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The inside story of the venture capital and startup world by Biz Carson.
July 31, 2021
Hello, and welcome to Pipeline.
I'm excited to announce that I'll be doing a special Protocol Pipeline event on Aug.10 called "Going Global" exploring how tech companies expand internationally. I'll be talking to some superstars from the industry: Accel's Rich Wong; Atomic founder-in-residence (and early Uber city launcher) Swathy Prithivi; and Oliver Jay, Asana's global revenue head who also launched Dropbox's APAC offices. Sign up here to join us on Aug. 10 at 9 a.m. PT.
On to the newsletter! This week: the buzzword hype cycle, how to build a SaaS org, and how athletes are upping their game when it comes to tech investing.
- "If you want to mislead investors in the public markets, you'll go to jail but if you want to mislead investors in the private markets, you'll go to SoftBank," tweeted meme king Logan Bartlett, after a grand jury indicted Nikola's Trevor Milton on three counts of fraud.
- "So much power has shifted from VCs to founders," tweeted Lattice founder Jack Altman. "The next logical step is a shift in power from founders to employees." That matches Protocol's Workplace Survey findings, which showed half of the tech workforce wants to unionize.
- Tech's latest buzzword: the metaverse. We're already past step six of NYT reporter Erin Griffith's buzzword hype cycle when VCs have launched dedicated metaverse funds.
- A CEO warned Kendall Hope Tucker that she "didn't want to be known around the office as 'a bitch.'" Now Tucker, the founder of Knoq, is suing the CEO of the company that acquired her startup for gender discrimination, retaliation and fraud.
- EBITDAC, or earnings before interest, taxes, depreciation, amortization and coronavirus. Still better than WeWork's community-adjusted CAEBITDA.
Biz on Biz
The investing Olympics
These days it's not uncommon to see a funding round with a string of celebrity names attached, but it's not just Hollywood A-listers like Ashton Kutcher, Will Smith and Jared Leto who are running the show.
Professional athletes have entered the investing arena to compete for the same deals. And some have already made a mark in the VC world.
- Serena Williams launched Serena Ventures in 2014. Run by Alison Rapaport Stillman, her fund now has an investment portfolio of more than 50 companies, the majority with diverse founders.
- Kevin Durant's Thirty Five Ventures, run by longtime manager Rich Kleiman, manages a portfolio of over 75 companies, including Coinbase and Postmates (which sold to Uber).
- Steph Curry anchored a new fund, Penny Jar Capital, which announced its first investment in June in pay-equity software company Syndio.
But those athletes are the 1% — the household names at the top of their field who have the money (and investing teams behind them) to match their success.
For the other 99% of athletes, including folks like Olympic gymnast Gabby Douglas, there's an interest in startup investing, but an education and access barrier to getting in a deal. That's where The Players' Impact, a 4-year-old 501(c)6 nonprofit, steps in.
- The 50 Cent-Vitaminwater deal sparked much of the initial interest in startup investing, said TPI co-founder Tracy Deforge. "It's a super sexy but elusive asset class," she told Protocol.
- To help demystify startup investing, TPI works on educating the 400-plus athletes in its network. It also helps with deal flow by screening investment opportunities. "We found that there's a whole host of athletes … that are looking for access to venture deals that are vetted and curated in a way that isn't the firehose of normal investing," Deforge said.
- What it doesn't do: tell the athletes what to invest in, or invest the money on their behalf. Instead, TPI's athletes can choose what deals they want to invest in and what size checks they want to write, and TPI helps pull together the deal. So far, its portfolio companies include Cameo, Robinhood, CircleUp and DraftKings, an investment that returned TPI athletes 6x after it went public via a SPAC.
While a lot of celebrity investing is about startup promotion, TPI takes the opposite approach. Its athletes remain anonymous to their startups and TPI coordinates the investment through an SPV, or special purpose vehicle.
- "We don't leverage the individual so everyone feels important, whether you're the second-string Ultimate Frisbee player or the NFL Hall of Famer," Deforge said. If the athletes are super passionate and want to be brand ambassadors, then it's negotiations they can do with the individual companies. "We really are encouraging them to do their own due diligence and get educated in a space," she said.
- The names that are public are its roster of athlete advisors, which includes Douglas, legendary NBA player Tracy McGrady, Pittsburgh Steelers great James Farrior and Olympic rower-turned-startup investor Garrett Klugh.
Venture isn't a bad next act for athletes. Former San Francisco 49ers QB Joe Montana is a regular around YC Demo Day, and his firm, Liquid 2 Ventures, is rumored to be raising $100 million for a third fund. "The earlier you start thinking about these things and learning about them, the better off you're going to be longer term," Deforge said. "When you're transitioning out of your sport, you may not feel as lost in what's next because you're getting exposure."
A MESSAGE FROM SINGAPORE EDB
Singapore is fast becoming a global hotbed of tech innovation. It's easy to see why. Nearly 80 of the world's top 100 tech firms have set up outposts there, including Google, Facebook, Stripe, Salesforce and homegrown unicorns like the super-app Grab.
Join Protocol's Biz Carson for a conversation with Atomic's Swathy Prithivi, Accel's Rich Wong and Asana's Oliver Jay during our upcoming event: Going Global: How Tech Companies Can Expand Internationally August 10 at 9 a.m. PT / 12 p.m. ET Learn More
- Stop calling your fundraising rounds "oversubscribed," says Homebrew's Hunter Walk. He says the tech press is getting played by startups using it as a bad signal for demand.
- Pinduoduo had a meteoric rise, hitting a $250 billion market cap during the pandemic. Then, fear over China and other factors meant it saw its value cut in half. Packy McCormick has an insightful look into the company, before laying out the bull and bear case with China tech specialist Lillian Li.
- Hiring is one of the hardest parts, so Craft Ventures' David Sacks wrote a guide on SaaS company org charts and what positions (and how many folks) startups should be hiring.
- If you need a mega-list of investor contact info, Julian Shapiro published a thread (with permission) of VCs, their interests and how to best contact them.
- The venture market is moving fast, but exactly how fast is too fast? There's lots of bonuses to an environment that's moving quickly, but Footwork's Nikhil Basu Trivedi explains some of the downsides too.
Need to Know
- Robinhood pulled a Facebook. Its public market debut was a "broken IPO" and the large allocation it set aside for individual investors to buy on its platform didn't do all that well with investors already underwater.
- Silicon Valley, we have a cap table problem. Here's the exclusive story I wrote this week on the Open Cap Table Coalition, a project between nearly all of the top tech law firms and competing startups like Carta and Shareworks to create an open standard for cap-table information.
- VCs like LIKE. Introduced by Rep. Zoe Lofgren, the Let Immigrants Kickstart Employment Act would introduce a startup visa to make it easier for foreign entrepreneurs to start companies in the U.S.
- SoftBank is reportedly offloading a third of its Uber stake. The sale is reportedly to cover the losses from its investment in DiDi after the Chinese ride-hailing firm saw its stock collapse.
- Not so locked-up anymore. Tech firms are shirking the traditional six-month lock-up period and instead giving their employees earlier chances to sell after an IPO, according to an analysis from The Information.
- Release radar: Electric boats! If a team of SpaceX engineers can put a rocket in space, it feels like electrifying boats should be a slam dunk. The only downside: the cost. Arc teased the release of its new $300,000 boat by the end of 2021. Participants in its $4.25 million seed round include Andreessen Horowitz and Chris Sacca's Lowercarbon Capital.
- On Protocol: Chatbots were a bust, but call-center automation is real.
- Also on Protocol: Is China killing its golden tech goose?
- Your weekend reading: The money and will of Elon Musk are reshaping a tiny Texas city. Its residents are divided on his vision for SpaceX, but their opinion may not matter at all.
Five Questions With...
Contrary Capital's Eric Tarczynski
Eric Tarczynski has a skill a lot of VCs envy: scouting outlier tech talent early. He's the founder and general partner of Contrary Capital, a firm known for identifying early-career talent and investing in their startups. Its portfolio includes companies like new unicorn Vise, Anduril, DoorDash, Hallow and Rubrik.
What's your best piece of advice to aspiring entrepreneurs?
My best piece of advice to aspiring founders is simple: Heed little of the advice you're given at the idea stage. At the earliest stages, ideas are so fragile, and generally people sharing their perspectives know very little about the space you're tackling. Instead, go do. That's how you learn, and within days you'll be running circles around the people trying to give you "advice."
What product or service are you totally, even irrationally, loyal to?
I'm irrationally loyal to my Nordica Dobermann GP 130 ski boots. I grew up in a rural town with a small mountain 30 seconds away. So as you might imagine, most people start skiing when they're 3 or 4. I grew up ski racing, and in ninth grade, my parents splurged and I got my first pair of ski racing boots that had these Peter-Pan-esque insoles — boots are the most important part of skiing, after all. I fell in love. Fifteen years later, I still wear them (they're destroyed and rusted) and can't find it in myself to get new ones.
What problem do you want to see a startup solve?
I'd love to invest in a company that makes device management, basic enterprise security, and remote data deletion 10x easier. Current solutions don't easily work out of the box, or at least well enough to be adopted by everyone with a laptop.
What book do you think every startup founder should read?
"Seeing Like a State" by James C. Scott addresses the concept of "legibility" in the context of government. I think most startups are also solving legibility problems for businesses and consumers alike — the book provides a number of interesting mental models and is a great read.
What's one of the worst predictions you've ever made?
Professionally, I tend to not make predictions. We're all fallible. Personally, my prediction that the Minnesota Vikings would win a Super Bowl is still one that's waiting to play out.
A MESSAGE FROM SINGAPORE EDB
Business leaders say they choose Singapore for its modern tech infrastructure, strong government support, robust pipeline of talent and pro-business regulations (the World Bank ranks it No. 2 in the world for ease of doing business). Plus, its location in the heart of Southeast Asia serves as a launchpad into the bustling Asian-Pacific market.
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