The Great Resign meets the Great Reset (Great R…un down these valuations please) – TechCrunch
Welcome to Startups Weekly, a fresh, human take on this week’s startup news and trends. To receive this in your inbox, subscribe here.
We love a counter-narrative angle these days, and this week’s pick is a look at why lower valuations may actually be a good thing for startups these days.
Over the past few months, Stripe and Instacart have had their internal ratings updated as part of a 409A review process. Startups saw their valuations slashed by 28% and 38%, respectively, following the ratings. Anita Ramaswamy and I looked at 409As and discovered a totally different meaning of a “valuation rating”.
Here is an excerpt from our article:
Many founders and industry experts consider a company receiving a 409A valuation lower than the valuation assigned by investors to be a bargain. This is because a low 409A valuation allows companies to award their employees stock options at a lower price. Companies can also use the new, lower 409A assessment as a recruiting tool, enticing potential employees with cheap options and the promise of cashing in at a higher price when the company eventually exits.
Sumukh Sridhara, head of founder products at AngelList, says companies see 409As as an “internal equity grantor, not thinking we’re worth less.”
“If these companies were successful, they would say they are worth 5% of what their public contracts represent. But they won’t really get away with it,” he said.
For our full version, read the full story, “WTF is a 409A” live on TechCrunch right now or read the companion TechCrunch+ article, “Stripe’s New Lower Internal Rating, Explained”.
Also, if you want to know more about the weeds of this conversation, join Anita Ramaswamy and me on a Twitter space next Tuesday at noon PDT, 3 p.m. EDT. We’ll have guests from the room on the mic, and of course riffs on whatever was cut from the story.
In the rest of this newsletter, we’ll tackle a fintech favorite, bots and software devouring head office. As always, you can support me by forwarding this newsletter to a friend or follow me on twitter or by subscribing to my blog.
Offer of the week
TomoCredit! The fintech has raised $22 million to make credit scores obsolete. I know, I know it’s not the first fintech to try this, but there is something that stands out.
Here’s why it matters, via Mary Ann Azevedo:Tomo is different from many other credit offerings in that it doesn’t rely on FICO scores to underwrite. Instead, it applies a “proprietary” underwriting algorithm (Tomo Score) to identify “high potential borrowers” with no credit score. The TomoCredit card requires no credit check, no deposit, 0% APR and no fees.
About these bots
TC Robotics was so wild this week that it shut down the site (for a few minutes). Seriously, the event was a blast and featured some of the biggest names in tech innovation. Big up to Brian Heater to spearhead the effort.
Here’s why it’s important: Robotics, unlike many tech sectors, is on course for a great year in funding and, according to investors focused on the category, has some key recession-proof characteristics. If you missed the event, don’t worry because we’ve covered every panel for you to read and relive.
Software is eating up the world and just engulfed a16z’s desks too
The first standing Thanks Haje for this witty subhed! Second, venture capitalist and investment adviser Andreeseen Horowitz announced this week that it will no longer have a single headquarters and will instead build global outposts.
Here’s why it’s important: The company prioritizes physical offices around the world instead of a centralized headquarters. That’s not entirely a surprise, considering, well, the ongoing pandemic. That said, it’s worth tracking how distributed VCs scale to a remote environment first, but not remote only.
Contrary Capital’s Eric Tarczynski says his firm has been remote since inception, but recently launched an in-person community space in New York for portfolio companies and founders within the firm’s network. Ankur Nagpal of Vibe Capital launched his fund with the intention of spending a month at a time in the geographies he plans to invest in. Brianne Kimmel of Worklife Ventures is creating an invitation-only community space in Los Angeles. More recently, Index Ventures opened its fourth New York office – its first new office in over a decade.
Insert the “Pitch Perfect” joke here
First, TechCrunch Live is on a whole new platform, and we’ve simplified the app for practicing pitching. Investors (and my inbox) can attest to the importance of brevity, insight and clarity in presentations, so it’s great to see.
Startups can now apply anytime, anytime for Pitch Practice by filling out this form. We will select startups 24 hours before this week’s event and notify startups via email. If you are selected for an event, you can also apply for future events. We want companies to present themselves more than once using previous feedback. Call it free growth.
Seen on TechCrunch
Amazon buys primary care technology provider One Medical for $3.9 billion
Andreessen Horowitz gives up physical seat in exchange for global outposts
SEC Takes Dreaded Stance in Coinbase Insider Trading Lawsuit
Google tells staff to act “more enterprising”. Translation: Work harder, otherwise
Tesla has sold 75% of its Bitcoin holdings
Airbnb co-founder Joe Gebbia steps down from leadership role
Seen on TechCrunch+
What does Amazon get for the $3.9 billion it pays for One Medical?
Where should US-based startups file their patent applications?
No one told Europe the party was over?
Can Medicare save the insurtech market?
Until next time,