Social Leverage Letter | Issue #41

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UPFRONT

Dealing with the Down Round

At first it’s a trickle, then a deluge. After being valued at over $5B last year, the Crypto financial services firm BlockFI is reportedly in the process of closing a down round valuing it at just $1B. This may be a signal the carnage that’s hit public tech is finally bleeding over into private markets.    

Howard calls it the The Down Round Reality and says “I liken this moment in the private markets to the Wile E. Coyote moments in the cartoon where he is out past the cliff and still spinning his legs …right before the plunge.”

And TechCrunch says founders are facing a Hobson’s choice between maintaining high-flying valuations – or conducting a “down round’. Experts suggest the latter makes the most sense; with legendary venture capitalist Brad Feld advocating that founders embrace the down round in those cases where you need the capital, but haven’t yet grown into a previous valuation.

In fact, your syndicate configuration may leave you with no choice. Brad says, “...if you can do a clean financing at a lower price, I always think that’s a better option for everyone (founders, employees, and existing investors.)”

Howard says we’ve had a fantastic up-cycle, but this painful pullback we’re seeing is likely not over; founders and investors should be asking if this is just the beginning. And Brad is hoping for a short-lived downturn/adjustment, but fears it won’t be.

To say there’s been a lack of clarity on how regulators should treat digital assets has been an understatement. Are they securities, commodities, or something in between? And with the recent “first ever digital asset insider trading scheme” unfolding this week, Investor Amnesia takes a look at the transition from the “wild west” of the digital asset world compared to a similar transition for equities and bonds over a century ago. 

WHAT ELSE WE'RE READING

Here's a few other stories that caught our eye over the past week

Software continues to transform all human activity. Over a decade later, Marc’s thesis, Software is Eating the World, still holds up; though some sectors aren’t being affected by technology fast enough. Healthcare, education, housing, and government continue to lag the progress seen in other domains. 

WHAT ELSE WE'RE LISTENING TO

A few more podcasts you might like: 

WATCHING

Social Leverage portfolio company Rally (Fund III) recently announced an initial offering for a 1994 BMW 850 CSi you might like to check out. The 850 CSi is incredibly rare with only 1,500 made worldwide. And only 225 examples were imported to the United States, making the 850 CSi about as rare as a Ferrari F40 or Porsche Carrera GT. The V12 in the 850 CSi formed the basis of the engine used in the famed McLaren F1. 

Effervescent goofball and all around car nut, Doug DeMuro, just so happens to have made an in-depth video featuring the BMW 850 CSi, And me being me, I'll find any excuse to put a classic car in an issue of the Social Leverage Letter. 

DEAL FLOW

The latest venture funding from around the globe:

CRYPTO CORNER

News on Crypto/web3:

JOB BOARD

Explore openings at our portfolio companies: 

Featured Jobs:

Check out all of our portfolio companies at Social Leverage.

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Affiliate Disclosure: Social Leverage Group, LLC ("SLG"), Social Leverage Capital Fund I, LP ("SLC"), Social Leverage Capital Fund II, LP ("SLCII"), Social Leverage Capital Fund III, LP ("SLCIII") and Social Leverage Capital Fund IV, LP ("SLCIV") are all distinct entities from Social Leverage, LLC ("SL"). Social Leverage is not a registered investment advisor. SLC, SLCII, SLCIII, SLCIV, SLG and SL have used the logo and branding of Social Leverage with the permission of Social Leverage Group, LLC.