TechCrunch+ Roundup: Equity Allocation, Unicorn Traffic, Blockchain Gaming

Attracting and Keeping Talent at Startups

Founders of early-stage companies typically have limited options when it comes to attracting and retaining valuable employees.

These methods generally center around three key components:

• Providing a competitive salary that reflects market value.
• Developing roles that effectively utilize an individual’s skills and passions.
• Granting employees equity in the company.

While equity compensation may not ultimately result in significant wealth for all employees, it does create a powerful incentive to remain with the company until fully vested.

Even a disgruntled employee is likely to reconsider leaving a position before their equity has fully matured.

Designing an Effective Equity Program

Kirsten Prost, VP at Tercera, a VC/PE firm, provides a comprehensive guide to designing an equity program in a recent TechCrunch+ guest post.

Her guidance includes specific brackets and multipliers for contributors at varying levels within the organization.

The article also features illustrative examples that founders can utilize for modeling purposes.

Furthermore, Prost offers advice on how to effectively communicate the value of equity to employees.

Experience shows that many entrepreneurs emphasize the importance of fostering an “ownership mentality,” but a truly transparent equity program is essential to move beyond mere rhetoric.

Without transparency, talk of ownership rings hollow.

TechCrunch+ Update & Weekend Closing

Please note that full TechCrunch+ articles are exclusively available to members.

A 20% discount is currently available on one- or two-year subscriptions using the code TCPLUSROUNDUP.

The TechCrunch+ team will be observing Martin Luther King Jr. Day on Monday, January 17th.

Thank you for your continued readership.

Wishing you a wonderful weekend!

Walter Thompson
Senior Editor, TechCrunch+
@yourprotagonist

Exploring the US Market: Visa Requirements for Business Exploration

Dear Multitasking Mom,

Your intention to visit your daughter and concurrently assess the US market for business expansion raises important visa considerations.

It’s crucial to understand the regulations governing business activities while in the United States on a visitor visa.

Visitor Visas and Business Activities

Generally, the B-1 visa is designed for short-term business trips. However, the scope of permissible activities is limited.

Simply visiting to "explore feasibility" can be a gray area, depending on the nature of the exploration.

• Activities like attending conferences, consulting with business associates, and negotiating contracts are typically allowed.
• However, engaging in productive labor or directly operating a business is prohibited.

Feasibility Exploration: What's Permissible?

Preliminary investigations into market conditions, such as meeting potential partners or researching locations, are usually acceptable.

However, activities that resemble establishing a business – like securing office space or hiring employees – could be viewed as violating the terms of a visitor visa.

Potential Visa Options

If your exploration involves more than preliminary investigation, consider these alternatives:

• B-1/B-2 Visa: This combined visa allows for both business and tourism.
• E-2 Treaty Investor Visa: If your country has a treaty with the US, this visa allows you to invest in and manage a US business.
• L-1A Visa: For executives or managers of an international company transferring to a US branch.

Recommendations

To avoid potential issues, it’s highly recommended to consult with an immigration attorney before your trip.

They can assess your specific plans and advise on the most appropriate visa strategy.

Accurate visa compliance is essential to ensure a smooth and lawful visit.

Justworks IPO Postponement Signals Trouble for Unicorns

A widening discrepancy in valuations between private and public tech markets is becoming increasingly apparent. The recent decision by Justworks to postpone its initial public offering (IPO) is potentially indicative of future challenges, as reported by Alex Wilhelm.

Public vs. Private Market Valuations

Currently, software companies listed on public exchanges are experiencing significant market pressure. Conversely, private markets continue to demonstrate strong confidence in tech startups.

Implications for Highly Valued Startups

This divergence in market sentiment could have negative consequences for startups with high valuations seeking an exit strategy this year. The gap in enthusiasm is particularly concerning.

According to Alex Wilhelm, “The delay in Justworks’ IPO highlights a substantial difference in optimism between private and public markets. This situation presents unfavorable conditions for expensive, cash-burning unicorns.”

A Potential Bellwether

Justworks’ decision to hold off on its IPO may serve as a warning sign. It suggests that the current market conditions are not conducive to successful public offerings for many tech companies.

The Growing Rift

The situation underscores a growing tension. Private market valuations may not be sustainable in the face of public market realities.

This could lead to downward pressure on valuations during future funding rounds. Companies hoping for lucrative exits may need to adjust their expectations.

What This Means

The postponement of the Justworks IPO is a significant event. It signals a potential shift in the landscape for tech startups seeking to go public.

Unicorns, in particular, should carefully assess their financial positions and exit strategies. The window for favorable IPOs may be closing.

Blockchain Gaming: Investor Perspectives on Regulation, Potential, and NFT Trends

In October 2021, Steam, a prominent game distribution platform, implemented a ban on games utilizing blockchain technology. This included the removal of any titles integrating NFTs or cryptocurrencies from its service.

Conversely, the game Axie Infinity, which is built on NFT technology, has seen new users investing substantial amounts – often hundreds of dollars – to obtain in-game assets like unique creatures and virtual consumables.

Despite this growing consumer interest, the blockchain gaming sector faces challenges related to unclear regulations and the often-speculative nature of cryptocurrency investments. This raises the question: what is the investor viewpoint on this evolving landscape?

To gain insight, a survey was conducted involving seven investors currently engaged in the blockchain gaming space.

• Anton Backman, principal, and Kenrick Drijkoningen, general partner, Play Ventures
• Banafsheh Fathieh, head of investments for the Americas at Prosus Ventures
• Josh Chapman, managing partner at Konvoy Ventures
• Eddie Thai, general partner at both 500 Startups and Ascend Vietnam Ventures
• Beryl Li, co-founder of Yield Guild Games
• Rajul Garg, founder and managing partner of Leo Capital

The survey aimed to capture a comprehensive understanding of the opportunities and risks associated with blockchain gaming.

Investor sentiment was explored regarding the long-term viability of NFTs within games and the potential impact of evolving regulatory frameworks.

The responses provide valuable perspectives on the current state and future trajectory of this rapidly developing industry.

Key Areas of Investigation

The survey focused on several critical aspects of blockchain gaming.

• The impact of Steam’s decision to prohibit blockchain games.
• The sustainability of play-to-earn models, exemplified by Axie Infinity.
• The role of regulation in fostering or hindering growth.
• The perceived value and longevity of in-game NFTs.

Understanding these factors is crucial for assessing the potential of blockchain gaming as an investment opportunity.

Creating High-Converting Lead Magnets That Provide Real Benefit

Attracting potential customers to your website is only the first step. Successfully motivating them to provide contact information or make a purchase presents a greater challenge.

With increasing consumer awareness regarding data privacy, Aleksandra Korczynska, CMO at GetResponse, emphasizes the importance of aligning lead generation strategies with the needs of the target audience.

Marketers who prioritize this alignment will be positioned for substantial success.

According to Korczynska, the core principle lies in establishing an initial point of contact that fosters ongoing interaction – this is achieved through effective lead magnets.

The Power of a Well-Designed Lead Magnet

A lead magnet serves as a valuable resource offered in exchange for a visitor’s contact details.

This exchange must be mutually beneficial; the offered resource should genuinely address a pain point or provide a desired solution for the prospective customer.

Examples of effective lead magnets include ebooks, checklists, templates, or access to exclusive webinars.

Key Characteristics of High-Conversion Lead Magnets

• Relevance: The lead magnet must directly relate to the visitor’s interests and the products or services offered.
• Value: It should provide tangible value, offering actionable insights or solutions.
• Accessibility: The format should be easily consumable and accessible on various devices.
• Specificity: Focus on a narrow topic to deliver concentrated value.

By focusing on these characteristics, businesses can significantly improve their lead generation efforts.

Ultimately, a successful lead magnet isn’t about collecting contacts; it’s about initiating a valuable relationship with potential customers.

Was the SPAC Surge a Bust?

Special purpose acquisition companies (SPACs) experienced a period of rapid growth in both 2020 and 2021, facilitating public listings for a significant number of businesses.

However, the prevailing sentiment suggests that this surge didn't deliver on its initial promise.

The resulting disillusionment isn't confined to a specific sector, as noted by Alex Wilhelm in The Exchange.

Companies spanning property technology, financial technology, media, and even personal transportation have witnessed substantial declines in valuation following their initial public offerings.

A Critical Assessment

Wilhelm posits that sufficient evidence has accumulated to definitively characterize the SPAC boom as a failure.

The initial enthusiasm surrounding SPACs has demonstrably waned, leading to a reassessment of their viability as a pathway to public markets.

This downturn impacts a diverse range of companies that utilized the SPAC mechanism to accelerate their public debut.

Industry-Wide Impact

The decline is observable across multiple industries.

• Property Tech: Experienced significant post-debut value reductions.
• Fintech: Faced considerable drops in market capitalization.
• Media Companies: Saw substantial declines after going public via SPAC.
• Personal Mobility: Also suffered from post-IPO valuation decreases.

These widespread downturns reinforce the argument that the SPAC boom ultimately fell short of expectations.

The Appeal of Traditional Gaming Over Blockchain’s Pay-to-Earn Model

While blockchain gaming distinguishes itself with a play-to-earn component, the fundamental question arises: should entertainment inherently involve financial compensation?

Alex Wilhelm, a Senior Editor, expresses a preference for the enjoyment and competitive spirit found in online gaming. He notes, however, that he holds a skeptical view of current crypto games, despite acknowledging potential incentive alignment compared to conventional gaming models.

Wilhelm’s Concerns Regarding Current Crypto Games

The core of Wilhelm’s reservations centers around the current state of the blockchain gaming landscape. He believes that the existing implementations fall short of delivering a truly compelling gaming experience.

Despite the allure of earning rewards while playing, Wilhelm suggests that the primary motivation for engaging in games should be the inherent fun and challenge. This perspective highlights a potential disconnect between the financial incentives and the core principles of entertainment.

A Focus on Entertainment Value

Wilhelm’s viewpoint emphasizes the importance of prioritizing entertainment value over purely economic gains within the gaming sphere. He values the thrill of competition and the enjoyment derived from interacting with other players.

This suggests a preference for games that are engaging and rewarding in their own right, rather than relying on financial incentives to attract and retain players. The intrinsic motivation of fun is considered paramount.

Play-to-earn mechanics, while innovative, are viewed with caution, prompting a consideration of whether they ultimately enhance or detract from the overall gaming experience.

Halsey Minor, CNET Co-founder, Expresses Optimism Regarding NFTs

Halsey Minor gained prominence as a co-founder of CNET and through his early investment in Salesforce.com.

However, his focus for the past few years has been centered on the cryptocurrency space.

Currently, he heads Vivid Labs, a company that runs a unique, internally developed platform for NFT publishing.

In a recent TC+ interview, Minor stated, “Similar to how I foresaw the substantial growth of the internet decades ago, I view crypto and NFTs as the defining technologies of the future.”

The interview also features guidance for entrepreneurs seeking funding for their web3 ventures.

Minor’s Transition to the Crypto World

Having spent thirty years in content creation, Minor’s move to leading Vivid Labs represents a significant shift.

He believes the potential of NFTs mirrors the early days of the internet, offering a transformative technological landscape.

His insights are particularly valuable given his track record of identifying and investing in groundbreaking technologies.

Advice for Web3 Founders

The TC+ interview provides actionable advice for founders navigating the complexities of raising capital within the web3 ecosystem.

Minor shares his perspective on what investors are looking for and how to effectively pitch web3 projects.

This guidance is aimed at helping entrepreneurs successfully secure funding and bring their innovative ideas to fruition.

2021 Witnessed Unprecedented Growth in Venture Capital Funding

Anna Heim and Alex Wilhelm are preparing to publish a series of articles for The Exchange, focusing on venture capital sectors and emerging trends across various geographical locations. As preparation for this upcoming coverage, they recently analyzed the extraordinary venture capital activity observed throughout 2021.

Record-Breaking Investment Levels

Data indicates that venture capital investment reached a total of $621 billion in 2021, representing a substantial 111% increase compared to the previous year, as reported by CB Insights. Crunchbase estimates the total investment at $643 billion.

The figures demonstrate a significant surge in funding. Regardless of the specific data source, it is evident that over $500 billion was channeled into rapidly expanding private companies last year.

This represents approximately a doubling of the investment volume seen in 2020 for this particular asset class. Venture capital experienced an exceptional period of growth.

Looking Ahead

The analysis of 2021’s performance serves as a crucial baseline for understanding current market dynamics. The upcoming reports from Heim and Wilhelm will delve deeper into regional variations and specific industry trends.