EC venture capital

Some crypto VCs see decentralization as the future following FTX collapse • ZebethMedia

By zebethcontrolPosted on November 9, 2022Posted in Binance, blockchain, Crypto, EC Blockchain, EC Cryptocurrency, EC venture capital, FTX, Venture, venture capitalNo Comments

As the crypto market digests the past few days of chaos, venture capitalists see the moment as a warning, but also an opportunity for the growth of decentralization and maturation of the larger blockchain space. “As venture investors, we take a long-term view on the industry; despite the current market turmoil, we are actively assessing and investing in the right opportunities,” Marc Weinstein, founding partner of Mechanism Capital, said to ZebethMedia. “The premise of DeFi has, if anything, been strengthened by the collapse of centralized entities from opaque counterparty relationships.” Decentralized finance (DeFi) is often associated with trusting blockchain technology to execute services through smart contracts, while centralized finance (CeFi) usually refers to more traditional business models and involves having people manage funds and manually execute services. “Market sentiment is shaken, but committed VCs with experience from several crypto market cycles will continue to invest.” Marc Weinstein, founding partner of Mechanism Capital Historically, the venture market doesn’t get “too offended” by what transpires in secondary markets, David Gan, general partner at OP Crypto, said to ZebethMedia. Regardless, he said, the seeming death of FTX is saddening for everyone, “not just in the VC space, but across the board.” When there are massive crashes and burns, it speaks to what we’ve been seeing over the past decade: It’s the Wild West out there, Samantha Lewis, principal at Mercury, said to ZebethMedia. “When summarizing it all, I see it a continuation of the phase that started when winter hit and we saw Luna and all these crazy companies crash and burn like BlockFi, Celsius and now we have FTX,” Lewis said. “As an early-stage venture investor, it’s telling me the hype is now for sure gone. But that ushers in the maturation of the space that a lot of us have been craving for a really long time.”

VC investors and startup founders see hope in the red wave that wasn’t • ZebethMedia

By zebethcontrolPosted on November 9, 2022Posted in 2022 midterm elections, EC venture capital, Government & Policy, Politics, Startups, VentureNo Comments

Janna Meyrowitz Turner’s biggest concern going into the U.S. midterm elections was that more than half of American voters had an election denier on their ballot. She was quite nervous, alongside pundits and polls who expected a red wave, a conservative flush that would take hold of Congress, state legislatures, and city halls. That didn’t happen. Instead, many candidates backed by Donald Trump failed to garner voters. Pro-abortion, anti-slavery, and pro-marijuana proposals passed while a young and diverse crop of politicians were elected at federal, state, and local levels. The red scare was nipped. For now, at least. “By and large, these candidates lost and will continue to do so,” Turner, the founder of Synastry Capital and co-founder of the coalition VCs for Repro, told ZebethMedia. “Despite the deliberate barriers to keep Black, brown, young, and new Americans from voting, these folks turned out in record numbers, which means our government will start to better reflect our citizens.” All in all, Democrats fared better than expected and are predicted to maintain control of the Senate, while Republicans are favored to take hold of the House. ZebethMedia conducted a vibe check with investors and founders to gauge how they feel as results continue trickling in. Many were happy with the progress being made, while others spoke of the issues they aim to tackle next as calls increase for progressive investors to start speaking up. “Democracy was the real winner last night, which is the underpinning of everything.” Jana Meyrowitz Turner, investor, Synastry Capital Naturally, one issue on everyone’s mind was abortion. Voters in many states had to vote on abortion-related proposals since the overturn of Roe v. Wade left such decisions in the hands of states. Shortly before the midterm elections, more than 100 VC firms came together to create VCs for Repro, a coalition rallying investors to vote in favor of reproductive health and wield more of their sociocultural power for change. Ballot results show that VCs for Repro’s cries were part of a larger clamor to protect reproductive autonomy. Kentucky voted against amending its state constitution to say that there was no right to abortion; Vermont, Michigan, and California voted to make reproductive freedom a constitutional right. Turner noted that pundits and polls drastically underestimated how much Americans support abortion. If it wasn’t clear then, though, it is now.

Will the FTX debacle scupper crypto venture dealmaking? • ZebethMedia

By zebethcontrolPosted on November 9, 2022Posted in Binance, blockchain, Crypto, EC Blockchain, EC Cryptocurrency, EC Newsletter, EC venture capital, FTX, The Exchange, Venture, venture capitalNo Comments

The dramatic fall of FTX is taking with it more than just the paper wealth of one of crypto’s most colorful players. Given the amount of invested capital that may be incinerated in the crypto exchange’s anticipated sale to rival Binance, it’s hard not to wonder where venture goes next in web3. FTX is no longer set to generate massive investor return when it goes public; instead, backers of the exchange are concerned that their investment could go to zero in the Binance transaction. The potential sale of FTX to the larger exchange may save the brand — there’s a lot we still don’t know about its health sans rescue — but it is not clear if any of the capital pools that helped power its rise will get their money back. The Exchange explores startups, markets and money. Read it every morning on ZebethMedia+ or get The Exchange newsletter every Saturday. The scale of the potential losses is staggering. FTX’s mid-2021 funding round was something that it described at the time as the “largest raise in crypto exchange history,” for example. The $900 million round valued the company at around $18 billion. The boast about the round now sounds more like a threat, at least from a venture returns perspective. “Over 60 investors participated in the $900M Series B,” FTX wrote at the time, noting that “Paradigm, Sequoia Capital, Thoma Bravo, SoftBank, Ribbit Capital, Insight Partners, Third Point, Lightspeed Venture Partners, Altimeter, BOND, NEA, Coinbase Ventures, Willoughby Capital, 40North, Senator Investment Group, Sino Global Capital, Multicoin, the Paul Tudor Jones family, Izzy Englander, Alan Howard, VanEck, Hudson River Trading, and Circle” put capital into the round.

What’s the right NDR target for SaaS startups? • ZebethMedia

By zebethcontrolPosted on November 8, 2022Posted in EC Newsletter, EC venture capital, Enterprise, openview, SaaS, Startups, The Exchange, VentureNo Comments

Why are software companies valuable? Put another way, why have we spent so many years valuing software companies using revenue multiples, instead of the profit multiples that are more common in other industries? There are several key reasons. First, software companies have very strong gross margins; software is cheap to sell once you’ve written the code. Secondly, and more to the point today, is the fact that modern software companies are set up to sell more of their product to existing customers over time. This is often achieved through selling more seats (individual use licenses) to extant accounts or, in the case of on-demand pricing, more total usage of a service over time. Regardless of the method, what matters is that software companies today tend to see limited gross churn (customers dropping their contracts) and positive net dollar retention (the sale of more product to existing customers over time). The Exchange explores startups, markets and money. Read it every morning on ZebethMedia+ or get The Exchange newsletter every Saturday. Net dollar retention (NDR) is, essentially, gross churn from existing customers plus upsells from the same, measured over a set time period. The resulting metric, measured in a percent of prior revenue, helps investors understand just how much built-in growth momentum a company has. The greater net dollar retention that a software company has, the more efficient its growth will be (selling more stuff to already-landed customers is cheaper than securing net-new accounts). NDR matters, and investors, focused on more efficient growth than last year, are likely putting more emphasis on the metric. So, what should startups target when it comes to NDR results? Even more, do those expectations match what startups are actually reporting? And who has better net retention, public software companies or their startup rivals?

Peloton co-founder John Foley is a rug guy now

By zebethcontrolPosted on November 8, 2022Posted in EC venture capital, fundraising, john foley, Peloton, startup, Startups, VentureNo Comments

What Ernesta’s round tells us about today’s VC market John Foley clearly didn’t take (ahem) a brake after leaving Peloton. The former co-founder and CEO of the connected fitness company — who stepped down as CEO in February and left the company altogether in September — is back with a new startup. Ernesta, which aims to launch in spring 2023, will sell custom rugs through a direct-to-consumer strategy. It has already raised a $25 million Series A round from a slate of investors that also backed Peloton, including True Ventures and Lee Fixel, through his current firm Addition. It’s not surprising to see Foley getting back into the startup game by any means — venture capital both embraces failure and loves a good comeback story. Plus, there are plenty of previous examples of this happening involving folks who left companies on much worse terms than Foley did. But this deal is particularly interesting — even when you look past the seeming randomness of it. For one thing, comeback stories in venture don’t generally start in the same calendar year that the previous tale ended in. And Foley’s ability to quickly raise such a sizable round before the company’s launch actually tells us quite a bit about where the market is at right now.

Maybe we were valuing software companies the wrong way all along • ZebethMedia

By zebethcontrolPosted on November 7, 2022Posted in EC Newsletter, EC venture capital, jason lemkin, Startups, tech valuations, The Exchange, VentureNo Comments

‘I honestly didn’t think it could get worse’ What’s a software company worth? It’s not an idle question, but one that underpins a huge amount of private-market investment and human effort. In 2021, the presumed value of software revenues grew, adding to a longer upcycle that pushed tech companies’ valuations into the stratosphere. Since late 2021, however, a decline in tech valuations in private and public markets has entirely shaken up the game. And then, after quarters of declines, tech stocks took another gut punch Friday, with a key index tracking the value of cloud and SaaS stocks reaching a fresh 52-week low. The Exchange explores startups, markets and money. Read it every morning on ZebethMedia+ or get The Exchange newsletter every Saturday. To paraphrase SaaS investor Jason Lemkin in the wake of the selloff, we didn’t think that it could get worse. So much for that misplaced optimism. The recent selloff is news in and of itself, but past examining the latest contractions, it’s worth asking the question lurking at the back of the entire software revaluation saga: Were we using the right valuation metrics all along? Maybe not. And if not, we’re not only seeing a reevaluation of software companies, but perhaps a new era of tech valuations more generally. It won’t be one that is attractive to startups. Public tech companies are also running afoul of the shift.

New data shows how SaaS founders have been dealing with whiplash from public markets • ZebethMedia

By zebethcontrolPosted on November 7, 2022Posted in EC venture capital, Enterprise, openview, SaaS, Startups, VentureNo Comments

What a difference a year makes. If you are looking for proof, go no further than OpenView Venture Partners’ 2022 SaaS benchmarks report, which couldn’t be more different from the 2021 edition. Both reports come from an annual survey of SaaS companies, and with 660 global respondents, the 2022 sample doesn’t look very different from last year. But boy, the mood has changed. Among other findings we’ll dive into shortly, OpenView learned that “an overwhelming majority of respondents are slashing spending regardless of cash runway.” This need to cut cash burn is of course an answer to the public SaaS selloff and the “whiplash” that ensued. Being set off by macro concerns, there’s no reason to think that it won’t continue for some time, which explains why companies are gearing up. Founders don’t just need to cut burn, though — they also need to turn their startups into the kind of companies that investors will back, and that’s definitely not the same as it was in 2020 or 2021. But then, what does a great SaaS company look like these days? And how to become one? Well, benchmarks are a good start to answering these questions — knowing what the top of the class is doing can help other entrepreneurs steer their companies in the right direction. OpenView has some how-to advice on the nitty-gritty, too, which we discussed with the report’s co-authors, operating partner Kyle Poyar and senior director of growth Curt Townshend. “One thing that we saw in talking to CFOs, as well as looking at the data,” Townshend said, “is that it’s just a really hard time to be a founder today — and you need to be very, very specific about where you’re going to put your dollars.” Let’s explore what the answer(s) might be.

VCs decipher the recent fintech layoffs — and why they’re happening now • ZebethMedia

By zebethcontrolPosted on November 4, 2022Posted in Chime, EC Fintech, EC venture capital, Fintech, Layoffs, startup valuations, Startups, stripe, tech layoffsNo Comments

Many big companies in the fintech world cut jobs in the past month. And yet Stripe’s announcement it would lay off 14% of its workforce still made a splash, proving that unicorns and decacorns are not immune to the challenging economic and fundraising conditions. The Stripe news closely follows Chime confirming this week that 12% of its employees would be laid off and Brex revealing last month that it was cutting 11% of its workforce. So what the heck is going on here? Well, according to Spiros Margaris, a fintech venture capitalist and founder of Margaris Ventures, the current layoffs by some of these larger fintech companies were “caused by the challenging geopolitical market environment and inflationary pressures. It affects the whole fintech startup industry — and globally all industries — since the prominent players have a strategic ripple effect on the smaller players.” “Laying off good employees endangers their strategy to succeed in the grand vision they initially sold to the VC.” Spiros Margaris, founder of Margaris Ventures Cameron Peake, a partner at Restive Ventures who recently invested in AiPrise, concurred, noting via email that much of what we are seeing today “were the dynamics we saw play out last year,” including all of the “large funding rounds, sunny market projections and a belief that companies needed more people to fuel their growth.” What resulted was “a lack of discipline around company fundamentals,” she added. While the frenzy was dissipating, it was then that companies “realized they were not only ahead of their skis but that they needed to cut back in order to focus more on profitability,” she said.

Amplitude’s earnings show what you need to report to survive in today’s market • ZebethMedia

By zebethcontrolPosted on November 3, 2022Posted in amplitude, EC Enterprise, EC Newsletter, EC venture capital, Enterprise, Startups, The ExchangeNo Comments

The U.S. Federal Reserve raised the price of money once again yesterday. Investors expected the move, but shares dove after the Fed declined to tell investors that it intends to slow the pace at which it raises interest rates in the future, as some had hoped. While shares of many U.S. companies fell in the wake of the news, tech stocks took a particular whacking. And then a few tech companies reported earnings. You have to feel for them to some degree — reporting earnings during a down cycle for your sector right after market conditions just became more difficult is not the stuff of CEO dreams. The opposite, really. The Exchange explores startups, markets and money. Read it every morning on ZebethMedia+ or get The Exchange newsletter every Saturday. But the earnings news was not all bad. Despite a weak advertising market imperiling the Snaps and Metas of the world, and in contrast to slowing cloud growth more generally, there were a few green shoots amid yesterday’s earnings reports that are worth our time. Why? Because when we see public market investors react warmly to smaller-cap tech companies’ results, we can get a vibe for how unicorns might be valued if and when they do go public. Robinhood, the consumer trading platform, is up around 9% this morning after its own earnings report, worth around $10 billion. And later this afternoon, Coinbase will report results.

More than 70 VC firms join VCs for Repro coalition to support reproductive rights • ZebethMedia

By zebethcontrolPosted on November 3, 2022Posted in EC venture capital, Politics, roe v wade, Startups, Venture, venture capitalNo Comments

Seventy-five venture capital firms, including Bloomberg Beta, 776, and M13, are standing together to launch VCs for Repro, a coalition stating that criminalizing abortion is a violation of human rights that stifles innovation. Announced today, the group seeks to entice more financial leaders to support and vote in favor of reproductive rights come the midterm elections on November 8. “Criminalizing abortion violates human rights and is anti-innovation.This matters to the people investing in the future of our economy. Vote like it matters to you on November 8, 2022,” VCs for Repro’s statement read. The group was started by Backstage Capital general partner Christie Pitts, Synastry Capital president Janna Meyrowitz Turner, Amboy Street Ventures founding partner Carli Sapir, Coyote Ventures co-founder Jessica Karr, and VEST Her Ventures founder Erika Lucas. “There is the outdated pressure for VCs to have to toe the line … about where they stand on abortion.” Simmone Taitt, founder, Poppy Seed Health Speaking to ZebethMedia, Pitts and Turner said progressives within the investment community need to start better utilizing their economic and cultural prowess to shift and shape society. For a long time, people have been silent and afraid to speak up. Their hope is that changes today. “The venture community has a tremendous opportunity for socioeconomic impact,” Turner told ZebethMedia. “They determine which entrepreneurs and ideas get funded, which problems get to be tackled, and whose experience is centered in those business models. Our hope for the coalition is that it inspires those in positions of leadership to find their voice right now. And then to follow that with action.” Lucas added that there is little that determines a woman’s life and career trajectory more than whether she can prevent and plan pregnancies. She said that abortion restrictions hamper the nation’s talent mobility, diminish workforce participation, depress earning potential, and can even drive families into poverty. “I’m hopeful this movement puts pressure on business and civic leaders to see that restricting abortion access is not just a moral or social issue, is an economic issue,” she told ZebethMedia. Already, the reversal of Roe v. Wade is making waves throughout the startup and venture ecosystem.