Welcome to this week’s edition of The TechCrunch Exchange, a newsletter focused on startups and market trends. It’s an expanded version of the daily column found on Extra Crunch, offered freely for your weekend enjoyment. Interested in receiving it directly in your inbox each Saturday morning? Sign up here.

It’s been quite a week, and indeed, a remarkable month. Are you managing to stay well? It’s perfectly acceptable to feel fatigued; we all are. That’s precisely why weekends exist.

This week saw individual investors challenge more established financial players in a surprising turn of events, successfully executing a strategy that, surprisingly, held merit – anticipating the continued decline of a struggling brick-and-mortar business.

By taking a long position in GameStop, these investors reversed the expectations of institutional traders. Subsequently, a series of unusual occurrences unfolded, including trading restrictions on certain stocks, congressional scrutiny, prominent figures publicly adopting populist rhetoric on social media, and a surge in the value of various cryptocurrencies, notably Dogecoin. As the week concluded, no definitive resolution had been reached, creating a distinctly unusual situation.

Let’s consider the key takeaways from these events. Firstly, avoid excessively shorting a stock to the point where it becomes vulnerable to a counter-trade. Secondly, the fintech companies that TechCrunch has followed closely have demonstrated a greater degree of fragility than previously thought, due to factors like reserve requirements or inherent platform vulnerabilities. And thirdly, circumstances can invariably worsen.

Further evidence of this final point emerged with news that WeWork is considering a public listing through a SPAC. This development casts doubt on the notion that this year would be more stable and predictable than 2020.

However, let’s move beyond recapping events and focus on the central topic of today’s newsletter: a discussion I had with my direct supervisor, Guru Gowrappan, the CEO of Verizon Media Group (VMG). For those unfamiliar, Verizon owns VMG, which in turn owns TechCrunch. VMG encompasses a diverse portfolio of assets, including Yahoo, various media brands, and technology products, generating billions in annual revenue – a figure that provides context for Guru’s position relative to mine, which is a valuable vantage point within TechCrunch, though not one that carries significant organizational authority.

A considerable distance, in fact.

We connect on Twitter, and following Verizon’s earnings report this week – which included notably positive results from VMG that I commented on – I was granted approximately thirty minutes of Guru’s time. This presented an opportunity to engage with my boss’s superior without any pre-defined agenda, an opportunity I couldn’t decline.

For context, VMG reported $2.3 billion in revenue for Q4, representing an 11% increase compared to the same quarter the previous year. Verizon characterized this as “the first quarter of year-over-year growth since the Yahoo! acquisition.” This growth was attributed, according to the Verizon earnings call, to “strong advertising trends with demand-side platform revenue growing 41% compared to the prior year.”

This positive trend was particularly welcome, given that VMG’s revenue had decreased to $1.4 billion in Q2 2020, a 24.5% decline from the previous year.

I posed several questions: Would the recent advertising momentum continue into 2021, potentially impacting numerous businesses beyond VMG; how crucial was this year-over-year growth to Verizon; how would commerce revenue be balanced with journalistic integrity; and what are Guru’s thoughts on emerging media products, such as the resurgence of newsletter technology, being explored by companies like Substack, Twitter, and Facebook.

Here’s a summary of what I discovered:

• Concerning the strong advertising performance in the latter part of the year during the COVID-19 pandemic, Guru stated that “the core fundamentals [of] the market dynamics have changed so that they’re more permanent,” and that consumer behavior is now “more digital, more online” than it was previously.
• The VMG CEO refrained from providing specific Q1 2021 projections, but indicated that VMG intends to “continue [its] momentum.”
• This momentum is partly driven by subscription products, which Guru highlighted as a success: “If you look at one of the trends that happened due to COVID, consumers [are] moving to more trusted content and want to spend more time and money on consuming subscription-based products […] TechCrunch/Extra Crunch grew almost 196% year-on-year.”
• His assessment suggests that the current environment is favorable for online media companies, a situation that hasn’t consistently been the case in recent years within the journalism industry.
• Regarding VMG’s position within Verizon – a topic I’ve considered following the BuzzFeed-HuffPost merger – I inquired whether VMG’s recent financial performance had increased its value to Verizon, and whether we had validated the initial investment strategy. This question, admittedly, was somewhat challenging to articulate when speaking to someone with the authority to terminate my employment. Nevertheless, Guru responded with a definitive “completely.” He further explained that the Verizon CEO views the media business as “core” to Verizon’s strategy, and that the company “will continue to invest in the media business while we continue to deliver on our promise.” Therefore, consider subscribing to Extra Crunch.
• Guru emphasized that VMG will not compromise its credibility by prioritizing revenue from e-commerce promotions: “At no point will we trade dollar value in a transaction for trust; there’s no way. […] The editorial team keeps me honest,” he said, adding that he avoids interfering with decisions that could compromise journalistic independence. This was reassuring to hear.
• Finally, regarding potential new media products, Guru expressed optimism about personalization but declined to reveal any specific acquisition plans, such as a potential purchase of Substack.

I also asked about the possibility of VMG selling or divesting any other media properties following the HuffPost-BuzzFeed deal. Guru stated that the Verizon CEO has affirmed the company’s “full commitment” to the media business, and that this commitment will be strengthened “upon investing and growing,” rather than through divestment, adding that there are “no plans to sell any additional properties.” Given my reliance on health insurance, this was encouraging news.

I recognize that this newsletter deviates from the typical format, but I consistently aim to share insights gained through my professional interactions with you.

Now, let’s return to the world of venture capital.

Market Notes

While GameStop dominated conversations on Twitter this week, several other noteworthy events occurred. For instance, Alfred, a U.S.-based financial technology company, secured $100 million in funding on Tuesday. This company uniquely combines artificial intelligence with human expertise to assist individuals in managing their finances.

Expanding on our recent analysis of venture capital data from 2020 – including a detailed examination of the African VC landscape – Work-Bench, an investment firm, has published a report on the performance of New York City’s enterprise technology sector during the latter half of the previous year. Typically, I would analyze this information for you, but given the events of this week, you’ll need to review the data yourself.

Continuing with the theme of data, Hallo, a company focused on helping businesses improve diversity in their hiring processes, released its “Black Founder Funding Q4 2020” report. It’s worth reading. However, if you’re short on time, the key statistic – one that was both striking and disheartening – is this: “Hallo’s research revealed that of the 1,537 companies examined [in Q4 2020], only 40 were led by Black founders.” 

This week also included a discussion with Microsoft following their earnings report. While a more comprehensive analysis will be available later, two points were evident: Significant expansion opportunities remain within the cloud computing sector, which is beneficial for a substantial portion of the startup software industry. Furthermore, if you’re seeking additional data regarding Teams’ growth to better understand the rationale behind Salesforce’s acquisition of Slack, further quarterly reports should provide more insight.

Various and Sundry

To conclude, the concept for a burrito cannon-based food delivery service originated with me in August 2014. The envisioned service would function through a mobile application; a single button press would initiate burrito delivery directly to your workplace, eliminating the need for any selections on your part. Interestingly, Postmates subsequently integrated a burrito cannon feature into their own application, a development that was both amusing and enjoyable.

Now, in 2021, Postmates operates as a division of Uber. And they have reintroduced the burrito cannon:

I hadn't foreseen that my initially simple and perhaps ill-conceived notion would, more than five years later, result in a professional football player running across a playing field while being targeted by a large-scale potato launcher propelling a Mexican food item. However, it is currently 2021, and this is the reality.

This serves as proof, in my opinion, that every startup idea I generate possesses merit,

Alex