Glenn's Weekly Digest - 2/23/24
Your Weekly Guide to the Startup Universe: Navigating the World of VC & Startups for Students
Stories of the Week
Klarna's Coup: Sequoia's Strategy Shift
‘You Come at The King, You Best Not Miss’ [The Information]
A rare and public board dispute unfolded at Klarna, with Sequoia Capital attempting to oust Michael Moritz from his board chair position, revealing internal tensions and differing visions for the company's future. Despite initial support for the move, Sequoia backtracked, apologizing to shareholders and reaffirming support for Moritz, highlighting the complexities of navigating leadership dynamics ahead of Klarna's anticipated IPO.
Why it matters: The confrontation within Klarna's boardroom, spearheaded by a prestigious firm like Sequoia Capital, underscores a rare and significant deviation from the typically discreet and unified front presented by venture capital firms in public disputes. Attempting to remove a well-established figure like Michael Moritz from the board is not only unusual but highlights the intense internal conflicts and strategic disagreements that can arise even within successful, reputable investment firms.
Why’d this happen? Numerous questions still linger regarding the conflict, particularly regarding the precise details Miller relayed to Sequoia that prompted the attempt to oust Moritz. However, it's evident that Moritz's status as a leading figure in the investment world renders him a formidable figure to any challenge.
What’s next? Sequoia Capital is entrusting Andrew Reed, a partner and growth investing leader, with smoothing out internal disputes at Klarna and guiding the company toward a successful IPO. Reed, a trusted protégé of Michael Moritz and experienced in managing high-stakes situations, as evidenced by his involvement with Robinhood during the GameStop saga and his board position at Figma, is positioned to navigate Klarna through its upcoming challenges. His track record suggests a strong capability to handle the regulatory complexities Klarna might face in its pursuit of going public in the U.S. or U.K.
Reddit's IPO Leap: From Threads to Treads on Wall Street's Beat
Reddit files to list IPO on NYSE under the ticker RDDT [CNBC]
Reddit has filed for an IPO with the SEC, planning to trade on the NYSE under the ticker "RDDT" in what will be the first major tech IPO of the year and the first social media platform to go public since Pinterest in 2019. The company, which has seen a 20% increase in annual sales to $804 million in 2023 but still operates at a loss, is leveraging its substantial user base and advertising potential while exploring new revenue streams through AI and a data-licensing business.
Why this matters? The company had aspirations to go public since its confidential filing in 2021, yet had to delay due to unfavorable market conditions. In essence, Reddit's public offering positions it as one of the most significant social media entities to enter the stock market following Snap's debut in 2017 and Pinterest's subsequent IPO.
Illustration: Aïda Amer/Axios What’s different? Reddit plans to engage its long-standing user base and the wider retail investment community by allocating shares through a "directed share program" and selling stock via platforms like Robinhood and SoFi for its IPO. The company warns that this strategy may heighten stock price volatility due to the participation of a large number of retail traders, potentially mirroring the "meme stock" phenomena that caused Robinhood's stock to surge temporarily post-listing in 2021.
What happens next? Investors are keenly watching Reddit's upcoming public market debut, marking it as one of the first major IPOs after a period of market downturn. There's a widespread hope that a successful performance by Reddit could reinvigorate the IPO market, paving the way for more companies to go public. Amidst recent market uncertainties, the outcome of Reddit's IPO is seen as a bellwether for potential market recovery, with investors eager for new opportunities and exits that a buoyant IPO market could bring.
Top Reads This Week
The Brex Boys’ Uncomfortable Reckoning [The Information]
In a candid journey down San Francisco's Market Street, the Information sits down with Pedro Franceschi, co-founder of fintech unicorn Brex, who reminisces about the company's meteoric rise and the significant spaces that marked its early triumphs. However, this nostalgic walk contrasts sharply with recent challenges, including a 20% workforce reduction and the departure of key executives, reflecting broader struggles within Silicon Valley and the tech industry's rapid adjustments to a new economic reality. Despite these setbacks, Franceschi and his co-founder Henrique Dubugras remain committed to Brex's future.
A comprehensive list of 2023 & 2024 tech layoffs [TechCrunch]
The tech industry's ongoing layoffs, continuing from a tumultuous 2022 into 2024, reveal a persistent challenge among giants like Google, Microsoft, and TikTok, with significant cutbacks still unfolding. Amidst slow recovery prospects, certain sectors like artificial intelligence show promise, yet the broader landscape sees companies pivoting towards efficiency over growth, underscoring the economic and human toll of these changes.
Top 5 Deals of the Week:
Magic.dev, an SF start-up that develops an AI coworker who functions as a software engineer, raised $117 million in funding from Nat Friedman, Daniel Gross, and others.
Power, an SF based clinical trial platform, raised a $12 million Series A round led by Contrary Capital.
Scribe, an SF platform that helps teams document processes in seconds, raised $25 million in Series B funding led by Redpoint Ventures.
Exponential Markets, an NYC company that creates financial risk mitigation tools, raised $10 million in seed funding led by MaC Venture Capital.
Northwood, an El Segundo based company that aims to make satellite technology more accessible by mass-producing data-retrieving ground stations on Earth, raised $6 million in seed funding from Founders Fund, a16z, and others.
Venture Jobs of the Week
Associate, LegalTech Fund [Remote]
Chief of Staff - Growth, a16z [Bay Area]
Senior Associate, Westly Group [SF]
Investor, Necessary Ventures [Remote]
MBA Summer Fellow, 53 Stations [Chicago]
Associate, JP Morgan Impact Fund [NYC]
MBA Associate, Touch Capital [NYC]
Investment Manager, Amex Ventures [SF]
Thank you for joining us for another edition of Glenn’s Weekly Digest! We hope you found valuable insights into the dynamic world of venture capital and startups. If you have any feedback or suggestions, feel free to reach out. Stay tuned for more exciting updates next week!
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The material presented on Glenn Borok’s website and blog are my opinions only and are provided for informational purposes and should not be construed as investment advice. It is not a recommendation of, or an offer to sell or solicitation of an offer to buy, any particular security, strategy, or investment product. Any analysis or discussion of investments, sectors or the market generally are based on current information, including from public sources, that I consider reliable, but I do not represent that any research or the information provided is accurate or complete, and it should not be relied on as such. My views and opinions expressed in any website content are current at the time of publication and are subject to change. Past performance is not indicative of future results.