Ironies of Seeds, American CEOs & Web3 🌾

Two, larger investors (not VCs, mostly HNIs or upper-middle class investors) are investing in younger startups that they believe in. These investors have lower returns expectations from the startups than venture capitalists. For venture capitalists who are targeting, say, a 30% internal rate of return (IRR), some young startups with low revenues might not be attractive enough at the deals they’re demanding. But large investors with 15% to 18% IRR expectations can afford that.

The sharpest declines in revenue per stage are at seed and Series B, as per data by CB insights. This also tells us that companies are expanding their capital value through Series A with less progress in hand than in prior years. 

In all, startups are getting paid better, faster for less work than before. It’s a great time to raise, but a pretty awful time for venture capitalists trained in an era when they got more equity for their dollar.

Thanks to last year’s trading and investing boom (and SPAC mergers), several companies went public on the back of a global trend. But as the sheen of SPACS faded, most of these companies’ shares went in free fall. 

One such example of this is the famed meme stock - Robinhood.

Last week, Robinhood’s stock dropped to as low as $10.85 per share, 71.5% off its IPO price and 87.2% off its all-time highs.

Reason: Its 2021 Q4 results.

Clearly, despite all the money coming in from sub-reddit investors, the company isn’t doing well. Let’s understand this further. 

Robinhood’s Business = Monthly Active Users X Average Revenue Per User. (Graph 1: Active Users. Graph 2: Average Revenue)

So for the company to grow, either or both of these factors need to increase. Which is what happened in the first two quarters of 2021. The company managed to effectively double its monthly users in Q1 and Q2, only to see the numbers in Q3 and Q4 go down.

Now to make up for this downturn, Robinhood would need to have pretty darn amazing revenue results. If average revenue rose sharply in Q3 and Q4, the company could manage growth.

Did that happen? No.

Robinhood has seen its user activity fall, as well as the value of users. And so its share price has taken on the same the mood.

What will the next generation of companies - that come out of crypto space - look like? 

Answer: Unafraid. 

The ever-changing crypto rules, bans and taxes across different countries haven’t been much of a deterrent. 

According to Bloomberg's analytics, entrepreneurs are building projects with a longer timeframe, where they’re not much concerned about the volatility or the liquidity of the crypto market. They’re building across the crypto ecosystem right now i.e. in Web3, gaming, blockchain, and even nascent fields like IoT and healthcare. 

There are a lot of ideas on how to use smart contracts and peer-to-peer transactions in a trust-less format, where you don’t have a middle-man and so your data is more secure, especially in the fields of life-sciences and health-care.

• Massive adoption of collaboration tools coupled with increased investments in IT infrastructure and cybersecurity.
• Offices canceled their leases and instead started working from distributed co-working spaces for the foreseeable future. All work is in the cloud.
• Mandatory extended vacation time incorporated into HR policies borne out of concerns of terrible work-life balance. 

While only 40% of the CEOs ranked "supply chain" as a priority, the majority see 2021’s supply chain challenges continuing into 2022, with 92% of respondents saying it would have some impact on their business.

While majority ranked climate change as the number one concern, when broken out by region, the story changes slightly.

In the Americas, “climate change” dropped to number three. Instead, “healthcare” and "income inequality" were more pressing concerns, proving that America has workforce rather than global warming at the centre stage. 

In the EMEA and APAC though, global concerns are at the top of the list with the overwhelming majority ranking "climate change" and "healthcare" at number one.