The public markets remain open to tech IPOs, and tech unicorns are trying to recover from pandemic damage, improve their finances, and get back to the starting gates. This week it's finally Airbnb and Palantir. Both have been startup icons for the past decade and have literally helped define the term “unicorn”. Both now illustrate the challenges that can arise from holding onto private funding for years when an IPO was possible.
For starters, the travel company made a confidential public offer on Wednesday, which means we'll likely look at the numbers after the third quarter, as Alex Wilhelm reported. It had finally decided to go public this year, then the pandemic changed its business, forcing a move away and mass layoffs. Now, it is said, business is booming again, at the expense of some established companies. The cost savings and new growth potential could prove to be an exciting combination for the public markets.
Palantir, meanwhile, appears to be heading for an IPO based on the S-1 screenshots Danny Crichton scooped yesterday. However, the oldest unicorn (17 years old) is still losing hundreds of millions each year, it still has a concentrated customer base for its data and advisory products, and its trading business is still relatively smaller than that of the government. The more positive financial news it has to offer? Government revenues have increased this year, apparently driven by stronger pandemic demand, and the commercial side has grown since then. Danny hears that it is also working to manage its stock price by doing a direct listing that is unusually accompanied by an employee embargo.
There have been many reasons for unicorns to stay private for the past decade, including large checks, exciting growth, often friendly terms, and a general lack of control. Almost nobody would have thought that a pandemic would affect everything like that. And without the pandemic, in retrospect, it might be easy that the slow pace of the IPO was the right one? Instead, every company must make decisions that harm their valuable pool of talented employees and a carefully cultivated culture.
In this scary new decade, might founders looking to thrive on the Airbnb and Palantir scale see public markets as a less risky way to reward shareholders and fund future growth?
Or are more startups primarily less interested in large share rounds? Danny spoke to a founder of Extra Crunch who has successfully followed this path with SaaS securitization.
Finally, check out Alex's rundown of what other companies on the IPO track are now at Extra Crunch. These include: Asana, Qualtrics, ThredUp, Ant Financial, Affirm, and many more once you are past this calendar year.
Farewell to the dairy
Another sign of changing times, a well-known local startup cafe in San Francisco has closed. Yes, The Creamery is ready to be leveled sooner or later for a development that has been in the works for years. My former theinformationsuperhighway colleague Ryan Lawler came back to write a guest requiem for us. Here's to start, but I suggest reading to the end for some throaty nostalgia about a period of time that you didn't know you would miss:
I can't remember when I first went to The Creamery, probably in early 2012.
I can't remember the last time either, although it was undoubtedly sometime in the last year, on a day that I had an additional five minutes before getting on the Caltrain for my morning commute.
And I barely remember the other hundreds of times during my years at theinformationsuperhighway, where there was an office a little more than a block away, I had a coffee, had lunch with a friend, or met some potential source.
The dairy was not a place to be remembered. It was firmly at the forefront of convenience and comfort – which is why it was the perfect place for the SF Technorati to see and be seen for a period of around five years from the early to middle teens of the third millennium.
This is also the reason why, after 12 years from one global recession to the next, it finally closes its doors.
Five investors talk about the real no-code opportunities
In our recent Extra Crunch investor survey, Alex and Lucas Matney found where no-code concepts actually have a big impact (instead of just sounding exciting, which they already do). Here is Laela Sturdy with CapitalG:
I don't think it's over the top, but I do believe it's often misunderstood. There has been no code / low code for a long time. Many of us have been using Microsoft Excel as a low-code tool for decades, but the market has recently caught on fire due to an increase in applicable use cases and a variety of innovations in the functionality of these new low-code / no-code tools on platforms , particularly in terms of their ease of use, the level and type of abstractions they can perform, and their extensibility / connectivity to other parts of a company's tech stack. On the demand side, the need for digital transformation is higher than ever and cannot be met with established technology platforms, especially in view of the shortage of technical workers. Low-code / no-code tools have bridged that void by allowing knowledge workers – ten times as populous as technical workers – to configure software without the need for code. This has the potential to save a lot of time and money and enable end-to-end digital experiences in companies more quickly.
When you look at large companies today, IT departments and business units are always mismatched because IT teams have limited resources and are unable to meet core business needs quickly enough. There just isn't enough IT talent to meet demand, and issues like security and maintenance take up most of the IT department's time. When business users want to build new systems, they have to wait months, or in most cases years, for their needs to be met. No-code changes the equation as it allows business users to take control of change and achieve goals on their own. The rapid state of digital transformation, accelerated only by the pandemic, requires more business logic to be coded into automations and applications. No code enables this transition for many companies.
Chamath Palihapitiya's latest act is a tech holding empire
After the long-time investor and former Facebook manager Palihapitiya was familiar with the modern SPAC trend early on, an additional master plan is in the works. It's similar to the SPAC plan, but with even fewer other investors to disagree with. Natasha Mascarenhas has the details:
Hustle is the third acquisition by Social Capital in the past three years. In 2018, Social Capital bought a healthcare company that has an archive of data on human physiology. Last year, the company launched a mental health startup that focuses on software-based treatments and tracks user progress. Palihapitiya declined to disclose the names of both investments, citing competitive advantages when it came to keeping them out of the press for the time being.
"I like companies that do not have obvious data connections," he said, noting that this is different from AI, machine learning, and other futuristic technologies. Although his SPAC returns could fuel acquisitions, he said his deals were funded by personal capital.
Palihapitiya's long-term strategy for Hustle is to build an empire around him. He plans to acquire aid companies with an ARR of $ 5 million to $ 15 million, consolidate them, and "now all of a sudden you can see we're reaching hundreds of millions of ARRs".
The hustle deal was closed in about a week. He says that by investing from a permanent balance sheet of his own capital, he can draw decisions faster than a traditional venture capital firm, which is in line with the general anti-VC sentiment of investors. He pointed to the merger between Credit Karma and Intuit, which is still ongoing. "We are still waiting for this deal," said Palihapitiya. "You know, I couldn't write a $ 8.8 billion acquisition myself. But I could write a $ 5 billion letter."
Caryn Marooney explains how to get people to take care of your startup
The problem is not new, of course, but Lucas has learned from former Facebook PR boss Caryn Marooney about the right strategies to solve the problem and put together an explainer for Extra Crunch. Here is an excerpt:
If you want to get someone to care first, you need to demonstrate your relevance. When creating their messages to resolve this, founders should ask themselves three questions about their strategy. She recommends:
- Why should anyone care?
- Is there an order for it?
- Who loses when you win?
These questions are about what you are offering, whether there is a customer, and who you are up against. From there, they can also help companies figure out how to expand their relevance in the face of new market developments.
"As a startup, you start out irrelevant," she says. "So your relevance comes from: you are a founder that people know, you come from a company that is important to people, or you are in an area that is already relevant and that people want to know about, or you are about to kill a competitor that people really care about, or you have customers that you get relevance from the customers. "
All about theinformationsuperhighway
Cloudflare's Michelle Zatlyn discusses building a company with a bold idea at theinformationsuperhighway Disrupt
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The founders of Blavity and The Shade Room are coming to disrupt 2020
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Announcement of the brand new, virtual agenda for TC Sessions: Mobility
The investors Reilly Brennan, Amy Gu and Olaf Sakkers come to TC Sessions: Mobility 2020
CrunchMatch supports virtual networks at TC Sessions: Mobility 2020
Visit Jeff Lawson of Twilio for live Q&A on Aug 25 at 2:30 pm EDT / 11:30 am PDT
In the course of the week
The industrialization of private space is here
China is building a GitHub alternative called Gitee
There is no front runner among the TikTok alternatives
When Oracle buys TikTok, I go to Danny and eat his pesky Stanford sweatshirt
Here are four areas that the $ 311 billion CPPIB mutual fund believes will be affected by COVID-19
Founders can collect donations before launching a product
Max Levchin is looking forward to the next big opportunities from Fintech
How technology can build more resilient supply chains
Dear Sophie, how can I transfer my H-1B to my startup?
The co-founder of PopSugar says the pandemic will create a "great windfall" for digital mediation
Hello and welcome back to Equity, theinformationsuperhighway's venture capital-focused podcast (now on Twitter!) Where we unpack the numbers behind the headlines.
What if the entire podcast crew is a little tired of everything and doing their best? That episode, apparently. A big thank you to Chris Gates for helping us shed the fat and doing something good for you.
Before we dive into the topics of the week, don't forget that Equity won't be back on YouTube for most of the weeks. So if you'd like us to have some extra fun on the production team, you can do so here. More will follow as soon as I get my new external camera up and running.
Here's what Natasha, Danny, and I did this week:
- Public markets are on fire these days as Apple hits $ 2 trillion in market cap and Tesla's stock does all sorts of weird things. In short, stocks have only been up for a while, and that means that there are warm, almost suffocating temperatures in all kinds of assets.
- Unsurprisingly, this translates into an increase in liquidity as asset managers of all kinds try to make the most of the time. So Asana is preparing a direct listing, Airbnb has submitted privately and ThredUp is planning an IPO in early 2021. We would expect it to happen around the same time as Coinbase.
- Airbnb also banned parties, which was the show's title.
- And SPACs are still happening in rapid fire. The equity crew isn't particularly impressed with the whole thing, but I'd like to say that with Paul "Fucking" Ryan it's probably a sign of the top of the market.
- And when Natasha finished the liquidity chat, she walked us through what Chamath has been up to and Danny made fun of Kabbage.
- Financing rounds! Welcome collected a check for $ 1.4 million which I covered, Labster raised $ 9 million that Natasha wrote about, Carrot Fertility raised $ 24 million which we all thought was pretty smart, and our friends at Crunchbase News wrote about PadSplit which is neat to be honest, but we ran out of it on time after spending too much time on SPACs. Check it out here.
Angry! We do a lot at theinformationsuperhighway.com so stay tuned and know that if we've been a little messed up this week, we'll be working on getting our backends down to bring you neat things. You will dig them.
OK chat Monday, a show we're already planning. Stay calm!
Equity decreases every Monday at 7:00 a.m. and Friday at 6:00 a.m. So subscribe to us on Apple Podcasts, Overcast, Spotify and All Casts.