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The inside story of the venture capital and startup world by Tomio Geron.
January 2, 2021
Hello and welcome to Pipeline. This week: a discipline problem, Miami moving perks and resolutions and deal predictions for 2021.
Plus, keep reading below for some exciting news about Pipeline.
(Was this email forwarded to you? Sign up here to get it in your inbox.)
- What happens when the cryptocurrency your venture fund is named after is sued by the SEC? Michael Arrington's Arrington XRP Capital is going to find out.
- Move to Miami, and get a discounted mattress. The latest draw to Miami, beyond the tax rules and sunshine in December, is all the startups offering discounts to tech people who are moving there.
- RIP due diligence? Sam Altman is worried that early-stage investment decisions (including his brother's) are not disciplined right now.
- A sign of things to come? An early-stage round is funded by all-female VCs and led by Array VC's Shruti Gandhi.
- The Power Law lives. Since 2010, 52% of VC exit value came from just 1.3% of exits. Speaking of top returns, angel investor Shervin Pishevar humbly places himself in a pantheon of top investors.
- Forget incubators, here are new ways to start companies: $400,000 (for 7%) for founders with just an idea or $10,000 for a one-week program to work on a project.
Biz on Biz
Let's start over in 2021
I'm not normally the type for New Year's resolutions, but 2021 feels different and more purposeful after 2020 threw every plan out the window.
- To start, my New Year's resolution for 2021 will be to spend the next 12 weeks off of VC Twitter as I take maternity leave after welcoming a baby girl in early January. My other goal is not to spend all of that time off Twitter playing Toon Blast, my favorite guilty pleasure.
- This will be the last week of "Biz on Biz" for a while, but I'm leaving Pipeline in the care of Tomio Geron, a name that is probably familiar to most of you. After years writing for Wall Street Journal's pro VC vertical, Tomio joined Protocol last month to cover fintech. He'll be taking care of Pipeline while I'm gone, so send all your news tips his way: firstname.lastname@example.org.
But in the spirit of starting fresh in 2021, we decided to ask a handful of VCs two questions:
- What's your New Year's resolution?
- What's one acquisition prediction you think we'll see in the new year?
It turns out that not everyone believes in resolutions, but people think we might see a bigger M&A play from Peloton in the year ahead — and of course, at least one SPAC-quisition.
Jenny Lefcourt, Freestyle Capital
- Her New Year's resolution: "Continuing to approach life with humility, compassion and flexibility (as who the hell knows what 2021 has in store for us!) I'm also going to begin weight training."
- 2021 acquisition prediction: "Discord. Its market share and engagement make it too powerful for one of the big tech companies to not own."
Arvind Gupta, Mayfield
- His New Year's resolution: "My professional resolution for 2021 is to help expand the toolbox for scientists who want to become entrepreneurs through educational programs and grant funding."
- 2021 acquisition prediction: "My prediction is a cell-based meat company gets acquired by a SPAC."
Lolita Taub, The Community Fund
- Her New Year's resolution: "Say 'no' more often, get paid in cash (no more perishables or swag as forms of payment), and invest in the best community-driven companies alongside The Community Fund team.
- 2021 acquisition prediction: "As we continue to see the wave of B2B companies' consumerization, it wouldn't surprise me if Microsoft bought Calendly. They already struck a partnership in late 2020, and Microsoft is committed to, as Satya Nadella states in their annual report, 'empower[ing] every person and every organization on the planet to achieve more.' Plus, Calendly can help broaden the customer reach and enhance the appeal of either Outlook or LinkedIn."
Ross Fubini, XYZ Venture Capital
- His New Year's resolution: "I'm going to celebrate every holiday. Each one. Flag day, Arbor Day, Grandparents day. Bring on all Hallmark card days, every celebration."
- 2021 acquisition prediction: "ServiceNow does a series of transformative acquisitions as we watch Salesforce, Workday, Microsoft and Amazon fight for the future of the enterprise and reinvent SAP and Oracle's ERP. Disney also buys Roblox."
Alex Taussig, Lightspeed
- His New Year's resolution: "See actual people in real life."
- 2021 acquisition prediction: "I anticipate that [Peloton] buys a wearables company to compete more directly with Apple in its health efforts. Given the technical progress in getting real health data from wearables, it could be an opportunity for PTON to level up from exercise into connected health. A move like this will bring PTON into competition with TDOC/Livongo, who are also focused on integrating consumer health data into their employer offerings. Maybe PTON starts selling through the employer channel, too?"
Shripriya Mahesh, Spero Ventures
- Her New Year's resolution: "I don't make New Year's resolutions, but I've starting working on a couple of things in the past couple of weeks: 1. Being more intentional about what I say yes to. 2. Making time on my physical and mental well-being including continuing my meditation practice with my Core trainer.'
- 2021 acquisition prediction: "There's likely to be a consolidation in the well-being space. Peloton's acquisition seems like just the start. There are companies with high valuations (both private and public) that will start to consolidate physical well-being, mental well-being and sleep. There are interesting companies in all these spaces."
Sundeep Peechu, Felicis Ventures
- His New Year's resolution: "I experimented with changing my information diet this year and it made a big difference to my mental health. Resolve to do a lot more of it next year."
- 2021 acquisition prediction: "I expect software platforms to continue to get better at drug discovery and a traditional pharma company makes a big bet to acquire these capabilities."
Have fun ones of your own? Email Tomio at email@example.com and he may include some other fan favorites in next week's issue.
The lockdowns this year have transformed our homes into offices, schools, concert halls, movie theaters and gyms. Our homes are working harder for us, but so is our technology. The device that is working the hardest is perhaps the TV—becoming our lifeline to a far more virtual world.
- Elad Gil asks: If Stripe is the overarching index for ecommerce, what are the indexes (or platforms) for the next big industries?
- Scott Belsky's annual future forecasts crystallize what's coming next, from "eduployment" to decentralization to "multiplayer" enterprise tools.
- Greylock's Reid Hoffman reflects on loneliness as a founder from his previous startups SocialNet and LinkedIn. Getting help, support and community is key, he says.
- The "techxodus" has struck a nerve, and the two posts that sparked the most discussions in the last weeks were Founders Fund's Mike Solana with "Extract or Die" and GV's M.G. Siegler's "Wake the fuck up San Francisco."
- What essays will define the year? Biz's "Inside Track" favorites from the year include Sequoia's Black Swan memo, Marc Andreessen's "It's Time to Build," Nikhil Basu Trivedi's coining of the term "solo capitalists" and Kevin Kwok on Mike Speiser's incubation playbook.
Need to Know
- Ripple lawsuit: The SEC sued Ripple, alleging that the company sold its XRP cryptocurrency as unlicensed securities. In response, Coinbase and some other exchanges said they'll suspend trading of XRP.
- Bill Gurley's Christmas present: The SEC direct listing ruling is "HUGE" says Bill Gurley, who has been railing against IPO pops for years. Now companies will be able to raise money as part of a direct listing after the SEC finally approved the NYSE's plans, a change that Gurley thinks will "unquestionably" kill the IPO.
- 2021's IPO class: SAP snapped up Qualtrics for $8 billion on the eve of its IPO two years ago. Now the SAP-unit Qualtrics is once again on the path back to the public markets, but it won't be alone: Protocol has a list of the other 2021 IPO candidates, from Bumble to Coinbase to Poshmark.
- Even SoftBank has a SPAC now. SoftBank, in theory, plans to acquire a non-SoftBank investment, but it of course left the door open to some financial hijinks by not ruling it out completely. Meanwhile, Group Nine Media, which owns sites like Thrillist, is launching its own SPAC as media consolidation becomes a hot topic for 2021.
- From Protocol: In 2020, COVID-19 derailed the privacy debate in the U.S, and regulators have done little to address it.
- More from Protocol: The breakthrough list is our view on the top 17 people who cut through the noise and found themselves in the spotlight this year.
- This week in VC history: Good Technology's $425 million acquisition by BlackBerry (down from its last $1.1 billion valuation and after Good turned down a higher offer) made some employees' shares virtually worthless, after many had paid taxes on them.
- Your weekend reading: You thought VC only runs in the family with the Drapers? Koh Soo Boon was a rare early woman venture investor who has had her own firm since 1999 and invested in companies like Unity. Her daughter Shiyan Koh is an investor with Hustle Fund and has learned some lessons from mom.
Five Questions With...
Protocol's Tomio Geron
Meet your new Pipeline newsletter writer! Tomio Geron joined Protocol from WSJ VC in December and has worked at other outlets, including Forbes. He'll be taking over Pipeline in the short term while Biz is on leave and will be focused on fintech.
What's one story you think everyone will still be talking about in six months? And what's a story no one is talking about that you think everyone should be?
People will still be talking about SPACs — the really hot ones and the massive failures. There will also be at least one (relatively) new consumer tech startup that people will be calling the next Facebook.
No one's talking about: overvalued startups. I don't know if it will be in six months, but at some point there will be a prolonged correction (the pandemic correction was relatively short for tech) and many startups will run out of cash quickly. No one seems to talk about this unless Sequoia puts out a slide deck. I get it, that's the whole game in venture, getting in the best deals to get the top returns. But that means no one prepares for a downturn.
What tech story or trend are you most excited to cover in 2021?
On my new beat, the battles between upstart fintech startups and establishment financial institutions, with tech giants also in the mix. This includes everything from banking to infrastructure to lending to insurance to payments to crypto.
In venture, the creation of a functioning private market in secondary startup shares. People have been trying to do versions of this for a long time, and I'm curious to see if it may actually finally happen.
Where do you stand on this whole tech vs. media Twitter war?
Overrated! Most tech CEOs and VCs can't take any critical coverage — and are used to tech journalism puff pieces. They also think journalists don't understand how tech works. Fair enough but many in tech don't understand how journalism works. Some in tech believe media should be "decentralized" — i.e. so that there is no authoritative news and the media becomes essentially Twitter or Reddit. But this doesn't solve problems of misinformation, etc. That said, I think people both in tech and media just like to pop off on Twitter. It's their recreation or blowing off steam, which I don't really understand.
What's a secret obsession of yours that most people don't know about?
During the pandemic, I learned how to make linotype prints. It was my quarantine coping mechanism. Something about carving into the blocks and then printing ink onto paper is very satisfying.
Besides Protocol, what is the website you read the most?
Right now probably Substack newsletters. Despite some of my criticisms of the form, I like reading different or independent or raw voices. I've subscribed to so many that I've been reading them on a reading app called Matter.