It’s been a busy week here on the News desk, including some news from Crunchbase itself that I’m sure you’ve seen by now. While we tidy up the weekend email draft, prep the final podcast episode of our first-ever mini-series, and compile startup financings into Last Week in Venture, I have a few more things to put on the site before we all break for a nap.

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And so for what I believe is on the second time ever, it’s time for a grab bag!

Progyny!

Last week I got on the phone with , President, CFO and COO of , a company that went public that very day.

, as a reminder, is a venture-backed company that before going public. It priced its IPO at $13 per share. Today it’s up past $16. That’s a .

The company is fascinating in that it helps employers provide fertility services to employees. It works with employers (who pay), employees (who use), and medical professionals (who use) to deliver its service.

Chatting with Anevski, I asked about the changing face of society and how that may, or may not be impacting the company’s growth trajectory (read its S-1 here). He agreed that societal changes that make it more feasible to discuss fertility are changing the game. His company is right in the sweet spot of riding that trend.

And as people have children later in life over time, Progyny’s usefulness will probably only rise. It’s a company to watch, and a win for , , , .

The State Of SaaS!

I wanted to do a pretty deep dive into the but only wound up mentioning it in this post. You can read the whole thing for yourself here (do, if you are in the SaaS world in any capacity), but let’s snag a few notes for the busy among us:

• SaaS companies as a cohort grow more slowly than you’d expect, even at modest ARR levels. This means that the percentage of SaaS startups that are venture capital-friendly is smaller than I expected. (Amongst survey respondees with over $5 million ARR, a 36.3 percent growth rate was the median.)
• In 2018, companies in the survey had blended CAC of $1.14 for a marginal dollar of ARR and burned $1.47 in capital for the same new $1 in annual recurring revenue. You can dig deeper into the figures, but having those top-line metrics are useful rubrics for your cranium.
• ACV has very little impact on a SaaS company’s growth rate, looking at all participants across all ACVs.
• SaaS companies of all sizes derive an average of just under 37 percent of new ARR from upsells and expansions; I can’t decide if that feels high or low, but, again, having a broad metric is useful.
• Expansion ARR is the cheapest to generate. Upsells are a close second. You knew that, but it’s nice to see it in chart format. Thanks, page 26.
• A working median for SaaS��only ARR is 78 percent. That feels precisely correct and goes to show why companies in the 80s can generate such high revenue multiples. They’re exceptional.
• Nearly exactly one-fifth (20 percent) of companies surveyed met the Rule of 40 benchmark. Put another way, 80 percent of SaaS companies failed the Rule of 40.

There’s a lot more. Go read it if you want to get a better view of SaaS as it stands this year.

The State Of The Market!

The folks over at put out their , bringing its regular dose of data to our lives. As with most SVB reports, it’s worth reading. I want to highlight two small bits from it while we’re here, as I was slightly gripped by the pair.

First, observe this chart:

And then this one:

I’m sure you can see the risks. Sleep as well as you can.

A Crypto Boomlet!

Here at Crunchbase News we’ve only covered crypto only a bit lately. We did a pulse check of the industry and touched on regular profitability (well done), and peeked at its venture scene.

But that’s been it, mostly because the wild price gyrations that make bitcoin and friends fun to watch have dried up to some degree. Until the other day, that is, when the , creating tens of billions of value seemingly instantly.

It was a positive rejoinder to market prices for cryptocurrencies that had fallen in lockstep before. What to take away from the recent boost to crypto values? That while the rest of the world is busy watching the Astros lose at home (four times!), the crypto believers are still busy out there building the future that they see as best. And sometimes the price of their underlying assets wakes up to remind us of that fact.

Next Up:

Esports! is a new company from a passel of MLG alums (, ) who are building out what appears to backend tech and services for the world of competitive gaming. With $60 million in the bank, we’re writing about them. I’ve touched-base with DiGiovanni, so prep up for words from us concerning esports on Monday.

Alright! That’s enough from me this week. Get some rest!

Illustration: .

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is one of the rare unicorns that makes money. CEO revealed at Vanity Fair’s New Establishment Summit on Tuesday that Coinbase was profitable in 2017 and 2018, and has been profitable to date in 2019.

Coinbase was founded in 2012 and operates in a space that has yet to gain mainstream popularity. But according to Vanity Fair, “Coinbase has generated nearly $2 billion of transaction-fee revenue since its launch back in 2012, and has generated more operating profit than V.C. money raised.”

Coinbase has raised to date, according to Crunchbase. That’s a lot of money, but that means the company’s driven even more operating profit. No easy feat here.

Notable competitors to Coinbase include and .��

Numbers, Markets

Coinbase’s ascent has been marked by impressive revenue figures, and at times huge growth.��

The company’s 2017 revenue the $1 billion mark according to some sources. Others closer to $920 million. Late-2017 was a heady period in the world of cryptocurrencies, with rising prices and rabid consumer interest fueling Coinbase and other companies operating in the space.��

The furor was so intense as 2017 came to a close that that Coinbase generated over 40 percent of its full-year revenue in December of that year alone.��

But as crypto prices sagged and some trading volume declined, Coinbase put up around a comparatively-modest, in 2018. The company was $1.3 billion in top line for the year.

The company’s operating profit is, therefore, an impressive result; it’s difficult to see revenue fall and profitability persist, especially among growth-oriented companies. That said, we can see Coinbase working to shore up its revenue generation. The company recently to its trading fee structure, including some robust price increases. (Outcry on social media was quick, but it’s not immediately clear if the complaints led to customer defections.)

If Coinbase can maintain its prior trading volumes or something close, the company could juice its prior rate of income from trading, a key revenue plank at the company.

The waters that Coinbase swims in today are still warm. Crunchbase News recently took a quick heat check of the crypto world and found it mostly healthy. That said, in the last 24 hours the prices of bitcoin et all have fallen from 8 to 10 percent. It’s a reminder that even a general upward tilt in the crypto markets can hit turbulence at any time.

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If you haven’t kept obsessively checking the price of bitcoin over the past year, don’t worry. You’re normal. For the rest of us, the price movement of the leading cryptocurrency has been somewhat staid.

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A year ago, bitcoin about $6,500. Today’s it’s worth about $8,100. That isn’t much movement. In between a year ago and today, however, bitcoin has set prices from as low as the $3,000 to and as high as $13,000. Bitcoin is still bitcoin, even if its former, regular value appreciation appears to have slowed.

But price is only one vital sign for bitcoin and its friends. There are others. Let’s examine two key indicators that we track to see where things are past the headline price.

Vital Signs

When I want to get a handle on the health of the crypto markets, I check (), , and, when I have time, the , the smaller, less-well-known cryptos that have yet to find a mainstream audience.

The logic behind the metric selections I hope is somewhat simple. Bitcoin transaction volume, while correlated to the price of the substance, helps paint a picture of how close bitcoin is to paying for itself. The more transactions that occur, the larger that miners can accrete. Since there is a time in the future when bitcoin miners won’t be paid in new bitcoin, it’s nice to know how much people are paying to use bitcoin. And, of course, companies like , so more volume can be viewed as bullish for startups in the sector.

Regarding decentralized apps, or “dapps,” I like to keep tabs on new dapp creation. Or, the pace at which new dapps are released. It’s a proxy of modest value to understand how many shots are being taken on the goal towards finding a great use case for Ethereum blockchain. Finally, market cap is something you can track here; it’s self-explanatory.

So, what do our first two indicators tell us?

• After a slump, bitcoin transaction volume has recovered from its 2018 lows and is high by historical norms. That’s bullish for bitcoin itself and the cryptocurrency market as a whole.
• And that new dapp releases are down sharply from their 2018 highs, but have matched the pace (roughly) set in late 2017. So, after a boom, about 60 new dapps are rolling out monthly. This is less bullish than our first indicator, while also showing that dapp activity is a multiple of where it was in 2016.

When I set out this morning to get a rough feel for the state of cryptocurrencies, I expected to find negative signals. Instead, bitcoin’s transaction volume recovery was stronger than I expected, and more dapps are being released than I anticipated.

The ICO boom is far behind us (), as are the heady days of 2017. But there’s still plenty going on over in crypto-land, even if bitcoin is still worth far less than it once was.

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Gené: Welcome to the #Angels founding team’s Katie Stanton and Jana Messerschmitt. All six founding angels met at Twitter. What was the momentum for creating #Angels?

Jana: After the IPO, one night over cocktails, we shared different tidbits around angel investing. We realized pretty quickly that we were very fortunate to come out of Twitter to see lots of entrepreneurs, and companies that were about to be formed. We decided it would actually be really fun to form this group or collective. Founders get to tap into the operating experience of all six of us. We all ran different parts of organizations and teams at Twitter across a wide variety of areas. We would also be able to take our deal flow and multiply it times six. Working at Twitter together, we built up a tremendous amount of trust. And so we wanted to be able to extend that into angel investing.

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Gené: You all have day jobs outside of #Angels?��

Katie: Our day jobs have actually made us better angel investors. It helps us with with operating experiences across product, legal, marketing, and PR. As an investment collective you can put in as much time as you want. You can slow things down, you can dial it up when you need to. We joke that we’re just winging it as angels.

Gené: Do you have a fund structure?

Jana: We invest personal capital. In some cases all six of us might write a check that goes into a company and other cases it might just be one or two of us. Flexibility is really important because at different moments in time with our operating gigs, we might have conflicts of interest. We might be busy with our operating career and we might not have time to look at deals closely.

Katie: A couple of us have been lucky enough to be scouts, which means working with different VCs that give us the capital to further invest in companies. This is a great way for other women, who may not have access to capital, to participate in this economy. The firm can extend their eyes and ears on the ground to different deals and different networks. It’s great for that angel investor who can learn, and have that practice with that capital. It’s great for the founder to reach a wider group of potential investors.

Gené: How does scouting work?

Katie: They’re all a bit different. A VC firm will work with a particular scout, they’ll negotiate terms. That scout will find the different investments and ultimately will make the decision to invest or not to invest, maybe putting together a lightweight deal memo. That scouts name is typically on the cap table of that company.

Jana: scout program is pretty widely talked about. It’s a mix of founders, operators, and just people who are well-networked, and who have a sense of deal flow. I think that’s the primary driver for a lot of venture firms for their scouts programs is how do we get into networks, into companies that they may not necessarily see at this stage.

Gené: Two of #Angels team are partners at venture firms. Jana you are an investing partner at Lightspeed Venture Partners, and Jessica Verrilli is a general partner at GV. How does that fit with your angel investing strategy?

Jana: #Angels was such a big driver for me to get into venture. It was a great way to try investing, understand what it’s like to work with founders, to come to a consensus on whether you’re excited about something, to get into the right networks. And so through the process of #Angels, I got to know a lot of different venture firms. It ended up turning into an opportunity for me to join . I am nine months in so still early. Jessica had been an associate at , earlier in her career right after undergrad. Then she ended up going back into venture, having understood a lot more through the #Angels experience.

Gené: Is there a conflict doing #Angels and investing with a fund?��

Jana: I think it’s pretty complimentary. #Angels is a valuable source of deal flow. We see so many interesting opportunities. LightSpeed is a little bit further downstream. They’re going to write much larger checks. We do everything from seed, all the way up through growth investing.

Gené: How much do you typically invest per deal? And how do you compete to get into deals?��

Katie: Across all the deals that we’ve done, I would say the most common check size has been $25K, sometimes we’ve done $50K. The most we’ve ever done is $200K where we have a lot of conviction in the deal. That’s per person. The large majority have been seed and Series A. Because of our network, from time to time we’ve gotten access to these breakout deals. We’ve invested in , , , and when they were a little bit further along.

Gené: How do you get into them at that late stage? There’s a lot of competing dollars trying to get into those successful companies.��

Katie: I think across all six of us we have relationships with many of those founders, or CEOs, or even some of the investors who are looking at not just capital because they get capital from a lot of places. That added value comes from our different experiences, in product, engineering, legal, international, and go to market strategy. Many of them were also looking for more diversity on the cap table, knowing that they had a lot of catch up work to do in terms of bringing diversity to their teams, to their executive teams, but also to their capitalization tables.

Gené: You are interested in getting more women on the cap table of successful startups. How do you make that happen?

Jana: Even though women are making gains in terms of representation in tech, we think that they hold just a fraction of the equity. from Carta reached out and said, I’m sitting on a bunch of data, do you guys want to work together? What came out was that even though women make up a third of employees at tech companies, they hold just value. So that’s a jarring statistic. If you think about what happens then with the wealth generation from these tech companies. It’s what shapes what products get started, and which companies get started, venture funds, angel investors or who has the ability to fund politics, and philanthropic endeavors. We thought that this was a watershed moment for the industry, the first study of its kind.

You have to get more women into the roles that take up the chunks of the cap table. So what are those roles. There’s four major areas. Number one is obviously founders — women still only get 2 to 3 percent of all venture funding. Number two is early employees. These tend to skew to the engineers, because you need people to build products. We need more women in engineering, hired for that first 10, 50, 100 employees. Number three is executives at companies. We need more women in executive roles. And then investors. That could be angel investors, check writing partners at firms. Those are the ways that we start to correct the gap.

Katie: Women on average makes 79 cents on the dollar. But when you factor in the equity involved, it goes to about 47 cents. When we started to angel invest, no one ever asked about who’s on your cap table. Are there women on your cap table? Are there people of color on your cap table? And increasingly we’ve seen founders approach us and say deliberately we have only male investors, we want to diversify our cap table. Would you be interested? That’s a change of mindset, which we think is very important.

Jana: In almost every deal that venture firms structure, there’s usually some amount left on the cap table for strategic investors. And so whether that’s individual angels, or maybe it’s a corporate. Now being a professional investor as well on the venture side whenever I’m doing a deal, I’m often saying, who are the other diverse investors that I can bring along?

Katie: Sometimes you can invest in a company with as little as $5K. You can add other value. You can be an advisor to those companies for free, and they will pay you to deliver some expertise that you have. We host these programming events called Angels Access. We will partner with a different VC firm, or another organization to host something around negotiations, around crypto, to help demystify what it means to become an angel investor.

Gené: Have you worked with any of the angel groups out there?��

Jana: There’s a group out of Facebook called . They are a group of ex-operators out of Facebook that we’ve worked with quite a bit. And we work with a ton of pre-seed, seed stage funds. You’ll continue to see more of this trend especially since 2019 has been a year rich with tech IPOs. There is an amazing alumni group from Uber that we’ve done some co-investing with. You’ll continue to see more and more companies IPO, more operators who have liquidity to invest.

Gené: Were these groups inspired by #Angels?

Katie: We were so thrilled when launched bringing so many women in venture together, sharing, not just deals but approaches and building community. Having more insight about how other firms perform. I am a principal. How do I become a partner? How much carry should I expect? To be able to ask questions and push the industry forward.

Gené: What have been the key learnings for you as a group?��

Jana: We’ve now invested in 120 companies. We’ve done a bunch of consumer because a lot of us have ties to consumer companies. We’ve actually done quite a bit of enterprise, because we also do have that expertise. One of our #Angels, was the chief product officer at . I worked quite a bit on Twitter’s enterprise business. Katie was the CMO of a genetics company called , so she is our healthcare expert. We invested in a few companies in aerospace. Why not invest in rockets? We invest across multiple different industries, multiple stages. A lot in Silicon Valley, but we have portfolio companies in LA, Austin, Chicago, Denver, Boston, and New York. We have one in Latvia, but not that many internationally. 40 percent of the companies have a female founder or CEO.

Gené: What’s next?

Katie: Becoming great investors and ultimately getting more women on the cap table of successful companies. And I think we want to show progress, pushing the industry forward to close that gap. There are other studies that we think could be informative. What are the root causes of that gap? For example, if you look at all seed stage funds and valuations, do valuations of companies founded by women skew less. I have an offhand observation at the most recent demo day with Y Combinator is that female founded companies that I saw were valued much lower than the male founded companies. Is that a source of part of that disparity?

Jana: When you’re a founder the terms that are set are ultimately driven by your ability to negotiate. Certain founders may only get one term sheet. So that’s the deal that they have to accept because they don’t have as much negotiation leverage. But other founders might go to Sand Hill Road and get six term sheets in a week. They’re going to drive the negotiation. They’re going to have lower dilution, higher valuations, and they’re going to set the terms. And so that’s something we talked about a lot in our group. Do women have as many options when they go out raising? Are they able to command and demand that same sort of excitement about the companies that they’re building where they’re able to drive the negotiation process and set those terms?

Gené: Are there a couple of companies you are excited by?

Jana: So one is , the scooter company. If you just look at product market fit for consumer companies over the last five years, scooters and micro-mobility, it’s one of those incredible companies with consumer product market fit. Both Bird as well as Lime are working on the unit economics and really trying to figure out how to scale this business. When I first talked to the founder a few years ago, it was just so exciting to be part of that journey because it’s completely changing the way that people get around.

Gené: And what stage, did you get involved in Bird?

Jana: I was an angel in Bird a couple of years ago. To see a physical product in the real world —�� scooters parked on corners. It is constantly reminding people that this is a way to get around your city. Because consumers love the experience so much they are sharing it on social media. It’s a bit like you’re flying. You don’t have to spend marketing dollars to get consumers.

Another company that we were both excited about is a company called . Most of our deal flow comes through people we know, the founders, or maybe other investors, or people in our network. This was one I randomly saw in the wild on social media. A friend of mine was using Cameo to propose to his girlfriend using the stars of the Bravo show Vanderpump Rules. How did they get these videos from these “celebrities”? I started doing research on the company and dmning the founder on Twitter and LinkedIn. It’s a marketplace that matches celebrities with consumers. The consumer will script what they want the celebrity to say. So it could be a happy birthday message. It could be an engagement message. It could be congratulations on your job promotion. Whatever you want it to be. And then the celebrity decides whether they want to fulfill it. The celebrity also sets their price. You have everything from cameos for $25 all the way up to slots charging a few thousand dollars.

The reaction videos that you get from people are, how did this happen? Is this real? How do you know this person? It’s one of those consumer products where you have virality in so many ways. You have the receiver of the cameo who takes and shares it on social media. You will also have the celebrities promoting it because this is a great way for them to make money.

Katie: Another company is . We saw that at seed and we love the idea of more products and services giving women more agency over their health. Fertility has been sort of a taboo issue. When I was trying to get pregnant, no one ever talked about it. Am I the only person not getting pregnant immediately? They’ve helped demystify fertility, and giving you more power towards understanding how fertile am I right now? What are my options? The two female founders are incredible. They recently raised their Series A from at , which is a perfect person and team to be able to bring that forward and reach a larger audience.

Illustration: .

After that the deal was underway, announced yesterday that it purchased the custody business of rival exchange . Fortune that the deal cost $55 million.

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Why did Coinbase spend a chunk of capital to pick up the asset? We’ll need to understand what custody means in the universe of cryptocurrency, how lucrative it is or isn’t, and how Coinbase makes money otherwise. Let’s do it.

Custody

As the name implies, custody in the cryptocurrency world means taking control of and securing the crypto-assets of others. There are various ways to do this, with Xapo itself making waves for holding customer assets .

In the cryptocurrency industry, hacks, thefts, and other security issues are rife. If you control a large chunk of a cryptocurrency, or indeed several different assets, you’re probably willing to pay to ensure its safety. And so, custody, a system by which major players in the crypto-space will hold onto your assets for you, exists.

For a fee, naturally. According — the name of Coinbase’s custody product — charges 50 basis points, or 0.5 percent, per year on held assets, after an “implementation” fee of between nothing and $10,000. Given that the setup fee is by nature non-recurring, we care more about the yearly income generated by storing crypto-assets.

After the Xapo deal, how much cryptocurrency will Coinbase hold in custody for customers? According , about $7 billion. That amount of cryptocurrency, at 50 basis points per year, works out to $35 million per year in fees. A nice chunk of change, and a solid revenue item for Coinbase.

A good question at this juncture is why does Coinbase care about driving custody incomes when it has a big trading business? Well, seasonality of a sort.

History

Coinbase had a cracking 2017. According , Coinbase’s revenue exploded from $16 million in 2016 to $923 million in 2017, generating a profit of $380 million in the year. That sort of explosive growth saw the firm . led the round, with , , and taking part, among others.

But, Coinbase’s revenue can fluctuate. Reuters, looking at the company’s reported non-domestic revenue, used the figure that Coinbase collected revenue of $520 million in 2018. A huge number, surely, and an impressive result given its 2016 revenue tally of just $16 million, but no company wants to see their top line shrink on a year-over-year basis.

Coinbase generates revenue from trading fees. When the price of bitcoin slumps, so too does trading volume. That impacts trading revenues for Coinbase and other exchanges.

Enter the custody business, with its regular income based on time. Provided that Coinbase can continue to attract new customers to that portion of its business, the firm may be able to take some variance out of its top line. Investors love predictability, after all. And if the value of the various cryptocurrencies rises the asset base tucked away inside of Coinbase Custody could appreciate in value, boosting revenues from the business.1

In short, Coinbase has shown rapid growth and the ability to make money during its life. Today’s Xapo deal should allow the firm to accelerate part of its business that will add revenue, and perhaps some predictability to its growth.

Illustration: .

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Both are bullish for companies operating in the cryptocurrency space. There’s for cryptocurrency companies in the trading game performing well when crypto prices appreciate. As there’s a between the price of bitcoin et al and trading appetite; when the price of cryptocurrencies rise, trading revenues presumably grow as well.

In the late-2017 crypto bull run stacked huge revenues and profits, for example. Later, the company would , adding to both its bank balance and valuation. Other firms rode the same wave, including Bitmain, which later had to pull its public offering after swinging from profits to losses.

So, when the price of bitcoin from the $3,000s in January to the $5,000s by April to $13,000 in July to a more modest $10,560 today, I was waiting for the impact of the price run to show up elsewhere.

This morning we got a little taste. Recall that we noted above that a rising �����������of cryptocurrency and related assets leads to a rise in trading volume of the same entities. Here’s a chart from citing his colleague who used data from their own publication, along with information from :

There are two things that we care about in the chart this morning. First, as expected trading volume has risen as the price of bitcoin and its subordinate crypto co-constituents have appreciated. And, second, that Coinbase has seen (according to this dataset) its trading volume rise sharply in recent months.

As Coinbase has a for what it calls “Buy/Sell Transactions” we can presume that the higher trading volume is leading to revenue growth for the American crypto-focused unicorn. The that we have for Coinbase is an $8.0 billion post-money valuation, meaning that the seven-year-old company has lots to live up to in revenue and profit terms.

Given the above chart, it seems like Coinbase, along with a host of smaller crypto-focused companies, is likely enjoying a welcome business boost after a turn in the wilderness after the most recent crypto bust.

Illustration: Li-Anne Dias.

Hello from the , where the snow has turned to ice and it’s cold enough that I’ve opted for warm espresso. It’s awful here, but happily, in the world of startups, things are still pretty hot.

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I want to hit on three things this morning, starting with a funding round. Then we’ll visit a small acquisition in crypto and close on a note regarding Uber’s latest quarterly results.

Three Cheers For�� SendBird and Twilio

is riding the SaaS wave. The company, which powers messaging inside applications, just raised $52 million in a Series B round led by Iconiq Capital.

The financing comes as public companies operating in similar spaces have been posting sharp gains.����in particular has been on a tear in the public markets in recent quarters. The company’s recent success, however, wasn’t always assured.

After proposing an IPO value�� back in 2016, shares of Twilio at a sharper $15 per and once it began trading. After climbing north of $60 per share, Twilio lost altitude, crashing into the $20s and $30s from late 2016 into 2018.

Then its shares took off, showing investors both public and private alike that vertical SaaS companies powering other firms’ apps and services could generate toothsome revenues and winsome growth.

As , , a popular payment processing unicorn, could be lumped in with Twilio. Along with, private-market investors hope, , which powers��messaging inside applications.

How is that different than what Twilio offers? The two products actually aren’t very close; Twilio wants to supply SMS and other forms of comms for your app as needed, similar to a utility. SendBird wants to place its messaging functions��into your app.

Investors appear to agree with Ron that there are similarities, however. We can surmise as such given that the investing class just fired a big Series B at the firm. Before the new round, SendBird a comparatively-scant $18.7 million.

Coinbase Wants More Coins

The popular crypto company bought Neutrino, a company that the unicorn “a blockchain intelligence platform.”

Why did Coinbase want the smaller company? From its on the matter, this stuck out: “[Neutrino will] also help us bring more cryptocurrencies and features to more people while helping ensure compliance with local laws and regulations.” I presume that the deal means that Coinbase will bring more coins onto its platform over time.

There’s over Coinbase’s work to expand its crypto lineup; amidst the complaints,��however, it’s often hard to tell at times what is pro-bitcoin drumbeating, and what is well-grounded worries about less established crypto projects receiving the Coinbase imprimatur.

The deal wasn’t priced, but as Crunchbase doesn’t have listed��funding information for , I doubt that the agreement was a tough chew for Coinbase.

Uber’s Not-Really-Slimming Losses

Here’s some correct coverage of Uber’s fourth-quarter results that we should discuss that emailed out last week:

To which we need to reply: Yes, but.

Yes, but a huge tax benefit saved Uber from posting a higher Q4 net loss in 2018 than it did in 2017.

The ridehailing company’s Q4 2017 net loss came to $1.1 billion. Uber’s Q4 2018 net loss after taxes was $865 million. But Uber’s Q4 2018 net loss��before the impact of income taxes was -$1.22 billion.

In short, Uber had a $358 million (benefit from) taxes that I don’t think that anyone external to the company fully understands. And since I suspect that Uber won’t be able to gin up a similar bump every quarter, perhaps we should look at some more recent profit metrics to see if the company is getting closer, or further away from profitability.

Well, in Q3 2018 Uber’s operating loss was $773 million. In the fourth quarter of the same year, that figure swelled to a $1.06 billion loss. Whoops.

Top Image Credit: .

On Friday, cryptocurrency exchange and wallet platform filed with the Securities and Exchange Commission indicating it’s raising $50 million in an equity offering.

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The filing indicates that Coinbase has already closed $21.3 million from 20 investors, leaving roughly $28.7 million left to raise in the round of funding. The filing indicates this is a new campaign from the crypto company; the date of first sale was December 7th. The filing was signed and dated today, December 21st.

A Coinbase spokesperson that this is a secondary market transaction. The spokesperson said that, “periodically, Coinbase offers its employees the opportunity to sell their equity back to the company in return for cash. The company recently initiated such an initiative.”

The spokesperson said the $50 million secondary market transaction disclosed in the filings was authorized in conjunction with its Series E capital raise. Coinbase raised�� led by , which earned the company a post-money valuation of $8 billion in October.��Coinbase’s total known venture backing .

Based on the legal entity name in Form D from True Capital Management, a wealth management firm based in San Francisco, originally made the deal look like it was a new series of venture funding.1 However, the previously-quoted Coinbase spokesperson reiterated the company has not issued Series F shares. Crunchbase News learned that the name of the special purpose vehicle which purchased Coinbase shares was unrelated to the series of shares being transacted in the deal.

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Over the past few days, the value of cryptocurrencies has fallen sharply. Bitcoin dipped under $4,000 and ether fell as well. Bitcoin hovered around $6,400 in the first half of November, before coming to rest around $4,000 over the weekend. That’s about a 38 percent fall. Ether hit the skids around the same time (mid-November), falling from $210 and change to the mid $110s this morning, including a rough Thanksgiving trading period. That’s a 45 percent decline.

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So it’s been a bad month. And it’s hard to find a consistent narrative about why the declines happened now, and, more importantly, what they mean for crypto’s health as a sector. Given that are still raising a lot of money (), it matters to the private sector. A lot, really, given that nearly every crypto company out there is still private, and powered by private capital.

Reading far more on the matter than I want to admit over the past few days, I’ll take a stab summarizing various market thoughts for us. Be lovely and write in with your own notes so that I can keep learning.1

But, as you haven’t sent a missive yet, here’s a digest of what other people are saying:

• Reddit Bulls: This is good for bitcoin, or at least good for the real bitcoin fans. The massive drop in the value of cryptos can be thought of as a chaff-culling event, or the de-foaming of a particularly hot latte. And as the declines are bringing prices down, the folks who��know that bitcoin et al will one day be worth far more than they ever have been can buy more at depressed prices. 2
• Reddit Bears:��Look at you goddamn idiots and your silly coins. $4,000 is just the start. Will you still buy in $3,000 and $2,000 and $1,000?3 Of course those comments aren’t new; what is different among the cryptoforums��is that the percentage and prominence of bears are both higher than they have been in other corrections, per my own observations.
• VCs: The venture world has been quieter than I would like concerning��crypto. I presume this is due to their investments losing steam, turning red, or becoming less liquid. (VCs tend to chest-thump when their portfolio companies are killing it, so we can read the silence at least somewhat.) Given that most crypto players are suffering (including , , , , etc…), sector venture investments are likely not having a very good run either. The best companies ( gets consistently high marks from investors in my personal experience, for example) will survive and keep raising, as always. The only interesting VC on crypto recently is , ��meditation that I liked quite a lot. He also wrote , a take on how long it normally takes to create material value and what happens when your magic fizzles. It’s also good.
• Market Watchers: This is the usual mixed bag. Internet hobgoblin and human that I like is correct that there is too going on among the crypto perma-bears (I plead guilty). And you can find the usual optimism among the faithful, especially on Twitter. The only truly interesting thought in the market concerning the �����貹������of the recent declines came from ���������in light of the correction, claims that developers can now really get to work are silly. That��“[b]uilding ‘real value’ is a canard. The most important thing that needs to happen for crypto is for people to think the underlying assets (the coins) have actual monetary worth. Then people can build stuff on top of them[.]”��

I am incredibly interested in what the selloff is doing to crypto-focused startups. Coinbase and are fighting about how to price trading, as transaction volumes are down year-over-year. That’s tough. The year’s expected crypto IPO is in tatters after a Q1 profit turned into a Q2 loss. I doubt Bitmain had a better Q3, and Q4 isn’t looking good given that the firm held of Bitcoin Cash (which is down about 92 percent this year).

And then there’s the grip of ICOs that raised in crypto and probably held. What will they do? Mostly die, I suspect. But some will make it out and do cool things. Which projects will survive?

Wrapping up as we’re long on a Monday morning, next year is going to be incredibly interesting for crypto companies. In good or bad or middling ways. More as it happens.

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It’s rough out there. After a nearly ten-year bull cycle, stocks are showing weakness yet again. Tech stocks were pounded yesterday amidst broader declines. The crypto world endured stinging losses as well, pushing bitcoin closer to $4,000 than $5,000. The token has seen its value fall from over $19,000 in late 2017.

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More losses are . The tech-heavy Nasdaq’s futures are off about 1.5 percent, an hour ahead of the market’s open.

Let’s quickly take stock of what took hits, and then gist those results down to how we view the startup market. Consider this post a short thread trying to link the public and private markets. Yes, Crunchbase News is focused a bit closer to the ground, but the weather matters no matter your altitude.

Stocks

Major tech companies and smaller players alike fell yesterday. The Big 5 (, , , , ) shed about $150 billion in market cap, falling to $3.51 trillion. That figure��crested the $4 trillion mark this year, for reference. Chinese giants fell as well, with and shedding around 3 percent apiece.

Shifting to smaller companies we can see even bigger hits than the nearly 6 percent that Facebook gave up, or the 5 percent that Amazon dropped.

slipped by nearly 7 percent, while Salesforce dropped nearly 9 percent. lost over 7 percent, leaving it worth about two quarters more than its IPO price. Staying on the SaaS theme, lost over 14 percent, while slid over 9.5 percent. was off nearly 11.5 percent as well. If it sells recurring software or tooling, it probably lost a lot of worth yesterday.

Chip player kept its fall going, sliding 12 percent to $144 and change. was off nearly 7 percent to $6.05 (IPO price: $17). fell nearly 11 percent. ? Down 5 percent. The list keeps going.

So What?

We’ve seen broad selloffs like this before in 2018 as the market’s momentum seemingly stalled. If this one will stick isn’t clear.

If the above losses do persist, however, they will represent another repricing of the value of technology indistry revenue, profit, and growth. The same things that startups are also valued on (though with less focus on profitability for obvious reasons). And, as the public market operates as a comp for private companies if the former goes down, the latter also sheds expected value (mostly).

Why? Because public markets helps set exit valuations. Dropbox is worth less today as a public company than it was as a private company. That could dampen enthusiasm among private-market investors (VCs, PE firms, etc) for shares in yet-public firms looking for capital. Result? Smaller valuations.

And if the Nasdaq falls sharply, expect it to dampen private investor sentiment as a rule of thumb.

Crypto

If yesterday was bad for tech stocks, and therefore technology startups, what’s happened in crypto is even worse.

Bitcoin fell from its comfortable range in the mid-$6,000s into the $5,000s at first. Overnight it fell under $5,000. It’s worth less than $4,500 as I type. The broader crypto market has lost about 30 percent of its value in the last week, falling from an aggregate value of around $215 billion to $146 billion.

But sharp declines and sharp recoveries are par for the course in crypto, so why care about this particular jolt? Because bitcoin, instead of bouncing back from its lengthy summer doldrums has broken negative. It’s cratering instead of recovering. And when bitcoin drops sharply, the value of every other token falls as well. So goes bitcoin, so goes the market for bitcoin competitors.

So What?

There’s a huge amount of startup activity that is threatened by the above declines. Some directly, as there are companies built around specific coins that are losing a lot of their liquid worth. There are ICOs sitting on crypto assets that were stored for later use; those reserves are now worth far, far less than they were, potentially harming development budgets. And there are crypto-focused venture groups that have made bets across the sector that aren’t having a good day.

Finally, the crypto-majors like the newly-capitalized�� are impacted. Coinbase charges a spread () on certain crypto transactions, to pick an example. Those incomes could fall with the slipping price of crypto-assets available for sale on the platform. And when is pushing zero-fee crypto trading, trading platforms may be under pricing pressure as well.

Today is already off to a bad start with more crypto declines, and the major public indices projecting sharp losses. More from us when things shake out.

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