#BlackLivesMatter

I’ve been following (& supporting) the #BlackLivesMatter (or BLM) movement for some time.

The data around the number of civilians who are killed by police is very clear and is alarming.  The data around the disproportionate number of black people who are killed by police is very clear and is alarming (see chart below).  The topic shouldn’t be controversial or divisive, they are facts and we need to be in action if we want to see the numbers decline.

This post includes action items for people who are conscious of the issue of black people being killed by cops at disproportionate rate (see below) and you haven’t done anything about it but are thinking about getting involved.

  1. If you are on social media (Facebook and/or Twitter), share articles on what is occurring.  Many people are silent on this topic.  While this seems like a trivial thing, sharing news has a viral aspect to it and the more people read about what is happening, the larger the odds of someone new becoming conscious of this issue as well.
  2.  Donate money.  There is typically a crowd funding site running a campaign to raise money for the families of those who are killed by police.  Even $5 can go along way, when aggregated among thousands of other donors, it becomes a meaningful amount for the families that are impacted.
  3.  Attend a BLM rally that is happening in your city.  These rallies are typically spontaneous, the way I find about them is typically via twitter.   If you are on twitter, you need to follow some other conscious individuals in your community, the best way to do that is do an advance search on twitter, filtering by location and the #BlackLivesMatter hashtag.  I’ve participated in several rallies in NYC, they are peaceful and are welcoming of anyone who wants to participate.
  4. Get familiar with Campaign Zero .
  5. Vote for politicians who are also conscious of this issue and will implement some of the recommendations outlined by Campaign Zero.

If there are other action items that I should add, please let me know, as I’m still looking to do more on my end.

See this chart, I hope you are aware of it, if not, I hope it makes an impact on you.

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2016 Market Cooling

As you may have heard, the venture market has cooled in 2016, in terms of dollars invested and number of investments (deals) that are being done by venture capitalists (VCs).

There are a number of reasons for why this has happened.  The main driver has been the macro environment- forces that VCs can’t control.  It is a combination of a slowdown in China, challenges with several European countries, Brazil, ISIS, volatility of oil prices, upcoming US election, etc.  This in turn has created “bears” in the public markets, which has resulted in almost no VC backed IPOs and a correction in the SaaS sector as a result of the significant LinkedIn ($LNKD) price drop in February 4, 2016.   The chain reaction of all of this has led to VCs becoming more cautious and spending additional time with their existing portfolio companies.

The data below was pulled via CBInsights.  We analyzed deals/dollars in the US for 2016.

The most significant point is the drop of deals in Q2 ’16 vs Q2 ’15, a whopping 28% delta. We wanted to be predictive on what the 2nd half of this year would look like and it is a bit bearish.  The figures in green are just guesses, so could be totally wrong here but wanted to be on the record on what I think will happen.  The reasons on why the 2nd half may turn out to have a great delta between 2015 vs 2016 is that the markets are still facing significant macro issues, with the newest being #brexit, which has created additional uncertainty that will likely trickle down to the venture ecosystem.

There is good and bad news on the prediction.  When you put the numbers of both 2015 and 2016 into context, they are really high compared to previous years, so a lot of deals and dollars are still being deployed, which is the good news.  The bad news from an entrepreneur’s perspective, is that raising money from VCs has gotten a lot more difficult.

Now, lets focus our attention on the dollars deployed by VCs, see second image.  Similar to deals, the numbers are down, although not as pronounced.  What we are seeing is that round sizes have gotten slightly larger on average, which can be mean a few things.  One it could mean that VCs are putting more money into their better companies (i.e. flight to quality) and/or the runways are being extended as the forecast of macro environment is uncertain.

Similar to the prediction of deals for the rest of the year, the numbers will likely be down, although not as significant.

Although the outlook is bearish, the reduced numbers in 2016 (vs 2015) is positive for the venture environment, as the market was over-heated and the correction was needed.

dealscapital invested

Thanks to our summer intern, Lorel Sim, for pulling this data.

Q3 and Q4 2016 data are only predictions (numbers in green).

Data was only for US based private tech (all sectors) companies.

 

Best Startups in NYC ?

There is always a debate as to which startups are the best ones in NYC.

Looking at Glassdoor can be one resource to utilize to make an argument as to which ones are the best.  How employees feel about a company, can be a good indicator as to how a company might perform.

I took at look at which NYC HQ’d VC backed startups had the highest rankings.  In order to be considered for this list, the startup had to have at least 25 reviews, which I feel is a good enough sample size.

So, here are the top 5:

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Market Cooling of 2016

VC rounds and dollars are down approximately 1/3 vs the same time frame as last year (2015).

I utilized CB Insights to pull some data.

I wanted to see what has happened the last few months, post the public market correction that took place in February 2016.

First thing I wanted to look at was all VC rounds in the US between March 15th and May 15th of this year.

The query provided: 523 rounds of equity financing, totaling $7.12B.

Now, I wanted to compare to same time frame of last year.

The query provided: 778 rounds of equity financing, totaling $11.6B.

So, rounds are down 32.8% and funding amount is down 38.6%.

I wanted to drill down and just look at Seed and Series A rounds, again, only in the US, on those same dates, March 15th to May 15th of this year (2016).

The query provided 293 rounds of equity financing, totaling $1.46B.

Again, wanted to compare it to the same time frame of last year.

The query provided 465 rounds of equity financing, totaling $2.09B.

So, Seed/A rounds are down 37% rounds and funding amount is down 30%.

This cooling off period is actually a great thing.  The funding environment was too frothy the last few years and there was a lack of discipline on both the CEO and VC fronts.  Companies are now focusing on getting a handle of their burn and spending their money in a slight more conservative rate.

While things have cooled, the good news for Founders is that there is still A LOT of money available to them.  The majority of VCs have new/newer funds raised.

Tech Activism

As you may of heard, there was a proposition in Austin that had an impact on ride sharing, specifically on tech companies/startups Uber and Lyft.  See this article if you are not familiar with the situation or want a refresher.

A lot of people in the tech community are upset about this decision, as they feel Austin is being anti-tech/startup.

The part that is disappointing is that people are being very vocal about this proposition AFTER the vote has already taken place.  One thing I have witnessed in living in the Bay Area and NYC, is that the startup community, broadly speaking, aren’t very involved in local politics.

If you look at the results of the proposition, it shows you that a very small percentage of the population ultimately made the decision.

Austin has a population of almost 900K people and as you can see below, 10K people were the difference in opposing the measure that has impacted Uber/Lyft.  The article that I reference above indicated that only 17% of REGISTERED voters participated in this specific proposition.

We, being the collective tech community, need to do a much better job of not only making our voices heard but connecting with those in non-tech community to influence their decisions.  Sending out tweets isn’t enough, their needs to be people in the street communicating the message directly to local citizens and also calling/mailing/emailing the local/state/federal politicians.

I’m using this specific Austin situation as a recent example, so this isn’t meant to only call them out.  Similar situations have happened in other cities.

 

Voting Results:

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Austin Population:

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Slack’s Valuation

As you may of heard, Slack just raised a $200M round of financing at a $3.8B valuation.

Per the first image below, they have 800K paying users.

If you look further down at the second image, you can see how much they charge paying users, between $6.67 per month or $15 per month.

Assuming all their 800K paying users are at the lower tier of $6.67 per month, they are at $64M in annual recurring revenue ($6.67 x 12 months x 800K).  If they were a public company at this revenue, they would be trading at a 60x revenue multiple ($3.8B/$64M).

If their 800K paying users were at the high tier of $15 per month, they are at $144M in annual recurring revenue and 26x revenue multiple ($3.8B/$144M).

Realistically, their users are paying somewhere in the middle of $6.67 and $15, so splitting the difference of 60x and 26x multiple, they would need to trade at a 42x multiple.

Taking a look at the Bessemer Cloud Index, you can see that the largest multiple of public saas companies is Workday, trading at a 10x revenue multiple.  So assuming the best case scenario, Slack is getting paying users at the upper tier of $15/month, the 26x revenue multiple is much bigger than Workday’s.  That being said and a major implication to their current valuation, they are growing at a much faster pace than Workday or any other company in the Cloud Index.

If you look at the valuation of companies in the Cloud Index, fourth image below, only 9 companies have a higher valuation than Slack’s $3.8B.

Given Slack’s revenue and growth rate, they could IPO today, but the big question is what their market capitalization could be.

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$FB vs $TWTR vs Snapchat

When these companies were at a similar life stage, (ie going from ~$100M to ~$300M in revenue) they had very different private market valuations.

Snapchat = $16B
Facebook = $10B
Twitter = $8B

The question for me is whether one is over-valued or were the other two under-valued?

Here are some tweets below with links to the data.

 

Make America Great Again ?!

As you know, this is Trump’s slogan.  What does he mean exactly when he says this?  When was America great?  When did we lose our greatness?

Make America Great Again…like when we took the land (& killed) of the indigenous population?

Make America Great Again….like when we enslaved (& killed) Africans?

Make America Great Again…like when the South was willing to lose the lives of over a million people in the Confederacy to protect the slave economy?

Make America Great Again…like when we dropped nuclear bombs on Japan?

Make America Great Again…like when our schools were segregated?

Make America Great Again…like when over a million people were killed in the Vietnam war?

Make America Great Again…like when civil rights leaders were being assassinated?

Make America Great Again…like when women weren’t allowed to vote?

Make America Great Again…like when we went to war with Iraq?

Make America Great Again…like when police killed over 1,000 people in 2015?

There are a lot of great things about America, but we are not great (yet) but are getting better over time.  We continue to iterate as a country, which is the greatest thing going for us.  Our past is painful, let’s never forget it but learn from it and build towards a better country.