Financial Infrastructure Wars, Plaid Forum at Midway SF, Luna, and TerraUSD go to nearly zero, and the big private rounds that are still happening
Stretch Four Insights Volume 25
Happy Saturday,
From the home of the best basketball franchise in the past ten years! Two games into both the NBA’s eastern and western conference finals I would bet money that we are going to see a Boston/Golden State NBA finals. With last night’s game, two wins by the Warriors convinced me even more that they will have a shot at their fourth championship this year.
This week I will keep it brief as I am getting ready for the first work trip of 2022. I will be attending the Lendit Nexus Conference in New York City from Tuesday to Thursday.
Plaid Forum event recap in San Francisco and the financial infrastructure wars that are heating up
Crypto Noise & Updates on DAOs & Luna
Big private rounds are still happening and why?
Let’s dive in.
Plaid Forum and in-person events
Thursday I spent a few hours at the Plaid Forum which was held in person at the Midway SF. This was the first time they had had an in-person event. It was a free first class event, that was fairly well attended albeit a lot of Plaid’s employees were sprinkled in. It went head to head with the Finovate conference which was taking place at the Hilton so that may have had something to do with it. The overall gist was Plaid is going all-in on identity and income verification products and building up an already heated financial infrastructure warfare. This beef of sorts culminated a few weeks ago when Plaid’s own CEO publicly disapproved of Stripe’s launch of a competitor product to Plaid’s core bank connections product with a now-deleted tweet.
Plaid is still fairly a young company, Zach the CEO is my age but they have already been around twelve years — it will be interesting to see how Plaid continues to build on their core product they are primed to become one of the largest fintech infrastructure platforms and have clients ranging from their original client Venmo all the way up to now having diversified clientele like John Deere.
Crypto Noise & Updates
How a Trash-Talking Crypto Founder Caused a $40 Billion Crash
It seems like weekly there is a new crypto project. In the past few weeks, I am thankful to the crypto gods that I never put a dollar in Luna or TerraUSD. Not that my small and dwindling portfolio of crypto did not feel the side effects, but it is relieving to know I was not exposed. From the NY Times hit piece it seems that Do Kwon, the founder of Terra Labs still was able to capture huge financial outcomes personally while there were a good amount of retail investors who lost a large amount of money. The Times piece also highlights investors who were smart enough to liquidate their Terra and Luna positions before the crash over the past few weeks which is telling why so many venture firms are so active in crypto. Pantera Capital was able to quickly turn $1.7 million into $170 million in a short order of time by investing in Luna.
The DAO is the new investment club
While one crypto project blew up in flames another craze right now in the crypto community is the DAO. This protocol piece focuses on companies that allow groups to pool together funds to purchase both crypto assets and non-crypto assets. The risk here is regulation as regulators are still not defining DAOs as investment vehicles which is the primary use case for most. DAOs seem like a less risky emerging trend in the cryptosphere that I plan to learn more about and this piece is a good primer on the early established companies doing interesting things so far. If you are a part of a DAO I would love to hear about it, email me at matt@stretchfour.co or leave a comment.
Big rounds are still happening and why?
If you are on Twitter in the small but growing community of #VCTwitter or you are a part of the general startup community you would think the world is coming to an end. From YCombinator to hundreds of other venture capitalists, startup founders, and angel investors the narrative is bleak. The advice to founders is to raise as much money as you can, take huge valuation cuts, and try and get 36 months of runway in the bank. From what I have experienced, it has always been difficult to raise venture capital for a lot of founders, and now it is harder. My core focus is to mute the noise, build more, and focus on customers and pleasing them. One of the main things this rapid down term exposes is how undifferentiated many startups are. As Warren Buffet says and the late Nipsey Hussle quoted, “Only when the tide goes out do you discover who's been swimming naked.”
In this downturn, it is important to know who you are selling to, if you are selling to other startups now is likely not the time. Many startups are not buying new products that are not essential to their core business. Throughout the valley there is a feeling of teams panicking, cutting budgets, and listening to their investors on conserving cash. On the other hand, there are more conferences happening than ever before, more dinners, and more and more extravagant events. Every startup and every industry is different and right now things need to be considered on a case-by-case basis.
Also, big deals are still getting done, maybe it is harder but put it looks like some founders are putting on the hard hats and pitching to more investors and still raising money. I do think most of the deals highlighted below were insider deals, previously I have covered Column Tax, which announced a $20 million A round this week. The caveat is that it was an insider round from the same investor who led their seed round and they added Felicis but this is likely an outlier.
Recent notable venture deals
Other news
What’s Next
I head off to NYC Tuesday for a full two days of meetings with both ModernTax clients and prospects, investors, and more newsletter sponsors to keep this publication growing and putting out coverage across technology. If you are in NYC next week, I would love to catch up if you will be in and around the Javits Center and Times Square.
Expect our next Long Four deep dive in the next few weeks as I am starting a series on the infrastructure wars. If you would like to be a part of my coverage please reach out to me at matt@stretchfour.co.
Have a good weekend and if you find this newsletter fun and interesting click the link below to let someone else know about it.
Back to the trenches,
Matt