Founders Fund backs Royal, a music marketplace planning to sell song rights as NFTs

Founders Fund and Paradigm are leading an investment in a platform that’s aiming to wed music rights with NFTs, allowing user to buy shares of songs through the company’s marketplace, earning royalties as the music they’ve invested in gains popularity.

The venture, called Royal, is led by Justin Blau, an EDM artist who performs under the name 3LAU, and JD Ross, a co-founder of home-buying startup Opendoor. Blau has been one of the more active and visible figures in the NFT community, launching a number of upstart efforts aimed at exploring how musicians can monetize their work through crypto markets. Blau says that as Covid cut off his ability to tour, he dug into NFTs full-time, aiming to find a way to flip the power dynamics on “platforms that were extracting all the value from creators.

Back in March, weeks before many would first hear about NFTs following the $69 million Beeple sale at Christies, Blau set his own record, selling a batch of custom songs and custom artwork for a collective $11.7 million worth of cryptocurrency.

Royal’s investment announcement comes just as a broader bull run for the NFT market seems to reach a fever pitch with investors dumping hundreds of million of dollars worth of cryptocurrencies into community NFT projects like CryptoPunks and Bored Apes. While visual artists interested in putting their digital works on the blockchain have seen a number of platforms spring up and mature in recent months to simplify the process of monetizing their art, there have been fewer efforts focused on musicians.

Paradigm and Founders Fund are leading a $16 million seed round in Royal, with participation from Atomic — where Ross was recently a General Partner. Ross’s fellow Opendoor co-founder Keith Rabois led the deal for Founders Fund.

The company isn’t sharing an awful lot about their launch or product plans, including when the platform will actually begin selling fractionalized assets, but it seems pretty clear the company will be heavily leveraging Blau’s music and position inside the music industry to bring early fans/investors to the platform. Users can sign-up for early access on the site currently.

As NFT startups chase more complex ownership splits that aim to help creators share their success with fans, there’s plenty of speculation taking off around how regulators will eventually treat them. While the ICO boom of 2017 led to plenty of founders receiving SEC letters alleging securities fraud, entrepreneurs in this wave seem to be working a little harder to avoid that outcome. Blau says that the startup’s team is working closely with legal counsel to ensure the startup is staying fully compliant.

The company’s bigger challenge may be ensuring that democratizing access to buying up music rights actually benefits the fans of those artists or creates new fans for them, given the wide landscape of crypto speculators looking to diversify. That said, Blau notes there’s plenty of room for improvement among the current ownership spread of music royalties, largely spread among labels, private equity groups and hedge funds.

“A true fan might want to own something way earlier than a speculator would even get wind of it,”Blau says. “Democratizing access to asset classes is a huge part of crypto’s future.”

#blockchain, #business, #co-founder, #companies, #cryptocurrency, #cryptopunks, #founders-fund, #keith-rabois, #musicians, #opendoor, #paradigm, #startup-company, #tc, #u-s-securities-and-exchange-commission

Playbook, which aims to be the ‘Dropbox for designers,’ raises $4M in round led by Founders Fund

When Jessica Ko was head of design at Google and then Opendoor, she realized that her teams spent about 90% of their time digging around Dropbox looking for assets.

In many cases, they’d find older versions. Or they couldn’t find what they were looking for. Or even worse, they’d accidentally pick the wrong asset.

“It was such a chaotic process,” Ko recalls. “Anyone could go in and alter things and change folder structures around. It was a total mess, and just continued like that because there was no alternative.”

As Opendoor grew in size, the problem became an even bigger one, she said. 

“Designers were quitting because it was giving them so much anxiety,” Ko recalls. “Dropbox hadn’t solved it yet. Google Drive was not a good alternative either. Designers deal with files the most, and we’re exchanging files constantly.

Besides the frustration and stress the problem of file storage and sharing caused, not being able to locate the correct assets also led to errors, which in turn led to lots of money lost, according to Ko.

“We spent a lot of money on photo shoots because we couldn’t find new things, or people would have to recreate designs,” she said. 

On top of that, she said, designers weren’t the only ones who needed to access the assets. Finance teams were constantly needing them for things like creating pitch decks.

So in 2018, Ko left Opendoor to set about solving the problem she was tired of dealing with by creating file storage for modern design workflows and processes. Or put more simply, she wanted to build a new kind of cloud storage that would serve as an alternative to Dropbox and Google Drive “built by, and for, creatives.”

In early 2020, Ko (CEO) teamed up with Alex Zirbel (CTO) to launch San Francisco-based Playbook, which she describes as the “Dropbox for designers,” to tackle the challenge. And today, the startup has emerged from stealth and announced it has raised $4 million in a seed funding round led by Founders Fund at a $20 million post-money valuation.

Other investors in the round include Abstract, Inovia, Maple, Basis Set, Backend, Wilson Sonsini and a number of angels, including Opendoor co-founder and CEO Eric Wu, Gusto co-founder Eddie Kim and SV Angel’s Beth Turner.

The first thing Playbook set out to do was attempt to reinvent the way folders exist for assets, with subfolders underneath. And then, the company set about trying to change the way people share files. 

“Since so much is done over email and Slack these days, version control becomes even more difficult,” Ko told TechCrunch. So Playbook, she said, has built a storage system that can be accessed by all parties as opposed to just sending files via different channels.

“For years, these assets have been dropped into what feels like a file cabinet,” Ko said. “But these days, sharing assets is much more collaborative and there’s different kinds of parties involved such as freelancers and contractors. So who is managing these files, and controlling the versions has become very complex.”

Playbook offers 4TB of free storage, which Ko says is 266 times the free version of Google Storage and 2,000 times that of Dropbox. The hope is that this encourages users to use its platform as an all-around creative hub without worrying about running out of storage space. It also automatically scans, organizes and tags files and has worked to make it easier to browse files and folders visually.

Image Credits: Playbook

In March, Playbook opened a beta version of its product to the design community and got about 1,000 users in two months. People continued to sign up and the company at one point had to close the beta so that it could manage all the new users.

Today, it has about 10,000 users signed up in beta. Early users include individual freelancers to design teams at companies like Fast, Folx and Literati.

The seven-person company wants to focus on getting the product “right” before attempting to monetize and launch to enterprises (which will likely happen next year), Ko said.

For now, Playbook is focused on the needs of freelancers. The company believes that the exponential growth of freelancers post-pandemic means “cloud storage needs to be smarter.”

“We want to first solve that use case, and unlock the problem from the bottom up,” Ko told TechCrunch. 

Also, another strategy behind that initial focus is that freelancers can also introduce Playbook to the companies and enterprises they work for, so the marketing then becomes built into the product.

“They can transfer assets and files through Playbook to their clients, who tend to adopt,” she said.

Today, Playbook is helping manage over 2 million assets and says it has “hundreds of waitlist sign-ups” every month.

Looking ahead, Zirbel said the startup wants to branch out into image scanning, similarity, content detection, previewing and long-term cloud storage and tons of integrations.

“There are lots of interesting technology challenges when you focus on the creative side of cloud storage,” he said.

Founders Fund’s John Luttig said when the firm first met Ko and Zirbel last year, it was “clear that they had a depth of understanding and thoughtfulness around file management” that his firm hadn’t seen before. Plus, in his view, there has been very little innovation in cloud storage since Dropbox launched in 2007. 

“The product leverages modern design, collaboration principles, and artificial intelligence to make file management much faster and easier,” he wrote via email. “Given their design-centric backgrounds, they’re extremely well-positioned to rethink the user experience for file systems from the ground up.”

Playbook, he said, is able to leverage recent advancements in computer vision and design “to build a far better product to manage and share files.”

#designers, #dropbox, #founders-fund, #funding, #fundings-exits, #jessica-ko, #john-luttig, #opendoor, #playbook, #recent-funding, #startup, #startups, #storage, #venture-capital

Monad emerges from stealth with $17M to solve the cybersecurity big data problem

Cloud security startup Monad, which offers a platform for extracting and connecting data from various security tools, has launched from stealth with $17 million in Series A funding led by Index Ventures. 

Monad was founded on the belief that enterprise cybersecurity is a growing data management challenge, as organizations try to understand and interpret the masses of information that’s siloed within disconnected logs and databases. Once an organization has extracted data from their security tools, Monad’s Security Data Platform enables them to centralize that data within a data warehouse of choice, and normalize and enrich the data so that security teams have the insights they need to secure their systems and data effectively.

“Security is fundamentally a big data problem,” said Christian Almenar, CEO and co-founder of Monad. “Customers are often unable to access their security data in the streamlined manner that DevOps and cloud engineering teams need to build their apps quickly while also addressing their most pressing security and compliance challenges. We founded Monad to solve this security data challenge and liberate customers’ security data from siloed tools to make it accessible via any data warehouse of choice.”

The startup’s Series A funding round, which was also backed by Sequoia Capital, brings its total amount of investment raised to  $19 million and comes 12 months after its Sequoia-led seed round. The funds will enable Monad to scale its development efforts for its security data cloud platform, the startup said.

Monad was founded in May 2020 by security veterans Christian Almenar and Jacolon Walker. Almenar previously co-founded serverless security startup Intrinsic which was acquired by VMware in 2019, while Walker served as CISO and security engineer at OpenDoor, Collective Health, and Palantir.

#big-data, #cloud-computing, #cloud-infrastructure, #computer-security, #computing, #data-management, #data-warehouse, #devops, #funding, #information-technology, #intrinsic, #opendoor, #palantir, #security, #security-tools, #sequoia-capital, #serverless-computing, #technology, #vmware

Mindset, an artist-driven mental wellness audio platform, raises a $8.7M from Scooter Braun and others

Mindset, a platform featuring personal story collections from recording artists, announced today that it raised $8.7 million in seed funding.

As co-founders of the K-pop focused podcast production company DIVE Studios, brothers Brian Nam, Eric Nam and Eddie Nam noticed that the studio’s best performing content came from podcast episodes where stars discussed how they handle struggles in their personal lives. So, the Nam brothers came up with the idea for Mindset, an off-shoot of DIVE Studios.

“We found that this was a unique selling point people really wanted more of — so we started to think about ways to really double-down on that aspect,” said CEO Brian Nam. “How do we provide more of this valuable content to Gen Z and young millennial audiences? We decided that there wasn’t really the right kind of platform out there for this type of storytelling, so we decided to develop our own mobile platform to uniquely share these stories in an audio format.”

In its current format, Mindset features four audio collections from artists like Jae, Tablo, BM, and Mindset co-founder Eric Nam, who happens to be a K-pop star himself. Each collection has ten episodes of around ten to twenty minutes long — the introductory episode is free, but to gain access to the rest of an individual artist’s collection, users need to pay $24.99. The app also has free Boosters, which are Calm-like, five-minute clips of bedtime stories and motivational mantras.

“Up until now, the primary source of income, especially for musicians, has been touring, music streams, and then maybe some endorsement deals, but we’re able to unlock this fourth one, which is monetizing your stories,” Nam said. “The pricing is similar to how they might price a ticket, or how they would sell merchandise.”

Mindset isn’t meant to be a therapy app. “We’re not licensed therapists, we don’t try to act like we are,” Nam said. Rather, it’s a way for artists to share more intimate experiences with their fans to show that behind they music, they’re people too.

Mindset launched in an MVP (minimum viable product) version in February. Nam declined to share active user or revenue numbers, but said that the app gained enough traction that by May, it raised venture funding. The $8.7 million round is led by Union Square Ventures with strategic participants like record executive Scooter Braun (of TQ Ventures), who has more recently made headlines over the Taylor Swift masters controversy. Other backers include Twitch co-founder Kevin Lin, Opendoor Co-Founder Eric Wu, and more.

“Scooter Braun was a strategic investor,” Nam told TechCrunch.

Braun has also worked with artists like Ariana Grande, Justin Bieber, and Demi Lovato.

“He’s really opened a lot of doors for us to branch out into the Hollywood and Western space, where we traditionally came from the K-pop space,” Nam added.

Mindset is putting its seed funding toward content creation, hiring, and product development. The app is currently available on iOS and Android, but it will officially launch on September 14. After that, Mindset will release another audio collection from an artist or actor every two weeks. Nam declined to share who these artists will be. 

#android, #apps, #ariana-grande, #artist, #ceo, #co-founder, #demi-lovato, #eric-wu, #funding, #justin-bieber, #kevin-lin, #minimum-viable-product, #opendoor, #psychology, #scooter-braun, #twitch, #union-square-ventures

SoftBank makes mountains of cash off of human laziness

Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast, where we unpack the numbers behind the headlines.

Natasha and Danny and Alex and Grace were all here to chat through the week’s biggest tech happenings. It was yet another crazy week, but did our best to get through as much of it as we could. Here’s the rundown, in case you are reading along with us!

  • Square is buying Tidal in a deal that some are skeptical of, but one about which we found quite a lot to like.
  • How capital-as-a-service can get you your first check in 2021, and a nod to Indie.VC, a pioneer in alternative financing for startups that announced it is shutting down net new investments this year.
  • Oscar Health priced its IPO above its raised range, which was good for it in terms of fundraising. However, since its debut the company has lost pricing altitude. Its declines mimic those of other public neo-insurance proivders in what could be a new trend.
  • And sticking to the insurtech beat, Hippo is going public via a SPAC. Because everyone else is?
  • Compass filed its S-1, which triggered a debate on how its different than OpenDoor.
  • Coupang’s IPO is also coming, replete with huge growth, an improving profitability picture, and a massive valuation. This is one to watch.
  • There was also a whole global news circuit around grocery delivery startups, with Instacart raising at a $39 billion valuation.
  • And we wrapped with the Surreal seed round that we found to be more than a little spicy. As it turns out, commercialized deepfakes are not merely on the way; they are here.

And with that we are back on Monday. Have a rocking weekend!

Equity drops every Monday at 7:00 a.m. PST, Wednesday, and Friday at 6:00 AM PST, so subscribe to us on Apple PodcastsOvercastSpotify and all the casts!

#clearbanc, #compass, #coupang, #equity, #equity-podcast, #fundings-exits, #grocery-delivery, #hippo, #indie-vc, #instacart, #insurtech, #opendoor, #oscar, #oscar-health, #square, #startups, #surreal, #tidal

Is anything too big to be SPAC’d?

While many deemed 2020 the year of SPAC, short for special purpose acquisition company, 2021 may well make last year look quaint in comparison.

It’s probably not premature to be asking: is anything too big to be SPAC’d?

Just today, we saw the trading debut of the most valuable company to date go public through a merger with one of these SPACs: 35-five-year-old, Pontiac, Michigan-based United Wholesale Mortgage, which is among the biggest mortgage companies in the U.S.

Its shares slipped a bit by the end of trading, closing at $11.35 down from their starting price of $11.54, but it’s doubtful anyone involved is crying into their cocktails tonight. The outfit was valued at a whopping $16 billion when its merger with the blank-check outfit Gores Holdings IV was approved earlier this week.

Why is this interesting? Well, first, despite UWM’s size, unlike with a traditional IPO that can require 12 to 18 months of preparation, UWM’s path to going public took less than a year, beginning with Gores Holdings IV completing its IPO in late January 2020 and raising approximately $425 million in cash.

Alec Gores, the billionaire founder of of the private equity firm Gores Group, led the deal. It isn’t clear when Gores approached UWM, but the tie-up was announced back in September and ultimately included a $500 million private placement. (It’s typical to tack-on these transactions once a target company has been identified and accepts the terms of the proposed merger. Most targets are many times larger than the SPACs. In fact, according to law firm Vinson & Elkins, there’s no maximum size of a target company.)

Also notable is that UWM is a mature company, one that says it generated $1.3 billion in revenue in the third quarter of last year alone. UWM CEO Mat Ishbia, whose father started the company in 1986, said last fall that the company is “massively profitable.”

It’s a story unlike that of many other outfits to go public recently through the SPAC process. Many — Opendoor, Luminar Technologies, Virgin Galactic — are still developing businesses that need capital to keep going and which might not have found much more from private market investors. Indeed, today’s deal would seem to open up a new world of possibilities, and for companies of all sizes.

Either way, it isn’t likely to hold the record for ‘biggest SPAC deal ever’ for long. Not only is interest in SPACs as feverish as ever, billionaire investor William Ackman is still sitting on a $4 billion SPAC to which he has said he’ll throw in an additional $1 billion in cash from his hedge fund, Pershing Square Capital.

You can bet the deal will be a doozy. Reportedly, Ackerman was at one point looking to take public Airbnb with his SPAC, which began trading in July. When Airbnb passed on the proposed merger, he reportedly reached out to the privately held media conglomerate Bloomberg (which Bloomberg has said is untrue).

Because SPACs typically complete a merger with a private company in two years or less, speculation continues to run rampant about what Ackman will put together. In the meantime, there have already been 59 new SPAC offerings this year — as many as in all of 2019 — that have raised $16.8 billion, and there’s seemingly no end in sight.

Just this week, Fifth Wall Ventures, the four-year-old, L.A.-based proptech focused venture firm, registered plans to raise $250 million for a new blank-check company.

Intel Chairman Omar Ishrak, who previously ran medical device giant Medtronic, is planning to raise between $750 million and $1 billion for a blank-check firm targeting deals in the health tech sector, Bloomberg reported on Sunday.

Gores Group isn’t done, either. On Wednesday, it registered plans to raise $400 million in an IPO for its newest blank check company. It will be the outfit’s seventh to date.

There are now so many companies to go public through a SPAC exchange-traded funds are beginning to pop up, putting together baskets of SPAC deals for investors who want to hedge their bets.

The very newest fund, reported on earlier this week by the WSJ and overseen by hedge fund Morgan Creek Capital Management and  fintech company Exos Financial, will be actively managed and snap up stakes in firms that recently went public by merging with a SPAC, as well as shell companies that are still on the prowl.

It will be joining the world’s first actively managed exchange-traded fund focused on SPACs, the Calgary-based Accelerate Arbitrage Fund, which launched in April of last year.

A second ETF, the Defiance NextGen Derived SPAC ETF, emerged in October.

#airbnb, #ipo, #luminar, #opendoor, #spac, #tc, #virgin-galactic

A quick peek into Opendoor’s financial results

As investing whirlwind Chamath Palihapitiya continues to make headlines with his full-court press to take private tech companies public via SPACs while markets are hot, one of his targets has disclosed financial information that helps us better understand the transaction it is undertaking.

Palihapitiya’s Social Capital Hedosophia Holdings Corp. II (a public, blank-check company, or SPAC) is combining with Opendoor, a San Francisco-based tech startup that facilitates real estate transactions. Opendoor often buys homes from sellers, later selling them itself. Given the complexity present in the residential real estate market and its scale, the company is an interesting play.

TechCrunch covered the Opendoor-SPAC tie-up in mid-September, when it was announced. Yesterday we got a fuller look into Opendoor’s financial results. So, this morning, let’s peek at the numbers to see if we can spy what Palihapitiya talked about in his investment thesis concerning the company’s future prospects.

The results

Opendoor’s 2020 results are not stellar. But that fact is not a surprise. The company went through a round of layoffs in April, impacting around 35% of its staff at the time.

However, even then, TechCrunch reported that “home sales haven’t fallen as far or as fast as one might imagine.” Indeed, in many markets the real estate market has proved surprisingly durable during the COVID lockdowns as some leave major cities for smaller municipalities.

Opendoor says plainly in its SEC filing concerning its combination with the SPAC that COVID has “adversely affected our business.” Its results, then, are framed by a changing market and a pandemic, even if areas of residential real estate have held up better than we might have anticipated.

Here are Opendoor’s raw numbers, for your perusal:

You have to read right-to-left to follow the flow of time correctly.

#chamath-palihapitiya, #fundings-exits, #opendoor, #spac, #startups, #tc

Chamath launches SPAC, SPAC and SPAC as he SPACs the world with SPACs

SPACs are going to rule the world, or at least, Chamath’s future portfolio.

Chamath Palihapitiya, the founder of Social Capital, has already tripled down on SPACs, the so-called “blank check” vehicle that takes private companies and flips them onto the public markets. His first SPAC bought Virgin Galactic last year, and his second SPAC bought Opendoor this week in a blockbuster deal valuing the instant home sale platform at $4.8 billion, less cash. His third SPAC officially fundraised in April, and has yet to announce a deal.

Now, it looks like he’s going to double down on his triple down. After the bell rung on Wall Street this Friday, the venture capitalist filed three new SPAC vehicles with the SEC. Social Capital Hedosophia Holdings Corp. IV has a headline value of $350 million, Social Capital Hedosophia Holdings Corp. V has a headline value of $650 million and Social Capital Hedosophia Holdings Corp. VI has a headline value of $1 billion.

Those headline values are targets: each SPAC will need to go through an investor roadshow process and officially raise capital before they can begin trying to find an acquisition target. Each SPAC is independent, and may share investors or have entirely independent investors around the table.

The three new SPACs share similar managers: Palihapitiya himself; Ian Osborne, who manages Hedosophia; Steven Trieu, the CFO of Social Capital; and Simon Williams, the chief administration officer of Hedosophia.

However, each has a different fifth director, who perhaps sheds some light on how each SPAC differs in strategy. Nirav Tolia, a co-founder and CEO of popular social network Nextdoor, is joining the fourth SPAC. Jay Parikh, a former head of engineering at Facebook, who left earlier this year, is joining the fifth SPAC. And finally, Dick Costolo, the former CEO of Twitter and current venture capitalist, is joining the sixth SPAC.

We’ve been talking about the accelerating pace of SPACs this year, and that appears in microcosm here around these Social Capital vehicles. It seems as though Palihapitiya and Hedosophia not only have great ambitions for these vehicles, but are increasingly mechanizing the process of fundraising them and taking advantage of markets that seem excited for any avenue toward growth.

#chamath-palihapitiya, #dick-costolo, #finance, #opendoor, #social-capital-hedosophia, #spac

Schools are closing their doors, but Opendoor isn’t

Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast (now on Twitter!), where we unpack the numbers behind the headlines.

This week Natasha Mascarenhas, Danny Crichton and myself hosted a live taping at Disrupt for a digital reception. It was good fun, though of course we’re looking forward to bringing the live show back to the conference next year, vaccine allowing.

Thankfully we had Chris Gates behind the scenes tweaking the dials, Alexandra Ames fitting us into the program and some folks to watch live.

What did we talk about? All of this (and some very, very bad jokes):

And then we tried to play a game that may or may not make it into the final cut. Either way, it was great to have Equity back at Disrupt. More to come. Hugs from us!

Equity drops every Monday at 7:00 a.m. PT and Thursday afternoon as fast as we can get it out, so subscribe to us on Apple PodcastsOvercastSpotify and all the casts.

#chainsmokers, #desktop-metal, #equity-podcast, #fundings-exits, #greylock, #opendoor, #podcasts, #startups

Can’t stop won’t stop: Social Capital Hedosophia just filed for its fourth SPAC, says new report

According to a new report in Bloomberg, Social Capital Hedosophia has filed plans confidentially with the SEC to raise $500 million for its newest blank-check company.

It will be the fourth special purpose acquisition company, or SPAC, to be raised by the outfit, which is headed up by Chamath Palihapitiya and Ian Osborne. Astonishingly, dozens more may be in the works. On the “All-In Podcast,” co-hosted by Palihapitiya, he revealed recently that has reserved the symbols from “IPOA” to “IPOZ” on the New York Stock Exchange. He also said he has $100 million of his own involved in each deal to demonstrate his alignment with potential investors.

What’s the play? In the podcast, Palihapitiya pointed to the Federal Reserve’s economic and interest rate forecasts and its plans to keep interest rates at zero for years to come. “I mean, quite honestly,” Palihapitiya said, “there’s no path to any near-term inflation of any kind whatsoever.”

It’s why he thinks investors are going to “get paid to be long [on] equities, because your risk-free rate is zero and will soon be negative. And what are you supposed to do if you’re an asset manager?”

Here’s how he framed it: “Let’s say you’re the California pension system, you have hundreds of billions of dollars, and you need to generate five or 6% a year to make sure that your pension isn’t insolvent, and the government is paying you zero. When everybody is in that situation, you’re overwhelmingly long equities . . .So all of these opportunities are generally buying opportunities, and I’m more bullish now than I was before.”

Indeed, when it comes to private or public market investing, said Palihapitiya, “I think it really is just public companies [that are worth getting behind]. . . I mean like, no offense, but if you’re a very good stock picker in the public markets, you’re generating better returns [than] Sequoia, Benchmark — name your best venture fund.  I see all these people spouting off on Twitter about how good they are in the early-stage markets, but it’s all kind of small dollars and not that meaningful.”

Certainly, he has reasoned to feel emboldened. The first SPAC of Social Capital Hedosophia, raised in 2017, ultimately merged last year with the space tourism company Virgin Galactic, and it’s now valued at slightly more than $4 billion by public market shareholders.

The outfit’s second fund, which was raised in April, announced yesterday that it will merge with Opendoor, a company that buys and sells residential real estate and that might have had trouble going public through a traditional IPO process, given its still-uncertain economics.

Social Capital Hedosophia’s third SPAC, also raised in April, has not yet named its target but the company has said it will use its IPO proceeds to buy a tech company that’s primarily outside of the United States.

Certainly, SPACs — which haven’t had a stellar reputation historically — have a growing number of other investors intrigued. According to SPACInsider, nearly 100 SPACs have been raised in 2020 already up from just 7 a decade ago.

Though Sequoia Capital is having a stellar year — given its stake in Zoom, Bytedance, and Snowflake, among many other headline-leading companies — its U.S. head, Roelof Botha, suggested in an interview yesterday that Sequoia hasn’t ruled out the possibility of forming SPACs, even while he implied that it was unlikely. “I love the fact that there’s more innovation” around the IPO process, he said. “It gives more choice to the companies.”

#chamath-palihapitiya, #ipo, #opendoor, #social-capital-hedosophia, #spac, #tc, #virgin-galactic

Opendoor to go public by way of Chamath Palihapitiya SPAC

Today, Social Capital Hedosophia II, the blank-check company associated with investor Chamath Palihapitiya, announced that it will merge with Opendoor, taking the private real estate startup public in the process.

The transaction comes during a wave of market interest in special purpose acquisition companies, or SPACs, often called blank-check companies. They exist as publicly traded entities in search of a private company to combine with, taking the private entity public without the hassle of an IPO.

In this case, the SPAC Social Capital Hedosophia II is combining with Opendoor, a richly-valued private technology company that operates in the real-estate market.

“This is one of many milestones towards our mission and will help us accelerate the path towards building the digital one-stop-shop to move,” Eric Wu, co-founder and CEO of Opendoor said to TechCrunch in a statement. “I am grateful for the continued support from my teammates and shareholders and most thankful for the tens of thousands – and I hope soon to be hundreds of thousands – of families, couples and individuals that trust Opendoor with the largest financial decision of their life.”

Palihapitiya, and his press team did not immediately respond to requests for comment from TechCrunch over phone and e-mail.

Shares of Social Capital Hedosophia II, which trade under the ticker symbol IPOB, were up around 14% in pre-market trading this morning.

According to a notice associated with the transaction, Opendoor will have an enterprise value of $4.8 billion in the deal, including equity value of around $6.2 billion and around $1.5 billion in cash. Social Capital Hedosophia II will provide “up to” $414 million in cash as part of the deal, while a private investment in public equity transaction, or PIPE, will provide another $600 million.

Some $200 million of the $600 million PIPE, or a third, will be funded by investors in the SPAC, with Chamath Palihapitiya himself providing $100 million.

Palihapitiya is not subtle about his plans to use SPACs to pursue his ambitions to be the next Berkshire Hathaway. He famously brought Virgin Galactic to the public markets through a SPAC, which played a role in the $1.7 billion profit that Social Capital made in 2019.

If not acquiring a public through a SPAC, he’s also used personal capital to take majority stakes in businesses. When describing his appetite for acquisitions, he put it curtly to TechCrunch: “I like businesses that build non-obvious data links.”

The rest of the PIPE will be funded by another Palihapitiya group, some private entities like Access Industries, and what a release hyped as “top-tier institutional investors” including Blackrock and a pension plan.

A total of $1 billion in cash is expected to be provided in the transaction. Notably all the cash will flow to Opendoor itself, with shareholders in the company “rolling 100 percent of their equity into the combined company,” per a notice. Along with the transaction, Adam Bain, former Twitter COO and founder of 01 advisors, will join the board, CNBC reports.

Opendoor last raised $300 million at a $3.5 billion pre-money valuation in March of 2019. Of that, $1.3 billion was in equity with nearly $3 billion in debt financing. Investors in the company include General Atlantic, the SoftBank Vision Fund, NEA, Norwest Venture Partners, GV, GGV Capital, Access Technology Ventures, SV Angel, Fifth Wall Ventures, along with others.

#chamath-palihapitiya, #exits, #ipo, #opendoor, #real-estate, #social-capital, #spac, #startups, #tc

Report: One of Social Capital’s newest blank-check companies is looking to reverse merge with Opendoor

Some people may have slowed down in 2020, amid a pandemic that has shut down much of the world. Not Chamath Palihapitiya .

According to a new report in Bloomberg, Opendoor, the San Francisco-based company that aims to help people buy and sell homes with the “push of a button,” is in advanced talks to go public through a merger with Social Capital Hedosophia Holdings Corp. II.

The outlet says the blank-check company, which raised $360 million in April and is led by Palihapitiya, is “discussing raising fresh equity to help fund the transaction with prospective investors” and that the combined company would be valued at around $5 billion in the deal. It adds that nothing has been finalized and that the deal could still fall apart.

We reached out to both Opendoor CEO Eric Wu and to Palihapitiya for comment. An Opendoor spokeswoman said the company has no comment; we have yet to hear back from Palihapitiya but will update this story if we do.

Assuming the deal is fairly far along, and at a $5 billion valuation, one could see the appeal for Opendoor, which was last valued by private investors at $3.8 billion and which, like many other venture-backed outfits, has had a topsy turvy 2020.

In April, it laid off 600 employees, or 35% of workforce at the time, citing the “unforeseen impact on public health, the U.S. economy, and housing,” prompted by COVID-19.

In recent months, however, home sales around the country have been brisk, spurred by low mortgage rates and a heightened appetite for more space, particularly outside of crowded cities.

According to a late-August report by the National Association of Realtors, U.S. home sales rose an unprecedented 24.7% in July, up 8.7% from the same time last year. Home sales rose 20.7% in June, too (which was a record at the time).

Opendoor is also a brand that many retail investors already know and can easily understand. In fact, its consumer appeal isn’t so unlike that of the space tourism company Virgin Galactic, which Palihapitiya’s first blank-check company ultimately went on to acquire after it raised $600 million in 2017. The combined outfit went public last October with a $2.3 billion market capitalization; its market cap is now above $4 billion.

As for what Palihapitiya might do with a third special purpose acquisition vehicle — it raised $720 million, also in April of this year — stay tuned. The company has said it will use those IPO proceeds to buy a company in the tech sector, primarily outside of the United States.

In the meantime, Palihapitiya is separately investing in Desktop Metal, a Burlington, Ma., company set to go public via a separate SPAC. Specifically, Desktop disclosed plans last week to list on the New York Stock Exchange by merging with Trine Acquisition Corp, a blank check company that raised $261 million in March of last year. Palihapitiya helped lead a $275 million PIPE (for private investment in a public equity) investment to finance the deal.

#chamath-palihapitiya, #desktop-metal, #opendoor, #social-capital, #spac, #tc, #virgin-galactic

SoftBank-backed Opendoor has announced a massive layoff, cutting 35% of its employees

Opendoor, the seven-year-old, San Francisco-based company that has from the outset aimed to help people buy and sell homes with the “push of a button” (or nearly), has just laid off more than a third of its staff.

According to a statement sent to us by co-founder and CEO Eric Wu, the company has laid off 600 of its employees, which constitutes 35% of its overall team, says Wu.

Like so many sectors of the economy, the residential real estate market has taken a hit as U.S. residents are asked to stay indoors and all but essential services are shut down in most of the country. (Florida continues to operate by its own rules and yesterday decided that World Wrestling Entertainment is an essential service.)

Home sales haven’t fallen as far or as fast as one might imagine, though that picture is changing as the weeks wear on. According to Realtor.com, the number of U.S. homes for sale declined 15.7% year-over-year in the month of March, with the number of newly listed properties falling by 13.1% the week ending March 21 and by 34.0% for the week ending March 28.

In his statement, Wu didn’t include details regarding the degree to which Opendoor has been impacted by the COVID-19 shutdown, saying only that because the pandemic has “had an unforeseen impact on public health, the U.S. economy, and housing,” the company has “seen declines in the number of people buying, selling, and moving during this time of uncertainty.”

He added that the reduction in force is “necessary to ensure that we can continue to deliver on our mission and build the experience consumers deserve.”

Every company’s management team is handling layoffs differently, of course. In the case of Opendoor, its separation package seems fairly generous as these things go, with laid-off employees receiving eight weeks of full pay and 16 weeks of reimbursement for health insurance coverage. Wu says he will also be donating his 2020 salary to a relief fund for Opendoor employees who may be in “more challenging financial or health circumstances” owing to the virus and that an unspecified number of other executives are also contributing to the fund.

It’s a better deal than some earlier employees received. Even before the coronavirus took hold in the U.S., Opendoor was paring back its employee base. Last summer, as Bloomberg reported at the time, the company fired 50 people and asked up to 300 others in offices around the country to relocate to its Phoenix location or else part ways with the outfit.

Opendoor specializes in “instant buying,” which remains a small but growing part of the residential real estate market, partly owing to the risk it entails. Zillow last fall told The New York Times that it bought fewer than 700 homes in 2018 but expected to be buying up to 5,000 homes per month within five years.

Opendoor meanwhile said it acquired 11,000 homes in 2018. It hasn’t disclosed how many homes it bought in 2019, saying in a December post that it “bought and sold thousands of homes” over the course of the year.

Typically, the company aims to hold homes for less than three months before selling them to a home buyer. To help fuel all those purchases, Opendoor has raised $4.3 billion in equity and debt funding over the years, including $1.3 billion in equity.

Backed early on by Khosla Ventures, then GGV Capital, the company had in more recent funding rounds strengthened its ties to the traditional real estate market by adding to is backers one of the country’s largest home construction companies, Lennar Corporation. The idea behind the relationship is for Opendoor to help get customers into Lennar-built homes faster, as well as to encourage them to “trade up” where possible.

Opendoor was also the recipient of one of the SoftBank Vision Fund’s enormous checks, trading a minority stake in the company in September 2018 for a $400 million check from the Japanese conglomerate, which also installed managing director Jeff Housenbold on the company’s board.

Opendoor announced its most recent round — a $300 million financing, including from General Atlantic and others — almost a year ago, at a reported post-money valuation of $3.8 billion.

It’s unclear to what extent the current market will impact that number going forward. Given the scale of its cutbacks, it’s also unclear whether, when the economy begins to re-open, Opendoor will continue to operate in the 21 cities where its services are currently available.

For now, the company has stopped making cash offers on homes. It says on its site that in the meantime, it is continuing to work with third-party buyers who may be able to provide home sellers with cash offers, as well as connecting customers with listing agents in cases where they are needed.

#coronavirus, #covid-19, #general-atlantic, #khosla-ventures, #layoffs, #opendoor, #personnel, #real-estate, #softbank, #tc

Unicorn layoffs keep piling up as the economy gets worse

Earlier today a grip of new data presented a sharply negative picture of the American economy. And this afternoon, news broke that a trio of well-known, heavily-backed unicorns were cutting staff.

With stocks down as well, we’ve received negative signals from the private market, the public market and the economy as a whole in the same day. Let’s take a minute to set the macro stage, and then go over the latest cuts from Carta (first reported by Bloomberg), Zume (Business Insider broke that particular story) and Opendoor (via The Information).

Economic malaise

The backdrop for today’s cuts is a faltering American economy. A glance at recent news is sufficient. In the last few hours, home builder confidence recorded the “biggest drop in history,” while retail sales fell 8.7% in March, what CNBC noted was “the most ever in government data,” and CNN Business reported that American factories’ output fell 5.4% in March, “their steepest one-month slowdown since 1946.”

It’s perhaps no surprise, then, that we’ve seen unicorn layoffs all year. In January the news was Vision Fund-backed companies cutting burn to skate closer to profitability. Then, the first round of COVID-19-forced staff cuts landed at big companies; firms like Bird and TripActions slashed staff as their companies were rent by a slowdown in their core operations by the pandemic and its related economic and social changes.

Slimmer cuts at smaller companies have happened on a nearly chronic basis, something that TechCrunch has covered, as well.

Today, however, saw three cuts from three unicorns (private companies worth $1 billion or more) that have long been objects of TechCrunch’s attention. So, let’s talk about them briefly:

  • Opendoor, a San Francisco-based home sales-focused startup with backing from SoftBank, announced deep cuts to its staffing today. In a statement provided to TechCrunch, the company’s CEO Eric Wu said that 35% of its employee base would be eliminated to “ensure that we can continue to deliver on our mission.” The CEO also said that exiting staff would get paid for eight weeks and “reimbursement of 16 weeks of health insurance coverage.” Wu is also donating his 2020 salary to a fund to support staff. Opendoor was most recently valued at $3.8 billion in a $300 million funding round announced last March.
  • Carta, a San Francisco-based private company equity service platform, announced cuts worth 16% of its staff, or 161 roles, according to a memo that the company shared publicly. Previously eShares, Carta has grown from a provider of equity management for small private companies into a larger, broader service and software play supporting yet-private firms. Carta most recently raised $300 million at a $1.7 billion valuation last May.
  • And finally, Zume. Zume didn’t respond to a request for comment by the time of publication and did not post a public note that we could find. Still, Business Insider reports that the company is cutting 200 more staff after earlier 2020 personnel reductions. The firm will be left with around 100 employees, working on compostable boxes. Zume last raised $375 million at a valuation of just under $1.9 billion (post-money) in November 2018.

It’s getting hard to keep track of all the cuts. Heck, I helped break Modsy layoffs recently with TechCrunch’s Natasha Mascarenhas, and we were first to the BounceX cuts as well. It’s a rough, bad economy, and it’s harming growth-oriented companies that like startup unicorns.

More when we have it, probably sooner than we’d like to report.

#business, #coronavirus, #covid-19, #economy, #entrepreneurship, #equity-management, #eshares, #fundings-exits, #layoffs, #opendoor, #personnel, #san-francisco, #softbank, #startup-company, #startups, #tc, #tripactions, #unicorn, #vision-fund, #zume-pizza

SoftBank expects $24 billion in losses from Vision Fund, WeWork, and OneWeb investments

The Japanese technology conglomerate SoftBank Group said it would lose a staggering $24 billion on investments made through its Vision Fund and bets on the co-working real estate company, WeWork, and satellite telecommunications company, OneWeb.

Ultimately, the company expects the losses to help generate a $7 billion total loss for the technology giant for the year as its ambitious bets on early stage companies come up short.

Over the past two years SoftBank and its founder Masayoshi Son have staked billions of (other people’s) dollars and its own fortunes on a vision that investments in machine learning technologies, robotics, and next generation telecommunications would reap of hundreds of billions in financial rewards.

While that was the vision that Son and his team sold, the reality was multiple billions of dollars invested into real estate investment plays like WeWork, OpenDoor, and Compass, and companies with direct-to-consumer merchandising plays like Brandless, pet supply businesses like Wag, and the food delivery business DoorDash. Add the hotel chain Oyo to the mix and the investment selection from the Vision Fund looks even less visionary.

Over the past year, several of its investments ran aground. Though none of them imploded as spectacularly as WeWork — whose valuation was slashed from over $40 billion to around $8 billion — many have struggled.

Brandless went bust earlier this year, and real estate investments in Compass along with investments in travel and tourism-related businesses like Oyo, have suffered in the wake of the COVID-19 outbreak which has shuttered economies around the world.

While many SoftBank and SoftBank Vision Fund bets were made into companies that have failed, seem to be on that path, or perhaps may struggle in the economic downturn, not every wage is a clunker. The Vision Fund put lots of capital into Slack before it went public, and the company has caught a huge tailwind in the remote-work boom that we’re currently seeing in light of COVID-19.

Perhaps the most visionary of the SoftBank investments (and one not included in the Vision Fund) OneWeb, too, collapsed under the weight of its own capital-intensive vision for a network of satellites providing high-speed global telecommunications services. Zume, SoftBank’s robotic pizza delivery business, also folded.

The only reason why all of these gambles haven’t completely destroyed SoftBank is that the company still has a cash cow in its Alibaba stake and a relatively strong core business in telecommunications and semiconductor holdings.

“The difference in income before income tax is, in addition to the above, mainly due to the expected recording of non-operating loss totaling approximately JPY 800 billion for fiscal 2019 on investments held outside of SoftBank Vision Fund, including The We Company (WeWork) and WorldVu Satellites Limited (OneWeb),” the company said in a statement. “This will be partially offset by the gain relating to the settlement of variable prepaid forward contract using Alibaba shares recorded in the first quarter of fiscal 2019 and the dilution gain from changes in equity interest in Alibaba recorded in the third quarter of fiscal 2019, as well as an expected year-on-year increase in income on equity method investments related to Alibaba.”

Ultimately, it seems that Son was too enamored of the mythology he’d created around himself as a maverick and a visionary. To the detriment of his company’s outside shareholders and investors.

As Bloomberg noted in an op-ed earlier today:

Son’s insistence that startups grow faster than their founders planned, and strong-arm them into taking more money than they might have wanted, has turned into a burden. And that’s become a huge liability to investors in the Vision Fund and SoftBank, too.

By throwing cash around, dozens of startups became addicted to spending instead of building fiscal discipline into their business models. For years, it seemed like a sound strategy. By having more money than rivals, SoftBank-backed companies could win market share by offering bigger incentives, taking out more ads and luring the best talent.

Today, SoftBank has a major stake in sector leaders like Uber Technologies Inc., WeWork, Grab Holdings Inc. and Oyo. But climbing to number one doesn’t mean being profitable.

#alibaba, #alibaba-group, #companies, #compass, #doordash, #food-delivery, #fundings-exits, #masayoshi-son, #oneweb, #opendoor, #oyo, #real-estate-investment, #semiconductor, #softbank-group, #softbank-vision-fund, #tc, #telecommunications, #vision-fund, #vodafone, #wework