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Potential Decline in Startup Valuations?

Greetings! Alex here, and we'll be discussing financial matters briefly before delving into startups, venture capital, and the actions of major technology companies. Your patience is appreciated.

Today witnessed a significant downturn in tech stocks; the Nasdaq Composite, heavily weighted towards technology, experienced a decline exceeding 2%. Cloud-based technology stocks suffered a proportionally larger decrease. The catalyst for this shift? Indications from the U.S. government regarding potential interest rate increases.

The impact stems from the previous low-interest-rate environment, which encouraged capital allocation towards tech stocks and venture capital funds focused on startups. With the possibility of altered monetary policy, investors are now divesting from technology holdings.

Byron Deeter, a partner at Bessemer Venture Partners, highlighted this trend, observing a “brutal few days in the clouds” with software stocks declining approximately 5% today and 10% for the week. He questioned whether this represents a temporary pause following the substantial gains of 2020, or the beginning of a more extensive valuation correction.

This is a pertinent inquiry. Further analysis of the economic factors at play can be found here and here. Let's now turn our attention to the startup ecosystem.

Twitter Strengthens Subscription Efforts

The direction of Twitter’s subscription plans is becoming clearer, and it involves the acquisition of existing companies. Today, Twitter announced its purchase of Scroll, a startup offering users an ad-free browsing experience across multiple news websites for a monthly fee. Scroll then shared revenue with the publishers it partnered with.

This is an interesting business model, reminiscent of Contenture, a similar startup covered by TechCrunch in 2009. However, Scroll achieved significantly greater traction. It’s worth noting that this author had no involvement with Scroll’s founding.

The acquisition of Scroll is significant because Twitter is actively integrating startups and their products to build a more comprehensive suite of services. This strategy aims to improve the platform’s long-term monetization capabilities. As reported by Sarah:

Is Twitter positioning itself as a competitor to Substack? Indeed. And is it also challenging Clubhouse? Yes. Furthermore, by assisting media organizations in increasing their revenue, Twitter is potentially competing with the media ventures backed by a16z. A rivalry between Jack Dorsey and Marc Andreessen wasn't anticipated, but it's a development worth observing.

This move signals a broader ambition for Twitter to become a central hub for content consumption and creator monetization.

Recent Activity in the Startup Funding Landscape

A significant amount of startup-related news emerged today, and we've distilled it to provide a concise overview. Special recognition is due to Mary Ann for her extensive coverage of these developments.

Here’s a summary of the key events:

• HoneyBook secured $155 million in funding, achieving a valuation exceeding $1 billion, to empower small and medium-sized businesses (SMBs) and freelancers with business management tools. This Series D round was spearheaded by Durable Capital, with participation from Tiger Global. Demand for financial management software remains strong.
• Persona obtained $50 million to enhance its identity verification services, following a tenfold increase in year-over-year revenue. The company previously raised $17.5 million in January of last year, demonstrating substantial growth during the pandemic.
• WorkBoard raised $75 million, anticipating economic expansion and evolving business practices, as a company specializing in Objectives and Key Results (OKR) software. The market for OKR-focused solutions continues to expand; further details on this emerging group of companies can be found here.
• Acronis secured $250 million at a valuation of $2.5 billion or more, intending to strengthen its cyber protection offerings. Beyond its sponsorship of the Williams F1 team, Acronis has become a multicorn company with substantial financial resources.

In addition to these highlights, two further funding announcements were made. Multicoin Capital, based in Austin, has launched a $100 million fund to capitalize on the increasing interest in the cryptocurrency market.

Furthermore, Stride VC, a seed investment fund located in London, has raised £100 million.

Insights and Evaluation from Extra Crunch

Strategies for Entering Silicon Valley as a Non-Native

Securing a meeting with an investor isn't achieved through simple means. Success, as is often the case, hinges on established connections and the value proposition you present.

According to Domm Holland, CEO and co-founder of Fast, “Developing strong interpersonal relationships is paramount.” He emphasizes this as the primary method for achieving fundraising success.

Since its inception in 2019, Fast has successfully secured $124 million in funding over three rounds, coinciding with user acquisition and partnerships with companies like Stripe for its streamlined one-click checkout solution. Holland, originally from Australia, provides practical guidance for aspiring entrepreneurs who are not traditionally part of the Silicon Valley network.

Holland clarifies that fundraising is only one aspect of the entrepreneurial journey. Essential components also include talent acquisition, team building, customer development, supplier relationships, and the creation of comprehensive ecosystems.

(Extra Crunch is a membership program designed to empower founders and startup teams. Registration is available here.)

A Response from Major Corporations

Let's begin with significant developments in the corporate world, but first, consider this: Tesla invested $3 billion – that figure is accurate – in patents concerning battery technology, which we believe holds substantial potential.

Regarding larger enterprises, Ron delivers two reports today focusing on prominent technology companies. He recently interviewed Christian Klein, the CEO of SAP. As you may remember, SAP previously divested Qualtrics. What future direction will the software company pursue? Ron investigates.

Box Faces Shareholder Pressure

Continuing coverage of Box reveals that several of its major public investors are pushing for changes. They aim to add further new members to Box’s board of directors, simultaneously criticizing the current leadership team.

This situation is noteworthy, as its outcome could either promote or deter further initial public offerings (IPOs) from unicorn companies.

Positive Developments from Tech Leaders

From the realm of Big Tech, there is some encouraging news to share. Instagram is currently developing enhancements to its captioning technology, which will improve accessibility for users.

Additionally, Devin – reporting independently of Twitter – shares that Microsoft is launching an initiative designed to assist children with reading comprehension.

• Tesla invested heavily in battery tech patents.
• SAP is navigating its future post-Qualtrics.
• Box is experiencing shareholder activism.
• Instagram is improving accessibility.
• Microsoft is supporting childhood literacy.

These developments highlight the diverse activities of major technology companies, ranging from strategic investments to social responsibility initiatives.

Insights from Language Learners

A recent inquiry posed to our Twitter followers regarding their experiences with foreign language acquisition has yielded a diverse range of responses. Readers are encouraged to share their own perspectives in the comments section. Some individuals have reported positive outcomes utilizing Duolingo, while others recounted surprisingly completing German language courses in junior high school without retaining any practical conversational ability.

Regardless of individual journeys, exploring the Duolingo EC-1 report provides valuable insight into the company’s origins, its monetization strategies, and future plans.

Entrepreneurial Discussions

For those currently engaged in building their own ventures, we invite you to participate in this week’s Extra Crunch Live event. Registration is available at this link and attendance is complimentary. We look forward to seeing you there.

The discussion will cover key aspects of company formation and growth.

Don't miss this opportunity to connect with fellow entrepreneurs.

Sharing Your Experiences

We value the input of our community and encourage everyone to contribute their thoughts.

• Have you used Duolingo? What were your results?
• What challenges did you face when learning a new language?
• What advice would you give to others embarking on a similar journey?