These Days, Investors Pitch Startups
The amount of money chasing tech startups has gotten a little crazy.
Good morning!
Here are today’s highlights:
Landlords are showering tenants with tens of millions of dollars and months of free rent.
What’s the most important factor when businesses choose accounting software?
America’s Chinatowns are dying.
Here’s how one NFT entrepreneur is unsettling the art world.
FINANCE
The amount of money chasing tech startups has gotten a little crazy: “It’s so crazy that more than 900 tech start-ups are each worth more than $1 billion. In 2015, 80 seemed like a lot. It’s so crazy that hot start-ups no longer have to pitch investors for money. The investors are the ones pitching them. It’s so crazy that founders can start raising money on a Friday afternoon and have a deal closed by Sunday night. It’s so crazy that even sports metaphors fall short. ‘It’s not like one jump ball — it’s 10,000 jump balls at once,’ said Roy Bahat, an investor with Bloomberg Beta, the start-up investment arm of Bloomberg. ‘You don’t even know which way to look, it’s all just wild.’ He now carves out two hours a day for whatever ‘emergency deal of the day’ pops up.”
“The activity has crossed into even frothier territory in recent months, as tech start-ups offering food delivery, remote-work software and telehealth services realized that they not only would survive the pandemic but were in higher demand than ever.”
“The result is a booming ecosystem of highly valued, cash-rich start-ups in Silicon Valley and beyond that are expanding at breakneck speed and trying to unseat stalwart companies in all kinds of fields.”
“Over a few days this month, three private start-ups hit eye-popping valuations: Miro, a digital whiteboard company, was valued at $17.75 billion; Checkout.com, a payments company, was valued at $40 billion; and OpenSea, a 90-person start-up that lets people buy and sell nonfungible tokens, known as NFTs, was valued at $13.3 billion.” READ MORE
POLICY
After the Supreme Court blocked the vax-and-test mandate, businesses have had to make their own policy decisions: “The issue bubbled up so much among employees at Carhartt, the Michigan-based workwear and other clothing company, that CEO Mark Valade emailed workers a day after the Supreme Court ruling to provide some clarity: Vaccination remained mandatory. ‘We put workplace safety at the very top of our priority list and the Supreme Court’s recent ruling doesn’t impact that core value,’ Valade wrote Friday, according to a copy of the email published to social media. ‘We, and the medical community, continue to believe vaccines are necessary to ensure a safe working environment for every associate and even perhaps their households.’”
“Valade, who noted how the private company was not changing the mandatory vaccination policy that would result in termination for employees who don’t comply, added: ‘An unvaccinated workforce is both a people and business risk that our company is unwilling to take.’”
“While the email has been celebrated by Carhartt fans supportive of its health and safety measures, some conservatives and anti-vaccine pundits have targeted the company on social media in what appears to be the latest attempt to shame and boycott a company over its mandatory coronavirus vaccination policy for employees.”
“The company has also faced protests from employees opposed to the vaccination policy in recent months.” READ MORE
HUMAN RESOURCES
To attract workers, larger companies are offering better 401(k) terms: “About 16 percent of large and midsize employers plan to raise their 401(k) contributions or reinstate a previously suspended match in 2022, while another 8 percent said they are considering such a move, according to preliminary results of a survey of about 100 companies conducted last fall by investment-consulting firm Callan LLC. The combined total is up from about 12 percent that took similar action in 2021.”
“Those taking action are typically boosting their match by 1 percent to 2 percent annually or are making one-time contributions on top of the match, Mr. Stinnett said.”
“Others are allowing new hires to participate in the 401(k) plan immediately, rather than after a waiting period, or are reducing the time an employee must work before taking ownership of the employer’s contributions on their behalf, he added.” READ MORE
ACCOUNTING
Thinking about getting a new accounting system? Gene Marks emphasizes picking a company that will grow with you—so you don’t have to go through this again: “Very small businesses can get away with simple invoicing applications like Invoice2Go, Square and PayPal. Smaller businesses can be perfectly happy with the mainstream, horizontal applications that are popular on the market like QuickBooks, Xero, Zoho Books, FreshBooks and Wave to handle most of their operations. But as your company grows you’ll need something more scalable like Sage, Microsoft Dynamics, SAP Business One or NetSuite. And, depending on the type of business you run, you may want something more industry-specific like Procore and Vista for construction, Epicor and SYSPRO for manufacturing, or Revel and Toast for retail and restaurants.”
“In 2022, accounting software applications are pretty mature and most are cloud-based. They’re constantly comparing themselves and upgrading their products to stay competitive. So although features are important, they’re not as important as the long term viability of the company providing the software.”
“Dig into their financials. Get referrals. Take a day and go to their user conference so you can meet other customers and tech people from the company. Evaluate their partners and the products they offer. Ask about their future goals and plans. Determine if the product will grow with you.” READ MORE
OFFICE SPACE
Offices are leased up—thanks to all of the giveaways: “Landlords are showering tenants with tens of millions of dollars and months of free rent. They are paying moving expenses and for customized alterations. In exchange for this largess, building owners are able to charge inflated rents that amount to much less than their face value suggests when all the giveaways are factored in. Nowhere is this more apparent than in Manhattan’s new trophy buildings. The average cash payment to tenants for the borough’s most expensive leases more than doubled over the past five years, from $76 a square foot in 2016 to $154 in 2021, according to real-estate services firm CBRE Group.”
“As a consequence, the amount of money landlords collected on these leases fell 7.7 percent. But high-end Manhattan office rents officially gained 1.6 percent on paper, CBRE found.”
“‘Face rents have not changed since the pandemic, but that’s not the story,’ said Jeffrey Peck, vice chairman at real-estate brokerage Savills. ‘The story is the fact that landlords are now receiving 20 percent less than what they had been receiving prior to the pandemic.’” READ MORE
STARTUPS
Walnut helps companies create product demos with no coding required: “Walnut pitches itself as a ‘sales and marketing demo experience platform,’ which basically means that it helps people create interactive product demos with zero coding required. Using Walnut’s Chrome browser extension, a sales team, for example, can create tailored demos that highlight specific features of an application that are relevant to one company, and create an entirely different demo on the fly for another customer. They can also add annotations to ensure that their prospects can follow and understand what’s happening in the demo.”
“At the center of the Walnut platform is analytics, which gives Walnut customers usage data that can help them optimize their demos for current and future prospects — this includes data points such as the number of times a demo was played and by whom; who the best-performing sales rep was; and what the best-performing demo template was.”
“In its short tenure so far, Walnut has managed to attract a fairly impressive roster of clients, including big-name enterprises such as Dell, Adobe, and NetApp.” READ MORE
SUSTAINABILITY
Amazon is desperate to find more electric vans: “In the fall, Jeff Bezos tweeted praise for Rivian, a start-up under contract to make 100,000 electric delivery vans for Amazon, and its founder, R.J. Scaringe, calling him ‘one of the greatest entrepreneurs I’ve ever met.’ Then, Mr. Bezos worked in a jab: ‘Now, RJ, where are our vans?!’ The comment may have been in jest, but the problem he raised is a serious one. Amazon has an insatiable appetite for electric vans, thanks to a ballooning logistics operation and a pledge that half of its deliveries will be carbon-neutral by 2030. But that hunger is running into the reality that the auto industry barely produces any of the vehicles yet.”
“Amazon expected to have roughly 175,000 of its vans on the road by the end of 2021, according to an internal document from late 2020, nearly all of which burned fossil fuels.”
“Amazon is several years — and tens of billions of dollars — into a huge push to deliver packages, shifting away from relying on large carriers like UPS.” READ MORE
LOCATION, LOCATION, LOCATION
America’s Chinatowns are struggling to survive: “If it seems impossible to imagine the death of such an established and historic community, one need only look to D.C.’s Chinatown, founded in the 19th century and which, just 30 years ago, catered to a significant resident Asian population with large grocery stores, shops, and dozens of traditional restaurants. Today, the community is a shadow of its former self, populated with chain restaurants and stores, while just a handful of Chinese restaurants remain, along with far fewer Asian American residents.”
“Lisa Mao, director of the 2021 documentary, ‘A Tale of Three Chinatowns,’ refers to it as a ‘dead Chinatown.’”
“‘The immigrant experience is fraught with challenges,’ Mao says, ‘and these were segregated communities where people were forced to live, in what were considered less desirable areas. But once that area becomes popular, it can be hard to hold on against developers.’”
“New York Chinatown’s Zip code, which it now shares with trendy SoHo and Tribeca, has created real problems for Asian American business owners. The 10013 Zip code is considered to be a high-income neighborhood, preventing struggling restaurants from qualifying for targeted economic injury disaster loans through the Small Business Administration, while other pandemic relief programs seem to benefit national companies.”
“‘These businesses are like your grandparents. They’ve always been there and you’ve taken them for granted. Now they need your love and attention.’” READ MORE
BLOCKCHAIN
An NFT entrepreneur unsettles the art world: “This past October, Erick Calderon stood in front of a crowd in Marfa, the West Texas town beloved by artists, and attempted to explain, in a public town-hall meeting, his new venture: a gallery showcasing NFT art. The Marfa gallery is the physical embodiment of Art Blocks, a virtual platform for NFTs that Calderon launched a year ago. Since then, the platform has generated more than a hundred million dollars in sales of digital art. Behind Calderon, a slide show flashed a picture of one of his own algorithmically generated art works, a rainbow-hued scribble known as the Chromie Squiggle, which he had released in an edition of ten thousand.”
“There’s a Chromie Squiggle that sold—and I just kind of laugh, because I think it’s completely insane—that sold from one collector to another three weeks ago for $3.2 million,’ Calderon said.”
“In the past handful of months, both Christie’s and Sotheby’s have auctioned Chromie Squiggles, calling the work ‘legendary’ and ‘iconic,’ and crediting it with ‘bringing conceptual art back to the art market.’”
“Unlike on other NFT platforms, artists can’t list a jpeg file or a video on Art Blocks. Instead, they write code determining a certain set of parameters and variables. Buyers purchase the opportunity to run the algorithm, thereby minting a piece of digital art.” READ MORE
THE 21 HATS PODCAST
I Want to Double Sales This Year: This week, we introduce another new member of the 21 Hats Podcast team, Liz Picarazzi, who talks Shawn Busse and Paul Downs through a series of challenges she’s faced at her business, Citibin. Among those challenges: why she outsourced her manufacturing to China, why she’s trying to bring it back, why she’s struggling to find an American fabricator that wants her business, why she thinks she wasted all of the money she spent last year on digital marketing, how she managed to double sales anyway, and where she found the right person to handle the aspects of running Citibin that she doesn’t think she’s good at.
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