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Will tech earnings justify the gains?

Hello! This week: Analysts and VCs preview the upcoming earnings season, fintech experts explain why B2B is where it's at, and Splunk's CFO made a really big Amazon mistake. Want Index in your inbox each week? Subscribe here.
Over 550,000 people have died from COVID-19. The U.S. unemployment rate is over 11%. And the Nasdaq 100 is up 23% this year.
Tech executives, analysts and investors have pointed to the "digital acceleration" brought on by COVID, claiming that the sector has much to gain from the work-from-home movement, the surge in ecommerce and other societal shifts that are all underpinned by technology — and, they say, it's also relatively insulated from the broader economic downturn. That's driven a huge surge in tech stocks. In the coming weeks, we'll find out if that surge was justified.
Earnings season kicks off next week, with Netflix, TSMC and ASML all reporting. Results from Big Tech will start to trickle in over the following week, with a flood of reports coming toward the end of the month. The numbers will offer our first glimpse at just how much tech's benefited from the pandemic — if at all.
Low expectations could mean nice surprises in the coming weeks, especially if it turns out that investors are right.
VCs I spoke to said the earnings probably won't affect their investment decisions, though they will be looking for trends.
What not to expect from this quarter? Well, Pacitti said he wants to know what the "new normal" is, but "tech earnings will not give a satisfying answer to that question."
Stronger Care ... from anywhere, to anywhere
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Fintech's in a weird patch right now. Unlike some tech sectors, it hasn't been massively accelerated by the pandemic — but it hasn't particularly suffered, either. "It's sort of like an unknown unknown," veteran fintech investor Peter Berg said of fintech's outlook. Berg used to run Visa's corporate VC arm, before moving into his current role leading business development at Very Good Security, a SaaS encryption provider.
One big area he's got his eye on: B2B fintech. "The consumer side has been kind of sexy for a while, and you've seen a lot of companies trying to serve every flavor of underbanked or niche customer," Berg said. "I think business banking and services for businesses … have been maybe less sexy, and have gotten less focus over time." In particular, "business-to-business payments is not properly solved."
But across the fintech board, expect increased consolidation to be an upshot of COVID, Berg says.
And watch out for corporate VC budgets being slashed, "if history is any indication," Berg said.
Has COVID-19 been net good or bad for the tech industry?
I wouldn't call COVID-19 a net "good" factor within the tech industry, but rather a catalyst for transforming business in ways many did not expect. For example: COVID-19 created a global teleworkforce, which helped organizations accelerate their digital transformation and, subsequently, cloud transformation initiatives. We have seen several customers tackle digital projects they thought would take three to five years to complete in just a few months. As more companies rapidly shift their business models to the cloud to meet surges in customer demand, COVID-19 will continue to reshape business as we know it.
What's been your worst financial decision?
That's an easy one: I sold all of my 2001-era Amazon.com stock options that had a $6 strike price, at an awesome return of 5x. Which would be $30. I'll let you do the math on that one.
What's your No. 1 tip for adapting your company to post-COVID?
The work-from-anywhere reality is here to stay, and it's going to keep evolving. There are a bunch of productivity lessons organizational leaders have learned in the past few months, and there is much more work to be done to reinforce and foster togetherness and serendipitous creativity, remotely at scale. I look forward to seeing more leaders integrate those two critical business values in the second half of the year.
What piece of financial advice should a founder ignore?
I'll instead give one my favorite pieces of financial advice: Never sell a dollar for 90 cents. In other words, you should never, at any point of your business growth, sell your goods or services at a negative contribution margin. Assuming that selling at a loss, under the notion that with volume you'll turn profitable, is a risky proposition — and it rarely works. Folks are often mistaken that this was an approach that Amazon took early on. It did not … we were relentless about maintaining a positive contribution margin, even when the company had large losses in its early days.
Stronger Care ... from anywhere, to anywhere
At Philips, we're pioneering stronger care networks with technologies we've spent decades innovating. With connected care solutions from telehealth to at-home monitoring, today's healthcare workers can face today's greatest challenges with smarter virtual tools. See how our telehealth technologies help doctors and nurses deliver care from anywhere, to anywhere.
Thoughts/feedback/tips? Email me — shakeel@protocol.com — or tips@protocol.com. And subscribe to get Index in your inbox every week. Thanks for reading — have a great weekend, and see you next week.
Correction: An earlier version of this article misstated the name of the venture capital firm where Hurst Lin is a general partner. It is DCM, not DCM Ventures. An earlier version of this article also misstated the name of the venture capital firm where Paul Murphy is a general partner. It is Northzone, not Norzone.
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