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Protocol Index: It’s not all doom and gloom in startup land

Protocol Index

Good morning, and welcome to Protocol Index, your daily pop-up report about the financial movements that matter to tech during the COVID-19 crisis. Want Index in your inbox each morning? Subscribe here.

Today: There's a surprising amount of optimism among some entrepreneurs, a whole new batch of loan problems, and some investors hate virtual meetings.

What Matters Today

  • 5:30 a.m PDT: Verizon holds a call to discuss its earnings, which will be closely compared to AT&T's, published Wednesday. Verizon beat earnings estimates, though it missed on revenue.
  • 7 a.m. PDT: The final survey of April consumer sentiment will show if things improved in the second half of the month. Look out for the consumer expectations number, which was relatively resilient in the last reading but could have worsened as it's become clear the crisis is far from over.

Layoff Watch

  • Hisense is laying off almost a quarter of its European workforce, around 2,200 jobs.
  • Oscar Health laid off 5% of its employees.
  • now says 23,871 U.S. startup employees have been laid off since March 11. Roger Lee, who runs the site, told Crunchbase News that "my estimate is still that the rumored count is two times the official count, but I wouldn't be surprised if it's actually three to four times the official count."
  • Tech job openings dropped 25% between early March and early April, according to Glassdoor.

Today's News

As of 4:25 a.m. PDT: Nasdaq Futures: 0.60% | Euro 600: -0.23% | Nikkei: -0.86% | Hang Seng: -0.61%




  • Expedia is raising $1.2 billion in preferred stock from Apollo and Silver Lake and $2 billion in debt financing. Apollo and Silver Lake will get seats on its board.
  • Snap plans to raise $750 million in new debt financing.
  • Netflix is paying just 3% for its new European bond offering, its lowest interest rate yet. The U.S. offering is expected to price at 3.6%.
  • Imagination Technology's interim CEO said the company plans to relist in the next few years, after the U.K. government halted efforts to appoint new directors to its board.
  • Dish said it will use Mavenir's 5G software for its new network.
  • BYD partnered with Toyota's Hino Motors to make electric buses and trucks.
  • House antitrust chairman David Cicilline wants to ban M&A during the pandemic.

Diving Deeper

Some startups are feeling surprisingly good

It's Friday, so I thought I'd keep things light by sharing some of the positive feelings I've heard from startups and investors over the past week or so.

  • Many people are surprisingly optimistic about business despite the pandemic. Plenty of entrepreneurs view this crisis as a major opportunity: As Entrepreneur First's Matt Clifford told me, "now is a great time for problem solvers."
  • That's partly because the crisis is forcing behavioral change. A thing I've heard again and again is that businesses are rapidly accelerating digitization plans as a result of all this. And now that genie is out of the bottle, there's little going back. Citrix said as much in its earnings Thursday: "We believe a greater number of employees will expect to continue to be able to work remotely," CEO David Henshall wrote. And that means there are opportunities.
  • Plus, startups are doing all they can to be relevant. Companies that might not have anything to do with COVID on the face of things are seeing what they can do to help: Take Vast Data, which is trying to use its fast storage hardware to help medical researchers. "Never allow a crisis to go to waste," as Rahm Emanuel said.
  • And many investors still seem keen, too. VCs seem to be telling the truth when they say they're still open for business: Things are taking longer, but plenty of investors are still looking for opportunities.

It's not all sunshine and rainbows, obviously. The caution that was already creeping into the startup scene after WeWork's implosion has accelerated: Everyone is now acutely aware of how much cash they've got, and how much they're spending.

  • I've already heard of startups changing tack from growth-at-all-costs to profitability. Expect that trend to continue.
  • And certain sectors are obviously being crushed, leading to many of the layoffs we're witnessing. (Though others may be using this as a scapegoat for other problems.)

All in all though, there's cautious excitement among many entrepreneurs.

  • It feels like the start of something new: That just as mega-companies like Airbnb and Uber were built amid the last recession, so too will new ones emerge during this crisis. What no-one is quite sure about just yet, though, is what that next batch of giants will look like.


  • "The witness Amazon sent to speak on its behalf may have lied to Congress." — Rep. David Cicilline said The Wall Street Journal's report on Amazon having used seller data when launching private-label products could have big implications.
  • "Whether you need to address financial pressures, support remote work, ensure business continuity or scale to meet unusual demands, we are here to support you and help however we can." — AWS wrote to customers after numerous reports that it wasn't helping businesses struggling to meet payments.
  • "2020 remains the 'Year of the CDN,' which has only been amplified by the outbreak of COVID-19 forcing more entertainment from home." — Piper Sandler's James Fish doesn't think Limelight's cautious guidance should detract from the overall potential for content delivery networks.
  • "The president is talking about a Phase 4 [of legislation] and Republicans and Democrats are talking infrastructure as a part of that. I do not think it will be enacted without a broadband component." — Sen. Roger Wicker, Senate Commerce Committee chairman, thinks this crisis could lead to government investment in broadband infrastructure.
  • "The U.S. composite PMI was 'only' as bad as 27.4 however, suggesting that for now their economy has managed to hold up slightly better than their European counterparts with shutdowns less widespread." — Deutsche Bank's Jim Reid pointed out that yesterday's data suggests the U.S. is doing comparatively OK — though U.S. services activity still hit a record low.

Everyone's Thinking About

More loan problems for startups

Startups faced an uphill battle getting PPP loans, thanks to initial confusion about whether VC-backed companies were allowed to apply. (They were.) And now a whole new set of challenges is set to appear, thanks to the Fed's Main Street Lending Program.

Protocol's Emily Birnbaum and Biz Carson reported Thursday on a key element of the program: It requires businesses to be EBITDA-positive. That makes a lot of startups ineligible.

  • "As we go through the high level terms [of the Main Street Lending Program], virtually everything lines up and looks like we would qualify — but for the EBITDA component," Alon Rotem, general counsel for online retail startup ThredUp, told Protocol.
  • "The EBITDA requirement puts this money out of reach and could have draconian ramifications," said another company's general counsel.

There's a reason for the requirement, of course: The Fed needs "to do what's in the public's interest, and that's not to fund companies that are going to go out of business," Rotem said.

  • But doing that without excluding high-growth startups — which could eventually become a major contributor to the economy — is tricky. And with loans of up to $25 million on offer, there's serious money at stake.

Lawmakers are pushing for changes. A group wrote to the Fed on Thursday to ask it to adjust the guidelines before the program officially launches.

  • "We can't afford [to] let a generation of startups fail just because government programs didn't account for their needs and business models," said Rep. Mike Doyle.

Closing Bell

Investors don't like virtual meetings

Shareholder meetings normally offer investors a chance to grill company executives. But now that the meetings are virtual, that's getting trickier. Reuters reports that many banks have moved to taking questions submitted in advance, preventing investors from engaging in a back-and-forth conversation with management. That's unsurprisingly annoying people: One activist told Reuters that he's now thinking about going to executives' neighbourhoods to confront them there, instead.

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

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