A Trojan unicorn
Photoillustration: Getty Images; Protocol

Big Startup could be the government’s next target after Big Tech

Protocol Pipeline

Hello and welcome back to Pipeline. This week, the new definition of value-add investors, new lows for female founders and why your pitch to a16z should be Lindy.

A deeper look inside unicorns

Big Tech has been under scrutiny for awhile. Now it may be Big Startup’s turn.

The SEC wants more transparency from unicorns, and it’s considering some interesting (or alarming, depending on your POV) ways to go about it, according to an under-discussed report from the Wall Street Journal earlier this week.

  • The SEC is not interested in “forcing medium- and small-sized companies into the reporting regime” but does have its eyes set on big private companies, Democratic SEC Commissioner Allison Lee told the Journal (her team declined a follow-up interview).
  • “When they’re big firms, they can have a huge impact on thousands of people’s lives with absolutely no visibility for investors, employees and their unions, regulators, or the public,” she told the paper. (The inclusion of unions as a stakeholder particularly caught the attention of a16z’s Scott Kupor.)

The overall idea is to require more large private companies to routinely file information. Right now, they don’t have to, because they are under a disclosure limit raised by the 2012 JOBS Act.

  • The JOBS Act made it possible for companies with fewer than 2,000 shareholders to avoid having to file public financials and make other disclosures. Investors also have ways to structure deals so that it’s pretty rare for a company to be forced to go public these days for running up against the limit.
  • One path reportedly being considered (and which is tied to an SEC agenda item) would be to have the SEC effectively be able to “look through” shareholders, like a fund, to see the number of investors really behind a company. In theory, more companies could hit the investor threshold that way. “The issue is that enforcing a look-through into LPs of SPVs and funds is more likely to reduce who can participate in private markets vs. push companies to go public sooner,” tweeted Samir Kaji.

The SEC hasn’t been shy about wanting more companies to go public. The question is whether to use a carrot — lighter regulation — or a stick — the threat of having to disclose closely held financial data — to accomplish that.

  • It’s clear the rule change’s backers think some of the quasi-public tech startups at a certain size (a la Stripe) could do more to publicly disclose information.
  • Commissioners Hester Peirce and Elad Roisman, both Republican members, issued a strongly worded statement in December criticizing Chairman Gary Gensler for not doing more to encourage companies to go public by lightening regulation.
  • NVCA CEO Bobby Franklin worries that any regulatory prescription that’s intended to address concerns about a handful of unicorns will drag down the herd of smaller startups, too.

In squabbling over rules, it’s easy to forget the goal of helping companies raise capital and giving investors and employees opportunity. Franklin said he wishes the government would try to make it easier and better to be a public company rather than making it more onerous to stay private. “There are pros and cons to being on public markets and pros and cons to being private,” Franklin told me. “I would hope that the SEC and government at large would focus on how we could encourage more pros, as opposed to building more cons to being on the private markets.”


“How to pay for sex,” “How to steal an election” and “The bright side of nicotine” were all names of sessions this week at Founders Fund’s Hereticon conference. Not on the agenda: Delian Asparouhov’s surprise wedding on stage.

“Talk about value-add investors. If your own investors aren't piercing flesh for your company, red flag,”tweeted Palmer Luckey with a photo of Cyan Banister getting a tattoo of the Anduril logo.

This week’s trendy stat to post: What percentage of your hiring was outside the Bay Area in 2021? Stripe’s Patrick Collison was first to post about his firm’s jump from 39% in Q1 2019 to 74% in the last quarter. For Coinbase, it was 89%. Of course there’s companies, like Automattic (96%) and Slice (100%), that were already nearly all outside the Bay Area to start with and are just seeing everyone else catch up.

The founder equivalent of “Back in my day”: “When we did YC, you got $20,000. Now you get $500,000,” tweeted Airbnb’s Brian Chesky.

The word of the week is “Lindy.” As my colleague Hirsh Chitkara pointed out, it’s what you need to know in order to pitch a16z.

Coming up

Calls for tech regulation — from lawmakers, regulators, small businesses, even consumers — have become deafening. It now seems almost certain that antitrust action, privacy laws and more will influence the industry in some form in a bid to undermine the most powerful companies in the world's most powerful industry.

Join us for our next Protocol Live event, "Tech regulation is coming. How does Big Tech respond?" on Jan. 26 at 10:30 a.m. PT/1:30 p.m. ET. Reserve your spot now.


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Inside track

Some crypto companies present a new challenge for VC firms: pseudonymous founders. Here’s how Volt Capital’s Soona Amhazrecommends diligencing someone when you don’t know their real name.

The journey to becoming California’s chief technology innovation officer after a career at GV isn’t what you’d expect. Instead, as Rick Klau detailed in a post, his very nonlinear path started with a call to Howard Dean’s presidential campaign team, eventually bringing him to Google, and now back to government.

If you missed it, Signal co-founder Moxie Marlinspike wrote what has quickly become the defining essay of the Web3 era (and questions whether that’s even truly a thing or not).

For your reading list: the five books that helped a16z’s Katherine Boyle make the move from journalist to VC.

Thinking of quitting your job to join a startup? The replies to Ryan Hoover’s tweet are a pretty good starting list of places to apply.

Need to know

Tiger Global had a surprisingly terrible year. Tiger’s frenzied investment pace reshaped the VC industry last year, but its returns weren’t quite as mind-blowing. Instead, Bloomberg reported, Tiger had its first annual drop since 2016.

Female founders also had an (unfortunately unsurprisingly) terrible year. Venture dollars to female founders once again declined to now make up 2% of the industry in 2021, its lowest since 2016.

Sequoia and Paradigm cut a deal with Citadel. In its first outside investment ever, Citadel Securities sold a $1.15 billion stake to the venture firms, signaling that Citadel could be eyeing crypto more.

Y Combinator is giving out $500,000 to each company now. It’s good news for YC who gets more ownership, but bad news for a lot of seed investors who are miffed about the changes.

Checkout.com bags a $40 billion valuation. If you haven’t heard of it, it’s because it didn’t raise outside investment until 2019. Now the British fintech company has a higher valuation than Instacart after raising another $1 billion.

New fund alerts: FTX launched a $2 billion fund, bringing on former Lightspeed partner Amy Wu. Kleiner Perkins raised an $800 million early-stage fund and a $1 billion growth-stage fund to back “high inflection” investments. Marcus Whitney and Kathryne Cooper launched Jumpstart Nova, a $55 million fund focused on Black-founded and -led health care companies. Dorm Room Fund is back with $10.4 million.

On Protocol: I love the truly unhinged nature of corporate TikTok. Take one of my favorites from Duolingo’s TikTok on what explicit language it's allowed to post, along with its general counsel’s duet reaction when he sees the resulting video.

Also on Protocol: Juicero. Quibi. Theranos. What do you do if there’s a flop on your resume?

Your weekend reading: Lux Capital’s Josh Wolfe has some truly scary ideas for what may come down the path in 2022, envisioning that the year could become a “punch in the face.” That may draw you into the story, but it’s worth reading Institutional Investor’s profile on how Wolfe became “the Renaissance man of venture capital.”

Five questions with … Andreessen Horowitz’s Sarah Wang

Sarah Wang was promoted this week to general partner on a16z’s Growth team. She’d been with the firm for three years where she led investments in companies like Crossbeam and Sourcegraph.

What was your first job, and what’s a skill you still use from it?

My first job was structuring interest rate derivatives at Morgan Stanley. I learned a lot about how monetary policy, inflation and the macro environment impact complex financial products, but the most important skill that I left with was not a technical one — it was how to explain esoteric topics in a digestible and empathetic way. Whether you’re the smartest person in the room or the newest and least experienced (as I was at the time), learning the right way to communicate has been paramount not only to getting a message across but also connecting with customers and colleagues. On the flip side, the minute you treat someone with contempt, the relationship is over. After all, as Maya Angelou said: “People will forget what you said, people will forget what you did, but people will never forget how you made them feel.”

What product or service are you totally, even irrationally, loyal to?

The Nanit [baby monitor]. I have a 1-year-old and the key to having some semblance of balance this past year was getting him to sleep through the night at four months. One of my former portfolio founders, Henry, gave it to us as a gift and it’s truly an example of where technology makes life better and easier. The Nanit camera and app combines computer vision, machine learning and sleep science to give parents data about how their baby is sleeping. It helped us through the painful process of sleep training and is now my favorite baby gift to give, because you have to pay it forward!

What problem do you want to see a startup solve?

Like many people, I’m fascinated by both the acceleration of ecommerce over the past two years and the fact that in spite of this we’re at only the tip of the iceberg. AMZN and SHOP are $1.6T and $133B market cap companies, respectively, and ecommerce penetration is 18%. The move from offline to online still represents an enormous opportunity and there are an unbelievable number of problems that haven’t been solved en masse — from efficient customer acquisition to the infrastructure supporting how customers shop and how companies catalog. This will continue to be one of the most exciting secular shifts over the next decade.

What book do you think every startup founder should read?

At the highest level, the two most important functions that founders need to nail are 1) hiring and retaining exceptional talent and 2) allocating capital to the highest-return projects. In terms of the first goal of building a healthy, disciplined organization, “The Advantage” by Patrick Lencioni is a must-read. In addition, for founders also focused on their personal development as a leader, “The Four Agreements” by Don Miguel Ruiz is another book that has been important in my own evolution. It’s more of a spiritual guide than your typical business book but covers four rules of conduct that are relevant in any setting: 1) be impeccable with your word, 2) don’t take anything personally, 3) don’t make assumptions, and 4) always do your best.

What’s one of your New Year’s resolutions for 2022?

After two years of spending a majority of my time inside the house in front of a screen, I’m resolving to go outside more and reprioritize relationships that have fallen victim to the black hole of the pandemic (and Zoom fatigue).


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