August 20, 2022
Photo: Veronica Irwin/Protocol
Hello, and welcome to Pipeline. I’m Veronica Irwin, and I drank more pressed juice than I have in a lifetime this week.
This week in the startup world: the popularity contest at LA Tech Week, a16z’s biggest investment yet, and how a risky credit environment is changing buyout strategies.
A16z claimed to move its HQ “to the cloud” in July, but that really meant opening up offices in more cities. The buzziest new hub for the venture capital firm is Los Angeles, and just as Founders Fund has embraced Miami, Andreessen Horowitz has become LA tech’s biggest cheerleader — with Erewhon-fueled buffets, beachfront soirees and celebrity-attended parties in the Hollywood Hills to rally the local scenesters.
This past week, a16z hosted LA Tech Week with the slogan “Time to Build.” There wasn’t much building, but there was a lot of branding of the Los Angeles vibe. Thousands of venture capitalists and founders descended upon the City of Angels for a week to attend networking meetups that included surfing lessons, beach walks and sound baths. Some wrote checks, others established new partnerships — and everyone came away with sunlit selfies and hangovers.
LA Tech Week ran on FOMO. Acquainted with the chaos of sniffing out the hottest parties at SXSW or Miami Tech Week? LA Tech Week made getting into events at those conventions look like a breeze, attendees groused.
If you could get in the door, the pressure was off. Getting into LA Tech Week events may have been stressful, but the events themselves were all about casual vibes. As one partier told me, in Los Angeles it’s “take shots with me today, we’ll have the business meeting tomorrow.”
The irony is that LA’s best attribute for founders may be how close Silicon Valley is. Ask a founder or VC why they chose to establish their headquarters in the city, and they’ll likely tell you that it’s because they wanted to live in a warm, sunny location that’s also a short flight from San Francisco. The shift to remote work over the past two years has only made migrating south easier.
“Let’s collab!” LA is a sprawling, economically and ideologically diverse city, meaning all sorts of companies can gain a foothold. But some of the city’s unique assets are its thriving entertainment and manufacturing industries, creating special opportunities for tech companies that serve those sectors.
Angelenos specialize in building hype — I know, I’m from there. A party with a long line out front is assumed to be good, a red carpet where anyone can walk is automatically lame. A16z didn’t invent gatekeeping, but it did play off the exclusivity effect for LA Tech Week, and likely to its benefit. Search #LATechWeek on Twitter, LinkedIn and Instagram and you’ll find tons of photos with captions thanking a16z for sponsoring the event. Never mind the paucity of checks written at the event: At LA Tech Week, people couldn’t stop talking about LA Tech Week. And maybe that was the point all along.
“Our nation has a housing crisis,” says the VC actively fighting the construction of multifamily housing units in Atherton, California. That’s the first sentence of Marc Andreessen’s blog post explaining the firm’s massive $350 million investment in Adam Neumann’s new proptech startup Flow. If you haven’t read Andreessen’s all-caps-heavy letter to the Atherton Town Council last week, you can catch up by reviewing the clapbacks on Twitter, because the tweets pointing out the hypocrisy just keep coming. Eric Newcomer’s smart analysis of the investment also made the rounds on social media this week, describing how part of Andreessen’s strategy may be proving to founders that a16z partners are willing to take heat for entrepreneurs they believe in, especially if they buck the norm. Newcomer aptly calls it the “troll theory.” Maybe that explains Andreessen’s apparently contradictory views on housing policy too.
LA Tech Week took a lot of energy to put on, but enough to cause a blackout? Organizer and a16z partner Katia Ameri made light of it on Twitter, but there really was a power outage in the area: It affected a swath of Santa Monica from 10th to 14th Streets, causing a significant amount of non-Angeleno investors and founders in Westside hotels to relocate Monday night.
“Instead of buying a latte, if you invest that $6 everyday, compounding will make the [average] person a millionaire before they die,” Hustle Fund’s Elizabeth Yin espoused on Twitter. We’re pretty sure that building considerable wealth requires more than skipping the latte or the avocado toast (we did the math, and $6 a day at an 8% rate of return gets you $1 million after 46 years), but Yin’s Twitter thread still has some great lessons about building wealth and balancing work and personal life.
How cybercrime is going small time: Cybercrime is often thought of on a relatively large scale. Massive breaches lead to painful financial losses, bankrupting companies and causing untold embarrassment, splashed across the front pages of news websites worldwide.
Frederik Gieschen, who works at the hedge fund Kize Capital and writes the Neckar’s Minds of the Market newsletter, loves to unpack the thought processes of notable investors. Late last week he published a historical analysis explaining why family offices stay in the media shadows. His article, published in Compound, tracks the history of the modern family office from the early 1900s to now, and explains how that history has shaped secretive investment habits.
Hedge fund manager Michael Burry, who made a name for himself betting against the housing market pre-2008, sold almost all his stock holdings last quarter, according to a securities filing spotted by the Wall Street Journal. It has personal investors who track Burry confused, and crypto wondering whether his divestment will wreak even more havoc on the battered DeFi ecosystem. The only asset his firm’s holding on to is GEO Group, which operates private prisons. The question is: Was it a mistake or a red-flag warning to other investors?
Chamath Palihapitiya, once SPACs’ loudest advocate, has put down his megaphone. The entrepreneur is pushing back the deadline for two SPAC vehicles to find a deal target, according to SEC filings. You wouldn’t know it looking at his Twitter feed, however — the SPAC king has been pretty quiet aside from sharing links to his “All In” podcast and his reading lists.
Employers are assigning their workers numerical efficiency ratings. Companies say it helps them keep their employees accountable, but workers are finding it difficult to shoulder the stress of surveillance. Lower-paid workers, in particular, are the most closely watched.
Elliott Management, a hedge fund known for activist investment, has discarded most of its stake in SoftBank. The firm has reportedly lost faith in SoftBank founder Masayoshi Son, who himself admitted he was “quite embarrassed” by the audacious bets made in recent years that cost the firm over $23 billion.
Bankers are changing their Citrix Systems buyout strategy. The buyout is one of the largest in the last decade, but is finding trouble amid an increasingly risky credit environment. Elliott Management and Vista Equity Partners are now planning to buy the company with $500 million in leveraged loans.
In a week marked by shocking comebacks, Bolt’s Ryan Breslow is back with a new pharmacy startup called Love. Blockchain technology, of course, is a major part — the company is launching a DAO for members who buy “love tokens.” The company recently announced a $7.5 million seed round.
From Protocol: If you follow crypto, you’re likely already familiar with Binance’s Changpeng “CZ” Zhao. But you may need a proper introduction to the exchange’s co-founder Yi He, a self-proclaimed “OG in the Binance group.” Now she’s leading the firm’s venture capital arm, Binance Labs.
Your weekend reading: Tech is still predominantly straight, white and male, despite the efforts of activists who have tried to change that, from Ellen Pao to Susan Fowler. The industry is only now beginning to make change in an essential area: the salaries and funding granted to marginalized groups.
How cybercrime is going small time: People have been swindled since before man created monetary systems. These aren’t new crimes; just new ways to commit them. But as cybercrime increasingly goes small-time, those on the front lines will need new and more effective ways to fight it.
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