Pre-Money: Apr 1st, 2024

KPIs

The week’s top performance indicators

Dots & Lines

The week’s top takeaways

• The next meme stonk may have arrived: Social media platform Truth Social’s parent went public by merging with the Digital World Acquisition Corporation SPAC last week. Trump Media & Technology Group, listed as $DJT on Nasdaq, rose more than 50% from the opening and closed the day up 16%. The stock boasts a market cap of more than $6.6B, close to what Reddit ($RDDT) is worth, despite much weaker metrics. It reported $4.1M in 2023 revenues while losing $58M, and has fewer than 500,000 active users, so its valuation is largely driven by sentiment. Namely, that its eponymous majority owner is worth betting on. Like what transpired with GameStop, fans may continue to bid it up beyond what anyone trying to value it on fundamentals can endure. It’s already one of the most expensive stocks to short given the low supply.
  

• The IPO flow is still low: It’s easy to think that since the seal has been broken, with positive debuts from Reddit, Astera Labs, and others, offerings should be coming in droves right now. However, today’s market has a high bar for new offerings, Accel partner Rich Wong suggested in a recent interview. Companies need to demonstrate “real” - i.e. $200M+ - revenues, 40% or higher growth rates and to be profitable - or within spitting distance of it - in order to entice public market investors. In his estimation, less than one fifth of the unicorns crowned in this cycle will measure up. So the IPO deluge may still be a ways off.

• AI news is non-stop, while some question valuations: AI investing continues at its frenetic pace, with Amazon investing $4B into Anthropic to keep pace with Microsoft’s OpenAI deal, and the UAE coming onboard as well after purchasing FTX’s stake. AI infrastructure platforms Scale.AI and Cohere are also lined up to raise massive rounds. Still others are exaggerating their usage of AI to enhance attractiveness to investors (anyone remember Long Island Blockchain?). This has been coined “AI Washing,” spurring warnings and penalties from the SEC. The spoils at play here are undoubtedly massive, but critics are starting to question whether these businesses will live up to expectations implicit in forward revenue multiples of 100x or more. It’s still early, so keep an eye on how this space evolves.

• Venture for the everyday investor: As interest in private markets has grown over the past few years, a common refrain is the challenges individual investors face investing into venture-backed private companies, be it due to exclusivity, high minimums or accreditation issues. This week, Destiny (D/XYZ) Tech100, an exchange-listed fund holding positions in unicorns like SpaceX, Klarna, Stripe and more, launched on NYSE. Critics were quick to jump on the product structure’s capital efficiency and price. But the stock lets anyone with a brokerage account get exposure to venture capital at a buy-in price below $25 and expenses in the 2.5% range. It’s imperfect, but something investors should hope to see more of as private and public grow more connected.

Deal Points

A few items of interest

• Rubrik, the data security startup that Microsoft invested in at a $4B valuation in 2021, is is expected to file for its IPO this week and aims to raise $500M

• Simple Agreements for Future Equity, or SAFEs, have become an essential tool for fundraising, but they also create unexpected headaches and challenges for companies that rely on them too much

• Canva, the design software maker valued at $26B in its last round, acquired Adobe competitor Affinity

• In another sign of growing bullishness, accelerator YCombinator is raising $2B for its next few cohorts and follow-on funds

• Brandtech Group, an adtech company using AI to automate marketing services, raised $115M at a $4B valuation led by French holding company Fimalac

• Fundguard, a SaaS company applying AI to multi-asset fund administration and accounting, raised a $100M Series C led by Key1 Capital

• Sam Bankman-Fried, formerly of FTX, was sentenced to 25 years in federal prison for fraud and conspiracy, closing one of the industry’s most notable incidents of deception

• A concise case study on how Brex became a $12B fintech powerhouse in 6 short years

• Former House Speaker Nancy Pelosi invested in Databricks recently, showing that the nation’s leadership sees the value of private markets

• Owning a stake in ByteDance is getting awkward for firms like General Atlantic and Sequoia as they find themselves on the wrong side of a geopolitical debate without any exits in sight

• Invest in Kara Water, the world’s first alkaline air-to-water dispenser.**

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