Hello and welcome back to our regular morning look at private companies, public markets and the gray space in between.
What a week it’s been. I’m exhausted. Not only are we another cycle deeper into the COVID-19 quarantine, but there seems to be more news than ever to sift through. I’ve fallen behind. So, today, this little column is taking look back at things that it missed but wanted to cover. (There may come a day when we run out of stuff to talk about, but it’s not coming any time soon.)
So let’s talk about a16z’s new crypto fund, recent economic data, the Ebang F-1, Lime’s layoffs, Procore’s IPO delay and fresh valuation, stocks, Luckin, and, if we have time, Twitter’s changing jobs data. Let’s get this all out of our heads and into the world.
Odds, ends
To annoy my editors, we’re using bullet points this morning. Bullet points are great way to convey a bloc of information in a neat format. Let the haters hate, we have a lot of ground to cover:
- A16z raised a new crypto fund worth $515 million. A few years after its first, $300 million crypto-focused fund, the folks at Andreessen Horowitz have loaded a second magazine. Now with a second, bigger fund there’s going to be more rounds for crypto projects than before. I suppose it’s good that the new fund was announced on the same week that cryptocurrencies and other blockchain-based tokens rallied, but it’s still a bit hard to square with how reality feels. I’ve heard nothing about early returns from the first a16z crypto capital pool (let us know?), but they must have been good enough to get another fund together. Aside from Coinbase, which startups in the crypto-tech, and crypto-services (i.e. the crypto cognates to fintech and finservices) are excelling? There must be some, because this Ebang IPO filing is garbage. (Also did Filecoin ever launch?)
- Speaking of which, Ebang’s IPO filing is a hot mess. You can read it here if you want. The company makes the vast majority of its revenue from selling crypto-mining hardware. But it’s shrinking sharply over time and, get this, in 2019 it reported negative gross margins. Form one line! All takers queue up!
- Not that other IPOs are doing much better. Procore has pulled back from its public debut and raised more private capital. Recall that this was an IPO we were modestly bullish about earlier in 2020. Per Bloomberg, the construction tech company has taken aboard $150 million at a $5 billion valuation and could still go public this year. Probably not, but you never know. This is an illustrative episode. Procore was in perfectly fine shape to go public before. Now it’s on hold. That means that companies of lesser quality (most unicorns, let’s be honest) are locked out from the public markets. We kinda knew that already, but here’s some confirmation.
- Lime laid off staff this week following Bird’s cuts. As you already knew, Lyft has also cut staff and Uber is said to be considering deep cuts. It was always a bit of a riddle why ride-hailing and micro-mobility companies were staffed like they were trying to build a search engine or low-orbit satellite network. Now we’ll get to see how they operate without a Silicon Valley-sized engineering team. This result isn’t that hard to grok, really. Uber, Lime, Bird and Lyft never had software-level margins. And yet they had software-level cost structures. That was never going to work when growth slowed, especially as none of them have ever generated material free cash flow or operating profit that I can recall. The question is what sort of corporate cost structure can you build atop these tech-enabled companies?
- Luckin’s mess is getting even worse. Fraud? Check. Delayed earnings? Check. Huge embarrassment for Chinese companies hoping to raise capital abroad? Check. And now no CTO. Damn. (On a personal note, I covered this company and its numbers and presumed that they weren’t cooked. That the numbers were misleading is so annoying I could spit. I passed them to you as if they were real and representative. That’s infuriating. Alas. Also read this story about Bird and how it massaged its own metrics and results. Yuck.)
- Stocks are up and the economy is down. If you’ve been on Twitter in the last, say, month, you’ve seen tweets about this matter. But the sheer scale of bad news this week finally managed to bend the equity markets down. Personal income, personal spending and jobless claims were all worse than expected this week, adding to weeks of shit data. I mean, this looks bad. What broke the camel’s back? Amazon, oddly enough? Amazon told investors that it was going to spend like hell in the current quarter to get through it, and that wasn’t too popular. Of course Amazon’s post-earnings declines are just a few days’ worth of gains it’s giving back. But if Amazon is going to have a tough Q2, lots of other companies are going to suffer.
- The cracks in the ads business are real, and we can tell from Twitter’s jobs data. The folks at Thinknum have put together a chart of Twitter’s job openings, which are sharply falling. Why? Twitter’s ad business isn’t performing very well in the COVID-19 era. It saw things get worse in Q1, and Q2 isn’t super great. So it’s curtailing costs. Indeed, Twitter has not made up nearly as much ground in the public markets as other firms when compared to its 2020 lows.
And there’s so much more. But I don’t get to spend all day writing, sadly. Hugs, and welcome to May. Perhaps we’ll have a better month.