I could spend hours discussing early-stage startup operations and community-based marketing, but deal flow is my blind spot.
But when investment bank UBS hired robot financial adviser Wealthfront for $1.4 billion in a cash deal this week, I took notice.
“At these prices, the company’s exit price is a win as it represents a multiple of 2x or more in its final private valuations,” wrote Alex Wilhelm on The Exchange. “But your output value can also be analyzed from several alternative perspectives: AUM, customers and revenue,” he added.
Examining each of these factors, Alex found that the deal is more than just a “next-generation push” aimed at “reaching wealthy young Americans,” as some headlines suggested.
This exit will help other fintechs set expectations, but should give a mental boost to anyone who thinks it’s too late to start in this space.
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Just over 56% of Americans own stocks, but that number is still several points lower than it was before the Great Recession more than a decade ago. With more consumers buying crypto and fractional stocks today, I would say the robotics advisor race is still making a parade lap.
Alex, who swims in the flow of business like a carefree dolphin, agrees with me – to an extent:
The recent drops in active users on platforms like Robinhood and the success of fintechs like M1 in recent years may point to a more open market for robotics consulting, but the question is whether its low-cost model can be interesting enough for investors.
Wealthfront, for example, takes a 0.25% cut of consumer funds. I think Robinhood was doing a little better when we considered their PFOF revenues relative to lower value client accounts that were actively trading.
Can robots present an equally strong financial image? If they can, they will likely prove to be less volatile than Robinhood is to this day.
We essentially agree: it’s never too late for a good idea.
Thank you so much for reading Ploonge+ this week!
Senior Editor, Ploonge+
European and US edtech startups see funding triple in 2021
Before the pandemic, VCs were notoriously reluctant to invest in education-related companies. Today, edtech startups are seeing higher average deal sizes, more seed and pre-seed funding from non-venture capital investors, and an influx of generalists.
According to Rhys Spence, head of research at Brighteye Ventures, funding for edtech startups based in Europe and North America has tripled in the past year.
“Exciting companies are popping up in all geographies and verticals, and even generalist investors are building conviction that the industry is capable of producing the same kind of massive returns generated in fintech, healthtech and other industries,” writes Spence.
See how far VCs have lowered revenue expectations for seeds through Series B
Valuations are rising, but revenue averages for SaaS startups “have seen a recent and rapid decline,” according to a Kruze Consulting report that Alex Wilhelm studied yesterday.
Revenue growth targets for early-stage startups looking to raise funds have approached over the past two years, meaning investors are now willing to invest money in slower-growing companies than before, Alex wrote.
“All in all, startups are getting paid better, faster and with less work than before. It’s a great time to step up, but a terrible time for venture capitalists trained in a time when they got more capital for their dollar.”
Dear Sophie: 3 questions about immigration and naturalization
My F-1 OPT will end in June. My employer agreed to register me for the H-1B lottery in March.
What are my options if I am not selected in the lottery?
I’m in the US on an L-1A visa that will max out later this year. My wife was with me the entire time on an L-2. Can my wife apply for the H-1B this year?
Would she need to leave the country to activate it?
— Helpful Husband
I have a 10 year green card that expires at the end of this year. I have been married to an American citizen for 11 years, but we are in the process of divorce.
Can I apply for US citizenship even after divorce?
-New Year New Life
IBM ignores investor concerns over EPS, sells growth story
IBM’s earnings report was positively received, but when CFO Jim Kavanaugh declined to share the company’s earnings-per-share expectations in a post-earnings conference call, the stock quickly plummeted.
The stock rallied the next day, but the blip was newsworthy as a narrow focus on transferring a few assets, expanding growth and free cash flow puts IBM on track for further growth, analysts told Alex. Wilhelm and Ron Miller.
“It’s good to see IBM regaining growth that eluded the vendor for longer than any investor would like,” said Holger Mueller, an analyst at Constellation Research.
“But a small ship can sail faster, and with the assets of Kyndryl and Watson Health being offloaded, that will help IBM sail faster.”
In blow to unicorns, global IPO market continues to soften
It’s still a great time to be a startup founder. Specifically – an early stage startup founder.
WeTransfer parent WeRock delayed its IPO earlier this week, becoming the latest major software company to shelve its plans to go public after JustWorks.
Prior to that, a bunch of SPAC IPOs that many had hoped would go to the moon instead veered off course after launch.
These signs, taken with several others, suggest this may not be the best time to go public, wrote Alex Wilhelm and Anna Heim in The Exchange.
“Are the good times running out?”
Edtech Startups Move to the Promise and Potential of Personalized Learning
Everyone learns differently, but parents, teachers and schools tend to forget this vital fact in the classroom.
The forced changes brought about by the pandemic, however, have led some teachers and parents to realize that personalized learning is critical to education, especially for neurodiverse students.
As a result, a new wave of startups has emerged that promise to deliver curricula that adapt to the student’s emotional or educational state, reports Natasha Mascarenhas.
“The prolonged stay of the pandemic has caused edtech entrepreneurs – and society – to see learning outcomes as broader than job placement and exam scores,” she wrote.
3 views: How should startups prepare for a post-pandemic slump?
If the public markets were a swimming pool, it would still be open for business, but there would be signs warning newcomers that the water has cooled a little.
Natasha Mascarenhas, Mary Ann Azevedo and Alex Wilhelm, the trio behind the Equity podcast, shared their predictions about what’s in store for startup funding and due diligence in 2022:
- Natasha Mascarenhas: ‘The lean startup’ aged with an asterisk
- Alex Wilhelm: Money over bulls**t
- Mary Ann Azevedo: Don’t try to be all things
Crypto Pioneer David Chaum Says Web3 Is ‘Computing With Consciousness’
In 1982, computer scientist David Chaum wrote a dissertation that described a blockchain protocol, along with the code to implement it.
Since then, his cryptological research has led to developments such as digital money and anonymous communication networks. This week, it released xxmessenger, which the company describes as the first “quantum resistant” messaging app.
When we asked him what has changed in recent years, Chaum said: “It seems to me that Bitcoin and the like have created something that can no longer be ignored. Now the question is, how can this be brought to the general public so that they can readily adopt this next generation of information technology?”