Tech Brew Ride Home - Mon. 07/18 – It’s Vibe Shifts All The Way Down

Starting point is 00:00:00 On April 4th, 2023, around 2 in the morning, a man was found stabbed multiple times on a sidewalk in downtown San Francisco. Hey, who did this to you? What happened next turned the story into a political firestorm. Reports have identified the victim as Bob Lee, the founder of Cash App. From Bloomberg Podcasts, this is Foundering, the Killing of Bob Lee, beginning April 16. Welcome to the Tech meme right home for Monday, July 18th, 2021. I'm Brian McCullough today. Everything we cover is in a full vibe shift of pulling back. Coinbase sent some eyebrows up over the weekend, but insolvency is off the table, right? Right. Adam Newman's crypto startup is hitting the

Starting point is 00:00:51 pause button. All the rapid delivery startups that flooded New York City last year seem to be gone, poof, and is Silicon Valley itself definitively shrinking? Here's what you miss today in the world of tech. But before we get to the retrenchment, a surprising new launch this morning. Snapchat launched Snapchat for web to let users send snaps and make video calls on the desktop, and the company says the average caller on its app spends more than 30 minutes a day on calls. So that's why this is a priority, quoting TechCrunch. To start, Snapchat for Web will be available to Snapchat Plus subscribers in the United States, United Kingdom, Canada, Australia, and New Zealand.

Starting point is 00:01:32 After the initial launch, the company plans to roll out Snapchat for Web to Snapchat plus subscribers in France, Germany, Saudi Arabia, and the United Arab Emirates, before making it accessible to all users around the world. With Snapchat for Web, you can send messages and snaps and also chat via video and regular calls. Snapchat for Web also allows users to take advantage of messaging features available on mobile, including chat reactions. Snap says it plans to bring its lenses feature to video calls in the future. To access Snapchat for web users need to head to web.snapchat.com and log in with their Snapchat username and password. From there, you'll be prompted to complete two-step verification on your phone by default. Once you open Snapchat for web, you can continue your conversations from where you left them off on mobile. When you're using Snapchat via desktop, your Bitmoji

Starting point is 00:02:21 will appear in chats with a laptop to indicate to others that you're accessing the chat via Snapchat for web. In addition, the web experience includes a privacy screen that hides the Snapchat window if you click away for another task. Similar to the app experience on mobile, messages that are sent via Snapchat for Web will be deleted automatically after 24 hours. The company also says Snapchat for Web will prevent people from taking screenshots. However, Snap is aware that people can still take a picture on their screen from their phone, noting that the product isn't perfect, end quote. As I said, a whole bunch of stories today about retrenchment, about pullbacks, about a negative vibe shift. Over the weekend, various outlets were reporting about having seen emails sent to three

Starting point is 00:03:09 creators by Coinbase, who said it is, quote, temporarily shutting down its U.S. affiliate program on July 19th and plans to relaunch it sometime in 2023, quoting Insider. We regret to inform you that Coinbase will be temporarily shutting down its affiliate program in the United States with an effective date of Tuesday, July 19th. The email reads, this has not been an easy decision, nor was it made lightly, but due to crypto market conditions and the outlook for the remainder of 2022, Coinbase is unable to continue supporting incentivized traffic to its platform, end quote. This change comes at a time when Coinbase is reeling from the crypto crash. On June 14th, Coinbase CEO Brian Armstrong announced in a blog post that the company was laying off

Starting point is 00:03:49 18% of its staff, or roughly 1,100 employees. On Friday, Bloomberg reported that Coinbase is now the world's 14th largest crypto exchange down from the fourth position less than a year ago. Before this recent affiliate news, Coinbase had already lowered commission rates for some influencers in June. One creator who was earning $40 per sign-up as early as 2022 said that they saw that amount drop by more than 90% to $2 per signup. My commissions are almost non-existent with them anymore, so I haven't paid attention, said a fourth influencer who used the program, end quote. Now, that might not seem like the biggest news in the world, but it became bigger news over the weekend because a bunch of folks leapt to the conclusion that this meant Coinbase might be in retrenchment mode financially to avoid being the next exchange

Starting point is 00:04:37 to have actual solvency issues. Quoting inside Bitcoins. The recent developments with Coinbase are now spooking investors. Ben Armstrong, a leading crypto influencer, warned his Twitter followers that what was happening with Coinbase suggested that the company could be on the verge of insolvency. The recent bear market has hit Coinbase hard. The company's stocks tend to perform in tandem with the cryptocurrency market. The stocks have plunged by around 85% from an all-time high of $357 created last year after the

Starting point is 00:05:05 company's direct listing on NASDAQ. The poor performance of the stock is also affecting investor confidence. Goldman Sachs recently downgraded Coinbase's rating from neutral to sell. The company's valuation has also taken a hit, given that it now sits at $12.4 billion in valuation down from the all-time high of $75 billion created last year. Coinbase's woes started in the first quarter of the year after the exchange released its financial results depicting a net loss of $430 million. The exchanges trading volumes and assets have also been on a notable decline. The Binance versus Coinbase debate has also recently intensified following how the two companies fared during the ongoing bear market. Binance, the world's largest exchange by

Starting point is 00:05:45 trading volumes, is holding up quite well. And while Coinbase is laying off 18% of its staff, finance is hired for more than 2,000 new open positions. Binance US also recently launched zero-fee Bitcoin trading. The move is set to expand Binance's dominance in the U.S. market currently dominated by Coinbase. Coinbase's high trading fees have become contentious, given that the spot trading fees go as high as $3.99, end quote. Here's, by the way, the specific tweet from Ben Armstrong, which does seem to take quite a leap in my opinion, quote, Coinbase shut down their affiliate program and are getting rid of Coinbase Pro. Recent history would suggest that there could be trouble ahead for Coinbase, so tread lightly. If Coinbase were to go insolvent, this would break crypto and the

Starting point is 00:06:29 crypto space like we have never seen before, end quote. Which I do agree with that, except, you know, Coinbase has billions of dollars in cash sitting in their coffers. Might this just be positioning themselves to survive what they fear will be a multi-year bear market? Except, reportedly around July 15th, around 50% of the stable coins on Coinbase Pro left the exchange, or the equivalent of $250 million out the day. door. Stable coins peaked at around $1.2 billion on Coinbase in January 2022, but now the value stands at just $284 million, according to Cryptoslate. And Coinbase has seen a steady decline in Bitcoin in its reserves, while Binance has been increasing during the same period. But again,

Starting point is 00:07:12 is this just a Coinbase versus Binance competitive thing? More carnage from the crypto winter. The fact that WeWork founder Adam Newman was starting a crypto startup was almost a a chef's kiss sort of story of, I don't know, irony or something, although I don't think we ever talked about it. Well, Newman's startup called Flow Carbon and some other startups, which similarly offer cryptocurrencies backed by carbon offset credits, have press pause on their product rollouts amid the crypto crash, quoting the Wall Street Journal. Flow Carbon, one of a group of companies that are issuing cryptocurrencies backed by carbon credits, has decided to wait for markets to stabilize before launching its products, said

Starting point is 00:07:58 chief executive and co-founder Dana Gibber. Other outfits such as Tukon Protocol Association and Klima Dow have effectively frozen new business as a plunge in crypto coincided with a crackdown on issuance of new cryptocurrency tokens by a big carbon market registry. Flow carbon and its peers are combining cryptocurrency, a type of digital asset that trades on decentralized computer networks, with another largely unregulated and volatile financial instrument. Carbon credits. Such credits are issued by projects that aim to remove carbon dioxide from the atmosphere, or prevent emissions from being produced through forest planting or conservation, for instance. Each credit represents one metric ton of carbon dioxide removed or avoided.

Starting point is 00:08:38 Corporations or individuals buy the credits and retire them to offset their greenhouse gas emissions as investors and others demand action to combat climate change. Most carbon credits are sold through brokers or directly by project developers, a process critics say is clunky, opaque, and time-consuming. Flow carbon and its peers say they can change that by bringing credits on to their networks as crypto tokens, Flowcarbons is called the goddess nature token, where they can be traded in large volumes like digital money and destroyed or burned when the owner wants to offset emissions. As someone who bought credits from brokers in the past, buying and burning tokens is

Starting point is 00:09:14 far, far easier, Mark Cuban, a tech billionaire and crypto investor said in a written response to questions, Mr. Cuban has used Klima tokens to offset 1,100 metric tons of personal and business carbon emissions, according to Klima Dowd data. Venture capitalists invested around $267 million into climate or carbon-related crypto deals in 2021, and another $156 million this year through early July, a surge in investment from previous years, although a fraction of the billions invested in cryptocurrency deals overall, according to research firm pitchbook data. A good chunk of that funding has gone to Flow Carbon, which was co-founded by Mr. Newman, best known as the ousted head of office rental firm WeWork.

Starting point is 00:09:54 Flow Carbon says Mr. Newman isn't involved in the daily operations of the company, end quote. But it's not just crypto stuff pulling back. It's basically everything in the startup universe. Remember those rapid delivery startups that flooded into everyone's consciousness about 18 months ago. Remember me saying about a year ago, I guess. They solved finally the unit economics problems of 15 minute or so delivery. I mean, so much money was being invested into the space that you had to figure the math had been run on the idea. Finally, if you follow my Twitter account, you also have. seen me post about all the coupons that were flooding my way as they targeted the New York City market, only to disappear, only to come back briefly and then disappear again. Anywho,

Starting point is 00:10:46 quoting Wired, mentioning the exact services I use, quote. It took only eight months for Joker, the super-fast delivery startup to become a unicorn, and just six months more for its strategy to start coming apart. Joker had plastered New York City with splashy ads promising to deliver groceries within 15 minutes for free, with no minimum order, and raised a total of $430 million in venture capital to continue blitzscaling across cities around the world. From Boston to Bogota, its turquoise-clad couriers whizzed around on scooters carrying pints of ice cream and jars of pasta sauce. Joker was also bleeding money, though. In the first half of 2021, the startup took in $1.7 million in revenue, but suffered $13.6 million in losses, according to data reviewed by the information.

Starting point is 00:11:30 In April, it shut down in Europe. This June, 14 months after launch, and a year after touting plans to build 100 micro-warehouses in New York City alone, Joker announced that it was pulling out of the United States entirely and laid off 50 employees. The company still operates in cities like Sao Paulo, Mexico City, and Bogota. Other fast-delivery startups have also become fast shrinking. In May, Gorillas and Gettier, two of the largest companies in the sector laid off thousands of employees and retreated from prime delivery cities around Europe. GoPuff, valued at $15 billion.

Starting point is 00:12:02 in 2021 vaporized 76 of its 500 distribution centers this summer. Those are the lucky ones. Others like bike, fridge no more, and zero grocery have already gone bust, disappearing just as rapidly as they arrived. The downfall of superfast delivery reflects the sobering mood of 2022. In the last two years, venture capitalists sunk nearly $8 billion into the six rapid delivery startups competing in New York City, encouraging fast growth and a land grab. Now investors are increasingly demanding profitability. The sudden reversal strikes Thomas Eisenman, a professor at Harvard Business School, as reminiscent of the 2000.com crash, when buzzy startups like Cosmo, which promised one-hour delivery of groceries and

Starting point is 00:12:42 DVDs, folded just a few years after collecting millions from VCs. With these new businesses, what's changed, he says. It didn't work then and it's not working now, end quote. Margins are already razor-thin for services that deliver groceries in hours or longer. On a $100 online grocery basket, about $70 goes toward the wholesale cost of the goods, consumer ordered. The other 30 gets devoured by overhead costs like refrigeration and storage, the wages of in-store workers who pick items from the shelves and pack them into bags, and the cost of delivery. A recent report from McKinsey found that while the typical North American grocer makes 4% profit margin from in-store shoppers, they lose 13% on each online order.

Starting point is 00:13:23 Companies like Instacart, which piggyback on the infrastructure and stock of existing stores by partnering with grocery businesses, have fared better, though Instacart is still not profitable. Demand for online groceries has surged in the last two years, largely because of the pandemic inspiring more people to try and avoid in-store shopping. In 2020, online grocery orders increased 50%. Demand for instant delivery increase, 41%, McKinsey found. The consumer need is there, said Vishwachandra, a partner at McKinsey who co-authored the report. The question is, how do you manage the economics, end quote. Well, it seems to me, even after 20 years of trying this idea, repeatedly, You still can't manage the economics? And it's not just here in New York City, where you'd think

Starting point is 00:14:07 the density makes the economics have at least a shot of working out. Chinese grocery delivery firm Miss Fresh, which had raised more than $1 billion in VC funding from Tiger Global, Goldman Sachs, and others, has fallen in market cap on the NASDAQ from $3 billion in 2021 to $88 million today, quoting the Financial Times. Ms. Fresh pioneered a strategy of blanketing cities with many warehouses that combined storage of a small number of high-volume items with delivery capabilities, allowing its pink-clad riders to zip fresh fruit and meats to Chinese households in roughly 30 minutes. Management claimed the low-cost model would allow Ms. Fresh to profitably deliver groceries a notoriously tough proposition. Investors stepped up to fund the venture with Tiger putting in

Starting point is 00:14:51 $117 million over several years for a 12% stake, while Goldman Sachs injected $66 million. The funding propelled Ms. Fresh's expansion into 16 Chinese cities, where it ran 625 warehouses as of June 30th last year. But the person close to Ms. Fresh said the company had blindly expanded, blindly opened new warehouses, and blindly entered new cities. The cash flow is drying up. If we don't pay vendors on time, it will cause a shortage of supplies, said the person who asked not to be named. Ms. Fresh denied it was seeking an acquirer and said the company had sufficient supplies. While Ms. Fresh has been unable to issue audited financials or its annual report for the year to December 31st, the company estimated losses last year hit

Starting point is 00:15:34 3.7 billion yuan, end quote. And finally today, can we say at last definitively that Silicon Valley itself is shrinking? I suppose not really. It doesn't depend on the amount of workers in Silicon Valley so much as it depends on the number and size of startups there. But it certainly feels that anecdotally folks I know in the industry have left Silicon Valley are leaving, are doing startups in other places, are working remotely, and according to the Wall Street Journal, at least 71 U.S. cities and towns now offer cash grants and other perks to attract remote workers, mostly from the tech industry, up from at least 24 cities offering such incentives back in October of last year. Quote, because these programs specifically target remote workers who have

Starting point is 00:16:30 high wages, a disproportionate share of those who are taking advantage of them work in tech, and especially for big tech companies. Companies whose employees have participated in one remote worker incentive program in Tulsa, Oklahoma include Adobe, Airbnb, Amazon, Apple, Dell, Facebook parent meta platforms, Google, IBM, Microsoft, Lyft, Netflix, Oracle, and Siemens, according to a spokeswoman for the organization. And that's just Tulsa. Local governments are offering people willing to move up to $12,000 in cash, along with subsidized gym memberships, free babysitting, and office space. Because of the relatively modest scale of these economic development programs, even small communities can get in on the game in a way that they never could for, say,

Starting point is 00:17:11 the Amazon HQ2 extravaganza. Among the towns doing this is Greensburg, Indiana, population 12,193. A skeptic may ask why local economic development programs are spending funds to subsidize the lives of people who work for some of the most valuable companies. in the world. On the other hand, because these remote workers aren't coming to town seeking local jobs, an argument can be made that they constitute a novel kind of stimulus program for parts of the country that have been left out of the tech boom, courtesy of big tech companies. Some of those companies are perfectly happy with this turn of events. In April, Airbnb said nearly all of its employees could work anywhere they liked and retain their full salaries. It's even promoting its product

Starting point is 00:17:53 as a way for remote workers to find temporary housing, says a spokeswoman for the company. Every remote worker these places successfully attract and retain is like gaining a fraction of a new factory or a corporate office with much less expenditure and risk, argues Mark Murrow, who studies cities and labor at the Brookings Institution, end quote. Hey, a buddy of mine got access to Dolly over the weekend, so tweet at me some images. You'd like me to have him generate for us. Like, I don't know. penguins making air quotes in the style of Basquiat or something like that.

Starting point is 00:18:33 In honor of me always saying quote end quote, all that stuff, I'll have him generate any images you send to me to share with us. Other than that, talk to you tomorrow.

Tech Brew Ride Home - Mon. 07/18 – It’s Vibe Shifts All The Way Down

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