A new tech coalition forms to support Palestinians | Equity Podcast

This episode is sponsored by Morgan Stanley atwork visit morganstanley.com Assessment to get your free transaction Readiness assessment [Music] Today hello and welcome back to equity a Podcast about the business of startups Where we unpack the numbers and the Nuance behind the headlines this is January 5th 2024 my name is Alex I'm Joined by my bestie it's marann aeto Maranne hello welcome to the new year Yes I am actually really excited about 2024 past couple of years were a little Bit rough personally but I I just feel Good about this year in general I think It's it's going to be a little bit more Of a we're going to see more positive Stuff happening in general this year Well D you've jinxed it oh gosh now We're going to get hit by an asteroid oh Gosh when that happens you can blame Maryann it's all my fault if that Happens oh no no don't be optimistic no I'm actually I'm actually entirely on Board with you and one of our stories on The show today does deal with a dose of Optimism from the tech runch crew so we Will talk about that in a little bit but On today's show rolling with that Positive vibe we are going to talk about In our deals of the week what's going on With Fox capital and exponent and then Corporate Venture capitals roll in a

Potential crypto rebound that is the Positive note that I can't wait to bring Up then we do Turn the Page a little bit And talk about some downsides talking About layoffs and shutdowns at front Desk and countdown Capital respectively And then we'll wrap with some good news For both startup support in Israel and Support for the Palestinian people from Tech Maran it's going to be a great show But we are going to start off with a Very interesting situation involving Ruth Fox blader Fox capital and also the Fact that she's still investing for her Old job what's going on yeah so Ruth Fox Blader she was a partner at anthemist Group for almost seven years before she Decided she wanted to venture out on her Own um and it's not it's not unusual for A partner to leave a firm and start Their own fund but this is unusual Because she's left anthemus but she's Still investing out of the fund that she Was hired to manage and so she's doing It as a sub advisor for anthemus so She's she's managing that vehicle she Was hired to run 7 years ago which is a Little bit unusual to me and once all That capital is Deployed then she says she's going to Start to fund raise to make new Investments so for those of you who are Not familiar Ruth is is brilliant she Spoke on the tech crun disrupt stage in

2022 she was just awesome and um she Anthemus is a fintech focused VC firm Based out of London so I'm not shocked That she decided to venture out on her Own I think she'll do great but but yeah I did find this whole sort of the Circumstances around her departure to be A little unusual okay so it took up Until about 10 seconds ago for me to Have an idea about why this happened Because I read the story I prepped for The show I thought about it and I was Just like what is going on this makes no Sense and then I remembered the demise Of open view what happened at open view Well a couple of key people left and the Whole thing dissolved there are often For example in lpgp agreements key Person requirements like you can't have The person we're most excited about Investing in the fund leave because then We don't want to be part of it anymore And you set this all up in advance so I Wonder Maryann and this is a a Hypothesis this is not even a rumor this Is just my thought I wonder if Ruth has Standed anthemus through the end of the Current fund to avoid triggering a Similar provision there but she's also Like the moment we're done though we're Done I do think there is something there Related to maybe contractual obligation Of sorts so I think you're on target but It sounds like they're on good terms

Obviously anthemus is has an economic Interest in that vehicle still I don't Know if it's going to be an LP in the The Firm when it starts investing in new Companies cuz that would be interesting Cuz it almost seems like they'd be Competing against each other at that Point for deals right so it's all a Little different and anthemus you know Had a weird year last year I covered Their what they described as a Restructuring which was technically a Layoff of about 16 people or almost 30% Of its staff which is also a little bit Unusual less unusual this year though I Mean we have been seeing a lot of people Leave VC a lot of firms begin to Struggle some soft fundraising numbers And I think that there's a general Anticipation that we're going to see Quite a number of fund sorry firm Shutdowns this year quiet or announced We'll have to see but I think that's Going to become more common yeah I agree I agree but at the at the time which I Think it was last April it wasn't wasn't Something I've been hearing a lot about And so you know in behind the scenes I Have I have heard that there's been some Kind of a little bit of internal strife At anthemus some I get I think Discontent perhaps with the way some Things have been run but I'm not going To get into all that right now but

Anyway Ruth did bring over an investment Associate from anthemus as well as a Former principal Kyle PR and Sophie Winwood and so she says she hopes to Start investing in new companies in 2025 And that brings us to our other bit of I Think it's also fintech focused Venture Capital news which is that exponent has A new fund and I believe Maryann it's About 50% larger than its fund one yeah Exponent Founders capital um so they Kind of really they essentially emerg From stealth today they've been around For a couple of years but they announced That they raised 75 million dollar in Capital commitments and they're not Actually exclusively fintech focused um Okay which is interesting because the The two managing partners and Co-founders do come from very strong Fintech backgrounds having worked at Plaid Robin Hood ramp for example but um They actually invest in SAS Enterprise SAS fintech infrastructure goto Market Software companies so not just fintech But I don't know I really love this Story I mean I was familiar with Charlie Ma who's one of the co-founders you know For a while he worked at he was one of The first business hires at plaid at Ramp and then went on to alloy really Nice guy um and he met the other Co-founder uh Mahi razza actually they Were kind of on opposite sides of the

Negotiating table when they were at um I Think it was plat and Robin Hood Respectively and that's how they met and So then they they separately went on to Become Angel Investors and then decided To team up and start this firm in 2021 So they quietly raised in 20121 let's See I think it was 30 was it $30 million Uh no 50 million ah 50 million in its First fund November 20121 they invested About 40 companies they said out of that Fund and now they're looking to back About 20 to 30 new ones out of this fund Yes a larger fund 75 to now 125 under Management and according to Tech is Reporting they're looking to put between $500,000 and $5 million into a check Targeting 5 to 10% ownership in Companies that they back so if you are Building an early stage company in one Of those areas one more fund to keep in Mind as you pitch now Maryanne I want to Put on my my happy hat and talk about Why I think one particularly out of Fashion part of the tech world could Have a good year it's crypto just in Case anyone was curious uh we all know That crypto had a really big 2021 and Then a couple of years really really far A field from a couple of different hype Cycles I mean there was a moment when AI Took off that everyone was joking that VCS were dropping their their crypto Moniker and moving to become AI experts

It became kind of a meme but I do think That the winds are shifting a little bit And here's what I'm thinking we have Seen in the last couple of months the Value of major crypto tokens be it Bitcoin ethereum salana whatever greatly Appreciate iate and we've also seen a Commensurate rise in value of total Trading activity and because a lot of Exchanges in the market your coin bases Your bances eat off of trading revenues Historically at least I think we're Going to see a lot more money at those Exchanges and that means finally getting To the point here that we could see a Rebound in corporate Venture Capital Activity as a result of that because Historically coinbase Ventures has been One of the most if not the most active Investor in the web 3 startup space and So I think that there's a number of Factors coming together here that paint A much more bullish picture for web 3 in 24 I think you're right Alex obviously We we see that the price of Bitcoin went Up a lot I think this was the highest It's been in a while this week reaching Or topping 45,000 45 47k somewhere in There I forget the exact typel but it's Around 45 as we record yeah exactly Which is which is huge and I feel like You know the whole FTX SPF debacle Really kind of hurt crypto in 2022 2023 Not just that company there were a

Couple of companies right binance others That that just sort of put um what's the Word a damper on the space but I feel Like people are starting to move on from That and starting to see okay crypto is Is not just because there's some bad Players in the space it's not all bad There's still potential here some some Bad players in the space maryan that is I do appreciate it when you break out Your British understand and just kind of Bring that to bear um I want to throw in Some more good news Fred Wilson over at Union Square Adventures one of my Favorite U and kind of the one of the Original I think Venture Capital Bloggers out there talked about how he Thinks this year is going to be the year Of regulatory Clarity for crypto that is Then well the question is what kind of Regulation and who's happy we don't know But at a minimum Clarity by itself will Have some value attached to it and There's a lot of other stuff going on I Mean I am talking to Jackie on the um Techren plus team also listen to chain Reaction podcast it's fantastic about The Bitcoin spot ETFs that are coming Out and so there does seem to be quite a Lot of factors that I think could yield A pretty good year for an outof favor Sector will we see what we saw in 2021 No but I do think at least we can bring In some startups from the cold and

Hopefully keep some of the early stage Companies alive that may have otherwise Just petered out run out of money you Know I mean that's happening a lot Lately yeah it is and I think I think it Was really smart of you to kind of tie In this rebound that we're seeing in Crypto to how we might see more Venture Dollars flowing into crypto startups you Know so that's why you're so awesome Alex because you connect the dots in a Way that not everybody can little do People know to connect the dots all you Have to do is overly caffeinate in the Morning and then panic when you don't Have an idea for your morning column and Then ideas will come well it it it made It makes sense it makes a lot of sense So I mean hey I know there's a lot of People that are skeptical about crypto But and I admit I was one of them but I Do think there is potential there I do Think that we're going to see a good Year and hopefully we've weeded out a Lot of those bad players and the reg new Regulations is going to help keep things A little bit more on the up and up one Last note about this because I think Everything you said is correct I me we Also got through the FTX lawsuit oh Sorry the S SPF FTX court case and we Also had the binance resolution to some Degree last year so that's totally dead On the thing that I'm impressed by is

The tenacity of the crypto faithful yeah No they're dedicated they're definitely Loyal and and it's nice to see that Right I like it it's like the the Opposite of like music fandom when They're like oh their last record was Trash that band sucks now Bitcoin goes Down like 50% and everyone's like eh you Know now I just can't eat lunch it's fun I can buy more and then it'll go back up Don't forget marann this is good for Bitcoin we are going to take a very Short break and then when we come back Layoffs and shutdowns what's going on at Front desk and countdown Capital but First a short Break is your company planning to go Public or conduct a shareholder Liquidity program within the next 18 to 24 months did you know that proactively Planning for your next private company Liquidity event or IPO can help you Maintain greater control over timelines And outcomes Morgan Stanley at work Believes that when you have the right Technology systems in place working in Harmony leading up to a transaction you Can prepare and execute with more Accuracy and ease visit Morganstanley.com Assessment to connect with their issuer Strategy and Excellence team for a free Assessment to find out if your company Is transaction ready again that's

Morganstanley.com Assessment to get your free assessment Today okay so we had our sunny side up We're going to put that away put on our Sad hat and we're going to talk about What's going on at front desk which Marann I'm not going to lie when I read Your story I thought it was a different Company in the same space but it turns Out it was a different company in the Same space so what's front desk and What's going on yeah so this was a scoop For me this week as was Ruth Fox blad's New firm so say that again just can you Uh can you say it one more time I kind Of have to brag a little bit sometimes It was a scoop I got I had a scoop Two Scoops which is not a fun kind of scoop Right though I don't like I don't like When my Scoops are related to layoffs But what happened um front desk is a Company or was perhaps is a better way To describe it a short-term rental Provider in the propex space that laid Off its entire Workforce on Tuesday as I Understand it from the folks who were Laid off it was a 2minute Google meet Call and it was about 200 people Affected including full-time part-time And contractors and they really weren't Told too much other than that the Company was was seeking a state Receivership which similar to chapter 11 Bankruptcy but not quite the same

Because it has you know a lot of real Estate assets and what's one of the Things that struck me most about all of This was how you can tell that the Company really just wasn't being Realistic about what was happening Because 7 months ago they acquired Another startup called Zen city as early As two months ago they have job postings On LinkedIn including one for a chief of Staff that were still there as of Tuesday so I I I get the vibe that the Executives were just really thinking This was not going to happen and and From what I hear from the employees that Were let go um the company was trying to Raise more Capital but investors were Were not buying it so they they couldn't Raise more money they had no choice they Had to shut down yeah when the cash goes To whatever the effective zero number is For your business everything stops cash Is business oxygen and if you can't Breathe you humans die businesses Apparently go into State receivership it Does sound like they had what they Thought was a promising funding round Coming together and a lot of things they Could kind of build up FR to that and Then afterwards and then that didn't Come together what we don't know at this Juncture at least is how realistic was The expectation that the funding round Would close they could keep going but

This is a business model point but but Roll with me here Maryann short-term Rental providers have to secure real Estate they have to manage it they have To Kit it out so people can actually Stay there then they have to advertise It and they have to compete with other Short-term rental options which range From Airbnb to long-term stay hotels it Seems like an enormously Capital Intensive way to get into a highly Competitive market that does have quite A lot of regulatory overhang to eek out Thin margins on a non-te product so why Were there so many of these companies Backed by Venture Capital dollars what What am I missing in this picture that Made this seem at one point to be a Viable way to deploy Capital you know I Think maybe a lot of them this one Started in 2017 a lot of them started Before I think rents and just housing Prices in general went nuts you know During I think the pandemic really Affected housing markets everywhere and And the short housing shortage and the Low interest rates and so rents went up Home prices went up and so I mean that's My guess I think they just didn't really Think longterm about what would happen If the market changed returned maybe They just didn't project enough to like Factor that into their models and and in Front Des case what I hear is that they

Were they were looking to try to move Into management like building management Which I've seen another I think it was Zeus living tried to do that as well and It died or reportedly died a couple Months back as well I think they Realized it wasn't working but you know They they also from what I understand Were not making rent on a number of Their properties and pissed off the land Lords which made things even worse and Then I think they were charging too much You know asking too much for the rentals As well and people are just like you Know not wanting to pay yeah well I Wonder who the target market was on the Consumer side like who are they trying To rent things to because there is a Market for example um corporations will Often have a handful of apartments in Certain cities if they have to dispatch One member or another to that city um It's easier to have a couple places in New York you can stashing executive for A couple months versus going out and Finding one every time you need to bring Someone to a particular City but those Relatively high dollar you know low Concern with cost contracts probably Aren't so big and so at that point You're just kind of trying to sell the Digital Nomads I guess I don't know yeah And I wrote about another company like This is the one exception I feel like in

This space that seems to be doing okay Back in October called any place and They and they're doing something very Similar where they they offer people Furnished rentals and kind of more Longer term they like a minimum of of 30 Days and so they just raised more money In October and they seem to be growing So they that company feels like an Exception to a lot of these others that Haven't done well because front desk is Not alone as I mentioned there was Zeus Living there was uh Wander John stay Alfred L Doo and actually front desk Bought the assets of some of those filed Companies which is kind of ironic Because now it it's joining the ranks of The filed companies in the space I I Mean we've seen that before I mean there Was some consolidation in the scooter Market for example and now as far as I Can tell lime is kind of the last Company standing there um I'm not going To talk about line because whenever I do Their PR team yells at me uh but I mean Mostly we saw some consolidation in that Space and then mostly failures and I Think you know I wouldn't be shocked if We see that in kind of like the E-commerce rollup players that raised a Lot of money to go after Amazon a couple Years ago I bet there'll be Consolidation there we've already seen This in the 15minute delivery space is

Mostly full of I would say smoking Craters in the ground where cash and Optimism have landed and burned maybe Actually that's an interesting indicator Maryan if there is rapid consolidation Inside of a space with players being Bought because they're dying maybe we Should just view that as like more like Contagion than salvation yeah it's a Good point yeah because we have seen That play out more than once yeah and Sometimes you have to countd down to the End of your capital and sometimes Countdown capital capitalizes on their Own countdown because they're done Maryann what's going on there ah yeah so Arya had her own scoop with this Countdown Capital announced this week That it would it was going to shut down And um yeah and it it was kind of a sad A sad story really uh the founder in Solo GP is uh Jay Malik basically he Said that funding industrial startups is Not inefficient enough to justify our Existence and he was very blunt and Explaining his reasoning for shutting Down the firm which I also thought was Interesting he said that larger Multi-stage venture firms are best Position to generate strong Returns on The most valuable industrial startups This just made me sad because it's like A smaller firm that really seemed to Have potential in trying to invest in

This space but he was basically Admitting it was just really hard to Compete with the bigger Venture players Yes I want to throw into my Understanding of his comments about the The inability or inefficiency of Investing in industrial hard tech was More predicated on his funds strategy Viz the market than investing in that Category large um but you know that's my Take on J's perspective the thing that Really stuck out to me was his Discussion in his letter he sent to you Know his team about this and he was Talking about how he thought they could Essentially be a very competitive fund They could fight for deal flow fight for Inclusion in hot rounds and so forth but It turned out that that was really tough Because multi-stage firms would come in And offer a 50 to 100% quote price Difference at the preceding seed stage Because in his view that's not super Material to a billion dollar fund but to A small fund that's the difference Between being able to write the check or Not or being ficed out or not or being Know the lead or not and so it really Does seem that some of these multi-stage Funds are not consciously or on Purposely inflating seed deal values but They just don't care as much and so it's Making the actual seed players struggle And you know the market will always sort

Things out in the long term but you know I saw some data about Q4 2023 from Pitchbook that showed that median seed Deal values in the US hit a record high Last year and so I wonder if this that We're seeing here from the demise of Countdown and the decision to shut it Down by the way didn't fail he's Returning capital and just kind of right Right calling it quit I I wonder if That's why C dos are so expensive and Also why countdown's kind of out in the Same stroke yeah I mean I I think Probably so I think it is hard for these Smaller firms to compete when you're Dealing with much larger players with With deeper pockets and it kind of boils Down to a few different factors and I Think part of it too is the startups Themselves you know because do they have To take the capital from this firm or do They have to take from you know it's a Tough call too you know right I I don't Envy any anybody in this situation but I Don't know and sorry if I mispronounced The name I'm not sure if it's ji or or Jay but I could feel kind of just Disappointments or his sadness in what How everything had transpired and I I Appreciated his cander well we we we got The message and then broke the story I Don't think he was particularly happy About that but I do appreciate that the Not he didn't send to us was canderous

Well yeah and I appreciate his cander at Least and communicating about it to Others yes which we then got to learn From and then we can bring to to Everyone who's with us today I I was Just talking to Tim on the tuck runch Plus team about a little town in Washington where there is a kind of Confluence of battery focused hard tech Investments right now and it just Reminded me about how distributed a lot Of this work is and so I just hope that Like well distributed and also critical And so I I just hope that what happened To countdown isn't representative of Other folks trying to invest in serious Hard industrial Tech because we do need A lot of that here frankly and so I'm Disappointed for a e here which is rare For me because I know me too what's our What's our rule no crying for people Richer than you that's rule one on Equity I kid yeah I do think because it Is so Capital intensive it does make it Harder than other spaces right other Other Industries so applaud him for Trying yeah yeah okay Maran I had more To say about the the price differential But we have more to get through so let's Put down that and pick up something else Israel which we all know is currently Fighting with Hamas which has impacted Its technology industry one thing that The Israeli government is doing is

Putting together a kind of like relief Package and I thought it was done in an Interesting fashion so according to the Ft the Israeli government is essentially Putting together a $100 million facility Over several tranches that will match Private investment into existing Israeli Startups and the money from the Government won't have to be repaid Unless the company becomes profitable Which is funny because startups aren't So it's kind of it's almost like free Money but tied to Capital to ensure that It's not poorly allocated and I think They put out about 40 45 million of it So far so maryan in terms of keeping Things aoat I think it's quite smart Yeah I thought it was interesting yeah According to the article they've paid Out about 41 million so far and the Condition is to be able to get access to This emergency funding is that the Startups have to find matching funds From the private sector as you pointed Out I think it's definitely admirable of Of the country the government and and Investors as well to try to help keep The startup ecosystem there alive Definitely it's hard to keep operating As you want to as a company as a startup When you're in the middle of a war and Everything around you is being impacted And a number of people I think it was Like 10 to 15% I read in the story of

Workers in the tech sector had been Called up for military service as well So yeah I was surprised that 41 million Had already been deployed yeah that was Fast well I mean keep in mind that when We talk about you know growing texins Israels has really come to its own I Would say in the last no man I'm going To butcher this timeline 10 15 years it Really feels like and there was a Massive boom in investment especially in Israeli cyber security companies through The kind of 2021 period there was some Interesting data from uh NAD Lev over at Y Adventures that we have uh over on Tech runch Plus recently there was 1.89 Billion invested in Israeli cyber Security companies last year that was 71 Different rounds that was done down 41% From 2022 is figure which was 3.22 Billion and down from 8.8 billion in 2021 so I think that the money that the Israeli government is putting to work Here would have been useful regardless But I do think as well as an emergency Measure is a pretty intelligent way to Defend what has become a a kind of key Plank in the National economy there and So you want to make sure that that's up And running for you once you get the Security stuff sorted out yeah the Financial times also reported that There's there's actually been a DE inine In the number of startups that are being

Founded in Israel each year which Dropped from about 1,400 in 2014 to around 6222 that statistic surprised me yeah Yeah so that is a little surprising that Was surprising because that's more than Half but maybe like this initiative is Also just to help ensure that the Companies that are there you know don't Shut down or fail due to a lack of funds Related to the war yeah elsewhere in the Region there has been a lot of Discussion about what has happened to The Palestinian Tech ecosystem we're not Making any sort of political comments on The show whatsoever so please don't take Anything that way but there is a cool New group out there called tech for Palestine that's bringing together um Engineers investors and kind of other Folks in the tech sector to try to find A way to help the Palestinian people and I thought it was a really cool idea Small group so far clearly kind of like Um a loose Collective if you will Maryanne but good to see that people are Trying to reach out and make sure that Everyone has as good of a shot as they Can inside of there has been a lot of Discussion of the conflict between Israel Hamas and the impacts on both Israeli and Palestinian citizens I was Just encouraged to see people coming Together and trying to work towards more

Harmony more care and hopefully to Ameliorate some of the I mean the clear Negative impacts of War yeah I mean Obviously Palestine doesn't have the Size Tech ecosystem that Israel does but It was growing in its own way there was Apparently a lot more companies that had Either that were hiring like freelance Engineers out of the region or some that Had had set up maybe satellite offices I Believe and so the war has really Devastated obviously what has existed There and I think uh this organization Called tech for Palestine which was Founded by Paul begar again don't know If I've butchered his name he's a Founder of a company also called Circle CI I think Paul is just trying to to Help bring a voice to people who support Palestine in a way that hasn't been Formalized and he's encouraging them to Build open source projects tools and Data to help others in the industry Advocate for the Palestinian people yes And let's just hope that 2024 is a year In which we see the end of several Wars Versus more bubbling up as we have in The last couple of years it has been sad To watch and just it's just sad anyways Um that's the end of the show for today On that particular note we were shooting For some positivity there seeing people Work together but the good news is is That Equity will be back next week will

Be here on Monday Wednesday and Friday As always we love you guys thank you so Much as a small reminder we did have a Number of excellent shows in the Christmas through end of the year period Three in fact so if you haven't got a Chance to listen to those we have Interviews we have rundowns it is an Absolute jam and if you want even more Of equity in the meantime we're Equity Pod on X and threads not Twitter I keep Almost saying that and we're also Tech Runch pods on Tik Tok if you are a Tik Tok person all right we're back on Monday goodbye bye happy New Year Everyone Equity is hosted by myself editorinchief Of Tech runch Plus Alex Wilhelm and Tech Runch senior reporter Mary an aeto we Are produced by Teresa loans solo with Editing by Kell Bryce Durban is our Illustrator and a big thank you to the Audience development team and Henry Pette who manages Tech runch audio Products thank you so much for listening And we'll talk to you next Time