The politics and economics of Venture and Startups


Reads of the Week

  • Prepare for the U.S. and China to Decouple - Harvard Business Review
  • Tim O’Reilly makes a persuasive case for why venture capital is starting to do more harm than good - TechCrunch
  • Break Up Google - Tim Bray
  • Why Virtual Events Are The Future - Christoph Janz
  • Zuckerberg loses $7 billion as firms boycott Facebook ads - Adage
  • Zuckerberg Tells Facebook Staff He Expects Advertisers to Return ‘Soon Enough’
  • Facebook's advertiser boycott is getting even bigger - Engadget

Politics & Technology

  • Social Media Drops the Hammer on Team Trump
  • Reddit bans r/the_donald for a pattern of inciting hate speech
  • 5 Serious Flaws in the New Brazilian “Fake News” Bill that Will Undermine Human Rights - Deeplinks, EFF
  • Twitch has suspended Donald Trump's account - Engadget

Venture

  • Sovereign Funds Pile Into Venture Capital Investments in 2020 - New York Times
  • Eduardo Saverin’s B Capital Group Raises $820M For Second Fund
  • Venture Capitalist Charged In Wide-Ranging Schemes To Defraud
  • Recast Capital - A New Platform for Emerging Fund Managers
  • Private Unicorn Board Now Above 600 Companies Valued At $2T - Gené Teare
  • World’s Largest Black-Led VC Firm Doubles Size of Latest Fund
  • Lemonade targets down-round pricing in impending IPO
  • Portfolio companies of startup studio eFounders have raised $148M this year

Startups

  • Lululemon set to acquire home fitness startup Mirror for $500M
  • How Much Equity Do You Give Up in a Series A Round? - SaaStr
  • A New Standard Deal - Y Combinator

Tweet of the Week

  • Rising Startups to Watch, with diverse Founders - Maren Bannon

That Was The Week, #25


-- Reads of the Week


Prepare for the U.S. and China to Decouple

Harvard Business Review

Executive Summary: The pandemic is likely the accelerate a trend to a bipolar U.S. vs. China world. In this context, firms present in Hong Kong and China need to prepare for a less friendly environment there.

Break Up Google

ongoing by Tim Bray

  • The online advertising business has become a Facebook/Google duopoly which is destroying ad-supported publishing and
  • thrown off by Google’s Web-search monopoly has fueled invasions of multiple other segments, enabling Google to bat aside rivals who
Tim O'Reilly. Image Credit - Reinvent

Tim O’Reilly makes a persuasive case for why venture capital is starting to do more harm than good

TechCrunch

  • That’s not to say that people who are African-American or women can’t also lead companies that are part of the high-growth VC model that’s typical of Silicon Valley.
  • The typical VC model is looking for this high-growth company with exit potential, because it’s looking for this big financial.

Why Virtual Events Are The Future

Point Nine Land - Medium

As is the case for many VCs, I used to spend a significant amount of time each year attending startup events, as well as organizing our own #p9family events. Over the last few months, that has all been put on hold as countries around the world have gone into lockdown. Whilst physical events died down, my inbox was suddenly overrun with invitations to join virtual pitch days, talks, networking sessions, AMAs, panels and more. I was initially sceptical about these events: what was the point in attending if I couldn’t benefit from the networking piece and meet cool companies? Would people really spend half a day watching a virtual event and why wouldn’t they just watch a YouTube recording of it? Don’t get me started on Zoom fatigue… 😴

Having attended a few virtual events over the last few weeks and after hosting our own virtual B2B marketplace meetup, I’ve definitely changed my perspective on the above. Here are a few key takeaways on why I‘ve grown to love virtual events.👇
Point Nine Land - Medium

Zuckerberg loses $7 billion as firms boycott Facebook ads

Adage

Mark Zuckerberg just became $7.2 billion poorer after a flurry of companies pulled advertising from Facebook Inc.’s network.

Shares of the social media company fell 8.3% on Friday, the most in three months, after Unilever, one of the world’s largest advertisers, joined other brands in boycotting ads on the social network. Unilever said it would stop spending money with Facebook’s properties this year.

The share-price drop eliminated $56 billion from Facebook’s market value and pushed Zuckerberg’s net worth down to $82.3 billion, according to the Bloomberg Billionaires Index. That also moved the Facebook chief executive officer down one notch to fourth place, overtaken by Louis Vuitton boss Bernard Arnault, who was elevated to one of the world’s three richest people along with Jeff Bezos and Bill Gates.

Zuckerberg Tells Facebook Staff He Expects Advertisers to Return ‘Soon Enough’

The Information

Facebook CEO Mark Zuckerberg told employees he was reluctant to bow to the threats of a growing ad boycott, saying in private remarks that “my guess is that all these advertisers will be back on the platform soon enough.”

Zuckerberg gave his thoughts on the boycott, which now includes large brands like Starbucks and Coca-Cola, during a video town hall meeting last Friday, according to employees who attended.

In the previously unreported remarks, Zuckerberg said the boycott is more of a “reputational and a partner issue” than an economic one, according to a transcript obtained by The Information. He noted that large advertisers participating in the boycott make up a small portion of Facebook’s overall revenue, and he said, “We’re not gonna change our policies or approach on anything because of a threat to a small percent of our revenue, or to any percent of our revenue.”


-- Politics & Tech


Social Media Drops the Hammer on Team Trump

Feed: All Latest

  • On Monday morning, the streaming video platform Twitch temporarily suspended Donald Trump’s campaign account for violating its policies against “hateful content.”
  • And r/The_Donald, which had no official affiliation with the White House or the Trump campaign, had been inactive for months; its members had already moved to a backup site after Reddit placed the community in “restricted mode” limiting most members’ ability to post.

Reddit bans r/the_donald for a pattern of inciting hate speech

Engadget

Earlier this month, several high-profile Reddit pages took a hiatus in protest of the company’s refusal to ban racist content. This seems to have finally caused Reddit to redefine its policies around hate speech and how it enforces them.

Man: What happened? Police officer: You shared that message that went viral accusing someone of a corruption scheme. They’re saying that it’s a lie and is calúnia. Descriptive text: It’s easy to imagine how the new traceability rule could be abused and make us all afraid to share content online. We can’t let that happen.

5 Serious Flaws in the New Brazilian “Fake News” Bill that Will Undermine Human Rights

Deeplinks

  • First, the bill (Article 7, paragraph 3) requires “large” social networks and private messaging apps (that offer service in Brazil to more than two million users) to identify every account’s user by requesting their national identity cards.
  • The bill creates a clumsy regulatory regime to intervene in the technology and policy decisions of both public and private messaging services in Brazil, requiring them to institute new takedown procedures, enforce various kinds of identification of all their users, and greatly increase the amount of information that they gather and store from and about their users.

Twitch has suspended Donald Trump's account

Engadget

Twitch has temporarily suspended Donald Trump’s account. The company says the channel’s broadcast of the President’s Tulsa Rally and recent re-airing of one of his 2016 campaign stops violated its hateful conduct and harassment policies.

Facebook's advertiser boycott is getting even bigger

Engadget

  • “The Coca-Cola Company will pause paid advertising on all social media platforms globally for at least 30 days.
  • We know we have more work to do, and we’ll continue to work with civil rights groups, GARM, and other experts to develop even more tools, technology and policies to continue this fight." The advertising boycott was organized by a group of civil rights groups, including the Anti-Defamation League, Color of Change and NAACP, who said they organized the protest as “a response to Facebook’s long history of allowing racist, violent and verifiably false content to run rampant on its platform.”

-- Venture


Sovereign Funds Pile Into Venture Capital Investments in 2020

The New York Times

LONDON — Sovereign wealth funds have participated in $17 billion of venture capital deals so far this year, already more than the entirety of 2019, as their appetite for long-term investment appears undimmed by the coronavirus outbreak.

The investments are against a backdrop of a generally subdued deal-making environment across the venture capital industry in the aftermath of the pandemic.

With their deep-pockets and longer investment horizons than many other investors, sovereign funds have increasingly sought out start-ups, particularly in technology in the hope they will yield outsized returns.

Eduardo Saverin’s B Capital Group Raises $820M For Second Fund

Crunchbase News

  • The new fund gives the San Francisco-based firm $1.44 billion in total assets under management, the company said in a written statement.
  • The venture capital firm started by Raj Ganguly and Facebook co-founder Eduardo Saverin closed on $820 million for its second fund to invest in growth-stage startups, the company announced Tuesday.

Facebook Co-Founder On Hunt For Startups With $820M Fund -

pymnts.compymnts.com

Billionaire Facebook co-founder Eduardo Saverin’s budding venture capital firm has raised a new $820 million fund for investments in startups, a move that comes at a time when many entrepreneurs are struggling amid a sharp decline in financing deals.

Venture Capitalist Charged In Wide-Ranging Schemes To Defraud

SFGate

  • A 36-year-old San Francisco man has been charged with 19 felony counts of wire fraud and other crimes, accused in connection with several alleged investment schemes from 2013 to 2016, according to a joint statement from the FBI, the U.S. Attorney's Office and the Internal Revenue Service on Friday.
  • Federal officials said Rothenberg also committed bank fraud with alleged schemes to obtain money to make up for shortfalls in one of the funds he managed.

Private Unicorn Board Now Above 600 Companies Valued At $2T

Crunchbase News

  • This cohort has reportedly added $64 billion to private unicorn valuations along with close to $12 billion in total funding to date–with an average of $300 million raised by each of these new 2020 unicorns.
  • For companies exiting in 2018, their last private valuation in Crunchbase valued them at $235 billion.

World’s Largest Black-Led VC Firm Doubles Size of Latest Fund

Yahoo Finance

  • (Bloomberg) -- The world’s largest Black-led venture capital firm, Base10 Partners, just got bigger, raising $250 million to invest in startups and back a handful of initiatives designed to diversify the mostly-White industry.
  • The efforts of Base10 and other firms to support Black people in the industry could be a sign that longtime calls for change are translating into action, said Pam Kostka, chief executive officer of All Raise, a women’s advocacy group in tech and venture.

Lemonade targets down-round pricing in impending IPO

Fundings & Exits – TechCrunch

  • Earlier today, insurtech unicorn Lemonade filed an S-1/A, providing context into how the former startup may price its IPO and what the company may be worth when it begins to trade.
  • According to its new filing , Lemonade expects its IPO to price at $23 to $26 per share.

Portfolio companies of startup studio eFounders have raised $148M this year

Fundings & Exits – TechCrunch

  • After those new funding rounds, the consolidated valuation of eFounders companies is now at $1.5 billion.
  • European startup studio eFounders has looked back at the first half of 2020 to share some metrics about its portfolio companies.

-- Startups


Lululemon set to acquire home fitness startup Mirror for $500M

Fundings & Exits – TechCrunch

  • The fitness apparel company noted its plans by way of a press release, noting that it hopes to close the sale by the end of the second fiscal quarter of this year.
  • Lululemon today announced plans to acquire home exercise startup Mirror for $500 million.

How Much Equity Do You Give Up in a Series A Round?

SaaStr

  • Your existing investors will want to do some or all of their pro rata, especially if a good Series A investor comes in.
  • And you can find non-traditional investors and others less sensitive to ownership percentages.

A New Standard Deal

Y Combinator

We are making two changes to our standard deal in conjunction with a recent fundraise. Starting with the Winter 2021 batch, our deal will be $125,000 for 7% equity on a post-money safe, and we will reduce the amount of our pro rata right to 4% of subsequent rounds.


-- Tweet of the Week