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A crash is underway in the early-stage market.
In a world, late-stage investors are reacting to tech fixes by clamoring for the early-stage investing world, forcing early-stage investors to go even earlier to defend ownership and potential returns. This trend was underscored by firms like Andreessen Horowitz launching a pre-seed program months after launching a $400 million seed fund. What’s more, Techstars, an accelerator literally launched to help startups get off the ground, debuted a fund to support companies that are too early for their traditional programming.
While all of that is going on, early-stage investors are bearing a valuation correction and portfolio discounts. Some admit they are telling portfolio companies to refocus on cash preservation, profitability and discipline, not just growth.
Suppose these two very different worlds are in the same universe: Early-stage investors are becoming more disciplined and cash-rich, but at the same time, early-stage investors are going first. Investors are pushing the founders to be lean but also green, but at the same time, offering them $10,000 to take PTO for a week and try their hand at entrepreneurship. Growth, gross margin and consumption are the new top priorities for CEOsbut at the same time, venture capitalists are clamoring to offer more funds, sooner, in newly invented subcategories of early-stage investing.
Many things are happening at once and I am worried about the race to the bottom, or the race to the first stage, and its consequences. For more ideas, read my TechCrunch+ article: “If Early Investors Continue Earlier, What Will Happen?”
In this newsletter, we will talk about news that has to do with Elon Musk and news that has nothing to do with Elon Musk. As always, you can support me by forwarding this newsletter to a friend, following me on twitter or by subscribing to my personal blog.
Let’s talk about Elon Musk
As I’m sure many of you are well aware, Elon Musk’s $44 billion dollar bid for Twitter was accepted this week, marking a massive moment in tech history and an imminent return to private markets for an essential social media platform. We wrote the entire timeline of the Musk acquisition, from tweet to closing, but we know the saga isn’t over yet: The deal hasn’t officially closed yet.
Here’s why it’s important: I mean, for once, this format doesn’t work because there are too many angles as to why Musk’s purchase of Twitter matters. Instead, I’ll just bullet point a few specific angles that TechCrunch looked into.
And finally, I’ll just remind everyone that Twitter, in its earnings this week, said that it has outperformed its users in the last 3 years. For 1.9 million accounts. God. It is a bad image for Twitter, but also bad news for advertisers, a source of income on which the platform depends a lot. What Sarah Perez In short, “for a company as reliant on ad revenue as Twitter is today, it’s amazing why they would agree to a deal that puts a free speech absolutist in charge.”
Ok, now let’s not talk about Elon Musk for the rest of the newsletter.
Yeah we’re at that point [insert high–profile news cycle] history. First, there are the leaks and the scoops. Then there are the lightly covered thought pieces. Then there is the Major Confirmation. Then there are the wild, direct discussion threads and opinion pieces, peppered with more leaks, more scoops, and key details. And finally, the stories that want to give a brief respite to the aforementioned madness. Let’s embrace this last stage!
The deal of the week, which may have gone unnoticed, is that Robinhood is laying off 9% of full-time staff.
Here’s why it’s important: Robinhood announced its layoffs just days before 2022 Q1 earnings, and after its value eroded in public markets. Therefore, the move appears defensive and the company’s attempt to show that it is on track to become a more efficient and growth-oriented financial institution. Also in fintech news, PayPal is closing its San Francisco office.
Things get tense:
Spotted on TechCrunch
How Lydia wants payments to be more personal and social
Does it smell like teen spirit or teen bankruptcy?
Airbnb Commits to a Fully Remote Workplace: ‘Live and Work Anywhere’
AppDynamics founder’s Midas touch strikes again as Harness valuation hits $3.7B
Snap announces a mini drone called the Pixy
Spotted on TechCrunch+
How to get into Y Combinator, according to YC’s Dalton Caldwell
Please don’t turn your 401(k) into shitty coins.
Having some crypto in your 401(k) is neither irrational nor exuberant
Why Latin America’s Freight Forwarding Opportunity Continues to Attract Capital
Loaded With Billions In Capital, Meet The 9 Startups Developing Tomorrow’s Batteries Today
Until next time,