Protocol Index: A capital crunch is coming
Source: Mark Coggins, Wikimedia Commons

Protocol Index: A capital crunch is coming

Protocol Index

Good morning! This Tuesday, NVCA thinks a capital crunch is coming, tech CFOs are feeling a little better, and Bloomberg Beta wants you to prepare for the worst. Want Index in your inbox each morning? Subscribe here.

What Matters Today

  • 7 a.m. PDT: Conference Board consumer confidence figures for April will likely show that most Americans' moods continue to worsen. That's bad news for any tech companies offering discretionary goods: Worsening sentiment is likely one of the reasons Apple is reportedly delaying iPhone production this year.
  • 1:30 p.m. PDT: Alphabet's earnings call will reveal just how badly it's been hit by the slump in advertising. Analysts aren't optimistic, saying the company is more exposed to travel and hospitality ad revenue than Facebook.
  • 2:30 p.m. PDT: AMD holds its earnings call. Rosenblatt analyst Hans Mosesmann thinks the company is exposed to a decline in game consoles but says notebook and data center demand could boost results.

Layoff Watch

  • Automation Anywhere, a SoftBank-backed robotic process automation company, is reportedly laying off more than 260 people, more than 10% of its staff. It was valued at $6.8 billion last fall.

Today's News

As of 4:10 a.m. PDT: Nasdaq Futures: 1.11% | Euro 600: 1.51% | Nikkei: -0.06% | Hang Seng: 1.22%



  • New York's attorney general reportedly has concerns about "inadequate" safety measures at Amazon warehouses that may violate federal standards. A letter seen by NPR says she is also investigating "potential illegal retaliation," related to the company's firing of a whistleblower.
  • NXP told investors second-quarter revenue could slump 20%, forecasting an operating loss.
  • China will require "critical information infrastructure operators" to get government approval for technology purchases that could affect national security.
  • Wirecard's shares dropped as much as 20% after it said KPMG's audit didn't have all the necessary data to prove its revenue was accurate.
  • Airbnb's new opt-in cleaning guidelines will require at least 24 hours between rentals.
  • Rovio missed net-profit expectations, but said revenues have risen in the last two months.


  • Google is reportedly in talks to buy cloud software company D2iQ. Axios reports the price is expected to be below D2iQ's last valuation of $775 million.
  • Nokia won a multiyear deal to supply India's Bharti Airtel with network equipment and services, estimated by analysts to be worth $1 billion.
  • Microsoft said it would supply business software to Coca-Cola for the next five years.

Everyone's Thinking About

The VC capital crunch

We all know things aren't great in the funding ecosystem, but just how bad are they? According to a new whitepaper from the National Venture Capital Association … pretty awful.

  • For a start, there's not nearly enough dry powder to keep startups alive. "If VC firms continue to invest at their recent pace, the dry powder reserves [which were around $120 billion in January] will last four quarters," the report says.
  • Much of the money can only be invested in new companies, rather than being used to sustain existing portfolio companies. And the cash that is reserved for portfolio companies will be used up pretty quickly now that times are tough.

Speaking of which, turbulent stock markets are bad news, because they mean IPOs will be delayed. "Delayed exits will make liquidity harder to come by," NVCA says, "requiring VCs to stretch their dry powder further."

  • And startups might struggle to access other capital, thanks to a retreat from nontraditional investors such as private equity firms. "This means a significant pull back in overall capital flowing to the startup ecosystem," NVCA writes.
  • The icing on the cake is that it'll get harder for VCs to raise their own funds, too: Between 2008 and 2009, "VC fundraising fell by nearly 60%."

The upshot? NVCA thinks things are about to get really, really bad. "The reality is that companies will shut down — at a higher rate than what is inherent to this risky industry — and there will be waves of layoffs," it writes. "It's going to be a bumpy ride."


  • "We're telling the startups we invest in that the safest assumption is that the next time you can raise money again is never." — Bloomberg Beta's Roy Bahat thinks startups should prepare for the worst.
  • "I do expect we will reopen up many more stores in May." — Deirdre O'Brien, Apple's head of retail, reportedly told staff that the company is "continuing to analyze this health situation."
  • "Quite frankly, we are in a very sound financial situation for a tech startup." — Republic CEO Kendrick Nguyen, on why the company didn't ask its investors for cash. It chose to apply for a PPP loan instead.
  • "Government could subsidize greater access to web-streamed entertainment services, because — in the current COVID-19 context — there is actually a public-good component in these privately provided services." — The World Bank's Apurva Sanghi and Michael Lokshin have proposals for how governments can incentivize social-distancing.

Diving Deeper

The tech mood's getting better

In some corners of the tech industry, things are looking a little sunnier. According to a new survey from PwC, tech CFOs are increasingly confident that their businesses can withstand coronavirus.

  • 65% of tech, media and telecom CFOs anticipated revenue or profit declines as a result of the crisis when surveyed last week — still a large number but down 19 percentage points from when PwC asked the same question in early April.
  • That's in stark contrast to CFOs across all industries. In the earlier survey, 81% of those CFOs predicted revenue or profit declines. In the latest one, 80% still do.

M&A sentiment also remains strong in tech.

  • Only 13% of TMT CFOs said COVID-19 was decreasing their appetite for takeovers, versus 25% across all industries.
  • The majority of tech CFOs said the crisis hasn't changed their M&A strategy.

But some things will change.

  • 38% percent of TMT CFOs said they're likely to reduce their real estate footprint, significantly greater than the 26% of all CFOs that plan to do the same.
  • And other industries' decisions could have impacts on the tech sector: 70% of CFOs said they are considering deferring or canceling planned investments, of which 48% said they were reconsidering IT investments.

Tech could see windfalls, though: 40% of all CFOs surveyed said they now plan to accelerate automation and new ways of working.

Closing Bell

Queuing tech doesn't work when there aren't queues

You've probably never heard of Accesso, but if you've been to Legoland (which happens to be my favorite place in the world) you may have used its virtual queuing system. Turns out that theme park tech is a terrible business to be in right now, especially if you're paid each time a rider buys a fast track pass: Accesso's April revenue is "expected to be down by 72% year-on-year." But its CEO thinks it may be poised to win whenever we all start riding roller coasters again: If traditional lines are deemed too dangerous, virtual queues might become a new norm.

Thoughts/feedback/tips? Email me — — or anonymously contact Protocol. And subscribe to get Index in your inbox each morning. Thanks for reading, see you tomorrow.

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