Pre-Money: Mar 18th, 2024

KPIs

The week’s top performance indicators

Dots & Lines

The week’s top takeaways

• That precious equity: Startups need a great team to succeed. Traditionally, startup employees commit their energies out of inspiration for the mission, along with the promise that their shares might one day be worth a life-changing amount. In the past two years, which have been challenging in the ecosystem, and where more jobs were eliminated than added, equity awards as a percentage of total stock dropped more than 35%. This is in contrast with salaries, which remained basically stable across all roles, according to Carta’s latest data. This differential can be explained in part by employees believing less in their shares’ potential financial upside in a time of limited liquidity, and optimizing for salary when negotiating an offer. Or by founders’ need to limit dilution in a world of potentially smaller outcomes. The drop has flattened, so it’s possible things will change direction in coming quarters as things warm up. Look out for any resulting impact on the ecosystem as relationships between investors, founders and employees continue to evolve.

• An unlikely unicorn: Conventional wisdom says venture-backed companies should have an innovative technology, an unfair advantage and a pronounced competitive moat. And that consumer products rarely work. Don’t tell any of those conventional folks about Liquid Death, the canned water maker that became the newest unicorn when it raised $67M on a $1.4B post. CEO Mike Cessario, a former ad exec, made water cool by putting it in beer cans and embracing irreverent slogans and product names, and created a behemoth that did $263M in 2023 sales and doubles in size each year. This just shows that a cool product paired with great design, ruthless execution and a focus on distribution can be just as disruptive as the next breakthrough app.

• Reddit is ready: It’s been a bumpy ride for Reddit since filing its S-1 back in 2021, but $RDDT looks ready to make its debut this week on the New York Stock Exchange, and investor interest looks strong. The business is still unproven and hasn’t yet reached profitability, but many in the industry are looking for the offering to break open the logjam and kick off a new cycle of tech unicorns going public. Reddit raised at a $10B valuation in 2021 and will enter the public market with a valuation close to $6.5B, a 35% markdown. Whether this serves as the benchmark for the upcoming lineup of IPOs remains to be seen. But it’s clear that with higher interest rates and lower multiples, we’re now in a new reality of lower prices for startups across the ecosystem.

Deal Points

A few items of interest

• The coming intergenerational wealth transfer of more than $100T from Boomers to Millennials will likely boost investment in venture capital in coming decades given the younger generation’s inclination towards innovation, risk and higher returns

• Startup acquisitions, by bigger companies and by larger startups, remain way below recent levels

• Ballistic Ventures closed its $360M second fund to invest in cybersecurity, raising it within several months in a market where GPs have struggled, a testament to the massive growth in the sector

• Autonomous vehicle software startup Applied Intuition raised $250B on a $6B valuation led by Lux and Porsche

• InDrive, a ride-hailing app based in Mountain View and serving markets in the developing world, raised $150M of debt from General Catalyst

• Zephyr AI, a biotech startup applying artificial intelligence to the development of precision medicine, raised a $111M Series A led by Revolution Growth

• In its feted annual letter, Stripe revealed that it’s cash-flow positive in addition to surpassing $1T in payments, suggesting again that it’s not under pressure to go public

• As pressure builds on TikTok to divest or confront a ban, prospective buyers are prepping to make a bid for ownership of the viral app’s US operations and its more than 100M active users

• Kite, the Blackstone-funded e-commerce rollup that aimed to acquire small consumer brands and unify them on a shared tech stack and last year raised $200M, shut down in another signal of the post-pandemic decline of a hot sector

• Companies have gained productivity with AI CoPilots, but now may be able to replace hires entirely with emerging AI tools like virtual software engineer Devin from Cognition

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