KPIs

The week’s top performance indicators

Dots & Lines

The week’s top takeaways

• A new path to liquidity: The IPO pipeline may still be cold and M&A is at its lowest level in a decade thanks to factors like regulatory concerns, rising rates and buyer uncertainty. But Limited Partners (LPs) still demand distributions from their venture investments, many of which are now a bit long in the tooth after 10 years or more. Top venture firm Lightspeed, which manages more than $25B, is reportedly exploring a $1B continuation fund to liquidate at least 10 of its investments. This vehicle, more established in Private Equity but also being tried in venture recently, purchases secondary stakes at a discount, providing liquidity to LPs that need it while keeping the investments (and future fees, of course) within the firm’s remit. Many investors dislike the concept as it forces them to re-underwrite for a potentially longer term, or sell at a discount, but tough times call for tough measures.

• Fintech’s fall (and rise?): Financial technology, or “fintech”, which promises to disrupt outdated, tired, and customer-unfriendly old guard banks and servicer providers, has been a popular investment sector for the past decade. Its allure has fallen over the past couple years, however, as lower margins and higher acquisition costs dulled the perceived advantages held by upstarts. Incumbent providers also showed that they can innovate and implement tech, complicating things further. Brex, a corporate credit and cash management startup and one of the poster children of fintech, announced 20% layoffs this week and came under fire for a reported cash burn in the range of $50M per quarter, out of whack with its $279M annualized revenue. Other top fintech companies like Klarna and Stripe have reported layoffs and down rounds in past quarters as well, with investment volume dropping off massively in the past two years. But looking ahead, up may be the only way to go. Public market fintech multiples have improved. Private markets have cultivated a robust herd of fintech unicorns like Stripe, Addepar and Rippling, that have weathered recent storms. Several could soon be ready to lead the next class of IPOs.

  

• New year, same old layoffs: One month into 2024, and last year’s pattern of job cuts from tech companies and startups unfortunately persists despite the confidence shown in public markets. This year has already seen more than 24,500 cuts from 93 companies, including giant Microsoft, Tencent acquiree Riot Games, accelerator Techstars, and unicorn Flexport, according to layoffs.fyi. Some fear that the dystopian narrative of AI coming for all jobs is already here, but that seems dubious. After all, a recent paper from MIT recently concluded that “only” 23% of roles merit replacement based on costs and benefits. Others suggest companies are rotating personnel into promising areas like AI and out of functions with less upside, which requires cuts in some areas and hiring elsewhere. There is a contagion idea, positing that as markets cheered layoffs last year and found new highs, the behavior spread and and continues to reinforce itself. Of course, it could be the simplest explanation - that the industry is normalizing to a healthy state after low interest rate funding frenzies and pandemic over-hiring created an unsustainable situation.

Deal Points

A few items of interest

• Snyk, a cyber-security company backed by Accel that provides developer tools and was valued at more than $7B in 2022, is reported to be hiring bankers for its IPO

• Social network Reddit is reportedly targeting $5B for its IPO valuation

• Bilt Rewards, which allows consumers to earn rewards for rent payments, raised $200M at a $3.1B valuation, led by General Catalyst

• As energy efficiency concerns surged, energy storage companies raised a record $9.2B of venture financing in 2023

• Figma, the design software provider that is no longer being purchased by Adobe, is creating secondary liquidity opportunities for employees said to be at a $10B valuation, half of the price on the table in the failed buyout

• Roomba-maker iRobot called off its purchase by Amazon citing regulatory concerns, and laid off thirty percent of its staff

• Byju’s, a top Indian edtech startup that provides a tutoring app, which once valued at $22B, is reportedly looking to raise $200M at a $225M(!) valuation, which would have cut its value by 99% if it succeeds and the business remains standing

• AI Voice startup Eleven Labs raised an $80M Series B from a16z and others, in the same week as it saw the first deepfakes show up to influence the presidential election

• The SEC expanded reporting requirements for blank-check companies, popularly known as SPACs, tightening yet another startup offramp and making it likely we won’t see any for awhile

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