Tech Pique (29 April)

Elon Musk has received approval to acquire Twitter…

…and he secured the financing to do so. I took a break from writing about this story last week but how can I not this week. Musk has secured debt and a margin loan to assist in taking Twitter private. The margin loan is against Musk’s shares in Tesla so this is a more than a bit of a big deal for him personally (although the risk of him receiving a margin call is low as outlined here) – this is not a joke as some thought it was when Musk initially made the bid. We’ve seen a few narratives emerge about the transaction and the future of Twitter since the board accepted the offer:

1.     Musk is vehemently pro unfettered free speech and critics are concerned this will provide a platform for radicals. As I wrote in this blog two weeks ago it remains to be seen where Musk draws the line regarding free speech as there must be one. I understand his desire to allow people like Donald Trump back on to the platform but would he allow terrorist organisations a platform to communicate their ideas? I would hope not. The key immediate test will be how Twitter post Musk handles the Russia-Ukraine conflict as the PR machines of both sides are keeping busy. Speaking of machines, the one thing everyone seems to agree on is Musk’s take down of bots on Twitter – this will surely force other platforms, e.g. Facebook and Instagram, to follow suit.

2.     Beyond high level changes, can Musk make a difference at Twitter and how much of his time will he devote to the platform. He is currently CEO of Tesla and SpaceX, founder of the Boring Company and co-founder of Neuralink and OpenAI. Despite this, he seems to spend a lot of time on Twitter. Musk has a mixed reputation as a leader (more here) – he’s clearly one of the pre-eminent entrepreneurs and thinkers of our time but on multiple occasions its been noted he’s not the easiest to work with. It will be interesting to see whether the current management team, including CEO Parag Agrawal, stick around and how this affects Musk’s ability to implement change at Twitter.

3.     It’s long been noted that Twitter has underperformed peers, both in terms of active users as well as monetisation of those users. Advertising is not the long-term solution and many have touted a progressive subscription model, one in which those with a bigger platform pay a higher price. My not so bold prediction is that subscription won’t be the first change implemented -Musk has openly said he doesn’t “care at all about the economics” - but is likely 1-2 years away.

4.     Should a billionaire own a media company? The inherent answer being “no” when people ask the question. I don’t see an issue. As Time notes “There is nothing new about someone with great wealth buying a media platform. A look through the past decades suggests that free speech is often enabled by wealthy patrons.” (More here).

5.     The question I haven’t seen asked is “what is Musk’s end game?” Maybe because its too soon to ask but I believe people like Musk always have an endgame in mind. Musk has sold companies previously (Zip2 to Compaq in 1999 and X.com to Confinity in 2000) but it doesn’t feel as though he needs to, or wants to, sell any of his other big plays (noting that Tesla is publicly listed and he owns c.17%). Is Musk preparing a turnaround of Twitter and will he then re-list it on the stock exchange once he’s “fixed it”. I think so. He is a fan of decentralisation, and I don’t think he intends to hold on to Twitter for as long as his other assets.

LVLY sold for $35m

The flower delivery service which was founded in 2015 was acquired by Limitless Technology. The co-founders will walk away with c.$20m in aggregate. A few thoughts:

1.     A great example of execution winning the day. Most companies have peers in market at launch and LVLY is no exception; there is no shortage of florists and flower delivery companies in Australia. However, the founders saw an opportunity to create a differentiated brand and executed well to attract an acquirer.

2.     This is not a venture-backable business and did not receive VC funding as far I am aware. However, there are many such business, which if executed well, can lead to a great windfall for the founders. In my experience there is a lack of funding available to such founders and I think this is a problem in the Australian market. The early-stage funding ecosystem is maturing, and we have seen the emergence of venture debt and revenue-based funding over the last two years. However, these forms of credit are not for every business, and I expect the credit options for early-stage founders will expand over the next few years through non-bank lenders.

3.     We’ve seen interest in the local tech and early-stage ecosystem from US VCs increase over the last couple of years and don’t be surprised if we see more south-east Asian VCs and tech companies take a greater interest in Australian companies. As an example, Singapore-based Wavemaker Partners, one of the more established south-east Asian based VCs, recently made an investment in local edtech Language Confidence.

More on the story here.

Rario announces $120m funding round

Love them or hate them, NFTs are here to stay. And there are obvious use cases. When I first learned about NFTs the analogy to Pokémon trading cards was made – rather than owning a physical card (of which there are multiple copies), own a digital card and there can be multiple owners. Rario is a marketplace for cricket trading cards where you own player cards or cards that represent an event in time. Rario recently signed an exclusive deal with Cricket Australia and the Australian Cricketers’ Association to create an Australian cricket metaverse of collectibles. However, the funding and the growth story here is all about cricket-mad India. Rario will get access to investor Dream Sport’s 140 million users in India. The cards on the platform range from $4 to $5,000 and it may be a good time to start a collection…more here.

Tweet of the week