Tech Pique (22 April)
State of Venture Funding Q1 2022
CBInsights released its State of Venture report for Q1 2022, highlighting US$149bn total investment into startups globally down 19% compared to Q4 2021, which was an all-time record quarter. This headline is not surprising. We’ve witnessed a rotation away from tech (and growth) stocks in public markets since late 2021 which has accelerated in Q1 as fears of rising inflation and interest rates drive investors to defensive equities. Tangentially, we’ve seen a 45% quarter-on-quarter decrease in public exits all but confirming the IPO / SPAC window is effectively shut. However, and this is not covered in the report, there is still a c.$300bn in dry powder in the VC ecosystem globally. VCs aren’t going to give this money back and so will continue to make investments – likely at more reasonable valuations (relative to historical average). It’s still a great time to start a tech company. More here.
Masters of Scale – Lessons from an Entrepreneur in the Ukraine (Alyona Mysko)
Not an article but a great podcast episode with Alyona Mysko, co-founder of Fuelfinance in the Ukraine. There is much to admire about Alyona’s work ethic, hustle and compassion (which no doubt is mirrored by other Ukrainian start-up founders and employees). There is also a lot to like about her team management – having a plan, staying positive, setting an example and using her position to positively influence and help others. This is a must listen for early-stage founders. The podcast can be found here.
Netflix losses 200k subscribers in Q1
Netflix reported Q1 earnings during the week, noting that it had lost 200,000 subscribers during the quarter. It’s share price was down 25% following the announcement. The headline loss of 200,000 subscribers masks the fact that Netflix ceased operations in Russia and lost 700,000 subscribers as a result. The bigger worry for investors seems to be the fact that Netflix is going to crack down on password sharing, especially considering growing competition. Netflix has 222 million paying households and estimates a further 100 million households are viewing the service for free. Netflix has already innovated once, moving into content production rather than just distribution and so it will be interesting to see how it moves forward in light of increasing competition. Ads have been discussed for lower tier accounts but that’s probably not innovative enough in the long term. It’s time for another step change in the business. A few ideas:
1. Become a more holistic entertainment company (like Disney)
2. Create shorter form content - TikTok users spend on average nearly 26 hours a month on the app (vs. 23.7 hours average each month on YouTube’s mobile app in 2021)
3. Bring affordable XR to households
More here.
Perth fitness startup Vitruvian raises $20 million in Series A
3 key takeaways:
1. There is a small but growing tech ecosystem in Perth (and not all of these companies need to backdoor list into an ex-mining company shell).
2. Like last week’s EQL raise, great to see an Australian company launched relatively recently, gain product-market fit and then raise a proper Series A growth round to tackle a large global market.
3. Peloton’s share price has decreased about 80% in the last year as investors question growth following the end of the pandemic. Yes, Peloton is now a US$7bn+ mature company and the growth baked into the share price in 2021 was likely unrealistic but one can’t help drawing the comparison.
More here.
Rampersand raises $40m Fund
It’s certainly not the biggest fund in the Australian ecosystem but it’s important for proven VC managers to continue raising funds to help Australian companies at the early stage. Often a large fund can limit the type of investments a VC can make at early stage because they need to invest large (>$2m) cheques for them to be meaningful in the context of the portfolio. There aren’t many businesses in Australia that need this amount of money at an early stage to prove product-market fit. Equally we have seen larger managers deploy smaller cheques but not be as active (which makes sense) at an early stage (some call this “cap table squatting”). Having co-invested with Paul and the team on a few occasions, I can attest to them being hands-on investors who add significant value to their portfolio companies. More here.