Great Resignation meets Great Reset meets (Great R…un down those valuations please) – TechCrunch
We love a counternarrative angle these days, and this week’s choice is a look into why lower valuations may actually be a good thing for startups these days.
In the past few months, both Stripe and Instacart have seen their internal valuations updated in a 409A appraisal process. The startups saw their valuations being slashed by 28% and 38%, respectively, as a result of the appraisals. Anita Ramaswamy and I looked into 409As and learned about an entirely different meaning of a “valuation haircut.”
Here’s an excerpt from our piece:
Many founders and industry experts see a company receiving a 409A valuation that’s lower than its investor-assigned valuation as a boon. That’s because a low 409A valuation allows companies to grant their employees stock options at a lower price. Companies can also use the new, lower 409A valuation as a recruiting tool, luring prospective employees with cheap options and the promise of cashing out at a higher price when the company eventually exits.
Sumukh Sridhara, head of founder products at AngelList, says companies view 409As as an “internal equity granting authorization mechanism, and not them thinking we’re worth less.”
“If those companies would have their way, they would argue that they are worth 5% of what their public market comps are. But they won’t really get away with that,” he said.
For our full take, read the entire story, “WTF is a 409A” live on TechCrunch right now or read the companion TechCrunch+ piece, “Stripe’s new and lower internal valuation, explained.”
Plus, if you want to get more into the weeds of this conversation, join Anita Ramaswamy and me on a Twitter Space next Tuesday at noon PDT, 3 p.m. EDT. We’ll have some guests from the piece on the mic, and of course riff on whatever got cut out of the story.
In the rest of this newsletter, we’ll get into a fintech favorite, robots and software eating up headquarters. As always, you can support me by forwarding this newsletter to a friend or following me on Twitter or subscribing to my blog.
Deal of the week
TomoCredit! The fintech raised $22 million to make credit scores obsolete. I know, I know it’s not the first fintech to try this, but there’s something that stands out.
Here’s why it’s important, via Mary Ann Azevedo: “Tomo is different from many other credit offerings out there in that it doesn’t rely on FICO scores to underwrite. Rather, it applies a “proprietary” underwriting algorithm (Tomo Score) to identify “high potential borrowers” without a credit score. The TomoCredit card requires no credit check, no deposit, 0% APR and no fees.”
About those robots
TC Robotics was so wild this week that it shut the site down (for a few minutes). In all seriousness, the event was a blast and featured some of the biggest names in tech innovation. Big ups to Brian Heater for spearheading the effort.
Here’s why it’s important: Robotics, unlike many tech sectors, is poised to have a great year in funding and, per investors focused in the category, has some key recession-proof characteristics. If you missed the event, don’t fret because we covered each and every single panel for you to read and relive.
Software is eating the world and just gobbled up a16z’s offices, too
First up, thanks to Haje for this witty subhed! Second, venture firm and investment adviser Andreeseen Horowitz announced this week that they will no longer have a single, physical headquarters and instead are building out global outposts.
Here’s why it’s important: The firm is prioritizing physical offices around the world instead of one centralized HQ. It doesn’t entirely come as a surprise, if you consider, well, the still on-going pandemic. That said, it’s helpful to track how distributed VCs adjust to a remote-first, but not remote-only environment.
Eric Tarczynski of Contrary Capital says his firm has been remote since inception but recently launched an in-person community space in NYC for portfolio companies and founders within the firm’s network. Ankur Nagpal, of Vibe Capital, launched his fund with plans to spend one month at a time in geographies he plans to invest in. Brianne Kimmel of Worklife Ventures is creating an invite-only community space in Los Angeles. Most recently, Index Ventures opened its fourth office in New York — its first new office in more than a decade.
Insert “Pitch Perfect” joke here
First things first, TechCrunch Live is on a brand new platform, and we’ve made it easier to apply for pitch practice. Investors (and my inbox) can attest to the importance of brevity, savviness and clarity in pitches, so it’s great to see.
Startups can now apply any day, any time for Pitch Practice by completing this form. We’ll select the startups 24 hours before that week’s event and notify startups by email. If you’re selected for one event, you can apply for future events too. We want companies to present more than once using the feedback provided from previous experiences. Call it growth at no costs.
Seen on TechCrunch
Seen on TechCrunch+
Until next time,