March 19, 2022
Hello and welcome to Pipeline! This week: Mercury gets into venture debt, the SaaS downturn in perspective and SoftBank unloads its Cruise stake.
Macro uncertainty with the war in Ukraine, rising inflation and volatility in public markets have caused some late-stage investors to reassess their strategies and deals. But their jitters haven’t slowed the market for venture debt. If anything, the dithering over valuations has made loans to venture-backed firms more attractive as a short-term financing strategy — a bridge to a time when conventional equity is easier to secure on attractive terms.
The fast-growing venture debt business has attracted a new player. Mercury, a startup that provides banking services to startups, just launched an offering.
Capital is competing to lend to hot startups. As valuations have ballooned, startups have been in the position of leverage.
With so much capital, seemingly every niche has its own lending option. With capital seeking growth investments, venture debt isn’t the only startup borrowing option.
Of course, debt carries its own risks. Venture debt is ideally used for things such as equipment, data centers or leasing, not operating costs.
In this risk-on environment, venture debt can be another helpful tool in the tool kit for founders. But founders should be aware of the risks. Handle sharp objects carefully.
VCs and journalists are fighting (again) on Twitter about anti-tech tech stories, and it’s … insidery? Part-time media critic Marc Andreessen took a break from posting Jack Dorsey memes to complain about a Business Insider story on problems at Glossier that he deemed a “hit piece.” Full disclosure: Axel Springer owns BI publisher Insider Inc. and Protocol. Fuller disclosure: Andreessen was an early investor in Insider.
I did a whirlwind tour of SXSW this past week with some Protocol colleagues. The event didn’t seem as big for VCs (or in general) as in past years due to COVID, but there was a decent startup and VC turnout — and especially crypto. First time attendee Deena Shakir of Lux Capital writes: “While I hadn't really heretofore considered SXSW as the primary go-to event for VCs (compared, for example, to Upfront Summit), I definitely ran into more VCs than expected there — as well as a large number of founders!”
Today’s job landscape is challenging for organizations looking to recruit and retain top tech talent. Recent labor trends, many of which are fueling The Great Resignation, have shown leaders across industries that their employees are searching for more.
People like to trash venture capital in Web3 and crypto, but one big benefit of VCs is they will stick with you in the tough times, says Fred Wilson, citing the example of Dapper Labs, which had to slog through a crypto winter before hitting it big with NBA Top Shot.
For Web3 projects with potential future tokens, SAFTs, the crypto equivalent of a SAFE, are less popular now than token side letters, especially for U.S. companies, says Robin Ji. He gave a detailed rundown on how to approach them.
The current drop in SaaS multiples could be like the 2000 or 2008 tech downturns, but probably won’t be as bad as either, said Jason Lemkin. Still, the next few months might be the worst time to raise growth capital.
GM bought back SoftBank’s Cruise stake. The Vision Fund 1 stake in the self-driving outfit was sold for $2.1 billion.
Oyo could cut its IPO in half. The SoftBank-backed company had a $12 billion target originally. It might even cancel its India listing.
Fund caps are so 1990s. Venture funds are raising more and more, so why bother with a cap on fund size? Answer: So LPs know the fund size matches the strategy.
From Protocol: Swedish startup Normative introduced a free version of its carbon emissions tracker, which it created to help relatively small companies get a baseline understanding of their emissions. Also: Check out our new Protocol Climate newsletter!Your weekend reading: Telegram thrives during Russia’s media crackdown.
Technology organizations need to look internally to find the talent they seek by upskilling and reskilling their existing tech workforce. For this vision to become a reality, organizations must focus on being creators, rather than consumers, of talent.