What's up with tech stocks, direct listings, and the end of all-male boards
Welcome to Nº 13 of In The Money, your weekly newsletter on all the financy things.
I want to start by saying from the bottom of my heart a big thank you to everyone for reading, commenting, and supporting ITM every week. The community has been growing a lot lately, which is super exciting. My mission with ITM is to make keeping up with the financial markets and learning about it easy and fun. Because I firmly believe that investing is for all. ITM emphasizes diversity and each week I’m highlighting a female role model in a section called Woman of the Week. Historically, women have been left out of the wealth creation opportunities that investing brings, and that sparked me to start this newsletter.
This week we saw more female-led funds, and early numbers on 2021 funding show more money flowing into underrepresented founders. Coinbase and Oatly filed for IPOs, of which the first-mentioned is planning a direct listing (we’ll learn what that is and how it differs from a traditional IPO). We’ll also explore what’s been happening in the US stock market and how that is connected to the economic cycles and many more financy things. I hope you enjoy this week’s edition.
New female-led VC fund 👏
As of 2019, 65% of venture funds still did not have a single female partner or GP (general partner) at their firm, according to All Raise. In recent newsletters, we have celebrated several newly launched female-led funds. Last Friday there was a new one when New York-based Avid Ventures announced the launch of its first $68 million venture capital fund.
Addie Lerner founded Avid in 2020. She has previously been an investor with General Catalyst, General Atlantic, and Goldman Sachs. Tali Vogelstein joined Avid as a founding investor soon after its launch and the two were able to raise the capital in 10 months during the 2020 pandemic. Vogelstein is a former investor at Bessemer Venture Partners. Lerner founded Avid with the goal of taking a hands-on approach to working with founders of early-stage startups in the US, Europe, and Israel. The fund has an impressive list of LPs including, Schusterman Family Investments and the George Kaiser Family Foundation as its anchor LPs. Avid also has the support of 50 entrepreneurs and investors as LPs, 40% of whom are female, including Mirror founder Brynn Putnam; Getty Images co-founder Jonathan Klein; founding partner of Acrew Capital Theresia Gouw (who was featured in ITM as Woman of the Week in this edition) and others.
Avid invests at the Series A and B stages, and so far, has invested in Alloy, Nova Credit, Rapyd, Staircase, Nava, and The Wing. Three of the companies have female founders — something Lerner said happened “quite naturally.” “Diversity can happen and should happen more organically as opposed to quotas or mandates,” she added.
The fund’s first checks typically being in the $500,000 to $1 million range and most of its capital is preserved for follow-on investments. Regarding sectors, Avid is focused on backing early-stage fintech, consumer internet, and software companies. It intends to invest in about 20 startups over a three-to-four-year period. “We want to take our time, so we can be as hands-on as we want to be. We’re not looking to back 80 companies. Our goal is to drive outstanding returns for our LPs,” Lerner said.
Black and female founders land 30% of funding 🚀
When tracking venture funding, a common lament is that Black and female founders raise a disproportionately tiny share of investment. While the issue has gotten a lot of attention in recent years, the numbers haven’t improved much. However, the start of 2021 might indicate that investors are finally paying attention.
Out of $150 billion in US venture investment in 2020, only $1 billion went to startups with Black founders, which is less than 1% of total funding, according to Crunchbase data. Teams with at least one female founder, captured approximately 11% of venture funding while all-female founded teams captured 2.3% of total funding.
So far this year, funding rounds of $100 million and up to U.S. early-stage companies are bucking this trend. These supergiant funding rounds represent a small but closely watched cohort. Companies that secure the largest early-stage investments are most likely to form the next generation of unicorns and decacorns.
Data indicates that this founder group is fairly diverse. A Crunchbase survey of Series A and B stage rounds of $100 million and above to US companies between January and mid-February found that 30% of these investments went to teams with female or Black founders.
Gender bias in senior executive search 🤦♀️
A study of almost 100,000 job ads in the UK over the past six months showed that companies searching for senior executives show greater signs of bias against women than in searches for junior roles. The senior roles are being consistently advertised using less inclusive language than junior roles.
The study by Sia found that businesses appear to be taking steps to use more inclusive language in job ads for junior positions. While the most senior roles are advertised using ‘masculine-coded’ language. This was consistent across all sectors, with the exception of real estate. The “gender-coded” language used in job ads, can influence the profile of candidates who apply for the jobs. If job ads contain mainly masculine words they are less appealing to female applicants. When using mainly feminine words, job ads are equally appealing to both female and male applicants. This can lead to a more inclusive workforce.
Research has shown that men are more likely to apply for a job for which they are unqualified, while women tend to be more reticent in applying unless they are confident that they would be suitable for the job. In June 2020, the World Economic Forum said the use of gendered language in job ads acts as a contributor to gender inequality in the workplace.
Diversity controversy 🤔
In last week’s ITM we learned that McDonald’s started to evaluate its executives based on diversity. Last Friday, Alphabet Inc’s Google announced that it will evaluate the performance of its vice presidents and above on team diversity and inclusion starting this year. The news comes as one of several responses to concerns about its treatment of a Black scientist.
In December, Timnit Gebru, co-leader of Google’s ethical artificial intelligence research team, said that Google abruptly fired her after she criticized its diversity efforts and threatened to resign. On Friday we also learned that Google fired Margaret Mitchell, the founder and former co-lead of the company’s ethical AI team. Mitchell announced it via a tweet.
In June 2020, Alphabet and Google Chief Executive Sundar Pichai said that by 2025, Google aims to have 30% more of its leaders come from underrepresented groups. Focus being on Black, Latinx, and Native American leaders in the US and female technical leaders globally. Some 96% of Google’s US leaders at the time were white or Asian, and 73% globally were men.
The company also expanded a commitment announced in June to devote more resources to retaining and promoting existing employees, including by expanding a team addressing disputes among workers and their managers. For years, Alphabet had rejected proposals from shareholders and employees to set diversity goals and tie executive pay to them.
Stream on 🔈
On Monday, Spotify made a bunch of announcements during an event called Stream On. The streaming service is launching a new tier Spotify HiFi that will offer “CD-quality, lossless audio” and users will get the chance to pay for this higher-quality audio. The pricing and launch date are yet to be announced.
The company also announced an audience development tool for artists, an audio ad marketplace, continued international expansion (to over 80 new markets reaching more than a billion people), a podcast co-hosted by Barack Obama and Bruce Springsteen, and a test of paid podcast subscriptions.
All-male boards are almost dead 👏
Of the top 25 US IPOs in 2020, just one company went public with an all-male board. That’s still one too many, but considering that two years prior, 12 companies did the same, we are making progress.
Overall among the top 25 largest US IPOs last year, women held 24% of board seats, up from 22% in 2019 and 11% in 2018, according to analysis from 50/50 Women on Boards (read the full report here), an organization advocating for gender equality in boardrooms. Two of these companies went public with gender-neutral boards, Rocket Companies, and Reynolds Consumer Products. The only company to go public with an all-male board was data provider Dun & Bradstreet Holdings. It said it is “actively recruiting highly qualified female candidates to complement existing leadership.”
The improving trend likely to some extent reflects, the attention institutional investors like BlackRock have paid to boardroom diversity in recent years. Last year, Goldman Sachs took its own stand, promising to not underwrite public offerings of companies without diverse boards. And in December, Nasdaq proposed a rule requiring the companies listed on its main US exchange to have at least one female director and one underrepresented director (you can read more about this in a previous edition of ITM).
“Those kinds of actions seem to be moving the needle, along with more transparency, stricter investment rules, heightened shareholder expectations, and research by business thought leaders, reconfirming that companies with women directors outperform companies without,” the 50/50 report says.
In previous editions, I’ve been trying my best to explain what SPACs are, but this video gives perhaps the best (certainly funniest) comparison out there
Tesla, Square, and Bitcoin
Last week we learned that Tesla had invested $1.5 billion in Bitcoin, after which the cryptocurrency hit new all-time high records. This week a decrease in Bitcoin’s price spilled onto Tesla shares, wiping off more than $110 billion of the electric carmaker’s value and some $20 billion from CEO Elon Musk’s net worth. According to analysts, Tesla’s share price is now directly linked to the price of Bitcoin.
Tesla is not the only company investing in Bitcoin from its balance sheet. On Tuesday Square revealed on its fiscal fourth-quarter financial report that it had bought $170 million worth of Bitcoin. The company said it purchased approximately 3,318 Bitcoins, expanding on its buy in October 2020 of 4,709. As of the end of 2020, Bitcoin represented about 5% of Square’s total assets.
Coinbase and direct listings 🔔
On Thursday the cryptocurrency exchange Coinbase filed to become a public company. It also revealed that its revenue more than doubled last year. According to the filing, Coinbase had net revenue of $1.14 billion in 2020, up from $483 million in 2019. The company also reported net income of $322 million for the year after posting a loss the previous year. The company said it has 43 million verified users as of the end of 2020, with 2.8 million making monthly transactions.
Coinbase will use a direct listing to offer its shares instead of a traditional initial public offering. A direct listing is an alternative to an IPO, in which a company offers its securities directly to the public to raise capital. With a direct listing, the company eliminates the intermediaries such as investment banks, broker-dealers, and underwriters that are typical in a traditional initial public offering. The streaming music giant Spotify also went public through a direct listing. Coinbase’s stock is going to trade on the Nasdaq.
The move comes amid a boom in cryptocurrencies broadly, in particular in Bitcoin. As you can read above, large companies such as Square and Tesla have been buying Bitcoin in recent months. Coinbase listed potential price declines in Bitcoin as one of its risk factors. “Our net revenue is substantially dependent on the prices of crypto assets and volume of transactions conducted on our platform. If such price or volume declines, our business, operating results, and financial condition would be adversely affected,” the filing said.
If you want to dive into the S-1 filing, you can find it here. On the first page, you can see a reference to the creator of Bitcoin, Satoshi Nakamoto (in last week’s edition of ITM we took a deep dive into what Bitcoin is and its history).
IPO like a vegan 🌱
In other IPO news. Oatly, the Swedish-based food brand that produces alternatives to dairy products from oats has submitted plans for an initial public offering to regulators on Tuesday. Among its prominent backers, the maker of vegan food and drink products counts Oprah Winfrey and rapper Jay-Z.
The company, which sells its Oatly branded products in over 20 countries across, could be valued at more than $5 billion. It has hired Morgan Stanley, JPMorgan, and Credit Suisse as underwriters on the offering. People who briefed Financial Times on the situation said it was looking at a New York listing with a valuation as high as $10 billion.
The planned listing comes as the plant-based food sector has gained investor attention. Much of the demand for plant-based food is being led by millennials and Gen Z consumers, who are more than willing to spend on sustainable products that are also healthy.
Popping bottles 🍾
Speaking of Jay-Z, the rapper had another reason to pop a bottle this week. The French luxury conglomerate LVMH, which owns Dom Pérignon and Moët & Chandon, announced it has taken a 50% stake in Jay-Z's Champagne brand Armand de Brignac, also known as "Ace of Spades." The terms of the deal were not disclosed.
The partnership comes at a time when LVMH is working to appeal to a more diverse group of clienteles. The luxury sector has long been criticized for its lack of diversity. Recently LVMH revealed tennis champion Naomi Osaka as its new brand ambassador. And a couple of years ago, it partnered with singer Rihanna on Fenty Fashion House, making Rihanna the first Black woman to lead an original brand with LVMH. A couple of ITM editions ago we learned that Fenty Fashion House was discontinued, but more investments were poured into Rihanna’s lingerie brand, Savage X Fenty.
Stock market and economic cycles 🎢
The stock market has been driven by volatility (volatility measures how much the price of a security or another asset fluctuates) this week which has been driven by investors’ fear of inflation. Let’s see what the market has been up to and try to disentangle in economic terms why some particular things have been happening.
The week started off with the tech-heavy Nasdaq index down nearly 5%. This comes as interest rates are rising. The 10-year Treasury yield (that is basically the interest rate the US government pays to borrow money) rose to its highest level since February 2020. However, interest rates remain very low by historical standards.
The yield on 10-year Treasury bonds was 1.37% Monday, well above its recent low of 0.51% in August and 0.92% at the end of December. Generally, higher Treasury rates translate into higher mortgage rates and corporate borrowing costs.
So, what is suddenly causing tech stocks to decrease and interest rates to rise? They are likely related to one thing: inflation fears. Investors are scared of inflation which causes the purchasing power of the dollar to decrease and prices will rise. For example, a cup of coffee that today costs $2 could cost $4 in a year. The Fed has added trillions to the money supply through stimulus packages and is planning another $1.9 trillion stimulus package. Such increases in cash in circulation could boost inflation risk.
The interest rates are rising because when there is so much cash in the system, people are worried that the money they receive in exchange for lending could be worth less in the future. And because of that, they are demanding higher rates from bonds.
On the other hand, tech stocks are falling because rising interest rates can make bonds and savings accounts more attractive compared to riskier assets (read tech stocks). Rising interest rates also increase the cost of borrowing, which can curb profits, growth, and hiring for companies. This in turn might result in less consumer spending, which is bad for the economy. This is an economic cycle of fluctuations in the economy between periods of expansion (growth) and contraction (recession).
Shares on Wall Street rallied on Wednesday, with the Dow Jones Industrial Average hitting a record high, of 31,961.86, which was powered by strong performance in energy, industrials, and financials sectors. This came after Federal Reserve Chair Jerome Powell’s comments calmed inflation worries. Powell told lawmakers on Wednesday it may take more than three years to reach the central bank’s inflation goals, a sign the Fed plans leave interest rates unchanged for a long time to come.
On Thursday the rate on the US 10-year Treasury note briefly soared as high as 1.6% before coming back down to around 1.52%, its highest level since February 2020. Simultaneously on Thursday, The Dow Jones Industrial Average dropped again, the S&P 500 lost 2.5% to its worst day since January. 27 and the tech-heavy Nasdaq Composite decreased 3.5% and suffered its biggest one-day sell-off since October 28.
Game back On 🎮
Remember a couple of weeks back when the game retailer, GameStop was at the center of a period of market mayhem? This was because retail traders led Reddit community WallStreetBets sent its share price skyrocketing, causing a short-squeeze on a number of Wall Street hedge funds that had bets on the company’s decline.
On Wednesday investors piled back into the bricks-and-mortar video game retailer following the reported ousting of Chief Financial Officer Jim Bell. The company announced unexpectedly on Tuesday that Bell will resign on March 26. No reason was given. The stock soared 103.9% before trading was halted. In premarket trade on Thursday shares climbed further 52.7%. And the shares continued their rally on Thursday as they traded up 50% for the session and were halted multiple times.
Canva goes shopping 🛍
During this week, Canva, the digital graphic design platform, announced two acquisitions. First being, Kaleido, a maker of a drag-and-drop background removal service for images and video. The price and terms were not disclosed; however, it is speculated that the company may have fetched nearly nine figures. The second acquisition was product mockup generator Smartmockups. The acquisitions suggest a major product expansion by the growing design company.
The Sydney-based Canva announced in June 2020 the close of a $60 million funding round, which brought its valuation to $6 billion. The startup has raised a total of more than $300 million. Investors include Bond, General Catalyst, Sequoia Capital China, Felicis Ventures, and Blackbird Ventures.
Canva was founded in 2012 by Melanie Perkins (you can read and learn more about Melanie who is featured as the Woman of the Week below), Cliff Obrecht, and Cameron Adams, with the mission to democratize design tools. While many non-designers can navigate their way around Google Slides or PowerPoint, going more in-depth on a design project can be daunting. Canva’s tools are meant to simplify design for people who don’t work in the design department. Around its fundraising announcement in June, the company had seen a 50% uptick in shared designs and a 25% increase in designs created each month. Overall, Canva is growing 100% year over year in both revenue and users. The company has 30 million monthly active users across 190 countries.
Congrats to these female founders who raised 💰 this week
Jenny Gyllander, founder and CEO of ThingTesting, the place to discover and learn more about new online brands (or the №1 destination for the modern consumer to make intentional brand choices in the words of its lead investor), raised a $2 million seed round led by Forerunner Ventures
The startup that makes coding accessible to girls, imagiLabs raised a €250,000 pre-seed round from notable angel investors. Btw, they are hiring a Community and Social Media Manager, read more and apply here.
Elise Smith, CEO, and co-founder of Praxis Labs raised $3.2 million in venture capital to help bring forth more conscious leaders using virtual reality
Woman of the Week
Melanie Perkins
Melanie Perkins is the co-founder and CEO of Canva. Perkins is one of the youngest female CEO of a tech start-up valued at over A$1 billion.
Perkins was born in Perth, Western Australia, where she attended Sacred Heart College. She is the daughter of an Australian-born teacher mother and a Malaysian engineer of Filipino and Sri Lankan descent father. At high school, Perkins dreamed of becoming a professional figure skater and routinely woke up at 4:30 am to train. At fourteen she had started her first business, selling handmade scarves at shops and markets throughout Perth. She credits the experience with developing her entrepreneurial drive as she never forgot the freedom and excitement from building a business.
Perkins enrolled at the University of Western Australia, majoring in communications, psychology, and commerce. At the time she also worked as a private tutor for students learning graphic design. She noticed the difficulties students had learning design programs such as Adobe Photoshop. The thought hit her that there was a business opportunity in making the design process easier. Her idea was to make a design platform where no technical experience was required. She dropped out of university at age 19 to pursue her first business with Obrecht, Fusion Books in 2007.
Fusion Books allowed students to design their own school yearbooks by using a simple drag-and-drop tool, with a library of design templates to which photos, illustrations, and fonts could be added. Perkins’s mother as a teacher would also co-ordinate the school yearbook. What Perkins saw was how much time was required to design a yearbook. Started in the living room of Perkins’s mother, Obrecht would cold call schools to get new clients for Fusion Book. Their parents would help with printing the yearbooks. Over five years, Fusion Books grew into the largest yearbook company in Australia. It also expanded to France and New Zealand. Perkins has said that she was rejected by over 100 local investors in Perth.
In 2011, prominent investor, Bill Tai visited Perth to judge a start-up competition where Perkins and Obrecht pitched Tai the initial idea for Canva over dinner. They received no funding but became regular fixtures at gatherings hosted by. Some of these gatherings took place in Silicon Valley where Perkins and Obrecht met Lars Rasmussen, co-founder of Google Maps. Rasmussen later became the tech adviser to the business where he introduced Perkins and Obrecht to Cameron Adams, an ex-Google employee with the relevant technical expertise needed for building Canva. After some persuasion he agreed to join Canva, becoming its third founder and chief product officer.
Today Canva is as mentioned in a section above valued at $6 billion. Ass Canva grows Perkins continues to try to prove you can build a global tech giant from anywhere. In an article of Canva in Forbes Mary Meeker, a seasoned internet investor whose firm, Bond Capital, has made an investment in Canva commented, “Melanie is a rare breed of entrepreneur, the likes of which you don’t find often anywhere.” Perkins has implemented policies at Canva that eliminate bias in the hiring process. These processes have resulted in Canva having 41% female representation, significantly higher than the industry average of 28%.
As of 2020, Perkins was the third richest woman in Australia. She is also an alum of the 2016 Forbes 30 Under 30 Asia list.
Thank you so much for reading this week’s newsletter. I would love to hear your feedback and please share this with a few friends you think would find this interesting. Have a lovely weekend 💜
I’m Marianne, an early-stage VC based in Stockholm. You can reach me by replying to this email, or find me on Twitter or LinkedIn.