Tech Brew Ride Home - Mon. 08/28 – The Tech IPO Is Back?

Episode Date: August 28, 2023

Apple looks to refresh the iPad to reinvigorate sales. Huge network crash is grounding planes in the UK. Some tentative sign that the Tech IPO window might be creaking open. Do you need a 100 year domain renewal? And the Silicon Valley bigwigs who are investing big money to build a new Bay Area city from scratch. Links: Apple Bets on Revamped iPad Pro to Reignite Sluggish Tablet Sales (Bloomberg) China’s BYD to Pay $2.2B to Expand Business With Apple (The Information) UK air traffic control hit by network-wide failure (The Guardian) Klaviyo files to go public in latest sign of life for IPO market (CNBC) WordPress Announces 100-Year Domain Name Registrations (Search Engine Journal) The Silicon Valley Elite Who Want to Build a City From Scratch (NYTimes) Learn more about your ad choices. Visit megaphone.fm/adchoices

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, August 28th, 2023. I'm Brian McCullough today. Apple looks to refresh the iPad line to invigorate sales. Huge network crashes, grounding planes in the UK, some tentative signs that the tech IPO window might be creaking open. Can I introduce you in a 100-year

domain renewal and the Silicon Valley bigwigs who are investing big money to build a new Bay Area city from scratch? Here's what you miss today in the world of tech. I don't remember how much I highlighted this in the last Apple earnings report report, but in a period where basically all of their hardware sales have been down, the real outlier for Apple was the iPad. So Mark German says that for 2024, Apple is planning the iPad Pro's first major upgrade since 2018, featuring a new M3 chip, an OLED screen, and a magic keyboard with a larger trackpad, quoting German in Bloomberg. The product was once seen as a potential successor to the Mac, but now the iPad generates the least amount of revenue among Apple's major segments. This past quarter, sales slipped to the lowest level since the cusp of the pandemic in early 2020, and it's not just a revenue problem.

Apple's unit shipments declined 17% in the second quarter, according to data from IDC. On its most recent earnings call, the company blamed a tough comparison with last year when it rolled out a new iPad Air. there's clearly a broader problem. Like desktops and laptops, tablet sales have slumped since a pandemic-fueled surge. Nearly every major manufacturer is suffering declines, including Samsung and Lenovo. There's just not much urgency among customers to buy a tablet or upgrade their perfectly functional old one. Many consumers also sought larger screen phones in recent years, making a tablet even less necessary. The good news is Apple has its best chance in years to,

reinvigorate the market, an overhauled iPad Pro. The next iPad Pro models, codenamed J717, 718, 720, and J721 will shift to the next generation M3 chip. They will also be Apple's first tablets with OLED displays, the same types of screens used on the iPhone since the 10 model in 2017. They are crisper and brighter and reproduce colors more accurately. The new models will come in 11-inch and 13-inch sizes. That's similar to the existing lineup, but the larger model is currently 12.9 inches. Something else coming with the new iPad Pro, I'm told, is a revamped Magic keyboard. The new accessory makes the iPad Pro look even more like a laptop than the current setup and adds a larger trackpad. That addresses a complaint about the current Magic keyboard, which debuted in

2020. The new models will likely give iPad sales a boost, but not for some time. They won't be part of the company's big launch event next month, when it will focus on the iPhone and Apple Watch and probably won't debut until spring or early summer. I'm not anticipating anything other than minor updates to the company's other tablets before then, end quote. Is this interesting or just interesting? Chinese EV giant BYD's electronics unit has struck a deal with U.S.-based Jabil to buy the key Apple supplier's manufacturing business in China. China for around $2.2 billion. BYD is that electric car manufacturer in China that in some measures is bigger than Tesla. Warren Buffett is a long time BYD shareholder. Quoting the information,

the consumer electronics unit of China's BYD has entered into a preliminary agreement to buy several Chinese factories operated by Jebel, a U.S. manufacturer that counts Apple as one of its biggest customers. The factories to be sold have historically assembled components for Apple products ranging from aluminum housings to touch trackpad and keyboard modules, according to people familiar with the matter. Jubile's factory divestager comes at a time when U.S. companies are reducing their exposure to China given increasing trade tensions, which could potentially disrupt the flow of materials and products between the two countries. While Apple is also trying to diversify its production beyond China, it is simultaneously turning more to Chinese companies like BYD to expand its

production in places like Vietnam. BYD has long-supplied components, including small metal parts and batteries to Apple, but began to assemble the iPad in 2020, the people said. BYD is part of a growing trend of Chinese manufacturers moving up the supply chain from simply providing low-end components to becoming an assembler of more sophisticated modules and entire products, end quote. At the time of this writing, the UK's National Air Traffic Services is experiencing seeing network-wide computer failures, and subsequently hundreds of flights in and out of the country have been delayed. Quoting the Guardian, some passengers have been told they could face delays of up to 12 hours while engineers seek to tackle the fault. According to flight tracking sites,

few planes have been able to take off from London Heathrow, the UK's busiest airport, since 1130 a.m., while inbound short-haul flights have been held from departure, a spokesperson for Nats, the National Air Airspace controllers said, we are currently experiencing a technical issue and have applied traffic flow restrictions to maintain safety. Engineers are working to fine and then fix the fault. We apologize for any inconvenience this may cause, end quote. A Heathrow spokesperson said, quote, as a result of national airspace issues, there is a disruption to flights across the UK. Passengers are advised to check with their airline for the latest information. We are working closely with Nats and other airport partners to minimize the impact this has on passengers, end

quote. British Airways told passengers that its flights were subject to delays. A spokesperson added, we are working closely with Nats to understand the impact of a technical issue that is affecting UK airspace and will keep our customers up to date with the latest information. Engineers at Nats will be racing against the clock with an extended outage likely to spell widespread cancellations. A computer glitch at the control center in Swanwick in 2014, affected flights until the following day, despite airspace being curtailed for only about an hour, end quote. I asked last week if arm filing to go public would be sort of a dam-breaking moment, and other tech companies might get brave and follow suit out the door, as it were.

Well, interesting initial signs. Instacart has filed for a U.S. IPO, reporting 2022 revenue up 39% year-over-year to $2.55 billion, and $428 million in net income up from a $73 million loss in 2021. And first half, 2023 revenue was up 31% year over year, which all that is interesting. They seem to have survived the COVID rubber band effect to their demand fairly well. But then again, Instacart is one of those companies that has flirted with going public for years now. They were likely to jump at any opportunity. more interesting, for our purposes at least, is e-commerce marketing, email, and SaaS company

Clavio, which has filed for a U.S. IPO and reported first half of 2023 revenue of around $3211 million versus $208 million a year ago and $15.2 million in net income versus a $24.6 million net loss a year ago. If Clavio is willing to take the plunge, that could suggest that companies that are slightly less ripe on the vine might be willing to come off the branch, as it were, quoting CNBC. Founded in 2012, Clavio helps companies store user data and build profiles on them to send targeted marketing via email, text message, and other channels. It got its start in the e-commerce industry by primarily serving online businesses, though Clavio said it's seeing growing demand from companies in other verticals like restaurants, travel, and events and entertainment.

one of Clavio's biggest backers and sources of business is Shopify. The Canadian e-commerce giant owns roughly 11% of Clavio's shares and invested $100 million in the company last August. As of the end of 2022, about 77.5% of Clavio's annualized recurring revenue or value of its existing paid subscriptions was derived from customers who also use Shopify, the company said. Clavio also has a partnership with Shopify, where it is the recommended email solution for members of its Shopify Plus program. It also has integrations with other popular

e-commerce platforms like Big Commerce, Adobe's Magento, and Salesforce Commerce Cloud. Clavio said it had more than 130,000 customers as of June 30th compared to 105,000 customers a year ago, end quote. Okay, WordPress.com has debuted a 100-year domain name registration product, priced at 30, $8,000 offering managed hosting and 24-7 customer service. You're probably aware that domains are typically capped at around 10 years of registration in terms of the registration period, although I once registered one domain that I own until the 2030s, quoting Search Engine Journal. Who is the 100-year plan for? WordPress says that the plan is designed for individuals, families, and company founders who want to document their company's legacy. The announcement explains,

quote, families who wish to preserve their digital assets, the stories, photos, sounds, and videos that make up their rich family history for generations to come. Founders who want to protect and document their company's past, present, and future. Individuals seeking a stable, flexible, and customized online home that can adapt to whatever changes the future of technology will bring, end quote. At this time, it feels apparent that the usage they have in mind are individuals who want to create a lasting way to communicate their stories. Matt Mullenweg, CEO of WordPress.com, is quoted it is saying, whether it's giving a newborn the special gift of a domain and lifetime home on the web, or something you put in your will to make sure your website and story are accessible to future

generations, I hope this plan gets people and other companies thinking about building for the long term, end quote. Silly me, when I signed up for that 20-30 domain thing back in the aughts, it was mainly because I was afraid I'd just forget to renew it. Turns out I should have been thinking of passing the domain down to my kids, though I wasn't even married. at that point. Finally, today, there's a certain strain in Silicon Valley thinking and philosophy that believes not just that the private sector can probably do things better than governments can, but also that Silicon Valley itself probably has the Nouse to do society better than maybe humanity has done thus far. The New York Times had a piece up this weekend,

outlining a mysterious company that is spending more than $800 million to buy thousands of acres in the Bay Area to apparently create a new city. Backers include Michael Moritz, Reed Hoffman, Mark Andreson, and others. Quote, a company called Flannery Associates has been buying large plots of land in a largely agricultural region 60 miles northeast of San Francisco. The company, which has little public information about its operations, has committed more than $800 million to secure thousands of acres of farmland court documents show. one parcel after another, Flannery made offers to every landowner for miles paying several times the market rate whether the land had been listed for sale or not.

Flannery is the brainchild of Jan Ceramek, 36, a former Goldman Sachs trader who has quietly courted some of the tech industry's biggest names as investors, according to the pitch and people familiar with the matter. The company's ambitions expand on a 2017 pitch seen by the Times and sent by venture capitalists Mike Moritz. Take an arid patch of brown hills cut by a two-lane highway between suburbs and rural land and convert it into a community with tens of thousands of residents, clean energy, public transportation, and dense urban life. The company's investors whose identities have not been previously reported are a who's-who of Silicon Valley, according to three people who are not authorized to speak publicly about the plans. They include

the venture capitalist Michael Moritz. Reed Hoffman, the LinkedIn co-founder, venture capitalist and Democratic donor, Mark Andreson and Chris Dixon, investors at the Andresen Horowitz Venture Capital firm, Patrick and John Collison, the sibling co-founders of the Payments Company Stripe, Lorraine Powell Jobs, founder of the Emerson Collective, and Nat Friedman and Daniel Gross, entrepreneurs-turned investors. Andresen Horowitz, the venture capital firm, is also a backer. It was unclear how much each had invested. California, housing has long been an intractable problem, as Silicon Valley's moguls have long been frustrated with the Bay Area's real estate shortage and the difficulty of building in California generally as their work forces have exploded.

Companies like Google have clashed with cities like Palo Alto and Mountain View over expanding their headquarters, while their executives have funded pro-development politicians and, yes, in my backyard activists who have pushed for looser development and zoning laws in hopes of making it easier to build faster and taller. practical need for more space has at times morphed into lofty visions of building entire cities from scratch. Several years ago, White Combinator, the startup incubator announced an initiative with dreams of turning empty land into a new economy and society. Years before that, Peter Thiel, the PayPal co-founder and billionaire Facebook investor invested in the C-steading Institute in attempt to build a new society on lily pad-like structures in the law and tax-free open ocean. But while these ideas have garnered lots of attention and curiosity lauded in some corners for vision and derided and others for hubris, they have been little more than talk.

The Flannery initiative seems different. As it began seeking property, it bought so much land so fast that it spooked locals who had no idea who the buyer was or the plans it had in mind. The land that Flannery has been purchasing is not zoned for residential use, and even in his 2017 pitch, Mr. Moritz acknowledged that rezoning could, quote, clearly be challenging, a nod to California's notoriously difficult and litigious development process. To pull off the project, the company will almost certainly have to use the state's initiative system to get Solano County residents to vote on it. The hope is that voters will be enticed by promises of thousands of local jobs, increased tax revenue and investments in infrastructure like parks,

a performing arts center, shopping, dining, and a trade school. The financial gains could be huge, Mr. Moritz said in the 2017 pitch. He estimated the return could be many times the initiative investment just from the rezoning and far more if and when they started building. If the plans materialize anywhere close to what is being contemplated, this should be a spectacular investment, Mr. Moritz wrote. The Bay Area is among the country's most expensive regions, even after rent and home prices fell during the pandemic. Economists and housing experts have for decades blamed a longstanding housing shortage and California's inability to build enough to meet demand. Mr. Moritz nodded to this in the email to the

investor, arguing that, quote, this effort should relieve some of the Silicon Valley pressures we all feel rising home prices, homelessness, congestion, et cetera, end quote. He added that his group had secured some 1400 acres for less than $5,000 per acre. The price per acre has since escalated, and the company's most recent purchases have neared $20,000 per acre, according to court documents and people familiar with the matter. The purchases burst into public view this spring when lawyers for Flannery filed a lawsuit in U.S. District Court, accusing landowners of colluding to inflate prices. The group focused on Jepson Prairie and Montezuma Hills, an agricultural patch of eastern Solano County between the cities of Fairfield and Rio Vista, according to the lawsuit.

This area is mostly unpopulated and covered with ranches, windmills, and power lines. As the offers continued and the prices escalated, landowners in Solano County started buzzing about who was buying so much land for so much money. They would come with an offer of four and five times over the market at the time. Ms. Moy said they were deals they couldn't pass up, end quote. Flannery's offers were creating multi-millionaires across the county, but no one seemed to know what the mysterious company intended to do with land that now amounted to a large chunk of the entire county, end quote.

Hello today from Northern Michigan, as I said, where I forgot that if you're here, even two weeks into July, it's already starting to get cold again. Highs for this week will be in the low 60s, which is bad for me because I forgot to pack a jacket or even long-sleeved shirts. All I've got is one pair of slacks. I had to go to Meyer last night just to get a sweatshirt. This happens to me all the time. It was so hot in Brooklyn, I couldn't imagine it being cool anywhere else. Same thing happens in reverse when we go down to Florida for Christmas. Oh well, There is an indoor pool here, so it's not a total loss, though. The beach is definitely out. Talk to you tomorrow.