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The TechCrunch Exchange: A Weekly Startup and Market Update

This newsletter, The TechCrunch Exchange, provides a weekly overview of the startup landscape and market trends. It builds upon the insights from the daily Exchange column, offering a free resource for weekend reading. Interested in receiving it directly? Sign up here.

Global Startup Activity Recap

This week’s analysis began with a focus on the Chinese market, then expanded to explore startup activity in Africa. Further examination returned to China, followed by an in-depth investigation of the Latin American startup ecosystem. Finally, we revisited the Robinhood IPO. A busy week, to say the least!

Amazon's Stock Dip and Investor Expectations

The recent decline in Amazon’s stock price on Friday may have seemed unexpected. The company reported substantial revenue increases, exceeding $113 billion for the quarter. Furthermore, its AWS public cloud division demonstrated consistent performance.

However, investors anticipated even greater growth and had factored this expectation into the stock’s valuation. When Amazon failed to meet revenue projections and forecasted Q3 2021 growth “between 10% and 16% compared with third quarter 2020,” a sell-off ensued.

Broader E-Commerce Trends

The investor reaction isn’t isolated to Amazon. Both Etsy and eBay experienced similar declines this week. A growing sentiment suggests that the accelerated e-commerce growth spurred by the COVID-19 pandemic is decelerating, potentially reaching its peak.

This shift implies that company valuations, including those of startups, are likely to be adjusted. A re-evaluation of growth prospects is underway across the sector.

Growth and Market Framing

Despite slowing growth, not all companies are facing difficulties. Duolingo, for example, enjoyed a successful initial public offering. Regardless of the impact of the delta variant, investor perspectives are evolving.

It is crucial to acknowledge this changing market framing and incorporate it into our analysis. Remaining aware of these shifts will be essential for navigating the current investment climate.

The Impact of Robinhood on Consumer Investing

A key observation this week centers on the significant changes Robinhood has brought to the landscape of consumer investing. While much attention focused on the company’s initial public offering and its subsequent trading performance, deeper analysis of its filings reveals a substantial cultural shift.

Robinhood’s latest S-1/A filings highlight a compelling pair of statistics demonstrating its growth.

These figures represent a considerable number of funded accounts and monthly active users. However, it’s important to note these statistics are from March 31, 2021. The company reported further growth in its June 30 quarter, reaching 22.5 million funded accounts.

This represents a remarkable 25% increase in funded accounts within a single quarter. While unique circumstances contributed to this growth during the second quarter, the result remains exceptionally strong.

A New Approach to Financial Services

Jan Hammer, an early investor from Index, commented that Robinhood is part of a broader trend of technology companies disrupting the financial services industry. He argues that companies like Robinhood offer more than just cosmetic improvements to existing financial products.

This assessment appears accurate, and it presents a challenge to established financial institutions with outdated websites and subpar mobile applications. It’s difficult to envision a younger investor choosing to switch from platforms like Robinhood, eToro, or M1 Finance to a traditional company such as John Hancock.

The shift in preference suggests a fundamental change in investor behavior. The current trend indicates that once investors experience the convenience of modern platforms, they are unlikely to revert to older systems.

The Future of Investing

A critical question arises: how can established firms like Fidelity and Vanguard attract Robinhood users to their services? It remains uncertain whether they can succeed, or if a whole generation of investors will bypass traditional finance altogether.

The bullish outlook on Robinhood suggests a belief that this generational shift is already underway, a perspective that is difficult to dispute. The long-term performance of Robinhood remains to be seen.

However, the monthly active user numbers from Robinhood and asset under management figures from M1 Finance indicate that fintech startups have gained a significant advantage over traditional 401(k) providers. This is a market segment that fintech companies are poised to further penetrate.

• Robinhood has fundamentally altered consumer investing.
• Fintech startups are outpacing traditional financial institutions.
• A generational shift in investor preferences is occurring.

Africa: July Funding Data

Let's revisit the African startup ecosystem and examine the funding trends observed in July. Previously, our analysis of the continent’s robust first half of 2021 concluded with data from June. Now, we’ll supplement that with more recent figures.

According to reports from The Big Deal, a key source for African startup news, companies across the continent secured $308 million in funding through 71 separate deals during the last quarter.

This translates to an annualized run rate of approximately $3.7 billion. Essentially, African startups remain on track to achieve a record-breaking year for venture capital fundraising.

Key Takeaways

• Funding Amount: $308 million was raised.
• Number of Deals: 71 deals were closed.
• Annualized Run Rate: Approximately $3.7 billion.

The continued growth indicates a strong investor appetite for African innovation. This positive momentum suggests a promising future for the continent’s startup landscape.

Stay safe, and consider vaccination.

Best regards,

— Alex