The Great Covid Churn

Will forces pent-up by the pandemic in 2020 unleash a wave of employee turnover in 2021?

Good morning. Here are today’s highlights: A company called Thrasio has mastered the dark art of selling on Amazon. Investors are just throwing money at startups. And is there a surprise PPP tax bill in your future?


Episode 42: The Great Covid Churn: This week, Paul Downs, William Vanderbloemen, and Laura Zander talk about William’s prediction that 2021 will be a year of employee turnover. His theory, which he says he’s already seeing in practice, is that pent-up forces that were blocked by the pandemic this year will be unleashed in 2021—especially as vaccines arrive and the economy improves. His advice: Make sure your best people feel appreciated. Or, as he puts it: “Better to keep a good employee—even if it costs you more than you think it should—than to have to call me.” Plus: we discuss whether, when the time comes, businesses should require employees to get vaccinated.

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Thrasio, a holding company that has been rolling up Amazon third-party sellers, has mastered the dark art of selling on Amazon: “[Co-founder Carlos] Silberstein says there are five dynamics that separate an also-ran product from the product that you decide to buy. The title of the Amazon listing has to effectively describe what the product does. It needs to have a great photo and an appealing price. But the fourth and fifth factor are the number of reviews it has, and the average number of stars, he says. When a product has four-star or better reviews, and several thousand of them, Silberstein says that creates ‘a review moat.’ You’re more likely to buy those products because other people say they’re high-quality. And the products that sell well on Amazon get a more prominent ranking in Amazon’s search results. That creates ‘a virtuous circle,’ Silberstein says.”

  • “‘The average company we’ve bought has seen its EBITDA grow 156 percent annually, after the acquisition,’ Silberstein says.”

  • “‘By the end of the year, we will have acquired 100 companies,’ Silberstein says. ‘That’ll add up to about $500 million in revenue with $100 million in profit.’” READ MORE

Facebook is adding shopping carts to WhatsApp: “Carts are aimed at making it easier for consumers to buy multiple items from a business, and for merchants to keep better track of order inquiries and manage requests. WhatsApp said it is adding the new feature after early positive response from some businesses who tested it recently. On WhatsApp, users will now see the option to add items to the cart. When done, users will be able to send the order request as a message to the business. WhatsApp said carts are going live for users across the globe today.”

  • “But one big element that remains missing from WhatsApp’s shopping experience is support for payments. As of today, when a user places an order with a business on WhatsApp, both parties are left on their own to figure out how money will exchange hands.” READ MORE



Investors are just throwing money at startups: “At the onset of the pandemic, warnings of start-up doom abounded. Those largely faded after the initial shock of the coronavirus wore off. Now, as the new reality of remote work, school, shopping and socializing supercharges the adoption of tech products and services, sentiment has flipped even further — to a frenzy of deal making.”

  • “Frank Rotman, a venture capitalist at QED Investors, tweeted in August that the pattern of start-ups raising back-to-back rounds of funding was ‘the most disturbing trend I’m seeing.’”

  • “Last week, as QED completed a new investment, another venture firm asked to put money into the same company at a twofold to threefold valuation increase. The firm wanted to get an agreement signed the day that Mr. Rotman’s firm wired its money, which was the earliest moment it would be possible to strike another deal.”

  • “‘This is insanity,’ Mr. Rotman said.” READ MORE

A new investment fund, Apeira, will bet on venture-backed startups to fail: “The New York firm is aiming to bring a hedge-fund form of long-short investing to venture-backed startups. It will invest about 70 percent of its money in the long portion of its fund, making traditional venture investments by buying early-stage Series A through C equity. With the remaining portion, Apeira plans to create ‘venture synthetics’ that mimic the price performance of individual startups’ equity to do the equivalent of shorting companies’ stock. In essence, the firm is creating one-off bets with other parties on the fate of individual startups.”

  • “Other synthetic products include mortgage-backed collateralized-debt obligations, which became infamous during the 2008 financial collapse, and synthetic exchange-traded funds.” READ MORE

One pandemic silver lining is that entrepreneurs are competing to deliver mental health: “Driven by personal experience — and further motivated by the pandemic, which has caused an increase in anxiety and depression among the general population, including among young adults — entrepreneurs ... are focusing on addressing aspects of the mental health care system that they view as broken. They seem undeterred by the complicated nature of that system: a byzantine insurance process, a wide range of provider types, and elusive fits between patient and therapist.”

  • “‘It’s a crowded space,’ Alex Katz, the founder of Two Chairs, which opened its doors with a single clinic in San Francisco in 2017, said of the mental health start-up scene. Nonetheless, he said, ‘because the problems are massive, we need a lot of great companies working in innovative ways to address the different populations, diagnoses and delivery of care.’”

  • “Two Chairs has relied on technology, using a frequently updated proprietary algorithm to match client and therapist after a prospective client’s first intake meeting.” READ MORE


Is there a surprise PPP tax bill in your future? Here’s the gist: If you get your PPP loan forgiven, it essentially becomes taxable income. For many, that’s surprise No. 1. But it gets worse: You may not be able to deduct the expenses you paid with your loan. That’s surprise No. 2—and potentially a significant tax liability. Concerned? Join us today at 3 ET when we’ll try to sort out this and a few related issues with a couple of experts: Chris McKee, managing partner of accounting firm Venturity Financial Partners, and Lou Mosca, chief operating officer of management consulting firm American Management Services. Bring your own questions!

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Is this the time when I actually have to care about Bitcoin? “After a couple of big crashes that destroyed billions in value, the digital currency has rebounded to its highest value since January 2018, crossing $19,000. The cause: a flurry of developments that suggest Bitcoin has taken some big steps toward going mainstream. In October, global payments giant PayPal Holdings started permitting its customers to buy and sell Bitcoin and other cryptocurrencies from their accounts. A number of tech companies, including payments player Square, have begun holding portions of their cash reserves in Bitcoin. And in August, Fidelity Investments, the asset management firm with $3.3 trillion in assets, announced the launch of its first Bitcoin mutual fund.”

  • “Still, Bitcoin and other cryptocurrencies have rallied and fallen many times before. The volatile instruments remain largely unregulated assets subject to the whims of a fickle market.” READ MORE

Apple co-founder Steve Wozniak has launched a crypto company called Efforce—“a blockchain-based ‘energy efficiency market’ for crowdfunding eco-friendly business projects. The launch came with the listing of a digital token, WOZX, and Efforce says investors drove the token to a $950 million market cap ‘in the first 13 minutes’ of its listing. The company had already raised $80 million in funding from private investors before its token sale. The token is up another 5 percent on Monday. And the company hasn’t done anything yet.” READ MORE


Retail in Center City Philadelphia is being decimated: “Retailers are drying up because the 275,000 people who used to arrive every work day on SEPTA and PATCO trains aren’t showing up. Neither are most of the 1.2 million annual convention attendees, the 3.5 million annual occupants of hotel rooms, the millions of domestic tourists, and the 1.2 million international visitors. In the wake of the pandemic, Center City office towers were only 20 percent occupied in November, according to the JLL report. The report concluded that retail demand dropped by more than $1 billion after office workers were sent home to work remotely.” READ MORE


Austin has become a magnet for those fleeing San Francisco and New York: “Business relocations to Austin announced this year are expected to create nearly 10,000 jobs. That is the city’s highest figure on record for a single year, according to the Austin Chamber of Commerce, and is helping offset the hit from Covid-19 to the city’s tourist-dependent restaurants, bars and music venues. It helps that Texas has no state income tax, that Austin winters are relatively short and mild, and that social distancing is easier in a city where homes tend to be roomy and many have backyards. Austin has also managed to remain cheaper than San Francisco, Brooklyn and Manhattan by building tens of thousands of apartments over the past decade.”

  • “‘It’s just a whole lot easier to hire. It’s a lot easier to get housing. It’s a lot easier to get business licenses than it is in other places,’ said Greg Schwartz, chief executive of real-estate startup Tomo Networks.”

  • “His company, based in Stamford, Conn., is preparing to open a co-headquarters in Austin.’” READ MORE