November 6, 2021
Photo: Smith Collection/Gado/Getty Images
Hello and welcome to Pipeline. A special thank you to Owen and Tomio for filling in while I was away for longer than anticipated. It's good to be spending Saturday morning with you again. This week: CEOs should never do a rap battle, Sam Altman's largest investment ever, and why VCs are suddenly "investment advisers."
Last week's Sequoia news certainly shocked the venture capital world, but it wasn't the part about the evergreen fund that had investors calling their lawyers. For a variety of reasons, the giant rolling fund is likely to continue as a rare breed in the VC world. But Sequoia won't be alone in abandoning the (technical) title of venture capital fund and becoming a "registered investment adviser," or RIA.
Many top firms, including Andreessen Horowitz, General Catalyst and Battery Ventures, are now investment advisers, per SEC rules, and Sequoia's in the process of joining them. A16z may have been said to blow up the venture capital model when it converted to an RIA, but it wasn't unique at the time. Firms like Foundry Group and others have been RIAs for years. So what's the difference?
Making the switch should be based on how diversified a firm's strategy is. Battery Ventures switched in 2014 because the firm was taking controlling stakes in later-stage growth companies and also secondaries as part of its strategy, and it tipped the firm over the 20% threshold, said general partner Michael Brown.
It may give venture firms more investing flexibility, but it comes at a cost (literally). Brown warns that the compliance overhead is not something firms should underestimate. Even things like a partner's private stock transactions have to run through compliance.
The good news? Things could get easier for VC funds. The NVCA has been pushing for years to "modernize" what it means to be a venture capital firm. "The definition is not keeping up with realities of the industry," says NVCA's head of policy Justin Field.
Venture funds may be more interested in exploring the path in light of the Sequoia news, but Brown isn't expecting every firm to make the switch overnight, especially if a policy change can release some of the pressure of secondaries. "I don't think there's any industry pressure to be a registered investment adviser," Brown said. "I think it comes down to individual firm strategy, and that's a decision, not an industry-wide trend."
CEOs should never promise to make a rap video, or else you end up like Circle's Jeremy Allaire rapping lines like "yo whatsup it's the crypto Yoda; coming at you like a loco motah" and leading chants for USDC.
The most expensive home in California now belongs to … [drumroll] ... Marc Andreessen, who broke Jeff Bezos' record for the most ever paid for a home in California by coughing up $177 million for an estate in Malibu.
"The culture at Rivian was actually the worst I've experienced in over 20 years in the automotive industry," former Rivian sales exec Laura Schwab told the Wall Street Journal. She's suing the electronic truck maker (which is aiming for a $60 billion valuation in an upcoming IPO) for gender discrimination.
Alexis Gay is here to totally help you understand NFTs.Zillow's flips became flops and Opendoor's stock cratered alongside it, but Opendoor co-founder and Founders Fund partner Keith Rabois doesn't think the two should be compared: "Selling or shorting Opendoor due to Zillow's flaws is akin to shorting Google due to Yahoo's inability to monetize search well or return long tail queries properly."
Achieving work equity in a hybrid world means equipping employees with the tech tools that enable them to feel fully seen, heard and valued no matter where they are. Work equity is the outcome of a business that champions work-from-anywhere, deploying technology to give workers autonomy and increase collaboration across underrepresented groups.
People (and in particular the tech media) tend to obsess over billionaire founders like Elon Musk and Jeff Bezos and ignore the rest of the mega-wealthy. The glare of the social media limelight isn't fun, but with the attention comes the ability to tell their own stories and make real change in the world, points out Founders Fund's Mike Solana in "The Shitposting Gods of Silicon Valley."
"The 100x ARR multiple might be the fundraising meme of 2021," writes Redpoint's Tomasz Tunguz, but he dug into whether it's actually supported in the public markets. (Spoiler alert: somewhat.)
It used to be that employers dictated how, when and where employees worked. Now, it's the employees who have the choice. Greylock's Asheem Chandna has tips on how startup founders can win the talent war.
Allbirds and Bird both went public. But Allbirds' ticker is BIRD and Bird's ticker is BRDS. This won't confuse anyone, just ask ZOOM (aka not the video app, whose ticker is ZM).
Female founders smashed funding records in 2021 — but there's still a widening gap as valuations in those companies trail the startup market average, according to a PitchBook report that I wrote about this week.
SoftBank isn't making enough bank for its top partners. Bloomberg reported that the managing partner exodus is linked to a too-small share of the profits.
A16z wants the White House to appoint a "Web3 czar." It's more than just a cool job title as a16z pushes for more regulation to make DAOs legal and to use Web3 for tax compliance.
Sam Altman made his largest investment ever: $375 million, or roughly two Marc Andreessen mansions, into fusion startup Helion Energy.
This week in Theranos: Investor due diligence is what's on trial now, and it could be a warning for today's investors who are doing diligence in 24-hour turnaround times.
On Protocol: SoftBank wants to prove its $100 million Opportunity Fund isn't just diversity theater.
Also on Protocol: Meet Dracula, the dark mode color scheme with a cult following.
Your weekend reading: Synthetic bio startup Zymergen had raised over $1 billion in venture capital and then went public in a successful IPO. But four months later, its CEO was gone and it's facing serious issues. Forbes has "the inside story of how SoftBank-backed Zymergen imploded four months after its $3 billion IPO."
Mathias Schilling is the co-founder and managing partner at Headline (formerly known as e.ventures). He's made investments in companies like Sonos, Gopuff, Farfetch and TheRealReal.
Pitch deck vs investment memo: What's your preference and why?
For me, it's Option C — it is all about the person telling the story. What is their vision, what motivates them, where do they want to be years from now? That energy is palpable and infectious, and it is the thing I'm immediately drawn to.
What was your first job, and what's a skill you still use from it?
At 16, I worked in the public relations department of NCR, and we launched a tablet, which was before its time and before consumers were ready for something like that. At the time, it was a product without a market, and I learned to never launch a product without an existing market.
What's one of the worst predictions you've ever made?
I've predicted that the market would crash since 2016.
What is the biggest issue that your partners are thinking/talking about at your Monday partner meeting?
Although my partners don't necessarily agree with me, the biggest issue I'm grappling with is that capitalism has shown to have far more problems than we previously understood, and we need to think deeply about how to best adapt to that.
What's one company that got away — and what you learned from passing on it?
In 1998, when I had first landed in California, I had a meeting with Larry Page and Sergey Brin before they raised their Series A. The CTO was a mutual friend of one of our portfolio company CEOs, Klaus Schauser.
At the time, search was so monopolized by the big players, and Google's go-to-market distribution strategy wasn't through consumers but through the enterprise, which we could have helped them with through our connection to Bertelsmann.
Their product was incredible, and I learned that you can break through any market share with a much better product.
Updated Nov. 6:This newsletter has been corrected to clarify that Sequoia is in the process of registering as an investment adviser.