Startup Stash - The Mess, The Want, And The Game 🎱

Two weeks ago, we wrote about Artifact, the “TikTok for news” startup that shut down just a year after launching. Another news startup with a similar product followed suit last week.

In May 2023, the Messenger launched in secret, with a small team of 35 people. It aimed to become the next big media venture. To that end, founder Finkelstein managed to raise $50M in funding. But sadly, the company could even make it to their first anniversary. It shut down after just 8 months in operation, marking it as one of the most significant media flops in the last decade. 

Finkelstein sent a shocking email last week to his 300 employees, informing them about the closure. In the email, he states “inability to raise sufficient capital to reach profitability” and the “economic headwinds” as reasons for the company’s failure.

So what went wrong? 

Their decision of quick expansion over sustainably proved fatal. During its 8-month existence, it spent $38 million to hire over 300 people in just a few months and rent office spaces in Washington, Florida, and New York, totalling over $8 million in expenses. 

But they generated very little revenue —only $3 million in 8 months (that’s only 8% of what they spent). The decline of third party cookies has come with a decrease in advertising spending. For this reason, many news companies have built a subscription model on top of their advertising revenue. But the Messenger’s folly was that it wanted to stay without any paywall.

More trouble

The day following its closure, Messenger received a class action lawsuit from its former employees, who had not received severance packages. In the lawsuit, Finkelstein is accused of violating the Worker Adjustment and Retraining Notification (WARN) Act, which requires companies with 100 or more employees to provide their employees with a 60-day advance notice of termination.

Americans wagered $106B+ on sports between January and November 2023. But that’s not the sad news. This is: Even though the minimum age to bet is 21, more underage Americans are making wagers through unregulated apps. Disturbing statistics show that one in ten college students is a pathological gambler, a much higher rate than the 2%-5% observed in the general population. And since there are no restrictions to download apps, it’s hard for states to control underage gambling, per The Washington Post.

This doesn’t mean governments aren’t doing anything. Some states have taken action against such practices. For instance, Big Fish Games had to pay $155 million for violating Washington state law, Underdog Fantasy faced a $392,000 fine in Maine for unlicensed sports betting, and PredictionStrike received a cease-and-desist order from Michigan.

But that’s not enough. Today, sports betting is legal in 38 states, with the remaining states on the verge of following suit. And the popularity of betting apps has been soaring so fast, that not even governments can revise their laws fast enough to counter the ill-effects. 

Case in point: eight of the top 10 App Store sports apps are centered around gambling.

• PrizePicks is Apple’s most downloaded free sports app.
• Sports betting app Fliff saw 101% YoY growth with 1.4m downloads in 2023.

And this is not a fluke. TV ad spend for betting sites hit $305m between January and November 2023, up from $197m total in 2021. The US market now accounts for 43% of the industry's business. The industry as a whole has grown more than 5x to ~$8 billion in just 3 years.

Founder and ex-CEO of WeWork, Adam Neumann, has been persistently trying to buyback his former company. He wants to improve its financial standing following its bankruptcy filing in November last year. Despite having been ousted from the company over four years ago, Neumann remains confident in his ability to lead the struggling shared office space business in a second term at the helm.

However, WeWork holds a different perspective on the matter. The company has consistently refused to participate in discussions about the potential buyback. The dismissal of Neumman comes despite the fact that WeWork’s profits aren’t going anywhere good. According to the company’s spokespeople, they receive “offers to buy” from external parties on a regular basis.

⛏️ Mining w/ AI - KoBold - a mining startup back by Bezos - found a large copper mine using AI. 

📵 Legally Logged Off - Australia's Senate passed a bill last week giving workers the legal right to ignore messages from their employers outside official working hours. 

🎧 Music? Take my Money - Spotify raised prices and still hit a record for new subscribers - adding record 31 million paying subscribers last year.

🥊 The battle Intensifies - Elon Musk is funding fired Star Wars' actress, Gina Carano's lawsuit against Disney, escalating their conflict further...
...And in a post on X, Musk made the offer to anyone who wants to sue Disney (or its subsidiaries). 

🍅 A Rotten Tax - A Florida trade group has proposed a 21% “tomato tax” on imports that would benefit the farmers and conglomerates, but send prices soaring.