The failure of a startup is easy to argue as a kind of martyrdom for progress, especially if the founders are starting out in a disjointed way and trying to save the world. But the heroic narrative gets complicated when the startup's failure involves the biggest names in entertainment, dubious product decisions, and more than $ 1 billion in losses in an already highly competitive consumer tech sub-category.
I was about to skip any mention of Quibi because, like me, you've already heard more than enough. But this week, its closing announcement turned into a Twitter debate about the nature of startup failure and whether this was still the right guy. Many in the startup world said it was still good, basically because most ambitious startup efforts lead to progress. Danny Crichton, in turn, argues that the negativity was fully justified in this case.
Let's be honest: most startups fail. Most of the ideas are wrong. Most entrepreneurs will never make it. This does not mean that no one should build a startup or pursue their passions and dreams. When success does happen, we like to talk about it, report it and try to explain why it happens - because ultimately, more business success is good for us all and helps drive progress in our world.
But also be clear that there are bad ideas, and then there are blatantly bad ideas with billions in funding from smart people who should otherwise know them better. Quibi wasn't the spark of the proverbial college dropout with a passion for entertainment trying to invent a new format for cell phones with friends and family's ramen money. Quibi was run by two of the most powerful and influential executives in the United States today, who raised more funds for their project than other female founders collectively raised this year.
Ouch. However, I think this still lacks the bigger dynamic that's happening.
Quibi was so easy to criticize that he created an opportunity to plausibly defend anyone who wants to prove they are here for startups, no matter how crazy. When you defend Quibi, you defend your process and make it clear to the next generation of startups that you are personally not afraid of other people with crazy ideas and have the will to try even if the result is a big mess. Which is who the founders want to hire in the early days and who the investors want to bet on.
I support both sides of this mass reporting game. Analysts and journalists have provided a wide range of invaluable insights into how Quibi was doing the wrong things, which have no doubt been internalized by founders of all kinds. Meanwhile, Quibi defenders are no doubt selecting their incoming admirers for great new business. All in all, Quibi and the debate around it could ultimately improve future companies a bit. What's what we all wanted in the first place, right?
Root Insurance plans pricing as soon as Datto goes public
The IPO market has not (yet) closed due to electoral unrest and so on. First, managed services provider Datto came out on Wednesday and has since experienced a gradual increase - a positive result for the company and its private equity owner, even if third parties have not benefited from an increase in pop. A few more notes from Alex Wilhelm:
Datto chief executive Tim Weller told ProWellTech in a call that the company will still be well capitalized following the public offering, saying it will have a very strong cash position.
The company should have places to distribute the remaining money. In his S-1 documentation, Datto highlighted a COVID-19 favorable wind stemming from companies accelerating their digital transformation efforts. ProWellTech asked the company's CEO if there was an international component to that story and if digital transformation efforts are accelerating globally and not just nationally. Auspicious for non-US-based startups, the executive said they were.
Next to the market, Root Insurance released the set stock price this week, taking the target to a valuation of more than $ 6 billion. It is definitely on track to be Ohio's largest tech IPO to date. Here's Alex again, with a comparison with Lemonade, another insurance tech provider recently IPOed for Extra Crunch:
[I]It appears that Root at around $ 6 billion is cheap compared to today's Lemonade prices. So, if you'd like to anticipate that Root raises its IPO price range to bring it closer to the multiples that Lemonade enjoys, feel free because you're probably not wrong. We are saying that Root will Double its rating to match Lemonade's current metrics? No. But close the gap a little? Sure.
For insurtech startups, including Root current the price is strong. Recall that Root was worth $ 3.65 billion last August alone. At $ 6.34 billion, the company has appreciated tremendously in just the last year and change. A little repricing could raise Root's valuation spread to a pot by 100% quite easily.
So for MetroMile and ClearCover and the rest of the related players, enjoy these good times while they last....
AR / VR is coming (sooner than expected)
A year ago, the market looked quite young. But now, the pandemic has made the value of augmented and virtual reality clearer to the world. Lucas Matney, who has been discussing the topic here for years, just conducted a survey of the top seven space investors. While they mostly keep seeing the vertical a little early, they see it becomes relevant quickly. Here is a key answer, from Brianne Kimmel of Work Life Ventures, on Extra Crunch:
Most of the investors I chat with appear to be long-term bullish on AR, but are now reluctant to invest in an explicitly AR-focused startup. What do you want to see before acting here?I think it all comes down to a single vision and a competitive edge when it comes to distribution. And so, I'll use these new ones [Zoom] app as an example, I think they are a great example where there are some aspects of the roles and some highly specialized skills where teaching, educating and doing your daily work on Zoom really won't cut it. I anticipate AR applications to become an integral part of certain types of work. I also think that now that many of the bigger platforms like Zoom are more open, people will start building on the platforms and there will be AR-specific use cases that can help industries where, you know, a traditional video conferencing experience isn't. it cuts it entirely.
Zurich's startup scene is loaded with talent
In other news from the survey, Mike Butcher continues his (sadly virtual) tour through the European startup hubs for EC, this week checking out investors in Zurich, Switzerland. Here is a neat explanation of the deep technical expertise of the city and country, from Michael Blank to invest:
Which industries in your city and region seem well positioned to thrive, or not, in the long term? Which companies are you excited about (your portfolio or not), which founders?Switzerland has always been at the forefront of technological innovation in areas such as precision engineering or life sciences. We firmly believe that Switzerland will also thrive in those areas over the long term. Thinking for example of additive manufacturing startups like 9T Labs or Scrona, drone companies like Verity or Wingtra or health technology startups like Aktiia or Versantis.
Investors from Brussels, Mike is heading towards you. You can reach it here.
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#EquityPod
Hello and welcome back to Equity, ProWellTech's venture capital podcast (now on Twitter!), where we unpack the numbers behind the titles. Myself, with Danny is Natasha he had a lot to do and more to say than expected. A big thank you to Chris for reducing the show to size. Now, what have we come to? Apart from a little bit of everything, we have analyzed:- The fall of Quibi and who lost money in the mix. ProWellTech has a little more on the downfall of the video service here.
- Netflix's quarter and why its stock lost ground after its report. The Quibi-Netflix stories show it's not smooth sailing in the online video market.
- If Netflix stumbled, Snap rose with stronger-than-expected growth. The company still loses a lot of money, but it is approaching reasonable results and has a lot of money.
- Then we turned to some media startups that they raised, including $ 4 million for Stir and $ 2.5 million for Quake. Rock the podcast company, beware, not the excellent FPS.
- Then there were a handful of case rounds, including the very clean Abodu and the controversial RVshare, which split us three over whether or not it would work.
- Then we received excellent reports from Natasha to analyze, including her piece on startup hacker houses and her report on a new class of female-centric accelerators.
From Alex:
