Welcome back to this week’s transcribed edition of Equity, TechCrunch’s venture capital-focused podcast that unpacks the numbers behind the headlines. We’re running an experiment for Extra Crunch members that puts the words of our wildly popular venture capital podcast, Equity, in your eyes instead of your ears.
This week, along with guest Anu Duggal, the founder of Female Founders Fund, the team discussed Uber’s impending IPO, Q1’s IPO pace, Stash’s raise and more changes at Y Combinator that saw Sam Altman take a seat as the accelerator’s chairman.
So if you don’t like podcasts but still want the goodness that is Equity, you can have a read of this week’s episode below.
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Connie Loizos:
Hello and welcome to Equity. I’m TechCrunch’s Silicon Valley editor Connie Loizos. I’m joined today by Crunchbase News’s Alex Wilhelm.
Alex Wilhelm:
Hello.
Connie Loizos:
Hello. We also have a guest in studio today from New York. Anu Duggal, the co-founder of Female Founders Fund, which has backed a lot of really interesting companies from the wedding site platform Zola to the smartphone lending app Tala, which caters to people and underserved and emerging markets. Anu, thank you so much for swing by today.
Anu Duggal:
Thanks so much for having me.
Connie Loizos:
It’s really great to see you.
Anu Duggal:
You too.
Connie Loizos:
So we were going to talk about the week being sort of slow. In fact, until about an hour ago, we were sort of talking about discussing the fact that there’s been this … a lot of talk and no action yet on the IPO front. Then Reuters broke the news that Uber is planning to kick off its IPO in April, which is just next month. And it’s also just right on the heels of the expected IPO of Lyft, which apparently is coming out at the end of this month.
Alex Wilhelm:
Yes. And this is evidence that the news gods still hate this show because this is, every single week we get on and say well there was no, oh, all the news broke an hour ago. So Connie details here are that we expect the Uber IPO to hit the Road Show in April or to actually get live in April?
Connie Loizos:
I think it’s got an issue. It’s required public disclosure of the S-1 and launching its Investor Road Show. And after that, I’m not really sure how long it takes. Is it maybe like a week later?
Alex Wilhelm:
It’s not long. So it could actually happen all together instead of April.
Connie Loizos:
Yes.
Alex Wilhelm:
That’s super exciting.
Anu Duggal:
Very exciting.
Alex Wilhelm:
About time, I feel. I mean how long have you been talking about this? Let alone on this show, but it’s in general, I feel like this has been the longest sleep.
Connie Loizos:
Exactly. There’s been so much anticipation and I mean a lot of these companies we sort of knew they’d filed confidentially what in like December. There’s just been so much confidential filing and these things are coming and they’re coming and I guess they are actually coming now.
Anu Duggal:
Yeah.
Connie Loizos:
It’s interesting. It has San Francisco completely freaked out. Are people in New York talking about these things?
Anu Duggal:
I think they definitely are talking about it, but the impact it’s going to have on San Francisco as a community, I think will obviously be much greater. Whether it’s real estate prices, whether it’s just the amount of liquidity in the market will be traumatically different I think then it compares to any other city in the United States.
Connie Loizos:
It’s really it’s really so interesting. There was a study recently that it really depends on where the companies are located. So when Google and Facebook came public there was a lot of wealth that was injected into this area, but it was spread out so much. But the fact that these companies Slack, Pinterest, Uber, Lyft, the fact that they’re all in San Francisco-
Alex Wilhelm:
Postmates.
Connie Loizos:
Postmates.
Anu Duggal:
All five of them.
Connie Loizos:
Yeah is hugely problematic. And I’m trying to find the study right now, but it said something like I think at the day that a company announces a home values within like a 10 mile range, go up 1% and then after they go public, they go up another like 0.8% immediately.
Anu Duggal:
Not surprising at all.
Connie Loizos:
Not surprising and it’s really kind of terrible given the sort of a wealth inequality already challenging the city.
Alex Wilhelm:
It’s going to get worse, which I didn’t think was possible.
Connie Loizos:
Yeah.
Alex Wilhelm:
I was just on my way here from therapy, I was talking to my Uber driver about this. He’s like, “[inaudible 00:03:24] has changed so much in 20 years. Here’s what’s changed.” And we were joking about how today, traffic was very good in the city, and that was the first time that’s happened in 100 years. Imagine when there’s even more people and more money and a worse real estate market and more traffic, I mean hot dang, this is going to be a mess. It’s going to look like Manhattan in a way.
Connie Loizos:
Well also this week Andreessen Horowitz, it was reported including bias, but we were reporting based on the journal and I had confirmed it with a source that Andreessen Horowitz is moving an office to San Francisco. They’re looking at it, it’s like a 40,000 square foot space, but my source that they’re not going to be taking up the whole building.
Alex Wilhelm:
Wait, 40,000 square feet?
Connie Loizos:
Yeah, right down the street actually, on Townsend.
Alex Wilhelm:
Townsend and what?
Connie Loizos:
150. I’m not sure what the cross street is.
Alex Wilhelm:
If you’re not in San Francisco, that’s not useful. What we mean is TechCrunch’s office is not in the coolest part of town. It’s near Caltrain, which is transit. Anyways, it means it’s nearby and walkable from here, which is good because we can just drop by all the time and steal their snacks.
Connie Loizos:
Absolutely. But Y Combinator, Kate Clark had reported, is very likely moving to San Francisco.
Connie Loizos:
So anyway, there’s a lot going on here. Good, bad.
Alex Wilhelm:
I want to leave YC for a minute, but I want to talk about the IPO climate in general. And I know this is a bit SF focus, so sorry to our New York based guest.
Anu Duggal:
No problem.
Alex Wilhelm:
But we are … Tomorrow is March 15th or today for everyone listening is March 15th, which is halfway through the last month of Q1 and there has been zero tech IPOs of note for any of US companies and I think that is a shocking result.
Alex Wilhelm:
I know there’s been problems with the SDC and the government shut down, but the fact that for offer all of this hype through 18, that 19 was going to be a year that these companies get out, I am shocked that nothing happened in Q1.
Connie Loizos:
Well, I think there’s there’s two ways to look at it. I mean, I actually think Q1 was incredibly active on the acquisition front. So, whether you look at HotelTonight and the Airbnb or Spotify’s acquisition of both Anchor and Gimlet media, I think that that was definitely unexpected and was an indicator that there’s still a lot of money out there. There’s still, I think going to be more acquisitions as we move forward into 2019 but to our earlier point we have five coming up.
Connie Loizos:
So, I think it’s more a question of all of them happening and popping at the same time versus not happening in the first, call it eight weeks of the year.
Anu Duggal:
One thing with regard to Airbnb, one of the founders, Nathan, had given us a interview to Business Insider earlier this week and he’s made it sound like it’s not a sure thing that they’re going to go public this year, which I thought was really interesting and there were speculation at the travel sites Skift that it’s acquisition of HotelTonight might be part of the reason that they want to sort of absorb this and figure out it strategy.
Anu Duggal:
So, they bought this company for a reported more than 400 million in cash and stock and HotelTonight gives them access to hotel rooms and sort of better enables them to cater to guests who are looking for last minute accommodations, which they couldn’t really do before.
Alex Wilhelm:
No.
Anu Duggal:
But this could be a huge part of their business. So it’ll be interesting to see if that the one of the five, it doesn’t sort of happen this year.
Alex Wilhelm:
Why do you have to figure everything out before you go public? What a lazy perspective. Traditionally, you would go public and then still figure some things out.
Anu Duggal:
Right. I know, I know.
Alex Wilhelm:
We’re going to go public when it’s absolutely perfect because we don’t want to answer.
Anu Duggal:
There’s also no perfect time.
Connie Loizos:
Right.
Alex Wilhelm:
Amen.
Alex Wilhelm:
But you know what would have been a good time though, Q1 when the stock market got better from Q4. It would have been a fantastic time to do.
Connie Loizos:
Well, you know, I think that 35 day shutdown, I think just sort of totally screwed everything up.
Anu Duggal:
Yeah. It threw a wrench into people’s plans.
Alex Wilhelm:
All right. Maybe I’m being too particular about this but I will say that aside from Lyft and I guess now maybe Uber, okay, but you know what? My point here and the notes’ doc says no big IPO is lead Alex and then Uber got its thing so now I’m looking a little bit silly, but if Lyft goes off and then Uber does follow in the timing we’re expected-
Connie Loizos:
Yeah, weeks later.
Alex Wilhelm:
… defeated and if there’s any delays they’re off. It’ll be a bit messy.
Anu Duggal:
And you have Pinterest as well.
Alex Wilhelm:
That’s also up the street.
Connie Loizos:
Right which is coming in April I think.
Alex Wilhelm:
Is that the latest April?
Connie Loizos:
I think so. That’s what I’ve heard.
Alex Wilhelm:
Not to put you on the spot, but on a confidence intervals, is that a 60% chance. Like if you were to-
Connie Loizos:
I honestly … Probably at most.
Alex Wilhelm:
Okay. Most of six years. Yeah. It’s like a 50, 50.
Alex Wilhelm:
My email is alex@crunchbase.com. Feel free to say hello.
Alex Wilhelm:
Anyways, the point is slow Q1, but it looks like Q2 is going to be revving up for two big IPOS, and they will set the tone for ride sharing and metro capital raising around the world and also for the Unicorn IPO crop moving forward. So it’s going to be a hell of a do. I’m excited about this.
Connie Loizos:
I’m excited too. But it is sort of one … I’m curious to see what happens. There’s a lot going on. Brexit is still sort of a question mark and we’re still having this, these trade issues with China. I mean there’s still a lot of uncertainty, so-
Anu Duggal:
The border wall is still an issue.
Connie Loizos:
Yeah absolutely. Right. So I don’t know what’s going to happen.
Alex Wilhelm:
Ah the American political climate. Can we talk a little bit about the Uber self driving round that may be coming together. So I think everyone saw the news this week that Uber is looking, according to various reports, for about a billion dollars to help fund itself driving unit and naturally, if you’re a friend of the show, you know this, SoftBank is involved. Shockingly enough through the Vision Fund and I’ll put a quarter in my vision fund swear jar for saying that but I think my perspective on this is, and please Anu, tell me if I am wrong, but Uber needs to clean up it’s losses if it’s going to be a successful public company and to do so, it needs to get its cost structure down and one place you can do that is to have other people pay for your research arm effectively.
Alex Wilhelm:
And so if you can raise $1 billion to put into your self driving unit that’s not from you, you can have a much cleaner net income looking forward and so to me that makes a lot of sense but, here’s my question, how the hell do you commercialize Uber’s self driving tech if you’re not Uber?
Alex Wilhelm:
So why would you put money into this unit? Is it a spin off? I don’t understand the structure of what this could be.
Anu Duggal:
Sure. So I mean I don’t have probably any more information than you do on the structure, but I do think that it’s to your point, very smart in terms of getting them closer to a balance sheet that makes sense as a public company.
Anu Duggal:
And I think you saw … You saw this with Google as well granted that was post going public that it just makes sense after a while to spin off these more risky, if you want to call them that, businesses. So I’m not surprised at all.
Connie Loizos:
In fact, speaking of that, I think was it the information that reported that Waymo might be looking for outside funding for the very first time?
Alex Wilhelm:
Good point.
Connie Loizos:
Which is really interesting.
Connie Loizos:
No, no, I was going to say, I’m like you, I’m not really clear on exactly how this will work. I know that well according to the Financial Times reported last fall that a Dara, the CEO of Uber was even like thinking about potentially like totally spinning it off. I mean, because it was such to sort of get their cost more in line.
Alex Wilhelm:
What’s it worth? How do you value it?
Connie Loizos:
I think the Journal said they were going to be investing a billion at a, like a maybe like a five or $6 billion valuation.
Alex Wilhelm:
That sounds fine. And it sounds kinda of … If we had all had to guess, if it was a $1 billion infusion play, about 20% so call it a $6 billion post money, fine.
Alex Wilhelm:
What? Why is it worth 5 billion? By what metric? By what standard? Is it the best? Do you do this by like number of human takeovers per mile recorded over the last million miles virtual or real? Is there anyway to value this other than magic?
Anu Duggal:
I mean, ultimately I think it’s whatever the market will give you, right? Particularly in this type of company, right? Where you do have a lot of losses, where you don’t have real proof of product market fit yet.
Connie Loizos:
Right.
Anu Duggal:
So I think that to your point, 20% for what they’ve built to me strikes me as being pretty fair.
Connie Loizos:
And this would be with Toyota, which you would assume sort of has some sense of what things are worth. So Softbank and Toyota?
Alex Wilhelm:
Yes.
Anu Duggal:
Yeah.
Connie Loizos:
Would be investing in this unit so interesting stuff for sure.
Alex Wilhelm:
It is. It won’t of course happen though before the IPO, I wouldn’t presume or it would probably delay it. This is a material transaction and you can’t really do two things at the same tie.
Alex Wilhelm:
Let’s scoot along to something that’s caught our eye this week, which the stash round, which Connie,you wanted to talk about. I think it was a $65 million dollar infusion.
Connie Loizos:
Yes. Well it was … What was interesting to me about this was we were talking with Jeff Clavier a couple of weeks ago about Acorns big round and the fact that there are these sort of up and coming companies that are catering to people who … Like the wealth management services, like betterment wealth front cater to people who’ve got like assets and want to kind of be more hands on with them and maybe pay less in financial advisory fees.
Connie Loizos:
There’re other firms that are kind of catering, very new, newly minted people with assets who are just trying to figure it out. And I think Stash is one of these, it’s three years old, it’s based in New York. So, Acorns had raised a series E at the time and we were saying, “Ph, it’s kind of funny. Stashes around the same age. I wonder if a series E was coming,” and in fact, this is at series z $65 million.
Connie Loizos:
Interestingly, it’s not saying who fueled around, I’m not really sure why. But as our colleague at TechCrunch, Ingrid had mentioned yesterday was sort of funny because Jim Breyer of Breyer Capital released a statement about the company saying, “Oh, its new technology. We’ll have CEOs and CMOs knocking on their door.” So we can probably assume that Jim Breyer is an investor, which is great. Its other backers include Union Square Ventures from past rounds, [inaudible 00:12:39] and Valor Ventures.
Alex Wilhelm:
I’m fascinated by the round timing cause I think it is very fitting in with what Acorns and Chime have done. The neo banking trend is here to stay with this amount of capital and they’re going to have several years of runway I presume. So whatever this is, we’ll keep going.
Alex Wilhelm:
I’m curious how much space there is to grow accounts very quickly. Chime … Remembering numbers from memory, went from 1 million accounts to 3 million accounts between rounds. Very impressive. I wonder how many more millions of accounts there are domestically to get that will be that easy. It will get harder. That’ll boost customer acquisition costs, that’ll lower margins, et cetera, et Cetera, et cetera.
Alex Wilhelm:
Also, we don’t know what the valuation was for this round. Now we don’t always know. A lot of companies keep it to themselves, which is rude and they should tell us that. We do know that the series D, the proceeding round for Stash was at a $350 million valuation, I believe post-money.
Connie Loizos:
Oh, is that right?
Alex Wilhelm:
This was supposed to be much higher.
Connie Loizos:
Okay.
Alex Wilhelm:
How high? I don’t know. I don’t like it when we don’t know so much stuff. It feels weird to me to not disclose investors, to not have better notes about evaluation. And that always puts up my bad news radar. But it’s hard in this case to make a bad news case.
Anu Duggal:
Well, I think what you’re seeing more and more is a couple of things as it relates to larger rounds. So I think a, we’ve seen this in New York for sure, where companies are either not announcing or delaying announcing a round and I think that can be for a host of different reasons, but-
Alex Wilhelm:
Can you tell the listeners just a couple of those?
Anu Duggal:
So there’s not any in particular that come to mind, but I do know it’s a trend that people in the venture capital industry have been talking about. And some of those actually may be companies that have not yet announced even yet.
Alex Wilhelm:
Fair enough.
Anu Duggal:
Even within our own portfolio, I think, the question of when you raise a $50 million plus round and you have very strong competitors, does it make sense to announce it or to just get to work?
Connie Loizos:
Right?
Anu Duggal:
Is something that is very real. So I do think it could be part of that.
Connie Loizos:
Sure.
Anu Duggal:
But I think to your earlier point just around this industry, I think you will start to see higher acquisition costs. I think that one to three million is obviously great, but how many more there and what are you going to pay to acquire those counts for, I think is a very real question.
Connie Loizos:
And Robin is another big player on this front too.
Alex Wilhelm:
Robin Hood is kind of been like the stocky bit and the crypto bit, you got Wealthfront and betterment in the more focused on investing in bit. And then you have Acorns, Chimes, Dash Term, almost more in the banking bit, but they’re all kind of related, and they’re bleeding into one another.
Connie Loizos:
I think they all see themselves ultimately as like the next big financial services company with everything.
Alex Wilhelm:
Well I was reading about the Stash round before the show just to prep a little bit and at first of all, they have a new partnership with Green Dot, which is the bank, and they’re working with a thing called stock back, which I think is some sort of rewards program that gives you like points into companies that you buy stuff from. It’s a way to get people to invest a bit like Acorns, which is a way to save.
Connie Loizos:
Do you get stock in the company?
Alex Wilhelm:
I think so, or shares and a quoted ETF approved by Stash.
Connie Loizos:
Okay.
Alex Wilhelm:
I think if you like pay for Netflix with their payment system, you get something. If I’m wrong, someone correct me. But that’s close enough. And so this is definitely a blend into the Robin Hood space and that’s why they did it. It’s just more bleeding around the edges but I think it’s great. \
Alex Wilhelm:
How fun would it be now to be just turning 18 and have a plethora of no fee, consumer friendly banking options? My campus had Citibank. That was fair. You know what? I still had a Citibank customer and they suck.
Anu Duggal:
I mean, I think all of these commercial banks, ultimately the margins are so thin that they, the way they think about customer service and just the entire customer experience has so much to desire.
Connie Loizos:
Absolutely.
Anu Duggal:
And I think that to your point, if you’re 18 and you’re graduating from college or going into college, you actually don’t even think that I need to open up a Citibank account because that’s what my parents did. You open up your phone and you say, what are the apps that can give me the most efficient and best customer experience?
Connie Loizos:
Right?
Anu Duggal:
So, I think over time you’ll start to see that stack develop whether it’s into savings, checking. I mean there’s so many directions that these fintech companies can, can move into, and we see that even with Talla, which is obviously focused more in emerging markets, but once you own that customer and have a share of their mind space, there’s so much you can do with it.
Connie Loizos:
Absolutely. It’s so smart. And, and speaking of shares, I think the fact that they’re connecting people with companies from a young age is so smart. And I’m sure the companies love it because they want these people to be shareholders from the time they’re 18 graduating until they’re, you know-
Alex Wilhelm:
Yes.
Alex Wilhelm:
One last thing about that, the under banking problem in America is real and the financial services aimed at people of less means are bad and predatory. And so if we can build better tools that don’t take advantage of people who have the least, which is how the American banking system works, fees are higher for low dollar accounts, overdraft fees are excessive and punitive. Extortionary really.
Alex Wilhelm:
And so shame on the big banks for what they’ve done to America’s poor and viva these new apps. The downside is you have to have a smart phone to take part and that is a significant hurdle towards adoption. But at a minimum there are better options available for more people and I hate to sound positive about a startup, but like I like the sort of thing.
Connie Loizos:
I like this one too. I wouldn’t sort of in a blanket way say they’re all great cause I think they’re all bit predatory to be honest but hopefully less predatory than what we’ve had in the past.
Alex Wilhelm:
Well speaking about big piles of money that people have access to, there are some changes over a YCombinator that we have discussed on the show when they were hypothetical or pending. And I think we should just riff on them really quickly to make sure everyone knows what’s up at what was formerly a small accelerator down in the South Bay that has now become a globe straddling financial machine and most critically, a Sam Altman is no longer going to be in charge of it.
Alex Wilhelm:
Sam Altman is someone that I’ve only met once or twice. I don’t know him personally at all but I think he’s played an integral part in YCombinator’s growth out of what it used to be, which was kind of a small collective cop, more punk rock than a mainstream pop. And now it’s the Ariana Grande of finance. So because it’s quote “run as a partnership,” YC claims they’ll be no significant operational change. That’s a quote, but they’re doing a ton of stuff in their blog post announcing their shift.
Alex Wilhelm:
They noted that they launched something called startup school, the quote series a program, the quote YC growth program, the quote work and start up program and quote YC China. So a bunch of operations but, certainly this is a shift. And finally bringing Connie’s earlier point back, they are looking for space in San Francisco because the center of gravity in Silicon Valley has moved all the way up to the top of the bay and the little city we all call home. And I’m curious in our last couple of minutes while we think about this.
Anu Duggal:
Yeah, I mean, I think you laid it out so well. YC has obviously evolved and really expanded their product offering. I think to a large degree that’s due to the strength of the brand. I think they were early, they picked some great early companies that really built on their success and quite frankly enabled them to expand into, for example, YC China or launch a growth fund.
Anu Duggal:
So I think that I think Sam obviously has played a huge role in this and I do agree that moving to San Francisco seems to be very in line with the larger trend that we’re seeing in terms of companies relocating here. So I think that they’re only going to continue to launch and to grow which I think is really exciting for them.
Connie Loizos:
Yeah. My sense … I had done a story sort of asking whether Sam was good or bad for YC. When you see somebody leaves and he, cause he sort of came through like a whirling dervish and shook up a lot of things and now he’s out the door but my sense from talking to people in the community was that it was very much a net positive that he introduced lots of products to the company as you were saying Anu and that it’s going to be sort of run seamlessly because it really is like a machine and they still have … Sam is still chairman of the board. They have the founders, Paul Graham and Jessica Livingston on the board.
Connie Loizos:
They have the same CEO, Michael Siebel, who has been there for almost four years, kind of running the core program. So yeah, I think it’s just continue … we’ll continue to click along
Alex Wilhelm:
And it’s never been more popular. YC noted that they had a 30% increase, I think it was year over year in class applications up to 12,000 for their most recent batch. And that’s just a staggering number in ideas and founders and people out there who are interested in trying to change things.
Alex Wilhelm:
Well, it’s encouraging in a way that there are so many and I guess I don’t want to ever go back to the computer history museum wherever it played that place because the commute was bad and the food was worse. So it’s going to be good to, to be at home.
Alex Wilhelm:
And I think that’s all the time we have for this week everybody so thank you for coming. Anu, it’s been lovely to have you so much for having me.
Anu Duggal:
Thank you so much for having me. It was a pleasure.
Alex Wilhelm:
We’ll be back in seven days. Everyone stay cool.
Alex Wilhelm:
All right everybody, thank you for listening and a big thank you to Connie Loizos, our producer Christopher Gates, our executive producer Henry Pickavet and we’ll see you all right here next week.