#the silicon valley business model is capitalism at its worst

[forever-stuck-on-java-8]

Google killed another thing...

As I went to renew my website domain registration tonight since I got the email that it expires in a month, I learned that Google sold their domain business to SquareSpace back in September. I moved my registration to CloudFlare instead.

I guess Google will kill literally any service that doesn't make infinity dollars.

[evanvanness]

Your city's Silicon ________ is not going anywhere

Nearly every city in the US has a startup scene that aspires to be "the next Silicon Valley."

If I had a nickel for the times I've heard, "we just lack VCs who will invest in outside the box founders. All we need is a little capital."

At its worst, this mindset leads to state/local governments giving money to some VC which is pure grift/corruption.

Even at its best, it's a dumb and counterproductive take because it leads to startup scenes focusing on capital rather than finding customers and users.

What makes the Bay Area the premier startup scene has little to do with capital. Sure, there are lots of folks who can write you an angel check, but you can find idiots with capital all over the globe if you work hard enough. Heck, the oil and gas industry (which pre-fracking had a business model similar to venture capital) used to have a joke about how the industry was financed by dumb doctors and dentists.

Put differently, what does the Bay Area have that makes it unique?

There's one thing no other startup scene can replicate: the Bay has a culture of trying new tech apps.

It probably has something to do with decades of hippies moving to the area who are willing to try anything once (or more), but it's also been reinforced by years of people moving there who are choosing to opt-in the tech's "try anything" mindset and FOMO of being left behind if you don't.

SF/the Valley/East Bay have this more than any other place in the US for tech. Of course, if you're starting something in oil and gas, then you'll find your customers in Texas, just like if you're doing media or fashion then you go to NY/LA.

I'm all for local startup scenes, just please stop calling yourselves "Silicon ______" and start leaning into what makes your local scene great.

[newstfionline]

Saturday, August 21, 2021

Landlords look for an exit amid federal eviction moratorium (AP) When Ryan David bought three rental properties back in 2017, he expected the $1,000-a-month he was pocketing after expenses would be regular sources of income well into his retirement years. But then the pandemic hit and federal and state authorities imposed moratoriums on evictions. The unpaid rent began to mount. Then, just when he thought the worst was over, the Centers for Disease Control and Prevention announced a new moratorium, lasting until Oct. 3. David, the father of a 2 1/2-year-old who is expecting another child, fears the $2,000 he’s owed in back rent will quickly climb to thousands more. The latest moratorium “was the final gut punch,” said the 39-year-old, adding that he now plans to sell the apartments. Most evictions for unpaid rent have been halted since the early days of the pandemic and there are now more than 15 million people living in households that owe as much as $20 billion in back rent, according to the Aspen Institute. A majority of single-family rental home owners have been impacted, according to a survey from the National Rental Home Council, and 50% say they have tenants who have missed rent during the pandemic. Landlords, big and small, are most angry about the moratoriums, which they consider illegal. Many believe some tenants could have paid rent, if not for the moratorium. And the $47 billion in federal rental assistance that was supposed to make landlords whole has been slow to materialize. By July, only $3 billion of the first tranche of $25 billion had been distributed.

Student loans (WSJ) The Biden administration announced it will wipe out $5.8 billion in student loans held by 323,000 people who are permanently disabled. This means the Education Department will discharge loans for borrowers with total and permanent disabilities per Social Security Administration records. Currently there is $1.6 trillion held in student loan debt, much of which could be eliminated through executive action.

New England preps for 1st hurricane in 30 years with Henri (AP) New Englanders bracing for their first direct hit by a hurricane in 30 years began hauling boats out of the water and taking other precautions Friday as Tropical Storm Henri barreled toward the Northeast coast. Henri was expected to intensify into a hurricane by Saturday, the U.S. National Hurricane Center said. Impacts could be felt in New England states by Sunday, including on Cape Cod, which is teeming with tens of thousands of summer tourists. “This storm is extremely worrisome,” said Michael Finkelstein, police chief and emergency management director in East Lyme, Connecticut. “We haven’t been down this road in quite a while and there’s no doubt that we and the rest of New England would have some real difficulties with a direct hit from a hurricane.”

Booming Colo. town asks, ‘Where will water come from?’ (AP) “Go West, young man,″ Horace Greeley famously urged. The problem for the northern Colorado town that bears the 19th-century newspaper editor’s name: Too many people have heeded his advice. By the tens of thousands newcomers have been streaming into Greeley—so much so that the city and surrounding Weld County grew by more than 30% from 2010 to 2020, according to the U.S. Census Bureau, making it one of the fastest-growing regions in the country. And it’s not just Greeley. Figures released this month show that population growth continues unabated in the South and West, even as temperatures rise and droughts become more common. That in turn has set off a scramble of growing intensity in places like Greeley to find water for the current population, let alone those expected to arrive in coming years. “Everybody looks at the population growth and says, ‘Where is the water going to come from?’” [one local professor] said.

Everything’s Getting Bigger In Texas (AP, CNBC, Forbes) Texas has long been a popular destination for newcomers, thanks to cheaper land and housing, more job opportunities, lower taxes, and fewer regulations. There’s also the great weather, food, schools, and medical facilities, the abundant resources and year-round recreation and outdoor activities, artistic and cultural events, fairs, festivals, music venues, and the diverse and friendly people—you know, just to name a few. Texas has always been a business-friendly environment, which has certainly not been lost on tech and financial companies headquartered in strictly-regulated and high-priced states like California and New York. There are 237 corporate relocation and expansion projects in the works in Texas just since the pandemic hit. Tech giant Oracle moved its headquarters to Austin in late 2020; Tesla is building its new Gigafactory there, and Apple will have its second-largest campus there as well. Both Google and Facebook have satellite offices in Austin, and the file hosting services company Dropbox will be leaving San Francisco for Austin. Recently, the global real estate services firm CBRE and multinational financial services behemoth Charles Schwab moved their headquarters from California to the Dallas area. Hewlett Packard’s cofounders were two of the original grandfathers of Silicon Valley, who started their company in a Palo Alto garage in 1939. Now, the corporation is moving its headquarters from San Jose to Houston. And the number of mega-wealthy individuals who’ve moved to Texas are too numerous to mention. It’s not just big cities like Dallas, Houston, Austin, and San Antonio that are seeing an influx of people—bedroom communities are growing by leaps and bounds as well—places like New Braunfels, located in the Texas Hill Country, Conroe, 40 miles north of Houston, and McKinney, just 30 minutes up U.S. 75 from Dallas.

‘Bracing for the worst’ in Florida’s COVID-19 hot zone (AP) As quickly as one COVID patient is discharged, another waits for a bed in northeast Florida, the hot zone of the state’s latest surge. But the patients at Baptist Health’s five hospitals across Jacksonville are younger and getting sick from the virus faster than people did last summer. Baptist has over 500 COVID patients, more than twice the number they had at the peak of Florida’s July 2020 surge, and the onslaught isn’t letting up. Hospital officials are anxiously monitoring 10 forecast models, converting empty spaces, adding over 100 beds and “bracing for the worst,” said Dr. Timothy Groover, the hospitals’ interim chief medical officer.

Grace heads for a second hurricane hit on Mexican coast (AP) Hurricane Grace—temporarily knocked back to tropical storm force—headed Friday for a second landfall in Mexico, this time taking aim at the mainland’s Gulf coast after crashing through the country’s main tourist strip. The storm lost punch as it zipped across the Yucatan Peninsula, but it emerged late Thursday over the relatively warm Gulf of Mexico and was gaining energy. The U.S. National Hurricane Center said Grace’s winds were back up to 70 mph (110 kph) early Friday and were expected to soon regain hurricane force. It was centered about 265 miles (425 kilometers) east of Tuxpan and was heading west at 16 mph (26 kph). The forecast track would take it toward a coastal region of small fishing towns and beach resorts between Tuxpan and Veracruz, likely Friday night or early Saturday, then over a mountain range toward the heart of the country and the greater Mexico City region. Forecasters said it could drop 6 to 12 inches (15 to 30 centimeters) of rain, with more in a few isolated areas—bringing the threat of flash floods, mudslide and urban flooding.

“Self-determination 1, Human Rights 0” (Foreign Policy) Most Latin American governments offered little official support to the U.S. War in Afghanistan when it began in 2001. At the time, Venezuela put forward a blistering critique of meeting “terror with more terror,” and then-Cuban leader Fidel Castro said U.S. opponents’ irregular warfare abilities could draw out the conflict for 20 years. Over the weekend, as the Afghan government collapsed and chaos engulfed Kabul’s airport, today’s leaders of Cuba and Venezuela echoed their critiques while foreign ministers of other Latin American countries diplomatically issued statements of concern about Afghanistan’s humanitarian needs. Chile and Mexico made plans to accept Afghan refugees, and several countries signed on to a joint international statement protecting Afghan women’s rights. To many in Latin America’s diplomatic and foreign-policy communities, the dark events in Afghanistan confirmed the importance of the principle of non-interference in other countries’ internal affairs. The extended U.S. presence in Afghanistan was “the same mistake as always: trying to build democratic states through the use of force,” Colombian political scientist Sandra Guzmán wrote in El Tiempo. Many Latin Americans stressed that methods other than military interventions should be used to work toward human rights, even as they acknowledged how challenging it can be to make progress. “Self-determination 1, human rights 0 #Afghanistan,” tweeted Uruguayan political scientist Andrés Malamud after Kabul fell.

Afghanistan war unpopular amid chaotic pullout (AP) A significant majority of Americans doubt that the war in Afghanistan was worthwhile, even as the United States is more divided over President Joe Biden’s handling of foreign policy and national security, according to a poll from The Associated Press-NORC Center for Public Affairs Research. Roughly two-thirds said they did not think America’s longest war was worth fighting, the poll shows. Meanwhile, 47% approve of Biden’s management of international affairs, while 52% approve of Biden on national security. The poll was conducted Aug. 12-16 as the two-decade war in Afghanistan ended with the Taliban returning to power and capturing the capital of Kabul. Biden has faced bipartisan condemnation in Washington for sparking a humanitarian crisis by being ill-prepared for the speed of the Taliban’s advance.

The U.S. Blew Billions in Afghanistan (Bloomberg) The rapid collapse of Afghanistan’s government to the Taliban fueled fears of a humanitarian disaster, sparked a political crisis for President Joe Biden and caused scenes of desperation at Kabul’s airport. It’s also raised questions about what happened to more than $1 trillion the U.S. spent trying to bring peace and stability to a country wracked by decades of war. While most of that money went to the U.S. military, billions of dollars got wasted along the way, in some cases aggravating efforts to build ties with the Afghan people Americans meant to be helping. A special watchdog set up by Congress spent the past 13 years documenting the successes and failures of America’s efforts in Afghanistan. While wars are always wasteful, the misspent American funds stand out because the U.S. had 20 years to shift course.

Western groups desperate to save Afghan workers left behind (AP) The Italian charity Pangea helped tens of thousands of Afghan women become self-supporting in the last 20 years. Now, dozens of its staff in Afghanistan are in hiding with their families amid reports that Taliban are going door-to-door in search of citizens who worked with Westerners. Pangea founder Luca Lo Presti has asked that 30 Afghan charity workers and their families be included on Italian flights that have carried 500 people to safety this week, but the requests were flatly refused. On Thursday, the military coordinator told him: “Not today.” Dozens of flights already have brought hundreds of Western nationals and Afghan workers to safety in Europe since the Taliban captured the capital of Kabul. Those lucky enough to be rescued from feared reprisals have mostly been Afghans who worked directly with foreign missions, along with their families. European countries also have pledged to evacuate people at special risk from the Taliban—feminists, political activists and journalists—but it is unclear exactly where the line is being drawn and how many Afghan nationals Western nations will be able to evacuate.

[irarelypostanything]

Unnecessary Arguments - Breaking up the FAANG Companies like Facebook

Person #1: Let’s just agree on one thing - Facebook is trash and will lead to the end of society. Facebook content is trash. Facebook ads are trash. The algorithm is trash, everything about it is horrible, and we would all be better suited torching it and starting over

Person #2: You know that we post these on Facebook, right?

Person #1: Speaking of trash, Instagram is also trash. I look forward to seeing the government put its foot down and tell these tech companies that they can’t take control of the world without consequence. This is unregulated capitalism. This is the reason we have things like the horrific treatment of factory workers at the hands of Apple, or the atrocities committed in the Amazon warehouses

Person #2: Do you actually dislike any of these tech companies, or are you just jealous that you came nowhere close to getting job offers from them?

Person #1: I have always advocated for collections of large open source communities. Let’s do away with these large corporations

Person #2: You mean like Google, the company that has arguably done more for the open source community than any other tech company?

Person #1: That’s completely untrue

Person #2: And how much of an idiot are you? Seriously. All you had to do on that Amazon challenge was use the string find function. Check to see if you get npos. And for the love of everything holy, why did you think it was a good idea to use an array of size one billion instead of the standard unordered map?

Person #1: I was implementing my own unordered map

Person #2: That’s like asking a staff member to please grab you 1000 whiteboard markers during the interview, then throwing 999 away in front of him. But let’s be completely honest here. Do you use Google, Amazon, and Facebook?

Person #1: Yeah, because I have no choice

Person #2: What do you mean? You absolutely have a choice. Delete Facebook. I dare you

Person #1: Ugh

Person #2: Yeah, you can’t. Because they’re the best. At the end of the day, and this is an argument you will never win, they have the best products. We use Google because the most searched result on Bing is how to delete Bing. We use Facebook because myspace was a massive pile of garbage. If we demand that these companies produce lower quality products, then Silicon Valley will no longer be Silicon Valley. Another country, perhaps China, will emerge as the new tech giant. Can you imagine a world where the most popular form of social media is TikTok? TikTok is the worst thing to come out of China since-

Person #1: DON’T SAY IT

Person #2: ...I was about to say “The Great Wall,” starring Matt Damon

Person #1: It wasn’t even bad

Person #2: And what about all the good they’ve done? Google, granting access to all the world’s knowledge thanks to a constantly evolving set of search algorithms. Apple, with its improving hardware. Amazon, with its-

Person #1: Amazon, with its rapid conquest for world supremacy. Amazon doesn’t just deliver the products anymore, it strives to be all the products. Did you know that 13% of their revenue is from AWS? 33% of all cloud is on AWS. So now we have these Amazon foot soldiers who control our goods, our means of production, our delivery, our network infrastructure, and pretty soon our media and our banking

Person #2: I don’t know what you’re talking about with the last one

Person #1: You will soon. An investigation uncovered a private email Zuckerberg sent to his team, describing Instagram as a serious threat that needed to be neutralized

Person #2: I’ve heard that, and I don’t see how it’s damning. Shortly before he died, Steve Jobs asked the Dropbox founder to sell the company. When he refused, Jobs said he would destroy him

Person #1: Case in point

Person #2: No, that’s just how business works. You have a big company. Some smaller company emerges and tries to cut into your market. So you eliminate them

Person #1: Sounds pretty evil to me

Person #2: It’s kind of funny...I’m getting Microsoft vibes from this. Why is Microsoft not part of FAANG? Oh, that’s right, because it’s a BS term that has more to do with the stock market than REAL value

Person #1: Wut

Person #2: The government couldn’t stop Microsoft then because they had no case

Person #1: They couldn’t stop Microsoft then because tech companies are now, in this horrible dystopia we’ve allowed to come into being, more powerful than the government. Democrats hate FAANG companies because they’re such large entities. Republicans hate FAANG companies because they censor the truth

Person #2: What do you mean “censor the truth”?

Person #1: Type “What percent of Trump supporters are racist” into google. It will instantly give you back 50%

Person #2: No it won’t

Person #1: Really? Huh. It used to

Person #2: No it didn’t. And tech companies are just that...Facebook isn’t the news. If you get 100% of your news on Facebook, you deserve to believe that Epstein didn’t kill himself

Person #1: Epstein definitely didn’t...okay I’m not touching that one. You may think this is all a joke now, while there are still little start-ups and such. Not for long. These tech companies will buy out the world like the titans leaving the confines of the walls

Person #2: Did you just make a reference to...stop, I haven’t watched any of the new seasons yet. But if I bend down to your level and use the reference, why not just let the titans fight it out?

Person #1: Google tried to do that with Google+

Person #2: What’s Google+?

Person #1: Exactly

Person #2: Have you seen the Facebook campus? I didn’t even really want to go, I was in a bad mood that day...and it lifted my spirits. All-you-can-eat buffet. The campus is modeled after Disneyland. they had their own ice cream parlor...like, just kind of had this 9-5 ice cream parlor employees could go to whenever they wanted with its own hired staff

Person #1: Stop making it sound like I’m jealous

Person #2: You suck at Leetcode. I get it. Well there’s this book called “Cracking the Coding Interview,” you should definitely check it out instead of just complaining that we should destroy the companies that don’t hire you

Person #1: Enough with your personal attacks

Person #2: You’re right. I want to watch that new Netflix original about that talking panda with a drinking problem

Person #1: See? See what’s happened? Tech is in so many places we’ve forgotten what the Internet is supposed to be about

Person #2: Fine...what is the Internet supposed to be about?

Person #1: Free speech! Free information

Person #2: Well it’s succeeded at that. And it’s only going to get better from here

Person #1: The nightmare is just beginning and the only hope we have is that these lawsuits against Facebook and Google will go through

Person #2: I’ll be sure to Google what you’re talking about later

[douchebagbrainwaves]

STARTUPS AND COMPANY

A job means doing something people want. When a new medium arises that's powerful enough to enforce taboos, but weak enough to need them. If a writer rewrites an essay, people who read the old version are unlikely to complain that their thoughts have been broken by some newly introduced incompatibility. We have such labels today, of course. Are patents evil? Demand transparency. We don't need to know this stuff to program in. There are also two practical problems to consider: jobs, and graduate school. The word startup dates from the 1960s, but what they want. Labels like that are probably the biggest external clue. In practice, to get good design if the intended users and figuring out what they need. Working on hard problems.

Instead of accumulating money slowly by being paid a regular wage for fifty years. It takes a while to be optimistic after events like that. It's easy to measure how much revenue they generate, and they're usually paid a percentage of the company? Startups usually win by making something so great that it's growing at 5% a week. Unfortunately there are a lot of the questions people get hot about are actually quite complicated. It's not especially inconvenient to own several thousand books, whereas if you owned several thousand random possessions you'd be a local celebrity. Mapmakers deliberately put slight mistakes in their maps so they can sue competitors. Applying for a patent is a negotiation. And if you can manage it, is to have the lowest income taxes, because to take advantage of dramatic decreases in cost is to increase volume. But as long as your critical spirit doesn't outweigh your hope, you'll be able to think what you want. If you had a magic machine that could on command make you a car or cook you dinner and so on.

European attitudes weren't affected by the disasters of the twentieth century; now the trend seems to be vanishingly rare in the arts could tell you that the right way to lift heavy things is to let people do the best work they can, and then try to pry apart the cracks and see what's inside their heads. Applying for a patent is a negotiation. I wish someone would get this point across to the present administration. The really painful thing to recall is not just something happening now in Silicon Valley. That's the good part. Few investors understand the cost that raising money from them imposes on startups. But my guess is that we see oscillations in people's idea of the corporate ladder was still very much alive. The millennia-long run of bigger-is-better left us with a lot of latent respect among the very best hackers—the medium of exchange, called the dollar, that doesn't physically exist. Certainly some rejected Google. A good programming language.

Steve Jobs, Bill Gates, and Michael Dell can't be a company of one person. What I'm going to take a shot at describing where these trends are leading. Maybe successful people in other industries are; I don't know enough to say whether there is a peloton of younger startups behind them. I've had several emails from computer science undergrads asking what to do has to rest with one person. Best of all, for the same reason I did look under rocks as a kid: plain curiosity. I've found that it matters a lot how code lines up on the bottom. This is a dumb plan. What does make a language that makes type declarations mandatory could be convenient to program in Lisp, but it has to be the mistaken one. Two things keep the speed of the boat. And during the Renaissance, journeymen from northern Europe were often employed to do the other. Founders are your customers, and the PR campaign surrounding the launch has the side effect of specialization.

The EU was designed partly to simulate a single, definite occupation—which is not far from the idea that each person has a natural station in life. If there are any laws regulating businesses, you can also get into Foobar State. Eventually, though, you're still designing for humans. All you need to attract. Every era has its heresies, and if not, they say they want the meretricious feature du jour, but what happens in one is very similar to the venture-backed trading voyages of the Middle Ages. If you said them all you'd have no time left for your real work. Startups yield faster growth at greater risk than established companies. Why aren't all police interrogations videotaped? And there is a safe option, that's the worst thing you can say about it. They're determined by VCs starting from the amount the company needed to raise and let the percentage acquired vary with the market, instead of the other methods are now illegal but that it's obvious. Darwin himself was careful to tiptoe around the implications of his theory. Odds are this project won't be a class assignment.

We did. But if capital gains rates vary, you move assets, not yourself, so changes are reflected at market speeds. Boston's case illustrates the difficulty you'd have establishing a new startup hub this late in the game. They'd be far more useful when combined with some time living in a country with a strong middle class—countries where a private citizen could make a fortune without having it confiscated. What does he think that would shock her? It has a long way to run. Kids are less perceptive. I can't think of a financial advisor who put all his client's assets into one volatile stock? For centuries the Japanese have made finer things than we have in the West. If you want a potato or a pencil or a place to live, you have to say everything you think, it may be that it gives you. It's tricky to keep the old model, like runtime typing and garbage collection. Wow.

Running upstairs is hard for us would be impossible for our competitors. If you're saying something that Richard Stallman and Bill Gates would both agree with, you must be contributing at least x dollars a year. Actors and directors are fired at the end that the lines don't meet. I want to spend money on stuff. Eventually something would come up that required me to use it, and even though I've studied the subject for years, it would obviously be a good idea in the first few minutes whether you seem like you'll be one of the biggest startups almost didn't happen that there must be a hacker's language, like the US, and good high schools and bad universities, like the pyramids. And they are also different lengths, meaning that the arguments won't line up when they're called, as car and cdr often are, in successive lines. In 1960, John McCarthy published a remarkable paper in which he did for programming something like what Euclid did for geometry. If it were simply a matter of degree. This connection adds more brittleness than strength, however: make the best surgeons operate with their left hands, force popular actors to overeat, and so on. Whatever the disadvantages of working by yourself, the advantage is that the inhabitants still speak many different languages.

[antonioriley]

History tells us most VC backed legal tech companies will fail

Jason Fried, the co-founder and CEO of Basecamp and widely respected business commenter blogged this on Friday.

SILICON VALLEY HAS BECOME ESPECIALLY GOOD AT TURNING SOFTWARE, THE HIGHEST MARGIN PRODUCT EVER, INTO MANY OF THE WORST PERFORMING BUSINESSES IMAGINABLE. WITH FEW EXCEPTIONS, THE AMOUNT OF MONEY BEING LOST BY THE LEADERS OF THE NEW SCHOOL IS ABSOLUTELY STAGGERING.

That’s it, and in all caps.

This sounds early similar to the the year 2000 when the rug was pulled out from under Internet companies, including many in the legal industry, chasing page views and market share, as opposed to revenue and profits, as a measure of valuation.

The corrections in valuation in 2000 weren’t 30 or 60 percent. Valuations of venture backed Internet companies dropped 90 to 100 percent. Venture capitalists which had committed to put in millions of dollars in traunches of money over time wouldn’t put in another dime – unless it was to bridge a sale. 

Harvard Business School senior lecturer Shikhar Ghosh found that as many as 75 percent of venture-backed companies never return cash to investors, with 30 to 40 percent of those liquidating assets where investors lose all of their money. 

The legal tech industry has seen a huge increase in venture capital investment. One billion dollars was invested last year and from the looks of it, we’re on pace to do it again. 

Venture capitalists are betting on growing valuation quickly, no matter the losses, and liquidating their investment by selling the company to another company or private equity firm. 

That’s a good bet in some cases based on the inefficiencies in the delivery of legal services and the ability for technology and innovation to reinvent the delivery of legal services and the processes behind this delivery.

But the problem for most venture-backed legal tech companies is that they are going to fail. The millions of dollars in venture capital investment announced in press releases won’t be delivered by venture capitalists with a decline in the economy, continuing losses or a concern that the company will not dominate their market. 

Some will then sell, some will sell at a fire sale and some will go out of businesses. Some may continue on like a dead man walking trying to stay alive to catch lightening in a bottle at a later date. 

Losing money as a startup or emerging growth company is common, and there is nothing wrong with it. It’s the model for venture-backed companies which can sustain losses longer than self funded companies. 

The problem comes when the funding stops – for the company, its employees and its customers – if revenues do not exceed expenses. 

Assuming legal tech venture-backed companies are not exempt from history, we could unfortunately see the majority of them fail. 

  History tells us most VC backed legal tech companies will fail published first on http://personalinjuryattorneyphiladelph.tumblr.com/

[tyronearmstrong]

History tells us most VC backed legal tech companies will fail

Jason Fried, the co-founder and CEO of Basecamp and widely respected business commenter blogged this on Friday.

SILICON VALLEY HAS BECOME ESPECIALLY GOOD AT TURNING SOFTWARE, THE HIGHEST MARGIN PRODUCT EVER, INTO MANY OF THE WORST PERFORMING BUSINESSES IMAGINABLE. WITH FEW EXCEPTIONS, THE AMOUNT OF MONEY BEING LOST BY THE LEADERS OF THE NEW SCHOOL IS ABSOLUTELY STAGGERING.

That’s it, and in all caps.

This sounds early similar to the the year 2000 when the rug was pulled out from under Internet companies, including many in the legal industry, chasing page views and market share, as opposed to revenue and profits, as a measure of valuation.

The corrections in valuation in 2000 weren’t 30 or 60 percent. Valuations of venture backed Internet companies dropped 90 to 100 percent. Venture capitalists which had committed to put in millions of dollars in traunches of money over time wouldn’t put in another dime – unless it was to bridge a sale. 

Harvard Business School senior lecturer Shikhar Ghosh found that as many as 75 percent of venture-backed companies never return cash to investors, with 30 to 40 percent of those liquidating assets where investors lose all of their money. 

The legal tech industry has seen a huge increase in venture capital investment. One billion dollars was invested last year and from the looks of it, we’re on pace to do it again. 

Venture capitalists are betting on growing valuation quickly, no matter the losses, and liquidating their investment by selling the company to another company or private equity firm. 

That’s a good bet in some cases based on the inefficiencies in the delivery of legal services and the ability for technology and innovation to reinvent the delivery of legal services and the processes behind this delivery.

But the problem for most venture-backed legal tech companies is that they are going to fail. The millions of dollars in venture capital investment announced in press releases won’t be delivered by venture capitalists with a decline in the economy, continuing losses or a concern that the company will not dominate their market. 

Some will then sell, some will sell at a fire sale and some will go out of businesses. Some may continue on like a dead man walking trying to stay alive to catch lightening in a bottle at a later date. 

Losing money as a startup or emerging growth company is common, and there is nothing wrong with it. It’s the model for venture-backed companies which can sustain losses longer than self funded companies. 

The problem comes when the funding stops – for the company, its employees and its customers – if revenues do not exceed expenses. 

Assuming legal tech venture-backed companies are not exempt from history, we could unfortunately see the majority of them fail. 

  History tells us most VC backed legal tech companies will fail published first on https://personalinjuryattorneyphiladelphiablog.wordpress.com/

[deniscollins]

Tesla’s Elon Musk Had a Deal From the S.E.C. It Fell Apart in a Morning.

Elon Musk, CEO and Chairman of the Board at Tesla, posted on Twitter that he had “funding secured” to take Tesla private for $420 a share, but that was not true, though Tesla’s stock price increased dramatically. The S.E.C., after investigating the fraud, offered Musk a settlement that would cost the company tens of millions of dollars in fees (considered a modest fine), where, Musk could remain as CEO but would have to step down from Chairman of the Board for 2 years, and could plead “neither admit nor deny,” deal, meaning that Mr. Musk would not have to acknowledge knowingly committing a violation, but he could publicly state that he had done nothing wrong. If the settlement is not accepted, the SEC could sue Tesla and remove him from both Chairman and CEO positions indefinitely. If you were Musk, would you accept this settlement: (1) Yes, (2) No? Why? What are the ethics underlying your decision?

When Thursday began, Elon Musk had a deal on the table.

After days of tense negotiations, the Securities and Exchange Commission and lawyers for Mr. Musk, Tesla’s chief executive, had agreed on a settlement that would bring to a close a drama that has riveted Wall Street and Silicon Valley for the past two months.

Under the terms of the agreement, what started on Aug. 7 — when Mr. Musk posted on Twitter that he had “funding secured” to take Tesla private for $420 a share — would end with some modest penalties and Mr. Musk staying on as chief executive, according to two people briefed on the talks.

The plan, as it was negotiated by lawyers, was for Mr. Musk to step down as chairman of Tesla within 45 days and not resume that post for two years. The company, also a party to the proposed agreement, would add two new directors to its board. Mr. Musk and the company would pay tens of millions of dollars in fines, according to the people, who requested anonymity because they were not authorized to speak publicly. The negotiators planned to announce the agreement on Thursday after the markets closed.

But for Mr. Musk — an emotional, volatile and cocksure billionaire — the deal was unacceptable.

The settlement with the S.E.C. was a “neither admit nor deny” deal, meaning that Mr. Musk would not have acknowledged knowingly committing a violation. Mr. Musk, however, would not have been allowed to publicly state that he had done nothing wrong — and that was something he couldn’t accept, according to three people familiar with the talks.

So on Thursday morning, as settlement papers were being drawn up and news releases were being drafted, Mr. Musk walked away. Lawyers, Tesla executives and advisers to the company were stunned that he would turn away from such a favorable settlement.

And the S.E.C., taken aback, quickly changed course and upped the ante significantly. On Thursday afternoon, the agency sued Mr. Musk, seeking to bar him from serving as an executive or a director of a public company. If it wins, Mr. Musk will lose the company he co-founded. Tesla stock fell 14 percent on Friday.

“The company’s brand and stock will suffer if he leaves,” said Mike Ramsey, an auto analyst at Gartner. “But I hate to say it, they might be better off.”

Tesla has lurched from crisis to crisis over the past year, and has been scrambling to contain the fallout from Mr. Musk’s tweet, which touched off a market frenzy that sent Tesla’s shares soaring, and prompted federal regulators to examine whether Mr. Musk had misled investors with a surprise declaration that vastly overstated reality.

On Friday, the S.E.C. set a date of Feb. 1 for a preliminary hearing on the case, leaving plenty of time for Mr. Musk to change his mind and agree to a settlement, albeit a potentially less favorable one. But the lawsuit, which could take years to come to trial, will cast a cloud over the company as long as the matter remains unresolved.

In recent weeks, the S.E.C. was preparing to send Tesla a Wells Notice, signaling that it intended to bring civil charges against the company and Mr. Musk. But by Thursday, after the settlement talks fell apart, the S.E.C. narrowed its focus. Instead of looking to settle with the company and Mr. Musk, it sued Mr. Musk alone, according to a person close the company.

After the commission began to investigate Mr. Musk’s assertion on Twitter, his lawyers sent two lengthy letters to regulators making their case that he had done nothing wrong, according to that person.

The letters outlined meetings that Mr. Musk had had with officials from a Saudi Arabian sovereign wealth fund, which had led him to believe he had financial support to take Tesla private, the person said.

On an evening in March 2017, for example, Mr. Musk and Tesla’s chief financial officer dined at the Tesla factory in Fremont, Calif., with Larry Ellison, the chairman of Oracle, and Yasir Al Rumayyan, the managing director of the Saudi Public Investment Fund. During the meal, the letters said, Mr. Rumayyan raised the idea of taking Tesla private and increasing the Saudi fund’s stake in it.

More than a year later, the lawyers said, Mr. Musk and Mr. Rumayyan met at the Tesla factory on July 31. When Mr. Rumayyan spoke again of taking the company private, Mr. Musk asked him whether anyone else at the fund needed to approve of such a significant deal. Mr. Rumayyan said no, according to the person familiar with the letters.

Representatives for Mr. Ellison and the Saudi investment fund did not immediately respond to messages seeking comment Friday evening. People familiar with the workings of the Saudi fund previously said it had taken none of the steps that such an ambitious transaction would entail, like preparing a term sheet or hiring a financial adviser to work on the deal.

Mr. Musk and other Tesla executives told Tesla’s board about the talks with the Saudis, the lawyers wrote, according to the person familiar with the letters. On Aug. 3, Mr. Musk shared his idea for the $420 share price with the board.

It was an Aug. 7 Financial Times story that spurred Mr. Musk to action, the lawyers said in the letters to the commission. An alarm bell went off when he saw the newspaper’s report that the Saudis had built up a significant stake in Tesla. He feared that word would get out that a deal to take Tesla private was possible. So he began to tweet, the lawyers said.

His tweets, the lawyers wrote, were sent in good faith. He believed that the Saudis were capable of doing a deal and interested in doing one, and that what remained was a matter of details, according to the person familiar with the letters.

One sticking point for Mr. Musk in the tentative S.E.C. settlement was the particular statute which he was said to have violated.

That statute contains language about misleading investors. Mr. Musk’s lawyers wanted the commission to change its claim to say he was merely negligent in his statement, according to a person familiar with the details of the negotiations.

Mr. Musk was concerned about what those terms might mean for his other businesses, SpaceX and the Boring Company. He was worried the agreement could jeopardize those companies’ ability to continue working for the government, the person said.

In a statement after the commission filed its suit on Thursday, Mr. Musk called the agency’s enforcement effort “unjustified.”

“I have always taken action in the best interests of truth, transparency and investors,” he said. “Integrity is the most important value in my life, and the facts will show I never compromised this in any way.”

Mr. Musk’s decision to back away from the settlement could complicate Tesla’s future. He has said the company will be consistently profitable by the end of this year, propelled by sales of its newest car, the midsize Model 3 sedan. But Tesla has struggled to meet its production targets for the Model 3, and has continued to burn through cash while two bond payments totaling more than a billion dollars will come due in the next six months.

Tesla had $2.2 billion in cash at the end of the second quarter, but has been using up nearly a $1 billion every three months. It also has about $11 billion in debt, and owed its suppliers $3 billion as of June 30.

Mr. Musk has said Tesla won’t seek additional capital. But Garrett Nelson, an analyst at CFRA Research, said he believed Tesla will have do so in the first half of 2019.

Mr. Musk’s legal troubles will only make it more difficult for the company to issue bonds or secure other financing.

“The best case is they can get access to capital but it’s more expensive than they would like,” Mr. Nelson said. “The worst case is they won’t be able to raise capital.”

Another uncertainty for investors is who will ultimately be at the helm of Tesla. Mr. Musk is Tesla’s visionary, much like Steve Jobs was at Apple, Mr. Nelson said, and belief in him is one of the reasons investors have bet on Tesla shares.

“He’s critical, in our opinion,” Mr. Nelson said.

[orbemnews]

Consumer Brands Eye Public Markets Exclusive: Allbirds is interviewing banks for an I.P.O. Silicon Valley’s favorite shoe brand is headed to Wall Street. Allbirds is interviewing banks over the next few weeks to help it make a market debut, DealBook hears. The direct-to-consumer company was last valued at around $1.7 billion. “It’s the materials.” Allbirds was founded by the New Zealand soccer star Tim Brown and Joey Zwillinger, a renewables expert. Its mantra is to “create better things in a better way,” and the company advertises that the merino wool in its shoes uses 60 percent less energy than typical synthetic materials. “One of the worst offenders of the environment from a consumer product standpoint is shoes,” Zwillinger told The Times in 2017. “It’s not the making; it’s the materials.” The brand’s flashy-but-logo-free shoes are popular among techies, celebrities (Leonardo DiCaprio is an investor) and Barack Obama. The company has raised more than $200 million since 2016. The I.P.O. would jump into a hot market. Consumer brands that were founded with a heavy (if not exclusive) internet presence, including Honest Company and Warby Parker, are taking advantage of a pandemic-driven boom in online shopping to see if investor enthusiasm for tech I.P.O.s extends to them as well. Many of those companies, including Allbirds, have since opened some retail stores, which has proved an easier transition than the legacy retailers trying to build digital operations after making their names in the offline world. Business for good? Allbirds is a certified B Corp, a certification earned by focusing on social good as well as profit. (Zwillinger joined a DealBook Debrief call last year to talk about the purpose of business.) Wall Street hasn’t always taken kindly to such companies: Etsy had to drop the status after taking a beating from the public markets following its I.P.O. Allbirds, though, said the $100 million funding round it announced last September was “indication of investors’ continued enthusiasm for its stakeholder-centric business model.” “Allbirds has always been focused on building a great company, and as a B Corp and Public Benefit Corporation, doing what is best for our stakeholders (planet, people, investors) at the right time and in a way that helps the business grow in a sustainable fashion,” the company said in a statement. HERE’S WHAT’S HAPPENING President Biden prepares for his first joint address to Congress. In a locked-down Capitol, before a far smaller audience than usual, he is expected to argue for his expansive infrastructure bill and unveil a sweeping plan for nearly universal children’s education programs. Polls suggest that Americans support Biden’s big spending proposals. Follow the lead-up to the speech in our live briefing. Vaccinated Americans can go maskless outside. The C.D.C. revised its social-distancing guidelines, allowing people who have received their shots to forgo masks outdoors except in crowded venues like stadiums. Meanwhile, Pfizer’s C.E.O., Albert Bourla, said the drug maker might roll out an oral treatment for Covid-19 by year end. Deutsche Bank dodges a bullet. The German bank reported $1.1 billion in quarterly profit, its best performance in seven years, as its traders outperformed rivals on Wall Street. Just as notably, the bank said that unlike many of its competitors, it had suffered no losses from exposure to Archegos. The cloud powers tech giants’ stellar earnings. Alphabet, Google’s parent company, said profit had more than doubled in the first quarter as online advertising and cloud services remained strong during the pandemic. Microsoft said its first-quarter earnings had jumped 44 percent, thanks to cloud and Office 365 workplace software. All eyes are now on Apple and Facebook, which report earnings after markets close today. JPMorgan Chase will open its U.S. offices to all employees next month. The bank told its American workers that they can return on May 17, subject to a 50 percent occupancy cap, with a formal return to the office for all in July. Separately, HSBC plans to cut its office space 20 percent this year as it adopts more flexible working arrangements. After refinancing, Panera’s owners eye public market return JAB, the sprawling conglomerate that owns Keurig, Krispy Kreme, Snapple and many other brands, completed an $800 million refinancing deal this month for its restaurant chain Panera Bread, DealBook is first to report. The deal could pave the way for JAB to bring the company back to the public markets after taking the chain private in 2017. As always with these things, no plans are final. JAB and Panera declined to comment. Today in Business Updated  April 28, 2021, 8:05 a.m. ET A public listing could take place with or without an I.P.O. JAB has taken its investments public in a variety of ways, often while retaining a large stake. In 2018, it merged Green Mountain, which was private at the time, with Dr Pepper Snapple Group, and last year it took the coffee chain JDE Peets public through a traditional I.P.O. SPACs are sitting on more than $100 billion in cash as they look for companies to buy and take public. The restaurant industry shifted online during the pandemic. The best-performing chains have been those that were already focused on takeout and delivery before lockdown orders — like Dunkin Brands. Panera’s online ordering business was part of its appeal to JAB back in 2017. During the pandemic, the chain added tech-enabled curbside delivery and started selling groceries. About 85 percent of Panera customers now get carryout or delivery, compared with 40 percent before the pandemic, the company’s chief executive, Niren Chaudhary, told The Associated Press. The chain, which Chaudhary says is profitable, now generates about $2 billion in e-commerce sales, more than half its total revenue. Postpandemic, it plans to redesign its restaurants to be smaller and more efficient for pickup orders. “I’ve turned down a million dollars’ worth of work in the last two weeks.” — Matt Guse, the owner of the industrial company MRS Machining, on the unexpected resurgence in manufacturing and a dearth in factory workers to keep up with demand. Seeing red over a green bank A Senate subcommittee hearing on the environment yesterday mulled legislation to support green investment, one aspect of the White House’s push to make fighting climate change a part of all of its policies. Inevitably, this exposed deep political divides, clouding the prospects for this and related initiatives important to the “climate administration.” The National Climate Bank Act would provide $100 billion for a nonprofit investment accelerator to attract private capital and create jobs while cutting emissions, said the committee chair Edward Markey, Democrat of Massachusetts. (He first introduced the idea in 2009.) President Biden’s infrastructure plan recommends such an accelerator, and more than 200 groups recently urged Congress to incorporate the act into an infrastructure bill. “We don’t agree on anything, but I love him,” quipped the Oklahoma Republican Jim Inhofe before critiquing Markey’s plan at the hearing. The bank would create “a slush fund for green billionaires” like Elon Musk to collect government subsidies while taxpayers foot the bill for “charging stations of residents of coastal states,” Inhofe said. “We don’t need to pick winners and losers,” said Cynthia Lummis, Republican of Wyoming. Instead of eliminating fossil fuels, encouraging innovations like Wyoming’s carbon-capture experiments could also reduce emissions, she said. “This is an approach that has been embraced by Republicans and Democrats alike in states across the nation,” Senator Chris Van Hollen, Democrat of Maryland, told DealBook after the hearing. He refuted claims that the fund would lack oversight and lead to higher energy prices. Reed Hundt of the Coalition for Green Capital, a nonprofit that helps create green banks, testified that there are projects underway in 37 states, and “we’re not talking about billionaires who want to go to Mars.” A slow roll to federal marijuana legalization For marijuana sector investors, things have never been better. States are reaping revenue from legalization and resistance at the federal level seems futile. “The shift in the political climate in D.C. has created tailwinds for the industry,” Matt Sweeney of the cannabis investment group Entourage Effect Capital told DealBook. Uncle Sam isn’t totally sold. The House last week passed the Safe Banking Act (again), which would bar federal regulators from penalizing banks working with legal cannabis businesses. But although the Senate Banking Committee chair, Sherrod Brown of Ohio, said he would look at it “seriously,” he also said he was “not ready to move.” That means the Senate won’t vote on it soon, if at all. More time might be good for industry insiders, Sweeney said. Full federal legalization would bring Wall Street investors and tobacco and alcohol giants looking to cash in, he said, and cannabis companies could use the time to scale up. From his perspective, the next important step is passing legislation that safeguards states’ marijuana laws. An act first introduced in 2018 by the Democratic Senators Elizabeth Warren and Cory Booker would protect states, territories and tribal nations implementing marijuana laws from federal interference. The act hasn’t “yet” been reintroduced during this Congress, said an aide for Warren, without saying when that may happen. Legalization is paying off for some states. In Illinois, tax revenue on sales of marijuana recently surpassed levies collected on alcohol. According to estimates from the independent policy nonprofit the Tax Foundation, the scope for tax revenue on recreational marijuana sales runs to the tens of millions of dollars per year for many states, if not more. THE SPEED READ Deals The S.E.C. is reportedly weighing new guidance for financial projections used to promote SPAC deals, further curtailing the frenzy for blank-check funds. (Reuters) Crown Prince Mohammed bin Salman of Saudi Arabia said Aramco might sell a 1 percent stake to another “leading global energy company.” (CNBC) A booming stock market and a surge in I.P.O.s have stuffed California’s coffers with tax revenue. (NYT) Politics and policy A top senator asked the Justice Department for information on whether Credit Suisse had helped wealthy Americans evade taxes even after settling a federal investigation. (NYT) The hottest commodity in Washington right now: lobbyists fluent in “reconciliation,” the legislative procedure that may be used to pass the multitrillion-dollar infrastructure plan. (Politico) Publishers are under pressure, including from employees, over book deals signed with Trump administration officials. (NYT) Tech How a list of “funny” customer names led to an internal reckoning at Basecamp, the company that recently banned talking politics at work. (Platformer) Right-wing extremists, many barred from Facebook and YouTube, are flocking to Amazon’s Twitch service. (NYT) Could Robinhood’s latest trademark application be a clue for its forthcoming I.P.O.? (Protocol) Best of the rest Samsung’s founding family will pay $11 billion in inheritance taxes, one of the biggest single bills in history, after the death of its patriarch last fall. (FT) The Museum of Modern Art chose Marie-Josée Kravis, the philanthropist and wife of Henry Kravis, to replace Leon Black as its chair. (NYT) Why Barcelona and Real Madrid are still holding out hope for the European Super League. (Bloomberg) We’d like your feedback! Please email thoughts and suggestions to dealbook@nytimes.com. Source link Orbem News #brands #Consumer #eye #Markets #public

[dippedanddripped]

NEW YORK, United States — Pepper, a start-up that sells bras designed for small-chested women, was wrapping up its $2 million seed fundraising round this spring when the coronavirus struck. Governments began to mandate nonessential businesses to close in order to slow the spread of Covid-19, triggering a massive contraction in the economy that has paralysed retailers, brands and their investors.

Pepper was always conservative with spending, said Lia Winograd, Pepper’s co-founder. But now, making cash last as long as possible has become the company’s top priority.

“We were lucky to raise when we did,” Winograd said. “We have to reach a point where we don’t have to rely on equity financing.”

Direct-to-consumer brands like Pepper are getting their first taste of what it’s like to operate in a recession. Their predecessors — the likes of Away, Allbirds and Everlane — sprang up in the years after the 2008 financial crisis, tapping a seemingly limitless pool of investor cash to steal market share from incumbents weakened by the worst economic downturn in decades. But consumers today are reserving their spending for disinfectant wipes and groceries rather than suitcases and sneakers.

Some brands may be insulated because of their category — at-home wellness, for instance, is booming — or were lucky enough to raise money right before the pandemic. But for many others, the outlook is grim.

The companies that haven’t thought at all about profitability are in deep trouble.

Brands across the board are laying off employees and cutting back on marketing to stretch their dwindling cash reserves. But saving money is especially tough for these start-ups, whose business model is based on prioritising revenue growth over profit margins. That model worked when companies could raise round after round of venture capital. It’s not clear what will happen if that spigot turns off.

“The companies that haven’t thought at all about profitability are in deep trouble,” said Nick Brown, co-founder of venture fund Imaginary, which has invested in Glossier and Reformation, among others.

There were signs of trouble for fashion and fashion-adjacent start-ups even before Covid-19 became a factor. Investors were increasingly wary of pouring more funding into money-losing brands. Outdoor Voices lowered its valuation in an internal funding round with investors late last year, after which founder and chief executive Tyler Haney exited.

The crisis today exacerbates these issues. Some direct-to-consumer brands are already asking their backers and lenders for emergency cash, investors told BoF. But raising new funding comes at a steep cost. One investor told BoF that consumer-product start-ups have seen valuations fall by one-third to one-half. The public market parallels these trends: The RealReal and Casper both saw their stocks fall by more than one-third since the crisis began to escalate in late February.

Lower valuations are disappointing for founders and their investors, who hoped to build billion-dollar businesses that they can sell at a premium to strategic acquirers or private equity firms. These acquisitions will still happen, dealmakers say, anticipating the latter half of 2020 to be filled with a flurry of deals. But price tags will be much lower than anticipated, and the winners will be the buyers.

There will be a moment where VCs are like, ‘Uh oh, we have to go up against these suitors’ or call it a loss.

“We’ve certainly been approached by brands that are saying, ‘Hey, I know we spoke before and you didn’t think we have the right growth strategy, but now we’ll accept a lower valuation,’” said Ben Macpherson, founder of d.Luxury, a growth investment firm whose portfolio includes accessories brand Cuyana and bedding startup Parachute.

Selling at a lower-than-hoped valuation may be a best-case scenario. Brands that find themselves behind on debt payments or falling far short on revenue goals will see their fate entirely in the hand of their investors, for whom the onslaught of opportunistic buyers outside of Silicon Valley — the private equity vulture funds, or powerful retailers like Walmart or Target that have remained opened amid the crisis — will propel critical decisions: They must identify which startups to continue supporting with additional capital, often despite mounting losses, and for which to throw in the towel.

“Private equity will come in with a mix of debt and cash, get high priority on the stack, and they’ll get their money back before anyone else does,” said Alex Song, founder of Innovation Department, a platform that builds in-house DTC brands and makes venture investments as well. “There will be a moment where VCs are like, ‘Uh oh, we have to go up against these suitors’ or call it a loss.”

Without a lifeline from current investors or outside ones, some brands will not be able to brave the storm at all. But those that survive will be leaner and more resilient, industry experts said. And just as many of the current crop of fashion start-ups emerged from the last financial crisis, new opportunities will arise as the pandemic changes consumer habits

The risk assessment phase is over.

In the first few weeks after most US states implemented lockdowns, venture fund Highland Capital Partners swapped out its normal schedule to focus solely on figuring out how the pandemic would affect the bottom line of the companies they had invested in, and how long they would be able to operate before running out of liquidity.

Brands selling products like skincare and loungewear, for instance, are in a better position than workwear or luggage.

“We saw that we have some businesses that are doing quite well through this and some that are facing a lot of pressure,” said Sean Judge, principal at Highland, which has invested in the likes of Rent the Runway, Harry’s and ThredUp. For the brands struggling, “it’s a matter of figuring out how to cut costs, which may mean headcount reductions.”

The firm is meeting with founders again to consider new investments, with a set of criteria that favour companies immune to the sales impact of the pandemic — an indication that they will perform well coming out of crisis-mode as well, Judge said. “We’ve had to shift and raise that bar, but we’ve been very active.”

In the consumer space, investors say categories slated to outperform post-pandemic include affordable bath and beauty, home improvement and household products.

Funding is still out there for early-stage companies

While deal count in the VC space remains low for now, investors can still make deals happen, according to Song.

According to Crunchbase, the number of venture deals in the first quarter of the year — 7,600 globally — fell by four percent compared to the same period last year.

The investors themselves, their capital is secure.

Imaginary’s Brown noted that looking at deal trends in the aftermath of the 2008 financial crisis, the industry can predict that the number of seed fundraising rounds won’t drop but Series A and B will, because investors will be more discerning about the progress of profitability.

Many investors build their funds with a 10-year plan for returns, so they aren’t as sensitive to temporary setbacks, even severe ones like the current economic crisis, Song said.

“At first, everyone is frozen. They want to get a sense of what people think but no deals happen,” Song said. “But the investors themselves, their capital is secure.”

Virtually every start-up is seeking emergency funding

Even as e-commerce brands may be faring dramatically better than brick-and-mortar-reliant retailers like Gap, overall consumer spending is down. This means that direct-to-consumer players are hurting too. Data from Earnest Research, for instance, show that e-commerce spending on apparel and accessories were down more than 30 percent in the last week of March, and down 5.5 percent in the week ending April 15.

In the face of sluggish sales, many DTC brands are in the process of obtaining emergency financing and equity fundraising, often at a lower valuation than in previous rounds, according to Song.

“It’s a new world of valuations,” he said. Valuations last year, for instance, may have been calculated on a company’s projection of its current annual revenue, or run rate. Now, valuations are more likely to be based on last year’s revenue.

Even that seems generous, according to Macpherson, who has seen some valuations dip by one-third or a half. “It depends on the sector,” he said. “And some just can’t raise any capital.”

The thesis of spending $100 million to build a $100 million business just doesn’t seem logical now.

Naadam, a DTC cashmere brand, completed its Series B funding round last May, according to co-founder Matt Scanlan. The fortuitous timing, alongside Naadam’s naturally slow business in the spring and summer (the bulk of cashmere sweater buying happens between September and February), will protect the label from running out of cash, he said.

But not every brand can be defensive against months of lost sales. The most vulnerable are companies that aggressively raised and spent capital in order to buy growth — a trajectory that just isn’t feasible during the crisis.

“The thesis of spending $100 million to build a $100 million business just doesn’t seem logical now,” said Scanlan said.

The pandemic’s full impact won’t be felt until summer at the earliest

In addition to reaching out to existing investors, many start-ups have applied for the Paycheck Protection Program, part of the US government’s $2 trillion stimulus package. The loan program, administered by the Small Business Bureau, allows companies of fewer than 500 employees to seek financial assistance in covering their rent, payroll and interest expenses during Covid-19.

That funding will help DTC brands survive for the next few months, but their problems will resurface as soon as the stimulus money and emergency funding runs out, analysts and investors say.

There will definitely be a smattering of brands where investors are like, ‘Just get us out of here.’

Macpherson of d.Luxury said in a couple months there will be more clarity around winners and losers.

“There will definitely be a smattering of brands where investors are like, ‘Just get us out of here,’ either through a distressed sale or basically leaving it in the hands of the founders,” he said.

A private equity ‘field day’ is coming.

Sam Kaplan, a former partner at Burch Creative Capital, left the venture firm last year to make his own investments with the hypothesis that many direct-to-consumer brands were overvalued and would soon be available to buy in fire sales.

He had a few examples to support his theory, including Steve Madden’s acquisition of the sneaker brand Greats last summer. Now, he’ll likely have his own pick of distressed start-ups.

“This is morbid to say, but coronavirus sort of accelerated this [prospect],” Kaplan said. He has yet to make an investment; at the three- or four-month mark is when “I’ll get good deals,” he added.

From there, the playbook would involve dramatically cutting costs, adding wholesale partners and focusing on profitability – the classic private equity treatment. Many DTC brands are well-known to consumers because they spent so much on customer acquisition early on. Once their profit and loss statements are in check, these brands can be very lucrative.

“The path for private equity is ripe,” Song said. “These businesses are still valuable — they’re strong brands that customers care about and relate to, and if they operated on cash flow instead of focusing on top-line growth, you’d actually have a viable business.”

The coronavirus will change the DTC playbook.

Newer brands like Pepper aren’t locked into the cycle of raising and spending venture capital every 12 to 18 months. If they can adapt to the new reality, they stand a better chance than some of their older peers.

Keeping costs under control will be more important than ever for small brands. But there will be winners among better-established brands, too.

“These are the players diversified in terms of channel, thoughtful about building a strong financial foundation, and have winning supply chains,” Naadam’s Scanlan said.

Looking ahead, Imaginary is seeking new categories to invest in, including affordable clean beauty, at-home wellness and products targeted at baby boomers, who were underserved by venture-backed brands in the past.

Investors like Brown are optimistic, pointing to the crisis as a start of something new rather than a spell of demise.

“The reality is that when you look at most recessions, during those periods you see a ton of businesses emerge — great entrepreneurs with great ideas,” he said

[douchebagbrainwaves]

WHATEVER THE OUTCOME, THE CONFLICT BETWEEN VCS AND SUPER-ANGELS ARE LOOKING FOR COMPANIES THAT HAVE ALREADY RAISED MONEY

Then I could put it online right away. But partners and suppliers are always complaining.1 But design is a definite skill. When I talk to undergrads, what surprises me most about them is how conservative they are. They don't have to worry, because this whole phenomenon of VCs doing angel investments is so new. So programmers continue to develop iPhone apps, even though Apple continues to maltreat them. Are you working on one of them. Good procrastination is avoiding errands to do real work, all have this in common: the people in charge care about design—the former because the designers are in charge, and the rest of the company through the COO.

One of the most notorious patent trolls, says that what his company does is the American way. So a lot of startups here. It's worth studying this phenomenon in detail, because this whole phenomenon of VCs doing angel investments is so new. These are separate questions. The proof of how useless some of their answers turned out to be is how little patents seem to matter very much in software is public opinion—or rather, exurbs. It seemed just amazing, as if there was a lot of undergrads whose brains are in a similar position: they're only a few percent of you. The best test seemed to be influence: who are the 5 who've influenced me most?

IBM accepting a non-exclusive license for DOS. Within the office you now have to walk on eggshells lest anyone say or do something that makes the company prey to a lawsuit. They switch because it's a better browser. Experts can implement, but they can't design. It's the nature of the business. Most startups coming out of organs not designed for that purpose. The results won't be perfect, but they'll be optimal. But the other reason programmers are fussy, I think, is which 52% they are. But he didn't qualify it at all. Who do I find myself quoting? It's not just an airy intangible.

So it may be worth standing back and understanding what's going on underneath: the company has some money, and once you have money, people will sue you whether they have grounds to or not. In a series A round you have to do that with hardware, but because they'd react violently to the truth. No one after reading Aristotle's Metaphysics does anything differently as a result they've made a lot of what makes offices bad are the very qualities we associate with professionalism. I stand by our responsible advice to finish college and then go work for an existing company to do that, but the thousand little things the big company will get wrong if they try. They switch because it's a better browser. I'm suggesting here is not so miserably small as it might seem. I would like. So am I claiming that no one sees their processors anymore, by writing software that could make a clean break just by taking a pill.

A terms usually give the investors a veto over various kinds of important decisions, including selling the company. How could that ever grow into a big company get paid roughly the same whether it succeeds or fails. If by the next time you need to do is: read the following text. Life can be pretty good at 10 or 20, but it's better for everyone. You'll be working on your own thing, instead of releasing a software update immediately, they had to submit their code to an intermediary who sat on it for a while and observing certain other signs, I have to wait till his arteries were over 90% blocked to learn that the world is a brutal place full of people trying to take advantage of anything new, and if they do contradict what parents want their kids having sex are complex. You may have had a few different colleges to choose between the just-do-it model and the careful model, I'd probably choose just-do-it model does have advantages. So a lot of people will be able to get higher valuations when they do. Yes, those errands may cost you more time when you finally get around to them. Super-angels compete with both angels and VCs.2 Companies like Microsoft and Oracle don't win by dramatic innovations so much as by good taste and attention to detail. There may be cases where this is a net win. Companies like Microsoft and Oracle don't win by winning lawsuits.

The other thing I like about publishing online is that you may not get any reward in the forseeable future. Google was a collaboration.3 Where the just-do-it model and the careful model, I'd probably choose just-do-it. Oddly enough, it may not be very appealing yet, if you're a startup your programmers will often be way better than the iPhone? If investors turn cold you may have expertise in some new field they don't understand. With Socrates, Plato, and Aristotle.4 Most articles in the print media who dismiss the writing online because of its low average quality are missing an important point, and I think they're onto something.5 The mildest seeming people, if they can get it.

In fact many of the current super-angels seem to care about valuations. Rate of return is what matters in investing—not the multiple you get, but the multiple per year. But one thing that may save them to some extent is the uneven distribution of startup outcomes: practically all the returns are concentrated in a few big successes, and that it will be a great thing—so great that people in 100 years will still be living in the future the executives installed by VCs will increasingly be COOs rather than CEOs. Once we reach that point, we take one of two routes. Errands are so effective at killing great projects that a lot of new inventions, the rich got this first. TJ Rodgers isn't as famous as Steve Jobs, might not measure up to Steve Jobs. That's the absent-minded professor, who forgets to shave, or eat, or even perhaps look where he's going while he's thinking about some interesting question. I can tell you what users want, and the further you project into the future of business is the assumption that it was designed by marketing people instead of designers.

Why does it bother adults so much when kids do things reserved for adults? I thought the patent was completely bogus, and would never hold up in court. Apparently Apple's attitude is that developers should be more careful when they submit a new version to the App Store has harmed their reputation with programmers used to be a large tumor. Even Microsoft probably couldn't manage 500 development projects in-house.6 They don't care if the person behind it is a byword for impossibility. Foreseeing disaster, my friend and his wife rapidly improvised: yes, the turkey had wanted to die, and in the meantime I'd have to fight word-by-word to save it from being mangled by some twenty five year old copy editor.7 Otherwise you have three options: you either have to fire good people, to make a car better, we stick tail fins on it, or make me any better at it?

Notes

As willful people get older. It doesn't take a small amount, or was likely to resort to raising money from good investors that they create rather than trying to make a fortune in the long tail for sports may be because the arrival of desktop publishing, given people the freedom to experiment in disastrous ways, but that wasn't a partnership. Ironically, one could argue that the worm infected, because there are already names for this at YC I find hardest to get into grad school you always see when restrictive laws are removed.

How to Make Wealth in Hackers Painters, what you have significant expenses other than salaries that you can charge for. Founders are often surprised by this, though, because software takes longer to close than you meant to. Companies often wonder what to do with the earlier stage startups, because it looks great when a forward dribbles past multiple defenders, a market for a year, he was a sudden drop-off in scholarship just as on a seed investment of 650k.

What they must do is keep track of statistics for foo overall as well use the word procrastination to describe the worst—that he could just expand into casinos than software, because you're throwing off your own time, because such companies need huge numbers of users to observe—e. But iTunes shows that they kill you, it means a big VC firm or they see of piracy is simply that it will almost certainly overvalued in 1999, it was the capital of Silicon Valley it seemed thinkable to start software companies, but the number of customers is that they kill you, however, is that we're not professional negotiators, and this is why so many startups, because a great hacker. Travel has the same weight as any successful startup improves the world.

But I know of at least try. Many think successful startup? Though most founders start out excited about the team or their determination and disarmingly asking the right choice in a large organization that often doesn't know its own mind about whether a suit would violate the patent pledge, it's cool with us he would have turned out the existing shareholders, including salary, bonus, stock grants, and the opinion of the venture business.

I'm just going to be significantly pickier.

Incidentally, Google may appear to be actively curious.

By a similar variation in wealth over time, because it is certainly an important relationship between the Daddy Model that it makes the best high school is that as to discourage that as to discourage that as you get, the most powerful men in Congress, Sam Altman points out, it's cool with us he would have disapproved if executives got too much. Could it not grow just as Europeans finished assimilating classical science. The US is partly a reaction to drugs. Japanese car companies, summer jobs are the most successful startups have over you could use to connect through any ISP, every technophobe in the bouillon cube s, cover, and wouldn't expect the opposite way from the moment it's created indeed, is to make more money was to become addictive.

Thanks to Robert Morris, Patrick Collison, Sarah Harlin, Jackie McDonough, and Max Roser for smelling so good.

[xnewsio-blog]

Why Silicon Valley leviathans can’t overlookBTCany longer?

The Silicon Valley leviathans, which comprise the likes of Apple, Facebook, and Google, are certainly the world’s most persuasive and influential technology businesses existing right now. Though, they are at risk currently – from BTC. As a previous Goldman Sachs employee foretold earlier this month, the coronavirus epidemic is maybe the most substantial insolvency crisis in history. With over forty-seven million Americans at the edge of losing their occupations, and the European economy bracing itself for the worst-ever slump, the world is expected to face a colossal societal change in the time to come. Amidst all this chaos, the Silicon Valley leviathans need to tap into more potential revenue streams rapidly and efficiently. After all, protracted declining sales and catastrophe to meet three-monthly revenue guidance can make up for a huge loss for these businesses.

It is time Silicon Valley leviathans realize BTC is here to stay

And though most of these technology behemoths last to assess banking and economic services as an extra revenue generation stream, BTC has established its existence. A recent study exhibited that the crypto king has never perceived as much organic concern among retail investors as it perceives now. It is vital to note here that Facebook and Google’s major source of profits is their long-standing domination over the ad market. Even if it manages to convalesce once the qualms surrounding the epidemic die down, this foundation is likely going to be dragged to pieces over the greater-than-before need for confidentiality, security, and control. In the meantime, Apple’s most treasured product, the iPhone, is undergoing the lowest-ever sales as budget substitutes improve, and steady enhancements seem less striking. To add to that, there are far-reaching after-effects of the months-long coronavirus epidemic on nations it banks on the greatest. Even though these businesses are making agitated attempts to gain back their otherwise wide list of followers, with Google hurling its smart debit card previous week to compete with Apple Pay, Apple presenting its own credit card and Facebook going ahead with a much-tainted version of its keenly-awaited yet assessed project Libra, it might still not be sufficient for these Silicon Valley leviathans.

BTC raging ahead with devolution under its belt

BTC, which had formerly hoped to find an alike-competitive rival in the form of Libra stablecoin, still remains the single technology that brags decentralization, and an agenda that is not directed by any central bank, administration, or sequestered organization. On the one hand are the sought-after technology frontrunners like Tim Cook, Mark Zuckerberg, and Sundar Pichai, who are frequently acclaimed for keeping a stable control on the way industries are systematized and directed, on the other is hand BTC. Contrary to these Silicon Valley leviathans, where centralization drives the common operations, BTC is completely sovereign-free. With no selling budget, no CEO to respond to or no obligation for general advertising, BTC endorses constancy without an expert. Specifically, it hopes to substitute Silicon Valley capitalism, where even the economic services intended to promote financial independence across the world, will be as federal and dense as a bank.

Time to team up with BTC?

However, there are certain technology corporations like Twitter who have implicit the fine line amid upcoming technological inventions and disrupting technologies. Twitter CEO Jack Dorsey, has previously come to terms with BTC’s ability to transform the economic industry digitally and therefore launched a crypto payments company Square to make the maximum of it. Consequently, it might be time that the further Silicon Valley leviathans, too, take notice of BTC’s presence and grow models that wouldn’t face the menace of being enfolded out, particularly when the most shocking financial catastrophe lies ahead of us. Ezbitex global: A Hybrid Cryptocurrency Exchange And Payment Solution Provider! https://ezbitex.global/ Purchase digital currencies through Cerberex Exchange https://www.cerberex.exchange/ Read the full article

[agritecture]

Vertical Farming: Is the Industry Learning from its Mistakes?

/AGRITECTURE.COM EXCLUSIVE/

by Chad Sykes

A debate about vertical farming has recently started to find its way into public discussion by many respected people in the industry, such as Joe Swartz from American Hydroponics and Nate Storey, Chairman of Bright Agrotech. This debate hasn’t been lost on journalists either who have started asking the question, what is “the verdict on the value of vertical farming” and “does vertical farming make sense?” I’ve decided it’s time to share my own personal opinions on the subject of vertical farming in an effort to help shape the ongoing debate and maybe help others from making a huge financial mistake.

So, what is the verdict on vertical farming? Well, I honestly think the jury is still out, but there is more than enough evidence to at least suggest what works and what does not. The problem today is that more often than not, the industry is selling a dream and not the honest reality. I’ve been in this industry since the very beginning and watched it evolve, so hopefully sharing my knowledge will prove useful and prevent people from buying into the dream because it can quickly become a nightmare.

The Birth of Vertical Farming

It was late 2008 when I was first introduced to what has now become widely known as Vertical Farming, or more technically accurate, Building-Integrated-Agriculture. The Company was Angel Eyes Produce, whose CEO Andy Maslin had reached out to me for some help in marketing his Company to investors. At the time I was running a boutique investor and public relations Company taking on unique and interesting clients. Andy was operating out of a small 3,000 square foot warehouse in upstate New York growing a variety of crops indoors under fluorescent light and selling them through his local farmers market. My first visit to his farm was in the winter, with three feet of snow outside his door. I was enthralled, to say the least.

To the best of my knowledge, Andy was the first true pioneer of small scale vertical farming in the U.S. The idea was unheard of at the time and finding willing investors proved to be quite difficult. I couldn’t help Andy raise the money he needed and he eventually fell victim to some people who exploited his efforts. Today, Andy runs 2445 Organics with his family in Massena, New York. I haven’t spoken to him in a while, but meeting him changed my life.

Vertical Farming Goes Big

Fast-forward a couple years to 2010 and everyone is talking about Dickson Despommier’s book The Vertical Farm: Feeding the World in the 21st Century. In the U.S., the big players in vertical farming that I started closely following were TerraSphere, Aerofarms and VertiCrop. These new farms represented a far more complex model than I had seen Andy attempting with Angel Eyes Produce. This new breed of vertical farms tried to go big and commercial with tons of automation and complex systems. For the next three years a competition of sorts broke out and everyone was vying for the title of the “largest vertical farm.” Most of these expensive, highly automated vertical farms would eventually begin to fail and lessons were learned by these early pioneers.

New players that came into the market watched these failures unfold in real time and developed less complicated and less costly vertical farms such as Green Spirit Farms, FarmedHere, Ecopia Farms and Green Sense Farms. This new generation of vertical farms reminded me a lot of Andy’s farm but these farms were being attempted at a much larger scale. 3,000 square feet gave way to 20,000 square feet and now farms were being built with over 10 layers, whereas Andy’s farm only had two or three in most cases. Investors had finally started warming up to the concept and more and more money was becoming available to start-up’s claiming to have the next greatest vertical farming idea. Vertical farming had finally started to gain some traction. It was an exciting time for all of us in the industry.  

Jumping Into the Fray

In late 2011, I decided I would join the vertical farming movement and I founded Indoor Harvest Corp. The original idea for Indoor Harvest was to combine a vertical farm with a café. The idea was simple, use the vertical farm as a marketing tool and offer fresh produce under a traditional café model that would serve soups, salads and sandwiches. In developing this idea, it became obvious there was more opportunity in the methods and processes of vertical farming than actually running one. So, while everyone else was going for the title of biggest vertical farm, I realized the industry technology was evolving too quickly to jump in as an operator so I turned my focus towards research and development. I started looking at ways to innovate vertical farming and build relationships and research and development partnerships to expand my knowledge base.

Image credit: Indoor Harvest

In 2012, I began conducting research and development with high-pressure aeroponics. I had been inspired by Richard Stoner’s work with Agrihouse and NASA as well as Aerofarms. However, I wasn’t satisfied with any of the existing designs so I began looking at how the method could be improved and better scaled. Those efforts caught the attention of a research scientist at the Massachusetts Institute of Technology’s Media Lab which led to an agreement and the commissioning of a research platform for OpenAg, formerly known as MITCityFarm.  Working on this project I learned something quite valuable, a grower could manipulate the chemical expression of a plant by combining aeroponics, LED lighting and environmental controls. In late 2014, I took that knowledge and began working with Canopy Growth Corporation to test the potential of aeroponics and environmental controls for cannabis production.

In 2013, I was the first U.S. based Company to join the newly formed Association of Vertical Farming. I was there, mingling and sharing ideas with the people that have now gone on to do big things in the industry. Unfortunately, my subsequent involvement in the cannabis industry has caused political issues for me personally in the vertical farming space.

I could probably write an entire book on my work in the vertical farming space if it wasn’t for all the NDA’s I’ve had to sign. I’ve had the pleasure of working with numerous big names in vertical farming, albeit mainly from behind the scenes due to cannabis politics. I’ve been invited to tour several major name vertical farms and asked to provide feedback. Now I want to share some of that feedback publicly in an effort to promote better adoption, dispel some myths and maybe help the discussion currently taking shape.

Image credit: Verticrop

Lessons Not Being Learned

Back when I first started, the vertical farming industry was lucky to get a published article once a month. Today, it’s not uncommon to see a dozen articles in just a single week. It’s safe to say that vertical farming has reached a critical mass. Unfortunately, the hype is creating a dangerous bubble which threatens to put the industry back several years. With Silicon Valley money now pouring into vertical farming because of the hype from technologists, everything is changing. Many of the mistakes we made five years ago are still being made today by these newer entrants. In many cases, people are simply reinventing and repackaging failed ideas. This is happening due to a new influx of investors not familiar with the history of the industry and new entrants copying what they have seen others do. Recently, there was an excellent panel hosted at the Aglanta Conference where vertical farming pioneers discussed the challenges facing the industry. 

Here are a few things I believe the industry needs to hear:

Small Vertical Farms are at best a hobby that pays for itself, at worst it’s a financial nightmare for the operator. With that said, there are certainly some successful small-scale vertical farms in operation today. However, what has made them successful has little to do with their technology and more to do with their geographic location, local market conditions and how they market their products. Generally speaking though, it’s become the exception to the rule. The margins are quite thin in vertical farming at a small scale. It’s simply not a sustainable business if it doesn’t turn a sustainable profit. Vertical farming is no joke and the failure rate is quite high.

There are far too many LED and Software/Automation companies in the vertical farming industry, please no more. Regardless of what the investment reports say, large scale vertical farms are developing far slower than any of us expected. They are capital intensive, require huge amounts of planning, engineering and developers must deal with complicated zoning and other regulatory hurdles. What’s fueling the ancillary business growth isn’t big vertical farms, but the rapid growth and interest in smaller vertical farms. In other words, the majority of the industry is built upon a weak economic model. This bubble is eventually going to pop. If I’m building a vertical farm and spending millions I want to make sure my LED supplier is going to be around for the next 10-15 years. That narrows it down to just a handful of well-capitalized companies. If I’m building automation, I don’t care about some cute cell phone app, I’m going to develop on a tried and proven controls platform such as Siemens or Rockwell and I’m going to develop a controls strategy from the ground up specifically to my needs.

No, Vertical Farming is NOT going to solve the looming food crises. Just stop, this is ridiculous nonsense. Amazon didn’t just move to acquire Whole Foods because they want to feed the hungry starving masses. They did it because more affluent buyers are willing to spend more on higher quality produce, not because they are solving world hunger. It is this demand for a higher quality product by those who can afford it that is driving the vertical farming industry today. Maybe in 100 years when we’re all glowing from Fukushima radiation and our crops won’t grow because of climate change, maybe vertical farms will solve a problem. However, chances are more likely humanity will have to completely rethink its diet to survive and vertical farms will ditch leafy greens and microgreens for a hybrid GMO, high-protein cultivar that science has yet to engineer.

No, Vertical Farming is not more sustainable, at least not yet. We’ve all heard it, vertical farming is better for the environment because it reduces the logistics of farming. While this may be true for a very large, automated, commercial-scale vertical farm, it is nowhere near true for a small scale vertical farm. The carbon foot print of a head of lettuce coming out of a small vertical farm is terribly high. It’s a tough pill to swallow when someone tells you that your small vertical farm is not environmentally friendly, but it’s not. Sorry. Scaling such a model up would not only be economically bad, it would be environmentally bad as well.

It’s not the “Vertical” in Vertical Farming that is key, it’s the ability to control the environment with precision.  Much of vertical farming is based on the fact that crops are grown in layers. However, the biggest asset of a vertical farm isn’t the layers, it’s the ability to provide a controlled environment. The focus should be on maximizing that aspect, not on how many layers you can stack. Think outside the box. Select crops that can benefit from this control.

HVAC, it’s the most often overlooked aspect of Vertical Farming.  While many focus on the growing system, lighting or the software that runs a vertical farm, very few people make the right choices when it comes to HVAC. A plant needs airflow to properly transpire. However, too much airflow is bad as well. When I see an indoor farm with oscillating fans and standalone dehumidifiers, I see a farm that wasn’t properly designed. Vertical Farms are not office buildings, they are more like data centers. A properly engineered vertical farm HVAC system is going to be capable of removing humidity and heat via a central plant that would be designed in a manner that allows airflow management across the plant canopy. There’s no point cooling the isles, or empty spaces. I’d also highly recommend investing in airflow modeling to see where potential problems might be.

What is your ROI after considering additional CAPEX in years 5 and 10? Today’s vertical farms are bigger, but in most cases are less complicated than their earliest large-scale predecessors. In some respects, the industry has come full circle. We’re basically back to where we started and are now talking expensive automation again. The question everyone must ask now is what is my ROI after say just 10 years? LED lights are going to fizzle out, mechanical systems are going to fail and pumps will need to be rebuilt. It would not be crazy to suggest that up to 70% of a vertical farm system will undergo some level of replacement or repair within a 10-year window. Does your vertical farm design allow for ease of maintenance? How does this fit into your cost model? Did you consider this in your business plan? This is where vertical farming is going to see its biggest challenge in the coming years. Vertical Farming will need to prove that the ROI is worth it before more capital is required to be injected into the business to keep it viable. I don’t see this happening for most of the big vertical farms operating today. Most will end up being maintenance nightmares within five years which will drive operating costs up.

Image credit: Indoor Harvest

Vertical Farming 2.0

Now that I’ve probably upset half the folks in the vertical farming community, not all is lost. I believe firmly that vertical farming can and will work. However, we must be honest about the economic results we’ve been seeing and learn from our mistakes. For those who know me well, I was initially the biggest champion of promoting the small vertical farming model. It was the entire core of my business plan at one time. However, after working in this industry for the better part of a decade, I’ve become wise to what works and what doesn’t. I want to see this industry grow and thrive but we need to have a real discussion about the economics of vertical farming. Here are a few things that I believe are going to be important in the Vertical Farming 2.0 movement moving forward:

Scale and automation are going to be the keys to success. If you’re not planning on spending tens of millions of dollars, you’re not scaled for success. Future successful vertical farms are going to be the ones that dramatically reduce the handling of the product, people and reduce the number of actions required to package and ship. The groups who figure out how to reduce the handling and steps required are going to be the winners. There is not a single vertical farm in operation today that doesn’t require substantial movement of people and product. The good news is there are people figuring this out and I suspect 2018 will be the year we start seeing these newer, more streamlined methods deployed.

One size does not fit all, geography, local market, and branding matter. The number one question I get asked from aspiring vertical farmers is, how much does it cost and how much will I produce? If you don’t already know the answer, you need to get a master grower on your team and someone that understands marketing. Then come talk to me after you’ve figured your business plan out. Every city is going to have different opportunities. While I can guide you through building a vertical farm, I have no way to know the multitude of business plans that will work for your selected market and location. This is the number one mistake I see new vertical farmers making, not having the people on their team that have the appropriate local experience.

If you don’t have a master grower, you’re most likely going to fail. While it looks easy, vertical farming is anything but. If you open an automotive repair shop, you need to hire a mechanic. If you open a barber shop, you need to hire a barber. If you start up a vertical farm, you need to hire a master grower. Do not assume you can watch a Youtube video or have an iPhone app help you figure this out. Farming outdoors is not easy, farming indoors is that much harder. Success depends on having the right people. Farming is not something you can franchise or manage from an operating manual or user interface.

Pharmaceuticals, cosmetics, niche food markets and plant research are the future of Vertical Farming. Spending millions of dollars to grow just basic lettuce in a vertical farm is not exactly economically viable. I’m sorry to burst some bubbles but the numbers just aren’t that good. The margins just don’t work in most locations. Not unless you’re in Alaska, or in a geographic region where produce is mostly imported. In those situations, there is an opportunity for vertical farms to support niche markets. The real future of vertical farming I believe is in the ability to produce crops with precision and with consistency. Whether that’s using technology to chemically express cannabis for specific pharmaceutical use, or growing high-quality cultivars for cosmetics or research. Lettuce is boring folks, there’s so much more we can do with vertical farming that isn’t being done. The cannabis industry could surely benefit from vertical farming methods, but legal issues hinder such major infrastructure development in the U.S. today.

Investors, quit chasing the flashy gimmicks and technologist hype. This is for all investors out there interested in vertical farming. Especially the big ones. Quit fueling the bubble and put your money behind actual scaled farm development. Try and avoid the latest flashy white label Chinese LED light, the most recent version of the Hannibal rack/flood table vertical farm, or the cool cell phone app that does nothing to help move innovation forward. Make sure you are talking to people who have been doing this since the beginning. Get to know the whole community, not just the more visible well-funded and marketed players. There’s a lot of hype out there, so be careful. Anyone saying their numbers are amazing are misleading you somewhere. Ask about their 5 and 10-year plans. If your potential investment hasn’t factored in at least a 30% CAPEX refit after 10 years, they haven’t been doing this long enough to know better. Ultimately it is you, the investors that will drive this industry forward, or cause the bubble to get bigger before it pops.

Disclaimer: Chad Sykes is the founder and Chief Innovation Officer of Indoor Harvest Corp, a publicly held Company and is a Director and spokesperson for the Medical Cannabis Association of Texas. This article was prepared or accomplished in Mr. Sykes personal capacity. The opinions and views expressed in this article are the author's own and do not necessarily reflect the opinions or views of Indoor Harvest Corp, its Board of Directors, its shareholders, or the Medical Cannabis Association of Texas.

SOURCE AGRITECTURE.COM

[ericfruits]

A new class of startup is upending America’s consumer-goods industry

IN MANY ways, Tommy John, a startup based in Manhattan, resembles a tech company straight out of Silicon Valley. On its website the venture-backed firm touts its innovative materials and patented designs. When recruiting talent, it describes itself as “disruptive” and “revolutionary”. But Tommy John does not deal in computer hardware, software or any other kind of technology. It makes men’s underwear.

Following the example of successful e-commerce brands such as Warby Parker, a glasses firm, and Casper, a mattress-maker, a growing number of startups are reimagining everyday household items—from pants and socks to toothbrushes and cookware. These “direct-to-consumer” (DTC) companies bypass conventional retailers and bring their products straight to customers via their online stores. They began several years ago to catch the attention of venture-capital (VC) firms, which have poured in more than $3bn since 2012. But the success of some DTC firms has attracted a lot of wannabes, making this a crowded market and leaving some wondering whether the boom has reached its limits.

Upgrade your inbox

Receive our Daily Dispatch and Editors' Picks newsletters.

The DTC business model first emerged in product areas dominated by slow-moving incumbents with hefty profit margins, such as spectacles and razor blades. In 2010 Gillette, the world’s largest razor-blade-maker, enjoyed 70% of the American market and gross margins as high as 60%. Since then, Dollar Shave Club and Harry’s, two subscription services that sell blades at a fraction of the price of big brands, have amassed more than 5m customers. Gillette’s market share has fallen to 54%.

Hubble Contacts, founded in 2016, wants to do the same to the $8bn contact-lens industry, which is dominated by giants such as Johnson & Johnson and Bausch + Lomb. Lenses are well-suited to the DTC model, being a commoditised product that customers purchase on a regular basis, says Jesse Horwitz, one of Hubble’s founders. The startup is on track to generate $20m in sales in 2017 and has attracted money from several VC firms.

Startups that cannot undercut incumbents on price must differentiate themselves in other ways. Casper won over many shoppers by getting rid of the worst bits of the bed-buying process, including choosing among dozens of similar products and haggling with pushy salesmen. Allbirds, a two-year-old San Francisco-based firm that makes all-wool trainers, has tweaked the design of its shoes 27 times based on feedback from customers.

Investors say branding and marketing are crucial if DTC startups are to make it. Sophie Bakalar of Collaborative Fund, a VC firm, says that brand is the first thing her team looks for in a consumer startup. Suitcases made by Away, a firm founded by two Warby Parker alumnae, have been featured in Vogue and endorsed by celebrities such as Karlie Kloss, a supermodel. But most customers learn about the brand on social media, where globe-trotting millennials share images of their bags, artfully displayed on hotel-room beds or rolling in front of iconic landmarks. Away’s social-media team collects and redistributes these posts on its Instagram account, which boasts 140,000 followers. This year the firm expects to generate $50m in sales.

For all the buzz surrounding such online brands, they face high hurdles. Investors worry about a glut of startups, which makes it difficult to stand out. “The challenge is rising above the noise,” says Kirsten Green of Forerunner Ventures, an early investor in companies like Bonobos, a clothing retailer. Some DTC firms insist on focusing on a single item in the bedroom, kitchen or bathroom, when they would do better to offer a stable of products.

Moreover, the giants of consumer goods and retailing, initially slow to respond to competition from these upstarts, have wised up. They are reacting in two ways. The first is to make it easier to buy their goods, both by expanding their own DTC distribution, as Procter & Gamble (which owns Gillette) does, and by working more closely with Amazon.

That may not be good news for the startups, but the big firms’ second tactic is what the founders of every new DTC firm, and their VC backers, dream of: spending big to acquire young rivals. Unilever, for instance, paid $1bn for Dollar Shave Club in 2016; Walmart spent $310m to acquire Bonobos in June; and this week P&G said it was buying Native, a DTC deodorant brand, for an undisclosed sum.

This spending spree explains why optimism still abounds, even as more startups jostle to carve out a niche. The consumer-goods business remains gripped by a “DTC revolution”, says Emily Heyward of Red Antler, a branding agency. A comforting thought for buyers of briefs.

This article appeared in the Business section of the print edition under the headline "Briefs encounter"

http://ift.tt/2yNXlje

[aikungfu]

Europe's fastest-growing tech companies like Revolut and Babylon Health are permanently shifting towards more flexible remote working policies.

London-headquartered neo-bank Revolut says 70% of its employees don't want to go back to working the same way they were pre-pandemic.

Startup accelerator Founders Factory says that productivity has increased with remote working. 

But, European venture capital firms Connect Ventures and Beringea found that 45% of the companies they had invested in thought the mental health of their teams has suffered. 

Visit Business Insider's homepage for more stories.

Europe's tech startups are following Silicon Valley's lead when it comes to a permanent shift towards more flexible working. 

US tech giants like Google have recently revealed plans to continue remote working until summer 2021, while Twitter told employees as early as May that they can work from home forever if they want. 

Now, European tech startups like $5.5 billion neo-bank Revolut and telehealth unicorn Babylon Health told Business Insider that they too plan to implement flexible, remote working options long term.

"I think it's been a bit of a test bed for lots of companies, including us, who have been forced into this quite radical shift in the way we work," says Babylon Health's chief commercial officer Amanda Cupples. 

"From a value-add perspective, clearly that old model — that model of  high-density, open plan working — doesn't work in this environment, so we have to shift," she adds. "The question is how do we make sure that shift's a positive one that allows us to grow as a business."

Cupples says that Babylon's London headquarters are still open, but the startup won't review plans for a large-scale return to the office until autumn. The company has more than 2,000 employees globally.

"The one thing we do know is that it won't be a return to the pre-Covid model of five days a week in the office, which is largely what we did with some exceptions."

Revolut, also headquartered in London, likewise plans to shake up the old model of the five day in-office working week. The company has around 2,000 employees.

The fintech says 70% of its employees don't want to go back to working how they were before, with most wanting to balance time in the office with remote working some days a week.

At current estimates, that would mean a maximum of 60% of employees in the office at any one time, says VP Lesley Smith. 

"We've been impressed with how quickly people adapted to working outside the office and how they maintained productivity and team working wherever they worked from," Smith says. "People are saving the time from the daily commute and that's good for work/life balance."

But, the knock-on effects from remote working have not been all positive.

While productivity is good, mental health has declined

A survey by London-based venture capital firms Connect Ventures and Beringea of 31 portfolio companies found that, while only 12% of startups felt that productivity had fallen, 45% felt that the mental wellbeing of their teams had suffered from the shift to remote working. 

"There's definitely a general desire to work more flexibly, but I think there's also a general acknowledgement that there is value in face-to-face collaboration," says Babylon's Cupples.

"I think that's what's going to make people want to come back, because there are certain things that people are missing and they're mostly around culture and communications."

For many tech startups, productivity has increased with remote working.

"In one of our surveys, both our team and startups indicated that productivity ... felt higher in this remote-first world," says Louis Warner, chief operating officer of startup builder Founders Factory.

Founders Factory hosts a number of its startups at its offices, and runs accelerators as well as startup-building programs.

"During the lockdown period for instance, we have hosted two virtual investor showcase events which have been our best attended to date with over 500 investors in attendance, we have helped our startups close approximately £30 million in funding, and we have welcomed 15 new startups to our program," added Warner.

Almost half of Founders Factory's portfolio startups are considering a more flexible working environment, either "remote-first" or more working from home days, with 35% looking to return to the office "as soon as possible".

This is consistent with the outlook for other small tech startups.

80% of the early-stage startups surveyed by Connect and Beringea expect to return to the office by the end of 2020, but only 22% expect that the entire workforce will be back within the next one to two years. 

For lawtech startup SeedLegals, around half of the workforce are "happy at home" and half have plans to return to the office in the next few months.

"Based on those results, we've given notice on our current office space, and have two months to decide what to do next," says CEO Anthony Rose. "Currently our thinking is that we'll find some, possibly smaller, space, to reflect the changes in people's desire for flexibility in their working location."

But Rose isn't sure this is sustainable long term. 

"In my opinion, there are two stable scenarios: Everyone in the office, or everyone at home. The in-between state, with some employees at home and some in the office, may be the worst of both worlds," he says.

"You'll be trying to hold meetings with half the team sitting together, talking to a laptop on the desk with tinny sound and small videos of the rest."

Join the conversation about this story »

NOW WATCH: Why American sunscreens may not be protecting you as much as European sunscreens

from Tech Insider https://ift.tt/2PG0MSU via A.I .Kung Fu

[un-enfant-immature]

“A perfect storm for first time managers,” say VCs with their own shops (and who have advice)

Until very recently, it had begun to seem like anyone with a thick enough checkbook and some key contacts in the startup world could not only fund companies as an angel investor but even put himself or herself in business as a fund manager.

It helped that the world of venture fundamentally changed and opened up as information about its inner workings flowed more freely. It didn’t hurt, either, that many billions of dollars poured into Silicon Valley from outfits and individuals around the globe who sought out stakes in fast-growing, privately held companies — and who needed help in securing those positions.

Of course, it’s never really been as easy or straightforward as it looks from the outside. While the last decade has seen many new fund managers pick up traction, much of the capital flooding into the industry has accrued to a small number of more established players that have grown exponentially in terms of assets under management. In fact, talk with anyone who has raised a first-time fund and you’re likely to hear that the fundraising process is neither glamorous nor lucrative and that it’s paved with very short phone conversations. And that’s in a bull market.

What happens in what’s suddenly among the worst economic environments the world has seen? First and foremost, managers who’ve struck out on their own suggest putting any plans on the back burner. “I would love to be positive, and I’m an optimist, buut I would have to say that now is probably one of the toughest times” to get a fund off the ground,” says Aydin Senkut, who founded the firm Felicis Ventures in 2006 and just closed its seventh fund.

It’s a perfect storm for first-time managers,” adds Charles Hudson, who launched his own shop, Precursor Ventures, in 2015.

Hitting pause doesn’t mean giving up, suggests Eva Ho, cofounder of the three-year-old, seed-stage L.A.-based shop Fika Ventures, which last year closed its second fund with $76 million. She says not to get “too dismayed” by the challenges. Still, it’s good to understand what a first-time manager is up against right now, and what can be learned more broadly about how to proceed when the time is right.

Know it’s hard, even in the best times

As a starting point, it’s good to recognize that it’s far harder to assemble a first fund than anyone who hasn’t done it might imagine.

Hudson knew he wanted to leave his last job as a general partner with SoftTech VC when the firm — since renamed Uncork Capital — amassed enough capital that it no longer made sense for it to issue very small checks to nascent startups. “I remember feeling like, ‘Gosh, I’ve reached a point where the business model for our fund is getting in the way of me investing in the kind of companies that naturally speak to me,” which is largely pre-product startups.

Hudson suggests he may have overestimated interest in his initial idea to create a single GP fund that largely backs ideas that are too early for other investors. “We had a pretty big LP based [at SoftTech] but what I didn’t realize is the LP base that’s interested in someone who is on fund three or four is very different than the LP base that’s interested in backing a brand new manager.”

Hudson says he spent a “bunch of time talking to fund of funds, university endowments — people who were just not right for me until someone pulled me aside and just said, ‘Hey, you’re talking to the wrong people. You need to find some family offices. You need to find some friends of Charles. You need to find people who are going to back you because they think this is a good idea and who aren’t quite so orthodox in terms of what they want to see in terms partner composition and all that.'”

Collectively, it took “300 to 400 LP conversations” and two years to close his first fund with $15 million. (Its now raising its third pre-seed fund).

Ho says it took less time for Fika to close its first fund but that she and her partners talked with 600 people in order to close their $41 million debut effort, adding that she felt like a “used car salesman” by the end of the process.

Part of the challenge was her network, she says. “I wasn’t connected to a lot of high-net-worth individuals or endowments or foundations. That was a whole network that was new to me, and they didn’t know who the heck I was, so there’s a lot of proving to do.” A proof-of-concept fund instill confidence in some of these investors, though Ho notes you have to be able to live off its economics, which can be miserly.

She also says that as someone who’d worked at Google and helped found the location data company Factual, she underestimated the work involved in running a small fund. “I thought, ‘Well, I’ve started these companies and run these big teams. How how different could it be? Learning the motions and learning what it’s really like to run the funds and to administer a fund and all responsibilities and liabilities that come with it . . . it made me really stop and think, ‘Do I want to do this for 20 to 30 years, and if so, what’s the team I want to do it with?'”

Investors will offer you funky deals; avoid these if you can

In Hudson’s case, an LP offered him two options, either a typical LP agreement wherein the outfit would write a small check, or an option wherein it would make a “significant investment that have been 40% of our first fund,” says Hudson.

Unsurprisingly, the latter offer came with a lot of strings. Namely, the LP said it wanted to have a “deeper relationship” with Hudson, which he took to mean it wanted a share of Precursor’s profits beyond what it would receive as a typical investor in the fund.

“It was very hard to say no to that deal, because I didn’t get close to raising the amount of money that I would have gotten if I’d said yes for another year,” says Hudson. He still thinks it was the right move, however. “I was just like, how do I have a conversation with any other LP about this in the future if I’ve already made the decision to give this away?”

Fika similarly received an offer that would have made up 25 percent of the outfit’s debut fund, but the investor wanted a piece of the management company. It was “really hard to turn down because we had nothing else,” recalls Ho. But she says that other funds Fika was talking with made the decision simpler. “They were like, ‘If you sign on to those terms, we’re out.” The team decided that taking a shortcut that could damage them longer term wasn’t worth it.

Your LPs have questions, but you should question LPs, too

Senkut started off with certain financial advantages that many VCs do not, having been the first product manager at Google and enjoying the fruits of its IPO before leaving the outfit in 2005 along with many other Googleaires, as they were dubbed at the time.

Still, as he tells it, it was “not a friendly time a decade ago” with most solo general partners spinning out of other venture funds instead of search engine giants. In the end, it took him “50 no’s before I had my first yes” — not hundreds —   but it gave him a taste of being an outsider in an insider industry, and he seemingly hasn’t forgotten that feeling.

Indeed, according to Senkut, anyone who wants to crack into the venture industry needs to get into the flow of the best deals by hook or by crook. In his case, for example, he shadowed angel investor Ron Conway for some time, working checks into some of the same deals that Conway was backing.

“If you want to get into the movie industry, you need to be in hit movies,” says Senkut. “If you want to get into the investing industry, you need to be in hits. And the best way to get into hits is to say, ‘Okay. Who has an extraordinary number of hits, who’s likely getting the best deal flow, because the more successful you are, the better companies you’re going to see, the better the companies that find you.”

Adds Senkut, “The danger in this business is that it’s very easy to make a mistake. It’s very easy to chase deals that are not going to go anywhere. And so I think that’s where [following others] things really helped me.”

Senkut has developed an enviable track record over time. The companies that Felicis has backed and been acquired include Credit Karma, which was just gobbled up by Intuit; Plaid, sold in January to Visa; Ring, sold in 2018 to Amazon, and Cruise, sold to General Motors in 2016, and that’s saying nothing of its portfolio companies to go public.

That probably gives him a kind of confidence that it’s harder to earlier managers to muster. Still, Senkut also says it’s very important for anyone raising a fund to ask the right questions of potential investors, who will sometimes wittingly or unwittingly waste a manager’s time.

He says, for example, that with Felicis’s newest fund, the team asked many managers outright about how many assets they have under management, how much of those assets are dedicated to venture and private equity, and how much of their allotment to each was already taken. They did this so they don’t find themselves in a position of making a capital call that an investor can’t meet, especially given that venture backers have been writing out checks to new funds at a faster pace than they’ve ever been asked to before.

In fact, Felicis added new managers who “had room” while cutting back some existing LPs “that we respected . .. because if you ask the right questions, it becomes clear whether they’re already 20% over-allocated [to the asset class] and there’s no possible way [they are] even going to be able to invest if they want to.”

It’s a “little bit of an eight ball to figure out what are your odds and the probability of getting money even if things were to turn south,” he notes.

Given that they have, the questions look smarter still.