Welcome to Startups Weekly, a new take on this week’s start and startup trends. To get this in your inbox, subscribe here.
We like a contrarian approach these days, and this week’s pick is to explore why lower valuations can be a good thing for startups these days.
In recent months, both Stripe and Instacart have updated their internal ratings in a 409A review process. The startups saw their valuations drop by 28% and 38% respectively as a result of the valuations. Anita Ramaswamy and I watched 409As and learned about a very different meaning of an “appreciation haircut.”
Here’s an excerpt from our piece:
Many founders and industry experts view a company receiving a 409A valuation that is lower than the investor’s assigned valuation as a blessing. That’s because a low 409A rating allows companies to grant their employees stock options at a lower price. Companies can also use the new, lower 409A valuation as a recruiting tool, luring potential employees with low-cost options and the promise to pay out at a higher price when the company is eventually left.
Sumukh Sridhara, head of founding products at AngelList, says companies see 409As as an “authorization mechanism for granting internal stocks, not that they think we’re worth less.”
“If those companies had their way, they’d claim they’re worth 5% of what their public market compositions are. But they don’t really get away with that,” he says.
For our full take, read the full “WTF is a 409A” story now live on londonbusinessblog.com or read the accompanying londonbusinessblog.com+ piece, “Stripe’s New and Lower Internal Rating Explained.”
And if you want to learn more about the weeds of this conversation, join Anita Ramaswamy and me on a Twitter Space next Tuesday at 12:00 PM PDT, 3:00 PM EDT. We’ll have some guests from the piece on the mic, and of course riff on what’s been cut from the story.
In the rest of this newsletter, we’ll take a look at a fintech favourite, robots and software eating up headquarters. As always, you can support me by forwarding this newsletter to a friend or follow me on twitter or subscribe to my blog.
Offer of the week
TomoCredit! The fintech raised $22 million to make credit scores obsolete. I know, I know it’s not the first fintech to try this, but there’s something that stands out.
Here’s why it matters, via Mary Ann Azevedo:Tomo differs from many other credit offerings in that it does not rely on FICO scores to underwrite. Instead, it applies a “patented” 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 those robots
TC Robotics was so wild this week that it shut down the site (for a few minutes). In all seriousness, the event was a blast and featured some of the biggest names in technical innovation. Big ups to Brian Heater for leading the effort.
Here’s why it’s important: Robotics, unlike many other technology sectors, is about to have a great year of funding and, according to investors concentrated in the category, has some key recession-proof characteristics. If you missed the event, don’t worry, we’ve covered every panel for you to read and relive.
Software eats the world and also swallowed the offices of a16z
First, thanks to Haje for this witty subhed! Second, risk firm and investment advisor Andreeseen Horowitz announced this week that they will no longer have a single physical headquarters and will instead build global outposts.
Here’s why it’s important: The company prioritizes physical offices around the world rather than one centralized headquarters. It doesn’t come as much of a surprise when you consider, well, the still ongoing pandemic. That said, it’s helpful to track how distributed VCs adapt to a remote-first, but not remote-only environment.
Eric Tarczynski of Contrary Capital says his company has been remote since its inception, but recently launched a personal community space in NYC for portfolio companies and founders within the company’s network. Ankur Nagpal, of Vibe Capital, launched his fund with plans to spend a month at a time in the regions he plans to invest in. Brianne Kimmel of Worklife Ventures creates an invite-only community space in Los Angeles. Most recently, Index Ventures opened its fourth New York office – its first new office in more than a decade.
Insert “Pitch Perfect” joke here
For starters, londonbusinessblog.com Live is on a brand new platform and we’ve made it easier to sign up for pitch drills. Investors (and my inbox) can attest to the importance of brevity, cleverness, and clarity in pitches, so it’s great to see.
Startups can now sign up for Pitch Practice by . any day, any time fill in this form. We select the startups 24 hours before that week’s event and notify startups by email. If you’re selected for one event, you can also sign up for future events. We want companies to present more than once using the feedback from past experience. Call it growth without cost.
Seen on londonbusinessblog.com
Amazon buys technology supplier One Medical for $3.9 billion
Andreessen Horowitz dumps physical headquarters in exchange for global outposts
SEC Takes Long Feared Position in Coinbase Insider Trading Suit
Google tells employees to behave more ‘entrepreneurially’. Translation: work harder, or else
Tesla has dumped 75% of its Bitcoin holdings
Airbnb co-founder Joe Gebbia steps down from leadership role
Seen on londonbusinessblog.com+
What does Amazon get for the $3.9 billion it pays for One Medical?
Where should US-based startups file their patent applications?
Didn’t anyone tell Europe that the party is over?
Can Medicare Save the Insurtech Market?
Until next time,