A failed acquisition usually triggers the same series of questions: What does this mean for early-stage startups in the sector? Will a chilling effect occur and hurt valuations? Will VCs stop funding this category? How will the exit environment look going forward?
This week gave that narrative a bullish twist. Visa and Plaid announced that they have reached a mutual agreement to no longer pursue a merger. The $5.3 billion deal had been under antitrust scrutiny from the DOJ, and eventually ended amid these regulatory challenges.
Fintech VCs and startups alike reacted to the fallen deal with aggressive optimism about Plaid’s future as an independently-owned fintech startup.
The most common arguments?
- Plaid’s price in this current moment is far beyond $5.3 billion, so now that it is a free bird it will pursue a much larger exit
- Plaid will go public through SPAC because it is in charge of its own destiny.
- And my favorite: One day, Plaid will buy Visa.
The fact that fintech is bullish on the future of fintech isn’t quite surprising. I will say that while one deal can never make or break a sector, a flopped merger certainly can surface the current temperature in the market. Startups Weekly readers will remember last week’s edition about how P&G’s decision not to acquire Billie could hurt DTC exit opportunities. Fintech seems unbothered and, in fact, celebratory. The only counterargument I got, via Twitter DM, is that it could set a bad precedent on big fintech mergers.
“Or maybe…corporations learn from this and look to make riskier acquisitions earlier in a company’s lifecycle because they know that if they let the company get too big they’ll lose the chance,” Rami Essaid, founder of Finmark, told me.
Only in 2021 could a $5.3 billion break-up and a DOJ investigation be considered a blessing. Rock on, ‘Plaid for X’ startups.
Columbus is the new Miami which is new the San Francisco
I hope that sub-hed gave you a headache, because that’s exactly what debates about where the best place to start a company do to me. The rise of Work From Anywhere has emboldened VCs to leave San Francisco for markets such as Miami or Austin in search of the next unsung hero of their portfolios.
For investors, though, the financial benefit of moving to an emerging market might not be apparent within months, but instead years. Venture is a long game (at least most of the time).
Here’s what to know, per Silicon Valley editor Connie Loizos: Drive Capital, a venture capital firm based in Columbus, Ohio, and started by two ex-Sequoia investors now has over $1.2 billion in assets. But before it had breakout companies like Root and Olive AI, Drive had to play the unusual role of investing in a region without key investing infrastructure.
Etc: Founding partner Chris Olsen explained how they set up their roots:
“We’ve had to spend a lot of time going into the universities and putting new seed managers in business and helping them fundraise and sort of building all of this infrastructure from scratch so that the next entrepreneur is out here [versus moves away], and it works. In our first year, we had inbound interest from 1,800 [startups], then it went to about 3,000 and now it’s up to about 7,000, which is more than I’ve heard any other venture firms say that they see in California. And I don’t think it’s because we’re great. I think that’s more [a reflection of the] scale of the opportunity that’s here now. One of the things that we would love to see more of is more venture capitalists coming here, because there’s certainly more opportunity than we can invest in.”
The CFO Tech Stack
If you want to start a company, go to a startup and look where employees are still using an Excel sheet. The best products are the ones fueled by frustrations, right?
Here’s what to know per managing editor Danny Crichton: For a trio of Palantir alums, 15 collective years at the now-public government tech company showed a huge gap in technology for CFOs. So, they started Mosaic, a techstack to help financial officers better communicate and perform their jobs.
Etc: Co-founder Bijan Moallemi describes the mistake other platforms are making:
“Everyone wants to be strategic, but it’s so tough to do because 80% of your time is pulling data from these disparate systems, cleaning it, mapping it, updating your Excel files, and maybe 20% of [your time] is actually taking a step back and understanding what the data is telling you.”
The future of consumer hardware startups beyond Peloton
Are wearables still exciting? Is consumer hardware ever going to get easier to pull off? What was the strategy that made Peloton so successful?
These questions and more are answered in the latest consumer hardware-focused Extra Crunch Survey, which brings together VCs from SOSV, Lux Capital, Shasta Ventures, and more.
Here’s what to know: Everyone is studying the Peloton success recipe. But the big question for consumer hardware startups is if the at-home fitness market’s boom is translating to other use cases.
Etc: Cyril Ebersweiler of SOSV noted that supply chain distribution disruption during COVID-19 has been difficult for category startups, but the need for innovative solutions has never been more clear.
“Everybody is waiting for new and mind-blowing experiences, and I guess we’ve all experienced the shortcomings or the magic of some IoT products over the shelter-in-place [orders]. Spatial and ambient technologies that work well will be in demand (audio or visual), while “holographic Skype” will invade households thanks to Looking Glass.”
Also: In another investor survey, five VCs weighed in on the future of cannabis in 2021.
Pop goes the public market
We had yet another noisy week of privately-held startups going public to a Very Warm Wall Street reception. The most opulent story of the week was definitely Affirm’s debut, which doubled its already-increased price when it started to officially trade.
Here’s what to know, per our resident IPO reporter Alex Wilhelm, who writes The Exchange:
Extra Crunch Live is returning in a big way in 2021. We’ll be interviewing VC/founder duos about how their Series A deals went down, and Extra Crunch members will have the chance to get live feedback on their pitch deck. You can check out our plans for ECL in 2021 right here, or hit up this form to submit your pitch deck. Episodes air every Wednesday at 3pm ET/12pm PT starting in February.
And if you’re feeling extra generous, take this survey to help shape the future of TechCrunch
Across the week
Seen on TechCrunch
Seen on Extra Crunch
Equity (and a bonus Equity)
The news keeps coming so we keep recording. This week, the trio chatted about the Plaid-Visa deal, but also about the Palantir mafia‘s next big bet. In early-stage news, I covered a fintech accelerator that pivoted into an edtech accelerator and a new startup coming out of Austin that makes car insurance more equitable. We also debated SPACs for a bit, and Danny was…optimistic?
Listen to our episode, follow the pod on Twitter, and if you so please, tune into our bonus Equity episode that just came out today. It’s an episode dedicated entirely to the barrage of payments and e-commerce funding that came out this week.
Until next week,