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This comes just one week after Austin Mayor Steve Adler said the show . As fears over the coronavirus have escalated, so has the pressure on festival organizers and city officials. In fact, according to , it was Adler who ordered organizers to cancel the festival, which was scheduled from March 13-22.

“Based on the recommendation of our public health officer and director of public health, and after consultation with our city manager I’ve gone ahead and declared a local disaster. And along with that issued an order that cancels SXSW this year,” Adler said during a press conference on Friday afternoon.

This is the first time the event has been canceled in its 34 years, according to a from the conference organizers. SXSW organizers said they are looking into ways to reschedule the event and “working to provide a virtual SXSW online experience as soon as possible for 2020 participants, starting with SXSW EDU.”

“We understand the gravity of the situation for all the creatives who utilize SXSW to accelerate their careers; for the global businesses; and for Austin and the hundreds of small businesses – venues, theatres, vendors, production companies, service industry staff, and other partners that rely so heavily on the increased business that SXSW attracts,” the statement read. “We will continue to work hard to bring you the unique events you love. Though it’s true that our March 2020 event will no longer take place in the way that we intended, we continue to strive toward our purpose – helping creative people achieve their goals.”

Earlier this week, we touched on the fact that startups and venture capitalists were following the lead of large companies such as and by backing out of the conference.

The event draws an estimated 400,000 people to the Texas capital each year, and the economic impact on the city will be huge. The 2019 South by Southwest festival had a $355.9 million impact on Austin’s economy, according to an referenced by the .

In fact, the 2019 event had the biggest economic impact in SXSW’s 33-year history. Further, SXSW “is the most profitable event for the city’s hospitality industry,” according to the report and as cited by the Statesman.

Rumors in the Austin community indicate that organizers waited for Mayor Adler to declare a disaster before canceling for insurance purposes.

Anecdotally, the results of that Crunchbase News Senior Reporter Mary Ann Azevedo posted earlier this week supported the decision. Out of 101 votes, 70.3 percent of respondents said that SXSW should be canceled or postponed.

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On March 2, and announced they would back out of the South by Southwest (SXSW) festival being held in Austin, Texas, due to fears over coronavirus (COVID-19). Today, Intel followed suit. A petition is being circulated by mostly Austin residents asking organizers to cancel the annual event (as of this morning, it had ). Now it appears that startup founders and venture capitalists, too, are nixing plans to attend SXSW – scheduled for March 13 to 22 – due to coronavirus concerns.

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I reached out to SXSW organizers to get their reaction, and they referred me to on their website that said they are working closely on a daily basis with local, state and federal agencies to plan for a safe event.

“As a result of this dialogue and the recommendations of Austin Public Health, we are proceeding with the 2020 event with the health and safety of our attendees, staff, and volunteers as our top priority,” they continued.

No doubt the unprecedented cancellation of SXSW would have a major economic impact on the Texas capital. The 2019 South by Southwest festival had a $355.9 million impact on Austin’s economy, according to an referenced by the .

In fact, the 2019 event had the biggest economic impact in SXSW’s 33-year history. Further, SXSW “is the most profitable event for the city’s hospitality industry,” according to the report and as cited by the Statesman.

‘Not worth it’

As SXSW organizers no doubt scramble to deal with the crisis, we talked to a few startup founders and VCs to hear about why they’re skipping the festival this year.

, founder and CEO of San Diego-based , told me he’s going to cancel his plans to attend SXSW. This is a big deal, he said, because his company (which recently raised a $6 million Series A) is in the pitch event for consumer tech.

As a new parent, Barbo said the risk simply isn’t worth it. And his co-founders, team and investors are all supportive of his decision.

“Attending SXSW is not the best decision for my family,” he told me in a phone conversation this morning. “We were honored to be selected for the pitch competition and it hurts me to pass that up, but with so many people converging on the city, it seems inevitable that something will come out of it if the event continues.”

Barbo, too, is disappointed in organizers and city officials for not taking things like Facebook and Twitter backing out, and the concerns of residents and attendees more seriously .

“I hate to say it, because SXSW has always had an immaculate reputation, but this feels like a lack of leadership on the part of organizers and the City of Austin,” he told me.

, co-founder and CEO of Bay Area-based , said he was planning to fly to Austin for SXSW but in light of the virus, his company has “restricted all non-essential travel.”

“SXSW has become one of those events that you feel like you should go to. There’s a lot of creative thinkers there,” he told me via Zoom this morning. “But it takes just one employee coming down with it to shut down a whole office. So I’m not going.”

Jain too shares Barbo’s surprise that the event is even still happening.

“W���ٳ� and Facebook cancelling their events, why would these guys continue? In fact, I should get my money back,” he said. “The amount of bad press they’ll get might ruin the brand for years going forward.”

VCs chime in

But it’s not just founders. VCs and investors also are opting to stay home.

Tim Ferriss, investor ���Ի���host of The Tim Ferriss Show podcast,  this morning that he’s not going.

“After much thought, I’ve cancelled my attendance at SXSW. I love SXSW, but I don’t believe the novel coronavirus can be contained, and I view an int’l event of 100K+ people as a huge risk to attendees and the entire city, given limited ICU beds, etc.”

On Twitter, San Francisco-based co-founder and GP revealed that after moving all in-person meetings to video, she also “cancelled SXSW.”

Via DM, she told me that her decision stems from the fact that COVID-19 seems highly contagious from the initial data.

“While I’m not worried about how it could affect my health, I’m worried about potentially becoming a carrier,” she wrote. “Our health system in the US seemingly cannot handle a large volume of cases, so I thought it was best to do my part in society and slow the number of cases. If they made it online, including the event I was supposed to judge, I’d be happy to still partake.”

And, a Los Angeles-based VC told me that one of his teammates had agreed to attend SXSW this year. He wrote me via DM: “She has asked not to go and we agreed she should not. We instituted a policy today strongly advising against attending any conferences until further notice (along with other guidelines).”

Ultimately, are organizers willing to sacrifice safety and health for dollars? Guess we’ll see. While it would no doubt be extremely difficult, and expensive, to cancel or postpone at this stage, they may have no choice if public pressure continues to build.

Meanwhile, head here to read about how heightened concerns about germs are contributing to a surge in sales for some startups in the disinfecting space.

Note: Post-publication, Founder said she is also not attending SXSW.

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Chroma Labs was founded in 2018 by ex- and employees Alex Li, John Barnett and Joshua Harris to help social media gurus create aesthetic and interactive stories. For those of you who don’t know what stories are, think of them as posts that generally expire after being posted for 24 hours (of course, exceptions exist).�� , Chroma Labs helps users create templates and filters, as well as “powerful text tools.” Some phrase it as a competitor to Unfold, which I wrote about before and was acquired by Squarespace in October 2019.

Chroma Labs, in its website post, claims millions have used the company to create stories. , the business is shutting down, “effectively immediately.”

Interestingly enough, Twitter doesn’t (yet) have the feature for users to post stories, which is precisely what Chroma Labs is focused on. . It tells us that there might be a pretty innovative product update in the future. Until that is clarified, let’s look at what we have so far.

Kayvon Beykpour, a product lead at Twitter and the co-founder of , tweeted that the team will “join our product, design, and eng teams working to give people more creative ways to express themselves on Twitter.”

And finally, in it also pointed to key objectives “increasing development velocity and trust” and “increasing healthy public conversation.” With today’s investment, it seems like Twitter’s trying to tackle both in one go.

In an email to Crunchbase News, a Twitter spokesperson pointed to the company’s broader hiring goals: “We are approaching hiring in many different ways given our global hiring targets this year: acquisitions, recruiting, acquihire and team hires.

“We’re continuing to acquire talent to bolster our talent, leadership and expertise in order to better serve the public conversation.”

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One such company is Austin-based , which has developed an agile leasing platform and network. The startup just raised $8 million in Series A funding led by of (who’s also backed the likes of and ). Breyer is contributing $5 million of the capital. , the venture arm of commercial real estate brokerage giant , put up the remaining $3 million. The financing brings Swivel’s to $14.6 million, according to its Crunchbase profile.

Swivel raised an $850,000 seed round in 2016 and then another $1 million in June 2017. In 2018, the company in what Swivel founder and president described as a Seed 2 round.

The startup has been testing its model across Texas, mostly in Austin and some in Dallas and Houston.

“Everything seems to be proven right and working,” Harmon told Crunchbase News. “So we raised this round to scale up nationwide.”

How it works

founded Swivel in late 2016 with some initial incubation capital from . He and Floodgate Co-Founder had started and sold a software company together in the late 1990s called , and decided they wanted to work together again.

They both ,” Harmon said, and felt like the commercial real estate office market needed to be disrupted.

So how does it work? Pre-qualified member companies can contract with Swivel’s landlord partners for turnkey office space on flexible terms with little or no upfront capital expenditure and no lease lock-in.

Landlords use the company’s agile leasing platform to backstop their leases for member companies. (I wrote about a similar startup, Landing, recently that is focused on flexible apartment leases). Using Swivel, leases are typically a 12-month commitment with a maximum of four years.

Clients are able to use Swivel’s software to configure and design the space however they want; most offices are between 3,000 and 10,000 square feet. Companies need only to give 60 to 90 days notice before moving out and then are not charged any penalties or move-out fees, and don’t have to deal with subleasing.

Since its network launch in 2019, Swivel has signed up over 30 landlords representing more than 150 properties across Austin, Dallas and Houston.

What it is and what it’s not

Harmon is quick to point out that unlike other flexible workspace operators such as or , Swivel is not a landlord. It does not lease space.

“We’re more like a VRBO for office space,” he told me. “People who own properties use our technology and platform to lease to new tenants on more flexible terms. Landlords make the money and share their profits with us.”

For example, a landlord can open up two floors in a building specifically to be listed via Swivel. They can charge a (10 to 20 percent higher) price per square foot because of the flexible terms, but it will still come out to about half the cost of a co-working space, Harmon said. Swivel will completely furnish the space, and “the building becomes more valuable,” according to Harmon.

“We work with hundreds of landlords,” Harmon said, “and we allow them to make more money by bringing a different kind of client into their building and providing a new class of service.”

Swivel is also not out to replace commercial real estate brokers, opting instead to partner with them so it saves money on marketing as well. It works out well for all involved, Harmon said.

Looking ahead

Swivel’s target market is tech-enabled companies in their growth phase, which make up about half of the tenants leasing through its platform. (It works with tenants such as Dremio, Graylog, Guideline 401k, hOp, Plivo, Samcart, TalentRobot, and Vertify.)

The process is a more appealing one to tech upstarts that simply prefer a more digital process in general.

“They’re just used to flexibility and that sort of convenience in other parts of their lives,” Harmon said.

But Swivel has also helped a number of multinational companies that require flexibility for their satellite offices.

The company plans to use its new capital primarily to expand across the U.S. in 2020. It is in talks with landlords in Boston, New York, Northern Virginia, Charlotte, N.C., Los Angeles, Salt Lake City, Utah, Denver and San Francisco.

“Expansion cities are a finite list and expand based on how our landlord partnerships unfold,” Harmon said. “Landlord partners will determine the order and timing of opening up each market.”

For his part, Breyer believes Swivel’s business model is an ideal approach to help landlords be able to meet the evolving needs of tenants.

“As a VC, one of my mantras [to portfolio companies] is ‘don’t sign anything longer than two years,’ ” Breyer told me. “Real estate hasn’t kept up with that, as the leasing business hasn’t yet been tech-enabled, particularly in very important markets, like Silicon Valley and Austin.”

In general, he also believes flexible leases will become more and more important in general given workforce needs.

“The next generation thinks about flexibility first and foremost,” Breyer told me. “Swivel gives landlords the opportunity to attract the tenants of the future.”

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, a defense company founded by ex-Facebook VR executive , is working to be on the border of innovation. Literally.

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The company is working to create a virtual border wall with its surveillance technology for government use – and a16z just invested in it, valuing it at $1 billion post-money, . Anduril did not immediately respond for comment regarding the new, reported financing round.

The Orange, California-based company has to date for its artificial intelligence technology. Investors beyond a16z include , , and .

The latter investor was part of Anduril’s DNA earlier than the company’s formation, quite literally. , which Luckey started in 2012, was acquired by Facebook in 2014 for . The founder was eventually ousted from the social media company that he funded an anti-Hillary Clinton, pro-Trump organization with ties to racism.

But Oculus gave Luckey insight on the commercial aspect of augmented reality and virtual reality, and led Anduril’s Series B. The size of that round was undisclosed.

Anduril states on its website that it “self-funds” all of its development, helping it launch software speedier than if it went through the government-first development process.

But Anduril was not the only late-stage round that a16z was involved with this week.

Samsara

Earlier this week , a company focused on industrial IoT sensors, blending hardware and software together, . The new capital values the four-year-old startup at $6.3 billion, according to .

a16z, which led the company’s and co-led its put money in the new round. and led Samsara’s newest round, which included more capital from a16z and .

The firm’s new $6.3 billion valuation is sharply higher than its preceding $3.6 billion rally. In less than a year, therefore, Samsara managed to grow its value by 75 percent. Such sharp rallies in value among high-growth private companies are not rare in 2019, but to see a company as highly-valued as Samsara add $2.7 billion to its worth in ten months is notable.

Also this quarter, a16z has invested in , the , , FlyHomes, Singularity 6, Hipcamp, Freenome, and Substack, among others. The investor currently participates in about 20 known investments per quarter.

Finally

To close, it seems that the unicorn era of booming valuations with big checks to match is still on a spree. And a diverse one at that.

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The poet once wrote: “The irony about loneliness is we all feel it at the same time.”

I imagine that , , and other leaders of social media would like to think of their platforms as a refuge for this human condition. After all, windows into each other’s lives have never been easier to look through. has 2.4 billion users who connect and share. , another Facebook-owned property, has .

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Despite those massive user numbers, data tells us we’re the loneliest we’ve ever been. In fact, the more online you are, the more likely it is that you actually feel alone.

Some of the blame for loneliness is the omni-present like button—an app feature some confuse for actual affirmation. For others, digital socializing is a contradiction in itself.

“Social media has failed in its promise of being social,” said , the founder of , a conversation platform he said is built “to help people to rediscover and reconnect over conversations.”

“The true promise of social media,” he said, “can only be realized through real conversations.”

Shah’s app helps people chat through spoken conversations, which he says are more intimate than the ones that could be had through keyboards or devices.

“The social apps of the world today have external validation and FOMO as their primary incentives,” said , the , an app which lets individuals screenshare and video chat.

The game, she said, ends up being how we can all get the most likes, comments, and follows.

“It’s exhausting and depressing to constantly compare everyone else’s filtered lives to your own real life,” she said.

Yet the largest social platforms in the world are slowing catching on to the inherent addictiveness of the apps they build.

A Filtered Lens

Instagram is rolling out a version of its app that removes the total number of likes on photos and video views. It is being tested in Australia, Brazil, Canada, Ireland, Italy, Japan, and New Zealand, according to , a spokesperson for Instagram.

“We are testing this because we want your followers to focus on the photos and videos you share, not how many likes they get. We don’t want Instagram to feel like a competition–we hope to learn whether this change can help people focus less on likes and more on telling their story,” she added. The test began in Canada in May.

Of course, some users have found social media, as is, to be useful. , the CEO of , spends about 19 hours and 44 minutes a week on Twitter, according to his Screen Time app. 1

“The value of Twitter, for me, is the stuff that is on no one’s feed,” he said. “It’s the DMs that have been really valuable to me. I try to use it as a place where I can have conversations with people and be genuine and share my thoughts.”

Through DMs turned into Zooms and phone calls, Twitter has given him friends in tech in Utah, San Francisco, and Los Angeles.

As for quality of conversation, money talk isn’t deep enough, Lavingia said. Talking about how hard it is to paint with the color green, however, is.

But having that deeper conversation requires a culture shift. It means relying on social media not for the affirmation but for the potential conversation. And it’s possible that culture shift, coupled with less addictive features, is the solution to loneliness induced by social media.

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�ұ��é: Welcome James Currier founder, angel investor turned into a fund manager with the founding of NFX fund in 2015. Why NFX?

James: We said let’s try to build a venture firm with network effects. We believe that the most interesting, most impactful things have big network effects. Originally we started with an accelerator. We dropped that two years ago. We were doing 15 companies per class. We either need to scale up to 80 per class, to get the random effect, to make that model work. Or we needed to scale down and increase the percentage ownership. In the end we decided to scale down and increase the percentage ownership and be a straight fund.

�ұ��é: Why the name NFX?

James: It stands for network effects. What we realized in about 2010, is that all the companies we had invested in as angels, that we were really excited about, all had network effects. They were growing. They were defensible. Mostly about defensibility.

�ұ��é: Given that we’re in the Internet era and everything’s connected, does almost every company have a network effect?

James: About 20 percent of the business plans have network effects in them, and 80 percent don’t. So if you’re a medical device, a synthetic biology company, SaaS software, enterprise software, or direct to consumer products, these things do not have network effects. These things have scale effects. They could have embedding effects, or they could have brand effects as their defensibility. But in the digital age, there are very few defensibilities left.

�ұ��é: And why don’t they have network effects?

James: So the basic definition of a network effect is that every new user or new customer makes the product more valuable for every other customer. The first time we saw network effects was with telephones.

�ұ��é: Which companies have stood out with a huge network effect?

James: Just look at the most valuable companies in the world. Microsoft is still one of the top market cap companies in the world, and they’ve been working on that two sided platform network effect since 1976. And then you’ve got Facebook, you’ve got Google, and you’ve got PayPal.

There’s like five or six of us who just spend so much time looking at this, at Harvard Business School, from Intuit, and a few others. There’s actually some interesting what we call “social network effects,” but not social network. One of them is naming. So “let’s grab an Uber” is a real problem for Lyft right. “Google that” is a real problem for Bing, Once Google became a verb, that’s an incredible social lock. It’s just awkward for me to use Bing if you tell me to Google something. That’s right on the edge of brand. Brand is different or the bandwagon effect.

�ұ��é: What other companies have a network effect?

James: Think of the big valuable companies, Uber, Lyft, and Slack. The more people in your company that use Slack the more valuable Slack becomes for you. Dropbox. Once my designer said, “Hey, I’m going to be sending you the mocks of the website on Dropbox”, and suddenly 76 people signed up in the next 48 hours because we had to get his mocks, all the engineers did and all product managers. Airbnb, the more properties, the more buyers. The more buyers the more properties. eBay,  Amazon Marketplace. More than 50 percent of all transactions on Amazon are now going to the marketplace. They’ve basically taken over what eBay was 15 years ago. It’s a two sided marketplace network effect. IOS. If you look at Apple’s market cap. It was $42 billion. And then they added iMusic for sharing music. And then they added iOS. Those were their first two network effect products. And then their market cap went up by 10 or 15 times. Before that they were selling hardware and software.

Since 1994, since the Internet connected everything, we looked at the 336 companies which have become worth over a billion. We looked at each of their business models and said, “Did they have a network effect at the core?” And if they did we looked at the market cap. 70 percent of the market cap came from companies with network effects, 30 percent did not. Yet only 20 percent of the businesses had network effects in the business plans, and 80 percent did not. So that seemed like a huge imbalance. So that’s why we decided to do NFX in 2010 but we didn’t get around to it because I was still running .

�ұ��é: What else are you trying to fix in venture?

James: We’re trying to help seed stage founders figure out how to navigate to their best investor. And that’s why we built to find the best investor for you. We don’t take salaries. We use the management fee to hire engineers and staff to support the company. We are building a platform to help the ecosystem.

We build our own CRM, and data analysis. And we’ve got an internal group which helps with pitch development, which helps with PR, culture building, hiring. Within a few weeks we’ll just answer so many questions, so that the founders can get back to product and iterating.

�ұ��é: Your most recent fund is $275 million, a pretty large seed fund, which you raised in April 2019?

James: We are a seed and pre-seed fund. Instead of investing over two years we’re going to invest over three years. We’re still going to be investing one to three million and lead seeds. In this fund we will make 35 investments. Four of them will be at a valuation which we would all consider to be a Series A, which is over $20 million. But we’ve also done probably 10 pre-seeds where we put in $250K, and help the company figure out what they want to do.

�ұ��é: What are the valuations for pre-seed and seed rounds?

James: Valuations for pre-seeds are typically one million dollars pre-money. For a seed round I guess the average would be about eight or nine million dollars pre-money. Our sweet spot for seed is investing is about $1.5 million in a round.

�ұ��é: How many companies do you meet in a year as a team?

James: We evaluate 3,000 companies a year, and then we’ll probably meet with 400. And invest in 15 companies in year.

�ұ��é: You invest in the Bay Area and Israel. How do you help startups build a network effect?

James: We’ve published this about the 13 different network effects. Starting with  the physical, which is the telephone or Comcast in the middle. And then you go into weaker and weaker network effects as you go out.

Once you understand each of these, you can start to imagine how to add these network effects to the various businesses. Whoever adds a network effect first wins. Because it adds more value without you doing anything. Someone signs up and pays you money, and suddenly your product is more valuable for everyone else. We’ve written long articles about and their defensibility. They’re not going anywhere.

�ұ��é: Facebook from what I understand worked hard to get each user 10 to 20 friends. Once you have that network you were never going to leave.

James: 10 for Facebook, 16 for Twitter, and 6 for Path. We call that network density

�ұ��é: Path however was not successful?

James: They weren’t because they were too late and the other platforms were largely serving the needs of people. Facebook messenger is a personal utility, which is actually stronger than Facebook. I can make payments, my wife wants me to pick the kids up at school. I can’t leave. Whereas Facebook, I can turn off.

Interestingly enough, the reason I exited the companies that I have is because they didn’t have network effects…Because if you really want to make  an impact in the world, the best way to do it is to run a network effects business like Nextdoor, or LinkedIn, or Tencent.

Stan, who’s a minor partner at an NFX, is now running Facebook Messenger. He and I have been talking about building the global currency since 2004 when I bought Blue.com with the intention of either building a spiritual group, or building a global currency.

I never got to do it, but he’s doing it as a part of Facebook. So once you get in a platform like that you have the opportunity to actually do these important things for the planet. Had I had a network effect business, I would not be a VC, I would be running that.

�ұ��é: Given that you’re investing in such an early stage, how do you perceive growth focus in our industry.

James: So let me be clear. Network effects is about defensibility and retention. Viral effects are about growth. Network effects are not about growth. It is about retention. It is about keeping people in. Network effects reduce churn.

We also want companies to grow very quickly, because fast growing companies attract the best people. Fast growing companies have more opportunities to do more creative stuff. Fast growing companies means that they’ve hit on something important to somebody. That is different from the sugar-coated viral growth of 2004, that people think of as growth hacking. We were very good at that, at that time. We did a bunch of that between 1999 and 2007. We invented a lot of A/B testing methodologies, and a lot of the viral loops. But since Facebook shut down Facebook Platform, virality has gone to near zero across the digital world.

�ұ��é: What is virality?

James: Virality is when a user of yours gets you another user for free.That was a 1998 to 2012 thing. It had a good 14 year period, and then it was over. But a very interesting period, with a lot of math, a lot of iteration.The culture of Silicon Valley, that we think of as Silicon Valley came from that age of rapid iteration, and changing all the time, and never sleeping. It was very exciting. It’s like running a 24 hour news program because things were changing so fast.

�ұ��é: Viral still seems to be here for users recommending brands?

James: Yes, there are still incentivised as viral programs. If you get someone to try Lyft, I’ll give you 20 bucks. Those are very popular. But that’s not for free. And in fact, for most of those companies their cost of user acquisition to the channel is higher than just buying ads on Facebook. But they don’t want to stop it, because it makes so much sense. And it gets the users to attach their own brand to the brand of the company.

So what we talk about is more fundamental growth. And that has to do with the name of the company, what is this thing for people, how valuable is it compared to the alternative, how do you lower the barriers to friction for people to use it. These are fundamental growth issues as opposed to growth hacking.

�ұ��é: So would you throw growth hacking out?

James: We do throw out growth hacking, except for the iterative culture that growth hacking bequeathed us. Because there was no A/B testing until about 1999. You can’t A/B test a shoe, or a computer, or a car. You put it out there. It works or it doesn’t. The mentality of A/B testing, the mentality of iteration, and letting go of what doesn’t work and trying something until it does, that we want to keep.

But the idea of creating very slick viral flows across the Facebook platform. Those days are gone. Even Upworthy, which was viral with their positive psychology stuff, which I loved, that’s dead now. is dead.

There are fundamental growth principles that are very deep. Which means you gotta get the founders to change the name of the company. The old name, no-one can remember it. No-one can spell it. Every ad you put out there, you’re going to lose 40 percent of value, because no-one can remember the name.

We need a stronger voice in this community about the creative product culture that brought us here, originally, as the waves of money culture flow over us. And figuring out how to create a protected area for entrepreneurs and founders who care more about the product and customer than they do about money. It is just a switch. Money can be second. You need fuel to grow, to attract talent to build the product. But that’s not the goal. And if it’s money first and creative to get the money, that’s really different. It’s really sour.

�ұ��é: Do you think Silicon Valley has gone that way?

James: If you’re writing a blog post and or tweet and you want someone to pay attention to it, you gotta put the numbers in. For instance, a lot of journalists say unless you have a financing they can’t really write about you. I think it’s because it’s the path of least resistance to aggregate confidence in something.

�ұ��é: This whole ecosystem is becoming global. Do you think that’s a protection against this money first culture, or do you think that just travels from Silicon Valley.

James: I think it travels, because people perceive Silicon Valley through the eyes of the bloggers and journalists. And the people tweeting out. And what they are  blogging about is the money, and who made what. Because that’s what people click on and read. So people outside understand if I go to Silicon Valley, I can make money. Silicon Valley is a product. People are incepting that I get money if I go there.

�ұ��é: So how do you change that?

James: I don’t think we can stop that. But I think we can create a pocket of people, and language, and writing, and events like the lobby. And the stronger the community who wants to keep it about creativity, and about product; and the more of Silicon Valley we influence; the more the products will be influenced; the more of the rest of the world we influence to really go after the creative future, rather than ‘I made a lot more money than you and therefore I have more worth.’

�ұ��é: What wave of technology are you riding?

James: We are riding synthetic biology. We are finding two-sided platform network effect businesses in the synthetic biology area where there’s three technologies which are all three on Moore’s Law sort of curves.

What is synthetic biology?

James: It’s essentially applying computation to the measurement and design of biology. You can do a lot more now, than you could because you have robotics, which are getting much cheaper, and are able to do 600,000 tests in an hour, versus six tests in five years. Machine learning, machine vision, and AI is getting better and better at processing and speed. Then the actual editing, the sequencing cost is coming down. Which is opening up vast new capabilities people haven’t even thought of. We are now waiting for the founders. There’s this gap between what the tech can do today, and what the founders are even thinking of doing, which is exactly where you want to invest.

�ұ��é: This is for disease prevention?

James: For disease, agriculture, oil and gas, replacing palm oil, and impossible foods. It touches almost every industry. It is incredible.

The other thing we see happening right now is that there has been enough fintech infrastructures built on top of the old rails, so that it’s becoming easier and easier to build faster and faster fintech related companies, or fintech enabled marketplaces, fintech enabled brokerages. The ease of developing in the fintech area, through regulation is much easier than it was three or four years ago.

�ұ��é: Is this due to platform players in the fintech?

Companies like that make it easier to get an API, or . So that’s another technology wave that we’re going with.

I feel as if the waves of tech change are slowing down compared to where they were in 1994 to 2012, because of TCP/IP and then because of mobile devices, opened up a huge Pandora’s box of potential. We haven’t had one of those big tectonic shifts since 2008. These are micro changes but the markets are so much bigger. Then the access is so much bigger. So the cost of acquisition is so much lower than it was in 1994 to 1998, because so many more people are on these networks and are easily addressable. So I think that’s making up for the fact that it’s not necessarily a tech wave. It’s a scale wave.

�ұ��é: What are the two companies that you are excited by and why?

James: based in New York is doing financial products in the real estate sector. They allow people to buy residential houses for cash. It’s a product that the agent can give to their buyer and then get the other agent to use the other side. So the network effect to new agents using Ribbon lowers the cost of house acquisition, and increases the amount of cash transactions.

So I go from saying I offer you $100k for your home and I’ll get a mortgage to saying I’m going to give you cash but I’ll give you $95k right now. And you say deal, done. And so Ribbon takes 2 percent. I as the buyer save 3 percent. You get the cash you want. The agent gets the transaction done. They each make their commission. Ribbon gives the cash for two to eight weeks for the transition to take place. And then the home buyer gets a mortgage. It really helps when you want to buy a home before you sell your other one. I can’t afford to buy a new home, until I sell my old home.

Another one would be , which is the largest repository of CRISPR IP in the world, which is gene editing. , a co-founder is a discoverer of CRISPR. They’ve created a platform play, and then they’re working with pharma and agricultural companies to develop diagnostics and therapies to edit change in a responsible way. The more people use the platform, the fewer experiments everyone needs to do because things have already been checked off. And there’s just more data available.

�ұ��é: Anything we did not cover?

James: We as founders have built 10 companies prior to starting NFX. Despite the money culture, we have exited for $10 billion. No other group has done that. It is about 2x any other new venture firm. As a venture firm of founders we’ve really been in the trenches for a while. I’ve made so many mistakes and have so much scar tissue. Let’s build a venture firm which is about building companies from the operators perspective who have been in their shoes. And that brings ethos, and respect, and authenticity to the conversation. That’s one thing that I think is important to us. We don’t dislike VCs who haven’t been operators. There are a lot of great VCs. But if I’m a founder, I want a founder.

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The second quarter is racing to a close. Amazingly, we’ll soon dive into July and the third three-month period of the year. That means earnings seasons (good!), summer (good!), and your partner taking you on hikes (bad!).

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But what matters for us this morning is momentum. More simply, in what sort of shape is tech dragging itself across the Q2 finish line?

To my surprise, it feels like the tech world is wrapping the first half of 2019 strongly. Let’s take a peek at some secondary signals that could give us a rough proxy for where tech is heading.

With the quarter nearly over, the Crunchbase News team is prepping our regular set of venture capital reports. We’ll have those turned in and hitting the presses right after the Fourth of July. But that’s to come, today we’re hunting around the edges.

Signals

We’re looking at three types of value today. We’ll start with the most exotic, move to the largest in terms of worth, and then examine the highest velocity.

Crypto, Again

Let’s start with cryptocurrencies. Now, you’ve stopped thinking about them after the great bitcoin crash that started as 2017 came to a close and effectively turned what had been a sure thing into, once again, a joke.

Things then got worse for the world of digital currencies and distributed ledgers as 2018 slumped in 2019. The value of a single bitcoin slipped under $4,000. The situation turned around in April of this year as bitcoin began to rally. And it’s kept going, recently cresting the $9,000 mark. All its friends added in, and the cryptocurrency market is worth just under $288 billion today, according to .

That’s up around 2.5x the figure’s lows. Recovery? Dead cat bounce? I don’t know, but watching bitcoin go full Lazarus is not a bearish sign.

Next, the stock market from two angles. First, incumbents. Second, upstarts.

Did you know that is up around 50 percent from its 52-week lows? Facebook’s lowest point in the last year was $123.02 as 2018 finished. The company’s share price has recovered in 2019, up to over $180 as of the time of writing. Sure, Facebook is still about $40 per share off highs, but the company’s sins have largely been forgiven by the market.

The techlash is more a media and Washington phenomenon than it is Wall Street fear, at least when it comes to the biggest tech shops. Facebook is worth $517 billion. is still worth north of $1 trillion. is worth $886.8 billion, $920.5 billion, and $753.4 billion.

So, at the top of the market, everything looks good. Sure, there’s some rustling for a new regulatory regime. But as one party is concerned about phantom bans centered around a caricature of their own political belief, and the other is led by animus for hard-to-regulate platform power, it seems unlikely that the Capitol will be able to get off its own hands and do anything.

The big companies are going to be fine.

And the smaller shops are doing well, too. is sharply higher from its recent IPO price. As is and . Even is back over its IPO price.

Vectors

From three angles, then, the tech world is chugging along. The old money is doing well. The giants are healthy and fat and rich. The new money is doing well too, with new offerings finding rapturous reception from public investors. And the putatively next money is doing well, too.

It’s a go from all three sides. The money in the middle of the three — venture capital — will give us a final look at the sector’s health. But if we use external signals to guess, I suspect the Q2 venture numbers will be just fine.

Illustration: Li-Anne Dias.

Facebook’s in the soup at the moment for a number of reasons that a host of excellent journalists are covering with rigor. , , and ���Ի��� are in the mix as well. If you are behind, it’s on you.

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The latest facet of the reporting cycle on Facebook that has caught my eye is Facebook’s employee retention risk. This that made the rounds this week claims that Facebook employees are looking for exits, but it’s hardly quantitive. This from earlier today has notes on internal discontent, as does from a few days back.

Their composite picture is Facebook workers—long reported in and around Silicon Valley to be a bit hard to unstick from their current office chairs—are losing enthusiasm.

And this morning, some Glassdoor data—the Yelp for workplaces that every Valley company keeps tabs on—that shows Facebook slipping in the workplace rankings. So the company’s punishing run of corporate mistakes and risible PR choices are taking a measurable toll, although a smaller impact than you might have thought. Here’s Ina:

“After a year of scandals, Facebook lost its place as the best company to work at, according to . Facebook fell from first to seventh in the survey.”

The trend is probably more interesting than the result. If Facebook’s ranking continues to dip over time it could suffer from a two-sided issue: hiring and retention. In a vying industry rife with wealthy competition looking to poach your best talent and compete for new hires, losing luster can be a bleeding process. And Facebook just dropped from first to one notch lower than Linkedin in the Glassdoor report.

My question is if antsy Facebook employees looking for something new to do will leave the social giant for another behemoth, like Google, or jump into startups. Of course, it will be a mixture of both, but which way the weighting lands will matter. Facebook’s loss could be the gain of a host of myriad smaller companies if they can attract the sort of talent that Facebook has long been loath to share.

Even more pertinent to our readers: how many Facebook employees may now leave to start their own companies? How many will go to work on new social products? Sure, Snap isn’t going to harm Facebook anytime soon, but there will be a next It social network, and there’s no guarantee that Facebook will be able to buy it.

And, of course, some Facebook employees just might stop working. The firm has generated so much money that not all its current denizens need to remain in the working classes. So many even go full-leisure and become investors.

In a few more months we’ll have another round or two of anecdotal reporting concerning Facebook morale, especially if the company continues to suffer from self-inflicted injury (here’s , as an example). But what I’m keeping an eye out for is smaller companies announcing that they have a shiny new ex-Facebook exec or notes from founders proud to have picked up Facebook engineering talent.

That may not happen; Facebook may be able to use its titanic wealth, history of employee retention, and more to keep staff in place. But in a talent market as broken as Silicon Valley’s in 2018, it’s tough to see that bearing out completely.

Microsoft worth more than Apple? Facebook with an employee retention problem? Bitcoin pulling an anti-2017? It’s an odd year.

Illustration:

Chances are you have about Facebook’s that sent its stock down sharply in after-hours trading. The trend continued this morning, with Facebook’s equity shedding around 18 percent of its value at the open.

The company’s repricing by public investors flips several narratives on their head. First, that Facebook’s model, ���Ի���perhaps the social media corporate method itself, allowed the company to maintain operating margins in the 40s.

Facebook’s Q1’18 operating margin was . In its most recent quarter, operating margin was . Looking ahead, Facebook expects future operating margin to land in the “.”

Second, that leading tech stocks could do no wrong. It’s now well-known that a has been driven by outsized technology wins. The biggest tech companies — five of which were worth over $4 trillion recently — kept the public game afoot as a group, each putting up even better earnings results as time went along.

It seemed like that would persist in the second quarter, with both Alphabet and Microsoft beating expectations. However, Facebook’s disastrous earnings, coupled with , have dispelled some of the magic.

Each of these changes impacts startups. The first issue, the problem of rising costs related to running a social media company, implies that startups building inside the market niche can expect either higher content moderation costs at scale than they did before, or that they must find a different approach to growth. Slower growth, of course, is a contra-valuation tonic.

And the second lesson shows that the great valuation boom that added $1 trillion in value to the industry’s biggest winners in about a year could be coming to at least a pause, if not a long-term finale. If that is the case, more than just social-focused startups could see their worth nipped in the private markets.

Cohorts

But Facebook is harming itself and the yet-to-go-public alike. It’s also not a good day for Snap and Twitter either. The two firms that have long toiled in Facebook’s shadow as smaller, less profitable – and less consistent in terms of both revenue and user growth – public social media firms.

The Menlo Park Meltdown has Twitter down 3.5 percent as of the time of writing, and Snap is off 3.4 percent.

Notably, Twitter has worked through its own molting period in recent years, working to clean up Nazis and bots alike. Snap has fewer problems of that sort of issues but is a walking cost factory. So Facebook’s recent lessons still apply. Snap just started teaching them first, ironically.

Things are still fresh, and surprise from Facebook still new. Things may come back. But today you can be glad that you . The so-called smart money didn’t see any of this coming.