basically involves handing over money in something of a blind-faith investment speaks more to the current frothy investing environment than the value proposition of a SPAC itself. With interest rates close to zero and expected to remain that way for the next few years, investors increasingly are swinging for the fences in the equity market. And with both holding periods and attention spans getting shorter, the SPAC is the ultimate form of immediate gratification. It enables investors to play a new trend—sports betting or automated house flipping, for example—the second it catches fire in the market without waiting for a young company to first demonstrate a breakout year.

Why IPOs, Direct Listings, and SPACs Will Flourish in Startupland

Tomasz Tunguz

  • Most high-growth software investors value public companies on enterprise value to forward revenue multiple.
  • But investors in private companies use a different metric, enterprise value to forward annual recurring revenue (ARR).The private markets project the ARR a year from now.

-Google & Anti-Trust

The Google Case

An Explanation and Evaluation for Non-Lawyers

Tim Wu

This post is meant to explain the Google lawsuit for non-lawyers (and lawyers too), and then give a rough evaluation of the merits, based only what is known publicly. A basic knowledge of the facts is assumed.

Google is accused of violating Section 2 of the Sherman Act, a law passed in 1890 that makes it illegal to “monopolize, or attempt to monopolize” a market or industry.

That law makes it illegal to either obtain a new monopoly, or maintain an existing monopoly, through “exclusionary” or anticompetitive conduct. The two parts of the case will be proving that (1) Google has monopoly power, and (2) that it used that power to exclude competitors.

The Justice Department’s accusation is that Google made exclusionary deals with Apple, among others, to make Google their default search engine. In other words, that Google paid off Apple to favor it over any would-be competitor (say, DuckDuckGo, or Bing). It would be as if, say, Budweiser were the beer monopolist, and they paid off every beer store and bar to stock their beer exclusively.

United States v. Google

Ben Thompson, Stratechery

So it finally happened: the U.S. Department of Justice has filed a lawsuit against Google, alleging anticompetitive behavior under Section 2 of the Sherman Antitrust Act. And, as far as I can tell, everyone is disappointed in the DOJ’s case; Nilay Patel’s tweets were representative:

I can’t speak to Barr’s motivations for launching this lawsuit now, although it has been frustrating to see the degree to which antitrust seems to have been politicized, particularly the AT&T-Time Warner case; I can understand the instinctual skepticism and suspicion that this was timed for the election.

That noted, I think the conventional wisdom about the specifics of this lawsuit are mistaken: I believe the particulars of the Justice Department’s complaint have been foreshadowed for a long time, and make for a case stronger than most of Europe’s; if the lawsuit fails in court — as it very well may — it also points to where Congress should act to restrain the largest companies in the world.

The Real Threat to Google and Alphabet Isn’t Antitrust Case

The Information

The just-filed U.S. antitrust case against Google’s web search dominance likely will take years to be resolved and, even if successful, may not cut into Google’s business by much. Instead, competition from powerful companies such as Amazon and Facebook as well as young foes like TikTok pose the biggest risk to Google’s fortunes.

The Anticlimax of the Google Antitrust Suit

Wired, All All Latest, Steven Levy

Google CEO Sundar Pichai does not come across as the most convincing villain in the justice department's new lawsuit.PHOTOGRAPH: MICHAEL SHORT/BLOOMBERG/GETTY IMAGES

AT THE TIME of Google’s birth, in 1998, Microsoft was in mortal combat with the Department of Justice, which had launched an epic antitrust suit against Bill Gates and his minions. Microsoft was accused of being a behemoth that dominated the entire industry. The DOJ won the suit, although it failed to break up the company as it had hoped. But it did hobble the Redmond, Washington giant in its efforts to dominate the world.

Google was one of the companies that benefited. During its rise, the company kept its corporate mouth zipped about the huge profits of search advertising. A diverted Microsoft didn’t realize what was happening until Google captured the market.

Now, 22 years later, Google is the one in the docket. The DOJ has specifically evoked the Microsoft case by the rare action of using the trust-busting Sherman Act to accuse the former “darling of Silicon Valley” (to quote its brief) of being an anticompetitive monopolist.

--Worth a Mention

11 reasons why Quibi crashed and burned in less than a year

The Verge

Photo illustration by William Joel / The Verge | Photo by Vjeran Pavic / The Verge

Quibi, the short-form video streaming service designed for people to enjoy on their phones, has shuttered after less than a year of existence.

Led by veteran Hollywood executive Jeffrey Katzenberg and former HP CEO Meg Whitman, the streaming service was designed to be a revolutionary way to watch videos on the go, with shows and films specifically formatted to work in both landscape and portrait modes. With nearly $2 billion raised before Quibi even launched in April and a long line of Hollywood talent on board to provide movies and shows, Katzenberg and Whitman felt pretty good about their prospects — even if analysts and media critics questioned the duo’s strategy.

Then the United States joined the rest of the world in shutting down due to the COVID-19 pandemic just a few weeks before Quibi launched. Quibi, a streaming service built around the premise that people would watch its shows on the go, now faced an entire population of potential subscribers stuck at home. In its brief six months of life, Quibi also faced a lawsuit backed by a wealthy foe, subscriber woes, and product feature hump. It never managed to escape being the app to ridicule.

So why did Quibi fail? Those factors all played in, but it was executives’ fatal misunderstanding of what Quibi should be that led to its inevitable and rapid downfall.

European Venture Picks Up In Q3 Following Slow Start — Crunchbase News

Crunchbase News

The European venture ecosystem is robust and growing with strengths in fintech, health care, deep tech, data and analytics, and commerce and shopping.

Subscribe to the Crunchbase Daily

In the last 10 years, European venture has experienced growth year over year at between 16 percent and 55 percent–bar one year (2016) that was down 13 percent. (2014 and 2015 each experienced growth above 50 percent year over year.)

Fast-forward to 2020: Overall European venture funding is down 17 percent for the first three quarters of 2020 compared with the peak funding year of 2019, according to Crunchbase Data.

Read our Q3 2020 funding reports for the globe here and North America here

However, this third quarter captured the highest funding since Q3 2019, with a particularly strong funding month in September 2020, the second-highest funding month in the last two years. Funding tracks at $10 billion in Q3 2020, up 21 percent quarter over quarter but down 12 percent year over year.

And as we note in this report, investors are raising ever larger funds, along with more companies raising rounds above $100 million.

These Young Investors Are Still Betting Big On Crypto — And Are Taking Harvard And Stanford Along For The Ride


An aggressive Bitcoin trade got crypto VC shop Paradigm flying out of the gate. But Fred Ehrsam and Matt Huang aim to do more than just generate outsized returns for their blue-blooded backers — they want to take alt-currencies into finance's mainstream.
  • Combining mainstream pedigrees and pioneering crypto cred, Ehrsam, 32 and Huang, 31, convinced top institutional investors like Harvard and Stanford to give them $750 million to invest in a market they were too blue-blooded to touch directly.
  • Ehrsam and Huang called all $400 million of their first close up front, then put it all into Ethereum and Bitcoin, using one of their own startups, crypto-focused trading desk Tagomi, to identify the cheapest places to convert pieces back into fiat currency as needed when investments required old-fashioned dollars.

Doing Old Things Better Vs. Doing Brand New Things

Andreessen Horowitz, Chris Dixon

The most common mistake people make when evaluating new technologies is to focus too much on the “doing old things better” category. For example, when evaluating the potential of blockchains, people sometimes focus on things like cheaper and faster global payments, which are important and necessary but only the beginning. What’s even more exciting are the new things you simply couldn’t create before, like internet services that are owned and operated by their users instead of by companies. Another example is business productivity apps architected as web services. Early products like Salesforce were easier to access and cheaper to maintain than their on-premise counterparts. Modern productivity apps like Google Docs, Figma, and Slack focus on things you simply couldn’t do before, like real-time collaboration and deep integrations with other apps.

How the Shift to Remote Work Is Changing Silicon Valley for the Better

Blog — Crunchbase, @VictorGSnyder

  • When Twitter CEO Jack Dorsey announced in May that employees would be able to work from home—or from wherever they’d like—indefinitely, it marked a major change in the tech industry. Soon, other Silicon Valley companies, including Square, Slack and Upwork, followed suit, announcing their own plans to shift to a remote model. And as COVID-19 continues to spike in California, more tech giants are likely to do the same.
  • While the current pandemic may have hastened the process, remote work was always going to be the future of Silicon Valley. And despite what you might have seen others saying, from my perspective, after having coached dozens of founders to turn their scrappy startups into sustainable businesses that they’re proud of, that’s a good thing. Yes, it’s true that many of the collaborations which made Silicon Valley what it is today were forged in person, but that was before the new normal, and there’s no going back.
  • Let’s take a look at some of the key ways remote work is poised to change Silicon Valley—and the technology industry as a whole—for the better.

Storytelling Can Make or Break Your Leadership

Harvard Business Review

“It’s a new goal-setting framework.” That was one of my large enterprise clients’ attempt at an inspirational rallying cry for their rollout of Objectives and Key Results, or OKRs. As you might expect, it wasn’t met with much enthusiasm: “Why do we need a new goal-setting system?” managers and employees protested. “What will this mean for my evaluation? Am I still on track for that promotion?”

The problem wasn’t anything inherent to the proposal — instead, what was lacking was the executive’s storytelling. Telling a compelling story is how you build credibility for yourself and your ideas. It’s how you inspire an audience and lead an organization. Whether you need to win over a colleague, a team, an executive, a recruiter, or an entire conference audience, effective storytelling is key. As a speaker, publisher, and author of four books and dozens of articles, I’ve found that my most effective stories all shared the following five characteristics: ....

Tech Is Transforming People Analytics. Is That a Good Thing?

Harvard Business Review, @drtcp

A century ago, Frederick Taylor’s Scientific Management laid the foundations for modern HR. His central premise was that organizations should turn their workplaces into real-world psychology labs, measuring and monitoring employees’ every move in order to boost their performance and reduce their stress levels. The paradigm was revolutionary, and led famous industrialists like Henry Ford to unprecedented innovations in human engineering, with the creation of the seminal assembly line, and a science-infused formula for optimizing roles, tasks, and job design to enhance employee productivity. Big companies, such as the Ford Motor Company, became a testing ground for applied psychology, and evidence-based HR was born.

It’s not enough to hope that ethics are at the forefront when companies are considering new technology or people analytics projects. In our view, companies need to adopt an ethics charter for people analytics that helps them to clearly govern what they should or shouldn’t do, in the same way that they have guidelines for the usage of customer or financial data. In order to build and maintain employee trust in the use of people data, organizations need to tackle the ethics and privacy topic head on, being open and transparent with employees in how they are using their data.

Fast forward 100 years or so, and it is all footnotes to Taylor. Some of the largest, most successful corporations, such as Google and Microsoft, are ramping up on data science, recruiting an army of Ph.D.’s in Industrial/Organizational Psychology, and accelerating their digital transformation to deploy smart technologies around AI and big data to improve their talent management systems. The people analytics age is here to stay, and it was already well advanced before the pandemic. But in a world of work that is increasingly virtual (and perhaps even only virtual), the volume of data available to understand and predict employees’ behaviors will continue to grow exponentially, enabling more opportunities for managing through tech and data.

Why Is Wokeness Winning?

The Weekly Dish, Andrew Sullivan @sullydish

A question I’ve wrestled with this past year or so is a pretty basic one: if critical race/gender/queer theory is unfalsifiable postmodern claptrap, as I have long contended, how has it conquered so many institutions so swiftly?

It’s been a staggering achievement, when you come to think of it. Critical theory was once an esoteric academic pursuit. Now it has become the core, underlying philosophy of the majority of American cultural institutions, universities, media, corporations, liberal churches, NGOs, philanthropies, and, of course, mainstream journalism. This summer felt like a psychic break from old-school liberalism, a moment when a big part of the American elite just decided to junk the principles that have long defined American democratic life, and embrace what Bari Weiss calls “a mixture of postmodernism, postcolonialism, identity politics, neo-Marxism, critical race theory, intersectionality, and the therapeutic mentality.”

Why Chinese firms still flock to American stock exchanges

The Economist, Graphic detail

Why would Chinese companies flock to America given the apparently toxic environment? For one thing, as Adam Lysenko of Rhodium Group, a research firm, points out, it is often easier to list on American exchanges than in China, with its more restrictive regulatory regime. An overseas listing also allows mainland companies to get round China’s strict currency controls. Gary Rieschel of Qiming Ventures, a venture-capital firm, says that going public in New York, the world’s pre-eminent financial centre, makes sense for Chinese firms like Lufax keen on global expansion. For rising technology startups in particular Wall Street also represents an imprimatur from the world’s most sophisticated investors, and access to its deepest and most liquid capital markets.

Tesla is a chain of startups, Elon Musk explains

TechCrunch, @mjburnsy

“The thing people don’t understand about Tesla is [the company] is a whole chain of startups,” Musk said. “And then people say, ‘well, you didn’t do that before.’ Yeah, well, we’re doing it now. I think we may have been a bit slower than other startups, but I don’t think we’ve really had anything fail.”

He concluded there are no plans to spin out any business, noting there’s no need to add complexity.

--Echoes (Reactions From Last Week)

RIP Section 230

Craft Ventures — Medium, @DavidSacks

The internet freedom we have long enjoyed owes a tremendous debt to Section 230 of the Communications Decency Act, a 1996 law which greatly aided the development of the Internet by enabling user-generated content. Suddenly, this visionary provision is gravely imperiled by a tragedy of errors committed by all three of the major actors in the Hunter Biden hard drive story — the New York Post, the social media companies Twitter and Facebook, and conservative legislators who want to take action against them.

The Post erred first by publishing a story that doesn’t come close to meeting journalistic standards. It gratuitously contains a sleazy and unwarranted invasion of Hunter Biden’s personal life. The elaborate tale of how the contents of his hard drive found its way to the reporters makes no sense, and has already been altered multiple times by the owner of the computer repair shop, and by Rudy Giuliani, since the story first broke yesterday morning. It’s more plausible that this is a case of hacking, possibly by foreign malefactors, with the stolen emails being fed to Rudy and then the Post. Furthermore, legitimate questions have been raised as to whether all the emails are even real. Even if they are, the story’s claim of a “smoking gun” is exaggerated because there’s no proof Joe Biden ever took the meeting with Burisma. (His campaign denies it.)

How Mark Zuckerberg Learned Politics

WSJ, @dseetharaman and @emilyglazer

  • Nick Clegg, a former British deputy prime minister whom Mr. Zuckerberg hired two years ago as global policy and communications chief, said the CEO has been “intimately involved” in deciding to bar new political ads the week before the election.
  • As tech platforms announced new political-content policies over the past year, Mr. Kushner has argued to Mr. Zuckerberg that some of those moves could hurt Republican and Democratic campaigns alike, people familiar with the matter said.

-- Startups Of The Week: Tekion, AirBnB

Tekion: This former Tesla CIO just raised $150 million more to pull car dealers into the 21st century


With the Series C round — which also participation from Index Ventures, Airbus Ventures, FM Capital and Exor, the holding company of Fiat-Chrysler and Ferrari — the company has now raised $185 million altogether.

It’s also valued at north of $1 billion. (The automakers General Motors, BMW and the Nissan-Renault-Mitsubishi Alliance are also investors.)

“I have to choose my words carefully,” says Joe Castelino of Stevens Creek Volkswagen in San Jose, California, when asked about the management software on which most car dealerships rely for inventory information, marketing, customer relationships and more.

Castelino, the dealership’s service director, laughs as he says this. But the joke has been on car dealers, most of whom have largely relied on a few frustratingly antiquated vendors for their dealer management systems over the years — along with more sophisticated point solutions.

It’s the precise opportunity that former Tesla CIO Jay Vijayan concluded he was well-positioned to address while still in the employ of the electric vehicle giant.

Get Ready for Airbnb’s IPO to Blow Away Expectations

Stories by Scott Galloway on Medium

While the entire professional class, and every elected official, all claim to be optimists, I see the world through gray-colored glasses. Vaccine by fall, herd immunity, a robust recovery, markets will continue to surge, AI …

Yeah, right.

Pessimists are underappreciated, as while optimists built the first plane, pessimists suggested seat belts. Both parties have a role. Neville Chamberlain, Charles Keating, and Bobbi Brown were all likely optimists. But I digress.

So, being angry and depressed doesn’t mean I’m wrong. There are good companies that are overvalued (Tesla, Snowflake), good businesses whose emissions are bad for society (Facebook, Twitter), and firms that are just a menace (Uber). There are also firms that are all three (Palantir). However, occasionally there is a firm that is so gangster even I can’t help but see the glass as half empty, vs. empty. The most valuable private firm in America is Airbnb.

Handshake Gets An $80 Million Cash Infusion For College Recruiting Platform

Crunchbase News

San Francisco-based Handshake has raised an $80 million Series D led by GGV Capital.

More than 1,000 colleges around the U.S. partner with Handshake to connect their students (my college-age sophomore included) with accounts that include their verified GPA, school year and course work. Students determine what they share with employers and who can reach out based on their career interest.

Past investors participating in this round includes its seed lead True Ventures, Series A lead Kleiner Perkins, and Series B lead Spark Capital along with other notable firms Lightspeed Venture Partners, which invested early at the seed stage back in 2015, the Chan Zuckerberg Initiative and Emerson Collective. This funding is two years on from Handshakes’ Series C led by EQT Ventures who also participated.

According to Garrett Lord, CEO and co-founder of Handshake, the company has brought efficiency and greater equality to a huge market.

Previously, employers recruited students by sitting in gymnasiums and hoping the right kids walked up to their booth. Now employers can recruit at scale with supportive technology, engaging with students year-round.

-- Podcasts Of The Week: Gangister

Gillmor Gang: Something Goes Right


  • As my partner Tina says to me on this once glorious sunny day (the view formerly known as the Pacific Ocean has been replaced by the fog like a Zoom background) we seem to be better prepared for something to go wrong than right.
  • If Apple Music were nudged to support the idea, it would resuscitate a major platform of the tech crowd with a mashup of DJ and playlist content.

Cyan Bannister on 20 Minute VC

Tweet Of The Week: Go Vote!